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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
[LOGO OF MILLENNIUM CHEMICALS INC.]
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 22-3436215
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
99 WOOD AVENUE SOUTH
ISELIN, NEW JERSEY 08830
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (908) 603-6600
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- -------------------------------------------------------- --------------------------------------------------------
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Common Stock, par value $.01 per share New York Stock Exchange
(together with associated
preferred stock purchase rights)
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
________________________________________________________________________________
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ITEM 1. BUSINESS
The information required by this item is contained in the sections
'Summary,'Risk Factors -- International Exposure,' 'The Stock Dividend and Other
Demerger Transactions,' 'Management's Discussion and Analysis of Financial
Condition and Results of Operations,' 'Business' and 'Millennium Chemicals
Inc. -- Notes to Combined Financial Statements' of the Information Statement
attached hereto as Annex A (the 'Information Statement') and such sections are
incorporated herein by reference.
ITEM 2. FINANCIAL INFORMATION
The information required by this item is contained in the sections
'Summary,' 'Capitalization,' 'Selected Financial Data', 'Selected Unaudited Pro
Forma Financial Data' and 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' of the Information Statement and such
sections are incorporated herein by reference.
ITEM 3. PROPERTIES
The information required by this item is contained in the section
'Business -- Properties' of the Information Statement and such section is
incorporated herein by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the sections
'Management -- Security Ownership of Certain Beneficial Owners of Common Stock'
and 'Executive Compensation' of the Information Statement and such sections are
incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item is contained in the sections
'Management -- Directors' and 'Management -- Executive Officers' of the
Information Statement and such sections are incorporated herein by reference.
ITEM 6. EXECUTIVE COMPENSATION
The information required by this item is contained in the sections
'Management -- Directors' Meetings, Committees and Fees' and 'Executive
Compensation' of the Information Statement and such sections are incorporated
herein by reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the sections 'The
Stock Dividend and Other Demerger Transactions -- Results of the Demerger
Transactions,' 'The Stock Dividend and Other Demerger Transactions --
Relationship between Hanson and the Company' of the Information Statement and
such sections are incorporated herein by reference.
ITEM 8. LEGAL PROCEEDINGS
The information required by this item is contained in the sections
'Business -- Legal Proceedings' and 'Business -- Environmental Matters' of the
Information Statement and such sections are incorporated herein by reference.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information required by this item is contained in the sections 'The
Stock Dividend and other Demerger Transactions,' 'Management -- Security
Ownership of Certain Beneficial Owners of
2
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<PAGE>
Common Stock' and 'Description of Capital Stock' of the Information Statement
and such sections are incorporated herein by reference.
ITEM 10. RECENT SALE OF UNREGISTERED SECURITIES
On April 18, 1996, as part of its original incorporation, the Company
issued three shares of its common stock, for a total consideration of $3.00, to
Derek C. Bonham, Andrew J. H. Dougal and Graham Dransfield (the 'Initial
Stockholders'), who are and will be the Company's sole stockholders until the
Dividend Payment Date, (as defined and described in the section 'The Stock
Dividend And Other Demerger Transactions' of the Information Statement, which
section is incorporated herein by reference). The Initial Stockholders have
agreed to sell, and the Company has agreed to purchase, all such shares for a
total consideration of $3.00 on the Dividend Payment Date contemporaneously with
payment of the Stock Dividend.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The information required by this item is contained in the sections
'Description of Capital Stock,' 'Rights Plan' and 'Purposes and Effects of
Certain Provisions of the Company's Certificate of Incorporation, By-Laws and
Delaware Statutory Law' of the Information Statement and such sections are
incorporated herein by reference.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The information required by this item is contained in the section
'Limitation on Liability and Indemnification of Officers and Directors' of the
Information Statement and such section is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is identified in 'Index to Financial
Statements' of the Information Statement and such information is incorporated
herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The Index to Financial Statements on page F-1 of the Information
Statement is incorporated herein by reference.
All Financial Statement Schedules, other than that indicated on page
F-1 of the Information Statement, are inapplicable, and are therefore
omitted.
(b) Exhibits
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2.1 Information Statement (attached to this Registration Statement as Annex A)
3.1 Amended and Restated Certificate of Incorporation of the Company (attached to Exhibit 2.1 as
Annex A thereof)
3.2 By-Laws of the Company
3.3 Form of Rights Agreement to be entered into between the Company and First Chicago Trust Company
of New York, as rights agent
4.1 Specimen form of certificate representing Common Stock of the Company
4.2 Documentation evidencing a $2.25 billion loan from Hanson Antilles N.V. to HM Anglo American
Ltd.
4.3 Documentation evidencing a $1.9 billion loan from Hanson Aruba N.V. to Hanson America Inc.
4.4(a) Indenture, dated as of March 1, 1994, among Hanson America Inc., HM Holdings, Inc. and The Bank
of New York as supplemented by the First Supplemental Indenture, dated as of May 16, 1994, among
Hanson America Inc., The Bank of New York and HM Holdings, Inc.
</TABLE>
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(b) ADS Issuance Agreement, dated as of March 1, 1994, among Hanson PLC ('Hanson') and Hanson
(Bermuda) Limited
(c) ADS Rights Agreement, dated as of March 1, 1994, among Hanson, Hanson (Bermuda) Limited and
Citibank, N.A.
(d) Keepwell Agreement, dated as of March 1, 1994, among Hanson and Hanson (Bermuda) Limited
10.1 Form of Pre-Demerger Stock Purchase Agreement, expected to be dated on or before September 25,
1996, between HM Holdings, Inc. and Hanson (including related form of Indemnification Agreement
and Tax Sharing and Indemnification Agreement)
10.2 Form of Pre-Demerger Stock Purchase Agreement, expected to be dated on or before September 25,
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)
10.3 Form of Pre-Demerger Stock Purchase Agreement, expected to be dated on or before September 25,
1996, between HM Holdings, Inc. and Hanson relating to certain Canadian subsidiaries (including
related form of Indemnification Agreement)
10.4 Form of Pre-Demerger Stock Purchase Agreement, expected to be dated as of September 30, 1996,
between HM Holdings, Inc. and Hanson relating to Lynton Group, Inc.
10.5 Form of Post-Demerger Stock Purchase Agreement, expected to be dated as of September 30, 1996,
between HMB Holdings Inc. and Hanson (including related form of Indemnification Agreement and
Tax Sharing and Indemnification Agreement)
10.6 Form of Post-Demerger Stock Purchase Agreement, expected to be dated as of September 30, 1996,
between Hanson and MHC Inc. (including related form of Indemnification Agreement and Tax Sharing
and Indemnification Agreement)
10.7 Form of Demerger Agreement, expected to be dated as of September 30, 1996, between Hanson,
Hanson Overseas Holdings Ltd. and the Company
10.8 Form of Indemnification Agreement, expected to be dated as of September 30, 1996, between Hanson
and the Company
10.9(a) Form of Tax Sharing and Indemnification Agreement, expected to be dated as of September 30,
1996, between Hanson, Hanson Overseas Holdings Ltd., HM Anglo American Ltd., Hanson North
America, Inc. and the Company
10.9(b) Form of Deed of Tax Covenant, expected to be dated September 30, 1996, between Hanson, Hanson
Overseas Holdings Ltd. and the Company
10.10 Form of Corporate Transition Agreement, expected to be dated as of September 30, 1996, between
Hanson North America, Inc. and HM Anglo American Ltd.
10.11 Form of Joint Ownership Agreement, expected to be dated as of September 30, 1996, between Hanson
North America Inc. and HM Anglo American Ltd.
10.12 Form of Agreement, expected to be dated October 1, 1996, between Hanson Pacific Limited and HM
Holdings, Inc.
10.13 Form of Management Agreement, expected to be dated as of September 30, 1996, among MHC Inc.,
Quantum Chemical Corporation and Welbeck Management Limited
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 N.A., as Documentation Agent, and Bank of America National Trust and Savings
Association, as Administration Agent
10.15 Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and William M. Landuyt
10.16 Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and Robert E. Lee
10.17 Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and George H. Hempstead III
10.18 Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and John E. Lushefski
10.19 Agreement, dated as of July 1, 1996, between Quantum Chemical Corporation and Ronald H. Yocum
10.20 Agreement, dated as of July 1, 1996, between SCM Chemicals Inc. and Donald V. Borst
10.21 Agreement, dated as of July 1, 1996, between Glidco Inc. and George W. Robbins
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 and Marie S. Dreher
</TABLE>
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10.23 Millennium Chemicals Inc. Annual Performance Incentive Plan
10.24 Hanson Industries 1996 Long-Term Incentive Plan
10.25 Millennium Chemicals Inc. Long-Term Stock Incentive Plan (attached to Exhibit 2.1 as Annex B
thereof)
10.26 Hanson Industries Supplemental Retirement Plan
10.27 Quantum Chemical Corporation Supplemental Executive Retirement Plan
10.28 SCM Chemicals Inc. Supplemental Executive Retirement Plan
10.29 Glidco Inc. Supplemental Executive Retirement Plan
11.1 Computation of per share earnings
21.1 Subsidiaries of the Company
99.1 Opinion, dated August 23, 1996, of Fried, Frank, Harris, Shriver & Jacobson, special U.S. tax
counsel to the Company
99.2 Form of Letter Agreement, dated July 3, 1996, between Hanson and U.K. Inland Revenue
</TABLE>
5
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
MILLENNIUM CHEMICALS INC.
By: /s/ GRAHAM DRANSFIELD
.....................................
Name: Graham Dransfield
Title:Vice President and Director
August 23, 1996
6
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT ON FORM 10 RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY INFORMATION
STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY THESE SECURITIES.
SUBJECT TO COMPLETION OR AMENDMENT, DATED AUGUST 23, 1996
INFORMATION STATEMENT
[LOGO]
[LOGO OF MILLENNIUM CHEMICALS INC.]
COMMON STOCK
This Information Statement is being furnished in connection with the
proposed dividend described below (the 'Stock Dividend') of the shares of common
stock, par value $.01 per share, together with associated preferred stock
purchase rights (collectively, the 'Common Stock'), of Millennium Chemicals
Inc., a Delaware corporation (the 'Company'), to be issued to holders of
ordinary shares of 25p each (the 'Ordinary Shares') in the capital of Hanson
PLC, a public limited company incorporated in England and Wales ('Hanson'),
including holders of Hanson American Depositary Shares ('ADSs'), each
representing five Ordinary Shares (collectively, 'Hanson Shareholders'). The
Company has been organized to hold the chemicals businesses currently held by
Hanson and conducted by Quantum Chemical Corporation, SCM Chemicals Inc., Glidco
Inc. and their affiliates, and will also hold an approximate 26% equity interest
in Suburban Propane Partners, L.P. ('Suburban Propane' and, collectively, the
'Chemicals Business').
The Stock Dividend is subject to certain conditions (the 'Demerger
Conditions'), including the approval of the Stock Dividend by the holders of
Ordinary Shares ('Shareholder Approval'). Shareholder Approval will be sought at
an extraordinary general meeting expected to be held on September 25, 1996 (the
'Hanson EGM'). Hanson Shareholders will receive a Shareholder Circular
describing the matters to be considered at the Hanson EGM and related matters
(the 'Hanson Shareholder Circular'). As described in the Hanson Shareholder
Circular, the Stock Dividend is one of a series of proposed transactions by
which Hanson will demerge (i.e., spin off) its chemicals, tobacco and energy
businesses as separate public companies.
If the Demerger Conditions are satisfied, the Chemicals Business will be
demerged from Hanson (the 'Demerger'). As part of the Demerger, the Chemicals
Business will be transferred to the Company and the Company will, in turn, issue
shares representing all of its then outstanding Common Stock to Hanson
Shareholders on a pro rata basis on the payment date for the Stock Dividend,
expected to be October 1, 1996 (the 'Dividend Payment Date'). The Stock Dividend
will be paid on the basis of one share of Common Stock for every 70 Ordinary
Shares (other than those represented by ADSs) and every 14 ADSs (the 'Dividend
Ratio') held of record at the record date for the Stock Dividend, expected to be
7:30 a.m. London time, 2:30 a.m. New York time on October 1, 1996 (the 'Dividend
Record Date'). No consideration or surrender of Ordinary Shares or ADSs will be
required of Hanson Shareholders in return for Common Stock issued pursuant to
the Stock Dividend, which will be fully paid and non-assessable. During the
period from and after September 27, 1996 up to and including the Dividend
Payment Date, ADSs are expected to trade on the New York Stock Exchange (the
'NYSE') with due bills attached that will entitle a purchaser of ADSs during
this period to receive one share of Common Stock for each 14 ADSs so purchased.
Up to and including the Dividend Payment Date, Ordinary Shares will trade on the
London Stock Exchange (the 'LSE') on a 'cum-entitlement' basis, meaning that a
purchaser of Ordinary Shares will be entitled to receive one share of Common
Stock for each 70 Ordinary Shares so purchased. If the Demerger Conditions are
not satisfied and the Stock Dividend is not paid, all such due bills attaching
to ADSs and 'cum-entitlement' rights of purchasers of Ordinary Shares will
become null and void. See 'The Stock Dividend and Other Demerger Transactions.'
Application has been made to list the Common Stock on the NYSE under the
symbol 'MCH'. The Common Stock is expected to trade on the NYSE on a 'when
issued' basis beginning on September 25, 1996, for settlement of when issued
Common Stock on October 7, 1996. If the Demerger Conditions are not satisfied
and the Stock Dividend is not paid, all such when issued trading will become
null and void. Except for the foregoing, there is not expected to be any public
trading market for the Common Stock prior to payment of the Stock Dividend. If
the Demerger Conditions are satisfied and the Stock Dividend is paid on the
Dividend Payment Date, it is expected that regular way trading in the Common
Stock on the NYSE will commence at 9:30 a.m. New York time on October 2, 1996,
subject to official notice of issuance. See 'Risk Factors -- Absence of Trading
History for the Common Stock' and 'The Stock Dividend and other Demerger
Transactions -- Listing and Trading of the Common Stock.'
Eligible Hanson Shareholders who receive fewer than 100 shares of Common
Stock in the Stock Dividend will have an opportunity to participate in a special
60-day program, commencing on the Dividend Payment Date, for the low-cost sale
of such shares or the purchase of additional shares to 'round up' their holdings
to 100 shares of Common Stock (the 'Odd-Lot Program'). See 'The Stock Dividend
and Other Demerger Transactions -- Manner of Effecting the Stock Dividend.'
------------------------
HANSON SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
'RISK FACTORS' BEGINNING ON PAGE 11 OF THIS INFORMATION STATEMENT.
------------------------
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 INFORMATION STATEMENT.
------------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
------------------------
Hanson Shareholders with inquiries related to the Stock Dividend should
contact Lloyds Bank Registrars, the U.K. Information Agent, or Georgeson &
Company Inc., the U.S. Information Agent, at the addresses and telephone numbers
set forth on the back cover page of this Information Statement.
THE DATE OF THIS INFORMATION STATEMENT IS AUGUST , 1996
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TABLE OF CONTENTS
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ITEM PAGE
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EXPECTED TIMETABLE FOR THE STOCK DIVIDEND.................................................................. 1
SUMMARY.................................................................................................... 2
The Company........................................................................................... 2
The Stock Dividend and Other Demerger Transactions.................................................... 3
Risk Factors.......................................................................................... 7
Summary Combined Financial Data....................................................................... 8
Summary Unaudited Pro Forma Combined Financial Data................................................... 9
RISK FACTORS............................................................................................... 11
Absence of Trading History for the Common Stock....................................................... 11
Lack of Operating History as an Independent Company; Significant Leverage............................. 11
Potential Defaults under Exchangeable Securities...................................................... 12
Historical Cyclicality of Significant Components of the Chemicals Business............................ 13
Price Volatility of Certain Raw Materials............................................................. 14
International Exposure................................................................................ 15
Environmental Matters; Litigation..................................................................... 15
Certain Structural Consequences of the Demerger....................................................... 16
Possible Effects of Dual Residence of the Company..................................................... 17
Certain Anti-Takeover Effects......................................................................... 17
THE STOCK DIVIDEND AND OTHER DEMERGER TRANSACTIONS......................................................... 19
Reasons for the Demerger.............................................................................. 19
Demerger Conditions................................................................................... 19
Summary of the Demerger Transactions.................................................................. 19
Manner of Effecting the Stock Dividend................................................................ 21
Results of the Demerger Transactions.................................................................. 23
Listing and Trading of the Common Stock............................................................... 23
Dividend Policy....................................................................................... 24
Relationship between the Company and Hanson after the Stock Dividend.................................. 24
Reasons for Furnishing this Information Statement..................................................... 25
CERTAIN TAX CONSIDERATIONS................................................................................. 26
Certain U.K. and U.S. Federal Tax Considerations for U.K. Holders..................................... 26
Certain U.S. Federal and U.K. Tax Considerations for U.S. Holders..................................... 30
Rights Plan........................................................................................... 34
CAPITALIZATION............................................................................................. 35
SELECTED COMBINED FINANCIAL DATA........................................................................... 36
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA................................................................ 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 42
Introduction.......................................................................................... 42
Results of Operations................................................................................. 42
Liquidity and Capital Resources....................................................................... 51
Certain Environmental Matters......................................................................... 53
Effect of Inflation................................................................................... 54
Foreign Currency Matters.............................................................................. 54
BUSINESS................................................................................................... 55
Strategy.............................................................................................. 55
Principal Products.................................................................................... 56
Quantum Chemical...................................................................................... 57
SCM Chemicals......................................................................................... 60
Glidco................................................................................................ 64
Research and Development.............................................................................. 65
Equity Interest in Suburban Propane................................................................... 65
Discontinued Businesses............................................................................... 66
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ITEM PAGE
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Employees............................................................................................. 67
Environmental Matters................................................................................. 67
Patents, Trademarks and Licenses...................................................................... 68
Properties............................................................................................ 69
Legal Proceedings..................................................................................... 70
TRANSACTIONS AND AGREEMENTS BETWEEN THE COMPANY AND HANSON................................................. 71
Agreements to Effect the Transfer of the Chemicals Business........................................... 71
Indemnification Agreements............................................................................ 71
Tax Sharing and Indemnification Agreements............................................................ 72
Corporate Transition Agreement........................................................................ 72
Hanson Indebtedness................................................................................... 73
Other Agreements...................................................................................... 73
MANAGEMENT................................................................................................. 74
Directors............................................................................................. 74
Executive Officers.................................................................................... 75
Directors' Meetings, Committees and Fees.............................................................. 76
EXECUTIVE COMPENSATION..................................................................................... 77
Historical Compensation............................................................................... 77
Company Stock Ownership Guidelines.................................................................... 79
Company Incentive Compensation and Benefit Plans...................................................... 80
Change in Control Agreements.......................................................................... 85
PROJECTED SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF COMMON STOCK.................................. 88
DESCRIPTION OF CAPITAL STOCK............................................................................... 89
Authorized Capital Stock.............................................................................. 89
Common Stock.......................................................................................... 89
Preferred Stock....................................................................................... 89
No Preemptive Rights.................................................................................. 90
Transfer Agent and Registrar.......................................................................... 90
RIGHTS PLAN................................................................................................ 90
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION, BY-LAWS AND
DELAWARE STATUTORY LAW................................................................................... 92
General............................................................................................... 92
Classified Board of Directors......................................................................... 92
Number of Directors; Removal; Vacancies............................................................... 93
No Stockholder Action by Written Consent; Special Meetings............................................ 93
Advance Notice for Raising Business or Making Nominations at Meetings................................. 93
Amendments to By-Laws................................................................................. 94
Amendment of the Certificate of Incorporation......................................................... 94
Preferred Stock and Additional Common Stock........................................................... 94
Delaware Business Combination Statute................................................................. 95
LIMITATION ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS...................................... 95
Limitation on Liability of Directors.................................................................. 95
Indemnification and Insurance......................................................................... 96
COMPARATIVE RIGHTS OF SHAREHOLDERS UNDER ENGLISH AND DELAWARE LAW.......................................... 97
Voting Rights......................................................................................... 97
Actions by Written Consent............................................................................ 97
Sources and Payment of Dividends...................................................................... 97
Rights of Purchase and Redemption..................................................................... 98
Special Meeting of Shareholders....................................................................... 98
Rights of Appraisal................................................................................... 99
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Preemptive Rights..................................................................................... 99
Amendment of Governing Instruments.................................................................... 99
Shareholders' Votes on Certain Reorganizations........................................................ 100
Rights of Inspection.................................................................................. 100
Classification of the Board of Directors.............................................................. 101
Removal of Directors.................................................................................. 101
Vacancies on the Board of Directors................................................................... 102
Liability of Directors and Officers................................................................... 102
Indemnification of Directors and Officers............................................................. 102
Shareholders' Suits................................................................................... 103
ADDITIONAL INFORMATION..................................................................................... 103
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
APPENDICES
A -- Amended and Restated Certificate of Incorporation of the Company
B -- Millennium Chemicals Inc. Long Term Stock Incentive Plan and summary description thereof
</TABLE>
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EXPECTED TIMETABLE FOR THE STOCK DIVIDEND
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Wednesday, September 25, 1996............................ Hanson Extraordinary General Meeting
'When issued' trading in the Common Stock is expected
to commence on the NYSE
Friday, September 27, 1996............................... ADSs are expected to commence trading with due bills
attached on the NYSE
Tuesday, October 1, 1996................................. Dividend Record Date for holders of Ordinary Shares and
ADSs (7:30 a.m. London time/2:30 a.m. New York time)
Dividend Payment Date
Commencement of Odd-Lot Program
Wednesday, October 2, 1996............................... Regular way trading in the Common Stock commences on
the NYSE
Ex-entitlement date for the Stock Dividend for Ordinary
Shares trading on the LSE
Ex-entitlement date for the Stock Dividend for ADSs
trading on the NYSE
Monday, October 7, 1996.................................. Expected settlement date for 'when issued' trading in
the Common Stock on the NYSE
Monday, December 2, 1996................................. Deadline for eligible recipients of odd-lots of Common
Stock to postmark or deliver Odd-Lot Program
authorization forms
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SUMMARY
The following summary is qualified in its entirety by, and is subject to,
the more detailed information and financial statements contained elsewhere in
this Information Statement. In this Information Statement, (i) all financial
information is presented in accordance with accounting principles generally
accepted in the United States ('U.S. GAAP'); (ii) references to the activities
of, and financial information with respect to, the Company prior to the Demerger
are to the historical activities and combined historical financial information
of the Chemicals Business and certain building materials and materials handling
businesses of Hanson (the 'Discontinued Businesses') that subsidiaries of the
Company will agree to sell to Hanson on the fifth day following the Dividend
Payment Date; (iii) references to '1995' and subsequent years are to the
applicable calendar year ended December 31, reflecting the fact that the Company
will have a December 31 fiscal year-end (effective as of January 1, 1995) when
it becomes a separate reporting company, and references to 'fiscal' 1994 and
earlier years are to the applicable fiscal year ended September 30; and (iv)
references to 'tonnes' are to metric tons, equal to 1,000 kilograms or 2,204.6
pounds.
This Information Statement 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.
THE COMPANY
The Company has been organized to own and operate the Chemicals Business,
which is conducted by Quantum Chemical Corporation ('Quantum Chemical'), SCM
Chemicals Inc. and its non-U.S. affiliates (collectively, 'SCM Chemicals') and
Glidco Inc. ('Glidco'). Each of these companies is at present a wholly-owned
indirect subsidiary of Hanson and will become a wholly-owned indirect subsidiary
of the Company as a result of the Demerger.
In 1995, the Chemicals Business (including Suburban Propane as a continuing
operation) had net sales of approximately $3.8 billion and operating income of
$842 million; at June 30, 1996, the Chemicals Business (including Suburban
Propane as a 26% equity investment) had total assets of approximately $5.6
billion. The companies comprising the Chemicals Business have long operating
histories and leading market positions in a broad range of commodity,
industrial, performance and specialty chemicals. The Chemicals Business is and,
upon the Demerger, the Company will be:
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 aroma and flavor chemicals derived from crude
turpentine.
In addition, following the Demerger, a wholly-owned subsidiary of Quantum
Chemical will continue to serve as the general partner of Suburban Propane, a
publicly traded limited partnership which, through Suburban Propane, L.P. (the
'Suburban Propane 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.
Subject to the satisfaction of the Demerger Conditions, including
Shareholder Approval, the Chemicals Business will be demerged (i.e., spun off)
from Hanson. To effect the Demerger, the Chemicals Business will be transferred
to the Company and the Company will, in turn, issue shares representing all of
its then outstanding Common Stock to Hanson Shareholders on a pro rata basis on
the Dividend Payment Date. See 'The Stock Dividend and Other Demerger
Transactions' and 'Transactions and Agreements between the Company and Hanson.'
Upon the Demerger, William M. Landuyt will become the Company's Chairman
and Chief Executive Officer and Robert E. Lee will become the Company's
President and Chief Operating Officer. Messrs. Landuyt and Lee currently serve
as President and Chief Executive Officer and Senior Vice President and Chief
Operating Officer, respectively, of Hanson Industries, the United States arm of
Hanson. In addition, approximately 65 other Hanson Industries executives and
employees will become executives and employees of the Company. Within the group
of United Kingdom, United States and
2
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international subsidiaries and divisions comprising Hanson (the 'Hanson Group'),
Hanson Industries has had management responsibility for the Chemicals Business.
The Company's strategy will be to maximize long-term cash flow, and thereby
enhance shareholder value, through improved efficiency at existing operations,
disciplined capital expenditures and selective acquisitions of other chemical
businesses. 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 will emphasize stock ownership by management and link 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 STOCK DIVIDEND AND OTHER DEMERGER TRANSACTIONS
<TABLE>
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Distributing Company......................... Hanson PLC, a public limited company incorporated in England and
Wales.
Distributed Company.......................... Millennium Chemicals Inc., a Delaware corporation.
The Demerger................................. Subject to satisfaction of the Demerger Conditions, Hanson will
transfer the Chemicals Business to the Company and the Company
will, in turn, issue shares representing all of its then
outstanding Common Stock to Hanson Shareholders on a pro rata
basis on the Dividend Payment Date. See 'The Stock Dividend and
Other Demerger Transactions.'
Demerger Conditions.......................... At the Hanson EGM, expected to be held on September 25, 1996,
Hanson will seek Shareholder Approval of the Stock Dividend. For
information concerning the matters to be considered at the
Hanson EGM, see the Hanson Shareholder Circular. The Stock
Dividend will also be subject to (i) the availability of funds
under a new $2.25 billion credit facility among the Company, as
guarantor, Hanson America Inc., a subsidiary of Hanson which
will become a wholly-owned subsidiary of the Company and will be
renamed Millennium America Inc. ('Hanson America'), and a
syndicate of banks (the 'New Credit Facility'), (ii) the Common
Stock being approved for listing on the NYSE subject to official
notice of issuance, and (iii) subsequent to Shareholder
Approval, Hanson's Board of Directors not having passed a
resolution to terminate the arrangements for the Demerger of the
Company. See 'The Stock Dividend and Other Demerger
Transactions.'
Dividend Ratio............................... One share of Common Stock (including an associated preferred stock
purchase right issued pursuant to the rights agreement described
under 'Rights Plan') for every 70 Ordinary Shares (other than
Ordinary Shares represented by ADSs) and every 14 ADSs held of
record on the Dividend Record Date.
Dividend Record Date......................... October 1, 1996 (7:30 a.m. London time/2:30 a.m. New York time).
Dividend Payment Date........................ October 1, 1996. The Dividend Agents will commence mailing share
certificates representing the Common Stock on the Dividend
Payment Date.
Trading in Ordinary Shares and ADSs.......... During the period from and after September 27, 1996 up to and
including the Dividend Payment Date, it is expected that ADSs
will trade on the NYSE with due bills attached that will entitle
a purchaser of ADSs during this period to receive one share of
Common Stock for each 14 ADSs so purchased. Up to and including
the Dividend Payment Date, Ordinary Shares will trade on the LSE
on a 'cum-entitlement' basis, meaning that a purchaser of
Ordinary Shares during this period will be entitled to receive
one share of Common Stock for each 70 Ordinary Shares so
purchased. If the Demerger Conditions are not satisfied
</TABLE>
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and the Stock Dividend is not paid, all such due bills attaching
to ADSs and 'cum-entitlement' rights of purchasers of Ordinary
Shares will become null and void.
Outstanding Capital Stock of the Company..... Based on approximately 5,207,400,000 Ordinary Shares (including
Ordinary Shares represented by ADSs) outstanding at the close of
business on July 31, 1996 and the Dividend Ratio, approximately
74,391,400 shares of Common Stock will be issued to pay the
Stock Dividend. The Common Stock to be so issued will constitute
all of the shares of capital stock of the Company that will be
outstanding immediately following the Stock Dividend. Shortly
after the Dividend Payment Date, the Company will recommend the
issuance to executive officers and other key employees of an
aggregate of approximately 1,889,550 shares of Common Stock,
which will be subject to certain restrictions. In addition, the
Company will issue a total of approximately 2,700 shares of
Common Stock to the Company's non-employee directors. After
giving effect to such issuances of restricted stock and non-
employee directors' stock, the Company will have approximately
76,283,650 shares of Common Stock outstanding. See 'Executive
Compensation -- Company Incentive Compensation and Benefit
Plans.'
Interests in Fractional Shares............... Fractional shares of Common Stock ('Fractional Shares') will not
be distributed to record holders of Ordinary Shares and ADSs.
Fractional Shares will be aggregated by the U.S. Dividend Agent,
which will then sell or arrange for the sale of such aggregated
Fractional Shares on the NYSE. The net cash proceeds of such
sales (the 'Fractional Share Proceeds') will be paid ratably to
those Hanson Shareholders entitled to fractional interests.
Holders of Ordinary Shares entitled to Fractional Share Proceeds
will receive payment in pounds sterling; holders of ADSs
entitled to Fractional Share Proceeds will receive payment in
U.S. dollars. See 'The Stock Dividend and Other Demerger
Transactions -- Manner of Effecting the Stock Dividend.'
Odd-Lot Shares............................... All Hanson Shareholders, except employees of Hanson or the Company
holding their shares through defined contribution plans, who
receive fewer than 100 shares of Common Stock ('Odd-Lot Shares')
in the Stock Dividend (each, an 'Eligible Hanson Shareholder')
may participate in the Odd-Lot Program by instructing the
appropriate Dividend Agent, acting as agent for such Eligible
Hanson Shareholder, (i) to sell (or, in the case of the U.K.
Dividend Agent, to instruct the U.S. Dividend Agent to sell)
all, but not less than all, of such Odd-Lot Shares on the NYSE
for such holder's account for cash or (ii) to purchase (or, in
the case of the U.K. Dividend Agent, to instruct the U.S.
Dividend Agent to purchase) for such holder's account additional
shares of Common Stock so as to 'round up' such shareholder's
holdings to 100 shares of Common Stock. More detailed
information concerning the Odd-Lot Program and a transaction
authorization form for use by Eligible Hanson Shareholders will
be mailed to such shareholders on the Dividend Payment Date or
as soon as practicable thereafter. A completed form must be
postmarked for receipt by, or delivered to, one of the Dividend
Agents on or before December 2, 1996 for an Eligible Hanson
Shareholder to elect to participate in the Odd-Lot Program.
Holders of Ordinary Shares who elect to sell their Odd-Lot
Shares or purchase additional shares will receive payment or be
required to pay for such shares, as the case may be, in pounds
sterling; holders of Hanson
</TABLE>
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<S> <C>
ADSs who elect to sell their Odd-Lot Shares or purchase
additional shares will receive payment or be required to pay for
such shares, as the case may be, in U.S. dollars. Neither Hanson
nor the Company will solicit or make any recommendations to
shareholders either to sell or purchase additional shares of
Common Stock in the Odd-Lot Program. See 'The Stock Dividend and
Other Demerger Transactions -- Manner of Effecting the Stock
Dividend.'
Dividend Agents.............................. The U.K. Dividend Agent is Lloyds Bank Registrars and the U.S.
Dividend Agent is Citibank, N.A. For the addresses and telephone
numbers of the Dividend Agents, see the back cover page of this
Information Statement.
Information Agents........................... The U.K. Information Agent is Lloyds Bank Registrars and the U.S.
Information Agent is Georgeson & Company Inc. For the addresses
and telephone numbers of the Information Agents, see the back
cover page of this Information Statement.
Tax Consequences of the Stock Dividend to
Hanson Shareholders........................ A person who is a resident of the United Kingdom for U.K. tax
purposes will not incur U.K. tax liability upon the receipt of
Common Stock in the Stock Dividend. Hanson has received an
opinion of counsel as of the date hereof that, for U.S. federal
income tax purposes, the Stock Dividend will qualify as a
tax-free distribution under Section 355 of the Internal Revenue
Code of 1986, as amended (the 'Code') and thus a person who is a
United States citizen or resident in the United States for U.S.
tax purposes will not incur U.S. federal income tax upon the
receipt of the Common Stock in the Stock Dividend. See 'Certain
Tax Considerations.'
Trading Market and Symbol for the Common
Stock...................................... Application has been made to list the Common Stock on the NYSE
under the symbol 'MCH'. Prior to the Dividend Payment Date,
there is not expected to be any public trading market for the
Common Stock except as follows: the Common Stock is expected to
trade on the NYSE on a 'when issued' basis beginning on
September 25, 1996, for settlement of when issued Common Stock
on October 7, 1996. If the Demerger conditions are not satisfied
and the Stock Dividend is not paid, all such when issued trading
will become null and void. If the Demerger Conditions are
satisfied and the Stock Dividend is paid on the Dividend Payment
Date, it is expected that regular way trading in the Common
Stock on the NYSE will commence at 9:30 a.m. New York time on
October 2, 1996, subject to official notice of issuance. See
'Risk Factors -- Absence of Trading History for the Common
Stock' and 'The Stock Dividend and Other Demerger
Transactions -- Listing and Trading of the Common Stock.'
Dividend Policy.............................. It is anticipated that, commencing in the first calendar quarter
of 1997, the Company will pay quarterly cash dividends, which on
an annual basis will initially aggregate (gross) $.60 per share
of Common Stock. No such dividend has been declared, however,
and the payment of any and all dividends will be a business
decision to be made by the Board of Directors of the Company
(the 'Company Board') from time to time based on the Company's
earnings and financial position and such other considerations as
the Company Board considers relevant. See 'The Stock Dividend
and Other Demerger Transactions -- Dividend Policy.'
The Demerger Transactions.................... The Demerger will be accomplished through a series of transactions
(the 'Demerger Transactions') between
</TABLE>
5
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<S> <C>
Hanson and certain subsidiaries of Hanson that will remain with
Hanson following the Demerger ('Hanson Subsidiaries'), on the
one hand, and the Company and certain subsidiaries of Hanson
that will be subsidiaries of the Company following the Demerger
('Company Subsidiaries'), on the other hand. The Company's
Combined Financial Statements reflect the assets and liabilities
related to the Chemicals Business, including the Allocated Loan
and Exchangeable Notes (each as defined below), and the assets
and liabilities related to the Discontinued Businesses (as
defined below), which are not related to the Chemicals Business
but, pursuant to the Demerger Transactions, will be owned by the
Company until the fifth day following the Dividend Payment Date.
The Company's Combined Financial Statements do not reflect
either the Non-Chemicals Businesses to be sold prior to the
Dividend Payment Date pursuant to the Demerger Transactions or
the Hanson Loan (as defined below).
At present, certain Company Subsidiaries own businesses and assets
that are intended to remain with Hanson ('Non-Chemicals
Businesses'). In addition, a $2.25 billion loan related to the
Chemicals Business (the 'Allocated Loan') and a $1.9 billion
loan unrelated to the Chemicals Business (the 'Hanson Loan') are
outstanding from certain Hanson Subsidiaries to certain Company
Subsidiaries. Certain Non-Chemicals Businesses will be sold to
Hanson prior to the Dividend Payment Date for a cash purchase
price presently estimated at $2.055 billion. The remaining
Non-Chemicals Businesses (the 'Discontinued Businesses') will be
sold to Hanson on the fifth day following the Dividend Payment
Date for a cash purchase price presently estimated at $1.125
billion, subject to adjustment if a material adverse change
occurs with respect to the Discontinued Businesses. The proceeds
of the pre-Dividend Payment Date sale of certain Non-Chemicals
Businesses will be used to repay the Allocated Loan and the
proceeds of the post-Dividend Payment Date sale of the
Discontinued Businesses will be used to repay the Hanson Loan,
in each case together with cash balances and borrowings under
the New Credit Facility, if required. On the Dividend Payment
Date, Hanson will transfer the Chemicals Business to the Company
in consideration for the Company's issuance of all of its then
outstanding Common Stock to Hanson Shareholders. If the
Company's Pro Forma Net Debt (as defined) as of the Dividend
Payment Date exceeds a specified amount to be established by
Hanson prior to the Dividend Payment Date (which will be
approximately $2 billion and not more than $2.05 billion),
shortly thereafter Hanson will also make a payment equal to the
excess to the Company or a Company Subsidiary. As the final step
in the Demerger Transactions, within 30 days following the
Dividend Payment Date, Hanson America will provide notice (the
'Required Notice') to the holders of its 2.39% Senior
Exchangeable Discount Notes Due 2001 (the 'Exchangeable Notes'),
including rights appurtenant thereto issued by Hanson (Bermuda)
Limited, a Hanson Subsidiary ('Hanson Bermuda'), that are
exercisable for ADSs (the 'ADS Rights' and collectively with the
Exchangeable Notes, the 'Exchangeable Securities') then
outstanding, specifying that it will repurchase Exchangeable
Securities from holders who exercise their 'Change-in-Control
Rights' for 101% of the then accreted value of the Exchangeable
Notes plus accrued
</TABLE>
6
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<TABLE>
<S> <C>
interest. See 'The Stock Dividend and Other Demerger
Transactions -- Summary of the Demerger Transactions' and'Risk
Factors -- Potential Defaults under the Exchangeable
Securities.'
Demerger Agreements.......................... Hanson and certain Hanson Subsidiaries will enter into a series of
agreements (collectively, the 'Demerger Agreements') with the
Company and certain Company Subsidiaries providing for the
Demerger Transactions. The Demerger Agreements will also include
indemnification and tax sharing agreements. See 'Risk
Factors -- Possible Effects of Dual Residence of the Company,'
'The Stock Dividend and Other Demerger Transactions -- Summary
of the Demerger Transactions' and 'Transactions and Agreements
between the Company and Hanson.'
Relationship between the Company and Hanson
after the Stock Dividend................... After the Stock Dividend, the Company and Hanson will operate
independently of each other as separate public companies. The
Company and Hanson and their respective subsidiaries will enter
into agreements relating to certain post-Demerger relationships
described under 'The Stock Dividend and Other Demerger
Transactions -- Relationship between the Company and Hanson
after the Stock Dividend.' Neither the Company nor Hanson will
have any beneficial stock ownership interest in the other
(although (i) employee benefit plan and share trusts sponsored
by the Company and Hanson and/or certain of their respective
subsidiaries will, in the near term and possibly the long term,
hold certain of the other company's shares, (ii) certain Hanson
Subsidiaries will hold shares of Common Stock in trust for
certain untraced shareholders and (iii) certain Company
Subsidiaries will hold Ordinary Shares in trust for certain
untraced shareholders). All executives and employees of Hanson
Industries who join the Company will cease to be executives or
employees of Hanson Industries. On the Dividend Payment Date,
Mr. Landuyt will cease to be a director of Hanson. Among the
Company's non-executive directors will be The Rt. Hon. Kenneth
Baker CH MP, a non-executive director of Hanson, The Rt. Hon.
The Lord Glenarthur, an executive of Hanson, and Martin G.
Taylor, a retired Vice Chairman of Hanson. Any future business
relationships between the Company and Hanson (or between the
Company and any of the other public companies proposed to be
demerged by Hanson) will be determined, at such time, through
arm's-length negotiations. See 'The Stock Dividend and Other
Demerger Transactions -- Relationship between the Company and
Hanson after the Stock Dividend.'
Transfer Agent and Registrar for the Common
Stock...................................... First Chicago Trust Company of New York.
Executive Offices............................ The Company's principal executive office will be located at 99
Wood Avenue South, Iselin, New Jersey 08830, and its United
States telephone number will be (908) 603-6600. The Company will
also have an executive office located at La Porte Road,
Stallingborough, Grimsby South, North East Lincolnshire, DN40
2PR, England and its United Kingdom telephone number will be
01469-57-1000.
</TABLE>
RISK FACTORS
Hanson Shareholders should carefully consider the matters discussed under
'Risk Factors' beginning on page 11 of this Information Statement.
7
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SUMMARY COMBINED FINANCIAL DATA
The following table summarizes certain historical 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 Information Statement.
Historical combined financial information may not be indicative of the Company's
future performance as an independent company. See also '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.'
<TABLE>
<CAPTION>
(IN MILLIONS)
FISCAL YEAR
SIX MONTHS ENDED YEAR THREE MONTHS ENDED
JUNE 30, ENDED ENDED SEPTEMBER 30,
--------------------------- DECEMBER 31, DECEMBER 31, ------------------
1996 1995 1995 1994 1994 1993
-------- -------- ------------ ------------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................. $1,510 $ 2,067 $ 3,800 $ 908 $3,288 $ 862
Operating income........... 109 (1) 537 842 203 344 139
Income from continuing
operations............... 93 (1)(2) 205 331 84 66 103
Net (loss) income.......... (3,111)(1)(2)(3) 178 349 96 94 123
BALANCE SHEET DATA (AT PERIOD
END):
Total assets(4)............ $6,140 $10,138 $ 10,043 $ 10,024 $9,691 $10,135
Total liabilities.......... 5,513 5,403 5,242 5,166 5,053 4,692
Invested capital(4)........ 627 4,735 4,801 4,858 4,638 5,443
OTHER DATA (WITH RESPECT TO
CONTINUING OPERATIONS):
Depreciation and
amortization............. $ 102 $ 122 $ 241 $ 59 $ 247 $ 44
Capital expenditures....... 153 107 276 30 109 28
</TABLE>
- ------------
(1) Includes the effects of a non-cash charge of $60 ($39 after-tax) to reduce
the carrying value of certain facilities employed in the sulfate-process
manufacturing of TiO2, as described in Note 3 to the Combined Financial
Statements of the Company.
(2) Includes the effects of an after-tax gain of $80 resulting from the
Company's sale 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.
(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 Statement of
Financial Accounting Standards No. 121 ('SFAS 121'), as described in Note 4
to the Combined Financial Statements of the Company.
(4) Includes net assets of the Discontinued Businesses of $597 at June 30, 1996
(after giving effect to the adoption of the SFAS 121 methodology referred to
in Note 3 above); $3,772 at December 31, 1995; $3,757 at December 31, 1994;
$3,757 at September 30, 1994; and $3,935 at September 30, 1993.
8
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SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following summary unaudited pro forma combined financial data reflect
the Demerger Transactions (including the Stock Dividend) as of January 1, 1996
and January 1, 1995, respectively, for pro forma combined income statement data
purposes and as of June 30, 1996 for pro forma combined balance sheet data
purposes. The unaudited pro forma combined financial data give effect to (i) the
sales of the Non-Chemical Businesses to Hanson at the anticipated fair market
values thereof; (ii) the Company's combined indebtedness, net of cash, of
approximately $2 billion (primarily under the New Credit Facility) after
repayment of the Hanson Indebtedness, repurchase of Exchangeable Securities
pursuant to the exercise of holders' Change-in-Control Rights (assuming 100%
exercise) and application of the Pro Forma Net Debt Adjustment; (iii) interest
expense and amortization of capitalized costs relating to such indebtedness;
(iv) changes in corporate overhead as if the Company had operated as an
independent entity; and (v) for 1995 pro forma combined income statement data
purposes, the Company's sale of a 73.6% interest in Suburban Propane. See 'The
Stock Dividend and Other Demerger Transactions -- Summary of the Demerger
Transactions.' 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>
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
<S> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Net sales............................................................ $1,510 $ 3,161
Operating income..................................................... 100(1) 776
Income from continuing operations.................................... 121(1)(2) 382
Earnings per share from continuing operations(3)..................... $ 1.62 $ 5.10
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1996
------------------
<S> <C>
PRO FORMA BALANCE SHEET DATA (AS OF THE FIFTH DAY
FOLLOWING THE DIVIDEND PAYMENT DATE):
Total assets....................................................... $5,144
Short-term debt.................................................... 440
Long-term debt(4)(5)............................................... 1,743
Total liabilities.................................................. 3,859
Stockholders' equity (invested capital)............................ 1,285
Book value per share(3)............................................ $17.30
</TABLE>
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(1) Includes the effects of a non-cash charge of $60 ($39 after-tax) to reduce
the carrying value of certain facilities employed in the sulfate-process
manufacturing of TiO2, as described in Note 3 to the Combined Financial
Statements of the Company.
(2) Includes the effects of an after-tax gain of $80 resulting from the
Company's sale 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) Pro forma earnings per share from continuing operations and book value per
share have been determined assuming approximately 74,866,500 shares of
Common Stock were outstanding. This is based on (i) the number of
outstanding Ordinary Shares and ADSs at the close of business on June 30,
1996 and the Dividend Ratio and (ii) the assumed issuance pursuant to the
Stock Incentive Plan, shortly after the Dividend Payment Date, of
approximately 472,400 shares of restricted Common Stock to executive
officers and other key employees of the Company pursuant to the Stock
Incentive Plan (excluding approximately 1,417,150 additional shares of
restricted Common Stock to be subject
(footnotes continued on next page)
9
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(footnotes continued from previous page)
to performance criteria established by the Compensation Committee of the
Company's Board of Directors after the Demerger) and approximately 2,700
shares of Common Stock to non-employee directors of the Company. See
'Executive Compensation -- Company Incentive Compensation and Benefit
Plans.'
(4) The Pro Forma Net Debt Adjustment will not compensate the Company if a
material adverse change affecting the Discontinued Businesses requires a
downward adjustment of the purchase price therefore to be paid by Hanson
pursuant to the stock purchase agreements to be entered into between Company
Subsidiaries and Hanson. Accordingly, such a reduction would increase the
amount the Company would need to borrow under the New Credit Facility to
repay the Hanson Loan and thereby result in the Company's actual combined
indebtedness, net of cash, exceeding $2 billion.
(5) To the extent that Exchangeable Securities are not purchased pursuant to the
exercise of Change-in-Control Rights, borrowings under the New Credit
Facility will be reduced. Exchangeable Securities that are not purchased by
the Company pursuant to the exercise of Change-in-Control Rights or
otherwise will continue to be obligations of Hanson America and Hanson
Bermuda. For a discussion of certain potential defaults under the
instruments governing the Exchangeable Securities, see 'Risk
Factors -- Potential Defaults under the Exchangeable Securities.'
10
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RISK FACTORS
ABSENCE OF TRADING HISTORY FOR THE COMMON STOCK
Application has been made to list the Common Stock on the NYSE under the
symbol 'MCH'. The Common Stock is expected to trade on the NYSE on a 'when
issued' basis beginning on September 20, 1996, for settlement of when issued
Common Stock on October 7, 1996. Except for the foregoing, there is not expected
to be any public trading market for the Common Stock prior to payment of the
Stock Dividend. Assuming the Demerger Conditions are satisfied and the Stock
Dividend is paid on the Dividend Payment Date, it is expected that regular way
trading in the Common Stock on the NYSE will commence at 9:30 a.m. New York time
on October 2, 1996, subject to official notice of issuance.
Shareholders should note that there has been no prior trading market for
the Common Stock and there can be no assurance as to the prices at which the
Common Stock will trade or the degree of volatility in the trading price. The
prices at which the Common Stock trades will be determined in the public trading
market and may be influenced by many factors, including the depth and liquidity
of the market for the Common Stock, investor perceptions of the Company, its
businesses (which are predominantly cyclical in nature) and its significant
level of leverage, general economic and market conditions and, at least in the
short-term, the investment preferences of Hanson Shareholders. In particular,
approximately 70% of the Ordinary Shares (including Ordinary Shares represented
by ADSs) are held of record by persons with addresses outside the United States.
It is possible that a significant number of these Hanson Shareholders could
determine to dispose of the Common Stock they receive in the Stock Dividend due
to the Company's status as a United States, rather than a United Kingdom, public
company having primarily United States-based operations, financial statements
prepared in accordance with U.S. GAAP and expressed in U.S. dollars, dividends
(when and if declared) paid in U.S. dollars and no public trading market for the
Common Stock in the United Kingdom. Such a determination would place downward
pressure on trading prices for the Common Stock for a period following the
Dividend Payment Date.
LACK OF OPERATING HISTORY AS AN INDEPENDENT COMPANY; SIGNIFICANT LEVERAGE
The Company does not have an operating history as an independent public
company. While the Chemicals Business in the aggregate has been 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 (such as the Hanson Indebtedness) and invested capital provided by
Hanson or its United States affiliates, after the Demerger the Company will have
to meet all of its cash requirements through funds generated internally from
operations and external borrowings (which may be more costly).
As of June 30, 1996, after giving pro forma effect to the Demerger
Transactions, borrowings under the Company's $2.25 billion New Credit Facility
and existing debt, the Company would have had combined indebtedness, net of
cash, of approximately $2 billion and invested capital of approximately $1.3
billion. The Company presently anticipates that its invested capital upon the
completion of the Demerger Transactions will be approximately $1.3 billion. The
actual amounts, however, will be dependent upon (i) the actual net cash used or
provided by the operations of the Chemicals Business from June 30, 1996 through
the Dividend Payment Date, including the level of capital expenditures, compared
to that which is anticipated, and (ii) whether or not there is a material
adverse change in one or more of the Discontinued Businesses requiring, pursuant
to stock purchase agreements to be entered into between Company Subsidiaries and
Hanson, a downward adjustment of the purchase price for the Discontinued
Businesses to be paid by Hanson subsequent to the Dividend Payment Date.
Accordingly, no assurance can be given that upon completion of the Demerger
Transactions the Company's actual invested capital will not be less than $1.3
billion or that its actual combined indebtedness, net of cash, will not be
greater than $2 billion. See 'The Stock Dividend and Other Demerger
Transactions -- Summary of the Demerger Transactions,' 'Capitalization' and
'Unaudited Pro Forma Combined Financial Data.'
The significant degree to which the Company will be leveraged following
completion of the Demerger Transactions could have important consequences to
holders of Common Stock, including the following: (i) the Company's ability to
obtain additional financing in the future may be limited or the
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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 and
ability to pay dividends may be limited by covenants contained in the New Credit
Facility; 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 Chemicals Business' below.
POTENTIAL DEFAULTS UNDER THE EXCHANGEABLE SECURITIES
Hanson America has outstanding $1,255,115,000 aggregate principal amount at
maturity of Exchangeable Notes. At June 30, 1996, the aggregate accreted value
plus accrued interest of the Exchangeable Notes was approximately
$1,083,000,000. The ADS Rights, which are exercisable at a holder's option at
any time until March 1, 2001, permit holders to cause their Exchangeable Notes
to be redeemed by Hanson America and the proceeds used (together with certain
funds held by a Hanson affiliate) to purchase ADSs from an affiliate of Hanson
at a ratio (the 'ADS Ratio') currently set at 33.741 ADSs per $1,000 principal
amount at maturity of the Exchangeable Notes. Upon payment of the Stock Dividend
on the Dividend Payment Date, the ADS Ratio will be increased in accordance with
the terms of certain provisions of an agreement relating to the ADS Rights.
Prior to the Dividend Payment Date, Hanson America intends to commence a
solicitation of consents from the holders of the Exchangeable Securities (the
'Consent Solicitation') to amendments (the 'Proposed Amendments') to certain
provisions of the indenture under which the Exchangeable Notes were issued (the
'Exchangeable Note Indenture') and two agreements relating to the ADS Rights
(collectively with the Exchangeable Note Indenture, the 'Exchangeable Security
Instruments'). Implementation of the Proposed Amendments requires the consent of
the holders of a majority of the aggregate principal amount at maturity of the
Exchangeable Securities then outstanding (the 'Requisite Consent'). A consent
payment will be made to noteholders who consent to the Proposed Amendments. The
Proposed Amendments would specifically permit the Stock Dividend and the other
Demerger Transactions (including the transfer of the Non-Chemical Businesses to
Hanson) without compliance by Hanson America or Hanson, as the case may be, with
certain covenants in the Exchangeable Security Instruments relating to
consolidation, merger or transfer of assets (the 'Merger Covenants'). Under the
Merger Covenant in the Exchangeable Note Indenture, the application of which
Hanson and the Company believe is uncertain in these circumstances, Hanson
America may not 'convey, sell, transfer or lease its properties or assets
substantially as an entirety to any Person (in one transaction or in a series of
related transactions)' unless the Person to which such properties and assets are
transferred assumes liability for the Exchangeable Notes pursuant to a
supplemental indenture and certain other conditions are met. Under the Merger
Covenants in the other Exchangeable Security Instruments, the application of
which Hanson and the Company believe is uncertain in these circumstances, Hanson
may not 'convey, sell, transfer or lease its properties or assets substantially
as an entirety (in one transaction or in a series of related transactions) to
any Person' unless the Person to which such properties and assets are
transferred assumes the performance or observance of Hanson's covenants therein.
The Proposed Amendments would also (i) specifically permit the prepayment by
Hanson America of the Allocated Loan in connection with the Demerger; (ii)
specifically permit the proposed demergers by Hanson of its tobacco and energy
businesses at one or more future dates; (iii) upon consummation of the Demerger,
provide that the delivery of certain financial information by the Company will
satisfy the covenant to deliver financial information in respect of Hanson
America; (iv) upon consummation of the Demerger, eliminate the limitations on
the grant of security interests on the assets and properties of Hanson America
or its subsidiaries; and (v) upon consummation of the Demerger, eliminate the
limitations on the incurrence of additional indebtedness by subsidiaries of
Hanson America. In addition, upon consummation of the Demerger and whether or
not the Requisite Consent is received, the obligations of Millennium America
under the Exchangeable Security Instruments will be guaranteed by the Company.
Hanson and the Company are unable to predict whether or not the Requisite
Consent to the Proposed Amendments will be received. However, subject to
satisfaction of the Demerger Conditions, Hanson and the Company plan to proceed
with the Demerger and Hanson America intends
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to prepay the Allocated Loan regardless of the outcome of the Consent
Solicitation and whether or not the Proposed Amendments are implemented.
If Hanson America does not receive the Requisite Consent pursuant to the
Consent Solicitation and the Proposed Amendments are not implemented, there can
be no assurance that the Demerger Transactions would not, if challenged, be
determined by a court to constitute a breach of one or more of the Merger
Covenants. In addition, if the Proposed Amendments are not implemented, the
prepayment of the Allocated Loan by Hanson America will constitute a breach of
the Exchangeable Security Instruments. If a breach is determined to have
occurred and is not remedied within 60 days of Hanson America's receipt of a
written demand therefor from the holders of at least 25% in aggregate principal
amount at maturity of the then outstanding Exchangeable Notes, such holders may
declare the accreted value plus accrued interest of all Exchangeable Notes then
outstanding immediately due and payable. In addition, regardless of whether the
Proposed Amendments are implemented, it is possible that holders of the
Exchangeable Securities could seek other remedies with respect to the
Exchangeable Security Instruments, which could include commencing litigation
seeking monetary damages or declaratory or injunctive relief. The Company
believes that it will have adequate resources, including existing cash and
availability under the New Credit Facility, to repay the Exchangeable Notes in
the event they are declared immediately due and payable. Neither the breach of
one or more of the Merger Covenants nor the declaration of the accreted value
plus accrued interest of the Exchangeable Notes to be immediately due and
payable, in each case arising out of or relating to the Demerger, will
constitute a default under the New Credit Facility or any other material loan
agreement to which the Company or any Company Subsidiary will be a party upon
the Demerger. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources.'
After the Dividend Payment Date, as required by the Exchangeable Note
Indenture due to the fact that Hanson America will have ceased to be an indirect
wholly-owned subsidiary of Hanson as a result of the Demerger, Hanson America
will provide the Required Notice. Any Exchangeable Notes and ADS Rights which
remain outstanding after the purchase of Exchangeable Securities pursuant to the
exercise of Change-in-Control Rights will continue to be obligations of Hanson
America and Hanson Bermuda, respectively. If Hanson America obtains the
Requisite Consent pursuant to the Consent Solicitation and the Proposed
Amendments are implemented, the Exchangeable Securities that remain outstanding
following the purchase of Exchangeable Securities pursuant to the exercise of
Change-in-Control Rights will be governed by the Exchangeable Security
Instruments as amended by the Proposed Amendments. In addition, upon
consummation of the Stock Dividend, the payment obligations of Hanson America
under the Exchangeable Security Instruments will be guaranteed by the Company.
HISTORICAL CYCLICALITY OF SIGNIFICANT COMPONENTS OF THE CHEMICALS BUSINESS
In the six months ended June 30 1996, Quantum Chemical's polyethylene and
related products contributed approximately 40% of the Company's revenues and
approximately 40% of its operating income with an operating margin (i.e.,
operating income as a percentage of net sales) of approximately 7%. In 1995 and
fiscal 1994, these 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. During the last 25 years, the United States market for
polyethlene has grown at an average rate of approximately 4% a year. Although
demand has increased steadily, producers have experienced alternating periods of
inadequate capacity (including some due to raw material shortages), 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, United States
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
utilization rates, selling prices and operating margins in 1990-1993. Quantum
Chemical's operating income was also adversely affected in 1989 and 1990 by a
fire and explosion at its Morris, Illinois facility. An unanticipated shortage
of ethylene, the principal raw material for the production of polyethylene,
resulting from plant outages due to cold weather, floods and mechanical failure,
led to significantly increased selling prices and operating margins for
polyethylene from mid-1994 through mid-1995. The restoration of lost ethylene
supply, in addition
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to expanded polyethylene industry capacity and inventory reductions by
polyethylene users, caused selling prices and operating margins to decline
significantly from mid-1995 through the first quarter of 1996. During the second
quarter of 1996, increased export and domestic demand and higher feedstock
prices resulted in an increase in selling prices and operating margins. There
can be no assurance that future growth in demand will be sufficient to absorb
currently anticipated capacity increases in the polyethylene industry (including
ethylene capacity increases) without an overall reduction in industry capacity
utilization rates, which reductions have in the past caused selling prices and
operating margins to decline. In addition, there can be no assurance 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 'Price Volatility
of Certain Raw Materials' below, 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and 'Business.'
In the six months ended June 30, 1996, SCM Chemicals' TiO2 and related
operations contributed approximately 31% of the Company's revenues and generated
an operating loss of $6 million as a result of a $60 million non-recurring
charge to reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2. Excluding this charge, this segment
contributed approximately 32% to operating income with an operating margin of
approximately 12%. In 1995 and fiscal 1994, 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
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 resulted in industry capacity
utilization rates increasing to above 90% and 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, reducing sulfate-process manufacturing capacity
both in the United Kingdom and the United States, delaying chloride-process
expansion programs in the United Kingdom and Australia and announcing increases
in global selling prices for TiO2 products effective October 1, 1996. The
Company presently expects to incur a charge in the range of $15 million to $30
million in the quarter ending September 30, 1996 for the costs of the program.
As part of the program, SCM Chemicals will close its 10,000 tonne
sulfate-process plant in Stallingborough, England and scale 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 6%). SCM Chemicals'
sulfate-process manufacturing operations made a negative contribution of $3
million, a positive contribution of $4 million and a negative contribution of $1
millon to operating income, respectively, in the six months ended June 30, 1996
and in 1995 and fiscal 1994. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
PRICE VOLATILITY OF CERTAIN RAW MATERIALS
Quantum Chemical purchases large amounts of natural gas liquid feedstocks
(including ethane, propane and butane) for use in its production of ethylene and
propylene, which it uses, in turn, as raw materials for its production of
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 is obligated 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
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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.
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. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations.'
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 22%, 10% and 8% of total revenues in the six months ended June 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 six months ended June 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 June 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, 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.'
ENVIRONMENTAL MATTERS; LITIGATION
The operations of the Chemicals Business 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, and there can be no
assurance that material costs or liabilities will not be incurred. In
particular, the production of ethylene, TiO2, methanol 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
future requirements under Environmental Laws as well as in connection with the
investigation and remediation of alleged or actual pollution.
Certain Company Subsidiaries 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 such Company Subsidiaries or their
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predecessors, some of which disposal sites or facilities are on the Superfund
National Priorities List of the United States Environmental Protection Agency
(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. 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. The Company currently believes that the disposition of environmental
claims and disputes individually or in the aggregate should not have a material
adverse effect on the Company's combined financial position, results of
operations or liquidity. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Certain Environmental Matters' and
'Business -- Environmental Matters.'
A former subsidiary of a Company Subsidiary has been named as a defendant
or third party defendant, together with other alleged past manufacturers of lead
pigments for use in paint and lead-based paint, 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 Michigan. 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. All of these cases (except the Pennsylvania case which is on appeal
following a judgment for the defense) are in various pre-trial stages. Although
liability, if any, that may result is not reasonably capable of estimation,
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. 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 (a) 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 (b) effectively overturn court decisions in which the Company
Subsidiary'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. 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 will agree to indemnify the Company against
any losses relating to such liabilities. See 'Certain Structural Consequences of
the Demerger' below and 'Transactions and Agreements between the Company and
Hanson -- Indemnification Agreements.'
CERTAIN STRUCTURAL CONSEQUENCES OF THE DEMERGER
The Demerger Transactions are designed to separate the Chemicals Business,
which will be held by the Company, from Hanson's other businesses and
operations, which will continue to be held by Hanson or by other
newly-established or to-be-formed entities which Hanson intends to spin off to
its shareholders as separate publicly traded companies simultaneously with, or
after, the Demerger, as described under 'The Stock Dividend and Other Demerger
Transactions -- Reasons for the Demerger.' Hanson and certain Hanson
Subsidiaries (including the Hanson Subsidiaries that hold the Non-Chemical
Businesses) will agree to indemnify the Company and the Company Subsidiaries
against all liabilities, litigation and claims arising out of certain Hanson
operations, including the Non-Chemical
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Businesses, and against certain tax liabilities. See 'Transactions and
Agreements between the Company and Hanson -- 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
and the contemplated demergers of Hanson's tobacco and energy businesses, 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 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. See 'Certain Tax Considerations.' Hanson
also agreed with the U.K. Inland Revenue that the Company Board will be the only
medium through which strategic control and policy making powers are exercised,
and that Company Board meetings almost invariably will be held in the United
Kingdom during such five-year period. In the Demerger Agreements, 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 $750 million. See 'Transactions and
Agreements between the Company and Hanson -- 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 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.
It is possible that the restrictions on the Company imposed as a result of
its U.K. tax residence, and the consequences of failing to maintain such tax
residence, may deter certain potential acquirors from seeking to obtain control
of the Company. See 'Certain Anti-Takeover Effects' below.
CERTAIN ANTI-TAKEOVER EFFECTS
The Company has entered into an agreement with First Chicago Trust Company
of New York, as rights agent (the 'Rights Agreement'), pursuant to which
preferred stock purchase rights (the
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'Rights') attach to its presently outstanding shares of Common Stock and will
attach to all shares of Common Stock to be issued from and after the date hereof
(including Common Stock that will trade on a 'when issued' basis) until the
Rights expire. The Rights may cause substantial dilution to a person or group
that acquires 15% or more of the Common Stock unless the Rights are first
redeemed by the Company Board. Unless earlier redeemed, the Rights will expire
at the close of business on the date of the second annual meeting of the
Company's stockholders following the Dividend Payment Date and the Rights
Agreement will not be extended or renewed beyond this date without the approval
of the Company's stockholders. In addition, the Company's Certificate of
Incorporation and By-Laws and the Delaware General Corporation Law (the 'DGCL')
contain several provisions that could have the effect of delaying or preventing
a change of control of the Company in a transaction not approved by the Company
Board. Accordingly, shareholders of the Company could be prevented from
realizing a premium on their shares in a transaction not approved by the Company
Board. The Company's agreements with its prospective executive officers and
certain other key employees may have the effect of making such a change of
control more expensive. Finally, as noted above, the restrictions on the Company
imposed as a result of its U.K. tax residence, and the consequences of failing
to maintain such tax residence, may deter certain potential acquirors from
seeking to obtain control of the Company. See 'Dual Residence of the Company'
above, 'Executive Compensation,' 'Rights Plan' and 'Purposes and Effects of
Certain Provisions of the Company's Certificate of Incorporation, By-Laws and
Delaware Statutory Law.'
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THE STOCK DIVIDEND AND OTHER DEMERGER TRANSACTIONS
REASONS FOR THE DEMERGER
Hanson, an industrial management company, is presently engaged, through
subsidiaries, in four principal businesses conducted primarily in the United
Kingdom and the United States: chemicals, tobacco, energy, and building
materials and equipment. The Board of Directors of Hanson (the 'Hanson Board')
has determined that it is in the best interests of Hanson and its shareholders,
for the reasons set forth below, to demerger the chemicals, tobacco and energy
businesses as three separate publicly traded companies. Hanson will focus on its
building materials and equipment business, as well as continuing to hold certain
other assets.
The proposed demergers are designed to result in four publicly traded
companies with distinct financial, investment and operating characteristics. The
Hanson Board believes that each company will benefit from greater management
focus on improving the operations, profitability and long-term prospects of its
particular business. It is intended that capital structures and dividend
policies will be put into place for each company that will enable each business
to be competitive within its industry and to have the opportunity and resources
for future growth. Each of the separate companies will have increased visibility
within the financial community, enhancing the likelihood that each will achieve
appropriate market recognition by potential investors who have a specific
understanding of, and interest in, the relevant industry. In addition, each of
the separate companies will have direct access to the capital markets.
The Hanson Board also believes that the demergers will better enable
equity-based and other incentive compensation for key employees of each of the
businesses to be tied closely to the performance of their respective businesses,
and therefore to the creation of shareholder value by these key employees, than
is possible while the four principal businesses are aggregated within the Hanson
Group. The Hanson Board believes that its principal businesses, as well as
Hanson Shareholders, as stockholders of the new companies and of Hanson, should
benefit from the positive effects of these more closely-aligned management
incentives.
With respect to the demerger of the Chemicals Business in particular, the
Chemicals Business, which is principally conducted in the United States, will be
given direct access to the United States capital markets based upon financial
statements that are prepared in accordance with U.S. GAAP and expressed in U.S.
dollars, rather than financial statements that aggregate its results with the
results of Hanson's other principal businesses and are prepared in accordance
with U.K. GAAP and expressed in pounds sterling.
DEMERGER CONDITIONS
The Stock Dividend is subject to the conditions that (i) Shareholder
Approval is obtained, (ii) funds are available under the New Credit Facility,
(iii) the Common Stock is approved for listing on the NYSE subject to official
notice of issuance and (iv) subsequent to Shareholder Approval, Hanson's Board
of Directors does not pass a resolution to terminate the arrangements for the
Demerger of the Company. THE DEMERGER IS NOT CONDITIONED UPON THE RECEIPT OF THE
REQUISITE CONSENT PURSUANT TO THE CONSENT SOLICITATION.
SUMMARY OF THE DEMERGER TRANSACTIONS
The Company was incorporated in April 1996 and, until shortly before the
Dividend Payment Date, it will not have any material assets or liabilities. On
the day before the Dividend Payment Date, a Company Subsidiary will sell to
Hanson, for a cash purchase price presently estimated at $2.055 billion, certain
businesses it holds that are unrelated to the Chemicals Business. The proceeds
of this sale, together with cash balances and borrowings under the New Credit
Facility, if required, will be used to repay the $2.25 billion Allocated Loan
presently outstanding from a Hanson Subsidiary to a Company Subsidiary. On the
Dividend Payment Date, Hanson will transfer the Chemicals Business to the
Company in consideration of the Company's issuance of all its then outstanding
Common Stock to Hanson Shareholders. The Company Subsidiaries that hold the
Chemicals Business will also at that time hold the Discontinued Businesses,
which (like the businesses to be sold prior to the Dividend Payment Date) are
unrelated to the Chemicals Business. On the fifth day following the Dividend
Payment Date, the Discontinued Businesses will be sold to Hanson for a cash
purchase price presently estimated at $1.125 billion, subject to adjustment if a
material adverse change occurs with respect to the
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Discontinued Businesses. The proceeds of this sale, together with cash balances
and borrowings under the New Credit Facility, if required, will be used to repay
the $1.9 billion Hanson Loan presently outstanding from a Hanson Subsidiary to a
Company Subsidiary. The Company's Combined Financial Statements reflect the
assets and liabilities of the Chemicals Business and the Discontinued
Businesses, including the Allocated Loan. The Company's Combined Financial
Statements do not reflect the assets and liabilities of the businesses to be
sold by a Company Subsidiary prior to the Dividend Payment Date or the Hanson
Loan (all of which are unrelated to the Chemicals Business). See Note 1 to
Combined Financial Statements of the Company.
Set forth below is a more detailed description of the Demerger
Transactions.
(1) Prior to the date of this Information Statement, the Company was
incorporated in Delaware. The following steps assume Shareholder Approval of the
Stock Dividend at the Hanson EGM and, subsequent thereto, the Hanson Board not
having passed a resolution to terminate the arrangements for the Demerger and
the other conditions to the Stock Dividend having been satisfied or waived by
Hanson.
(2) On a date prior to the Demerger (expected to be on or before September
25, 1996), a Company Subsidiary will enter into stock purchase agreements with
Hanson (each, a 'Pre-Demerger SPA') for the sale by such Company Subsidiary to
Hanson of certain of the Non-Chemicals Businesses on the day before the Dividend
Payment Date (expected to be September 30, 1996), for a cash purchase price
equal to the fair market value of the respective Non-Chemicals Businesses being
sold pursuant to the Pre-Demerger SPAs as determined by independent investment
bankers retained by Hanson and the Company. The purchase price is presently
estimated to be $2.055 billion; it will be reduced dollar-for-dollar to the
extent of any non-operational dividends paid by such Non-Chemicals Businesses
between June 30, 1996 and the date of sale. The assets and liabilities of the
Non-Chemicals Businesses to be sold under the Pre-Demerger SPAs are not
reflected in the Company's Combined Financial Statements because they will be
sold prior to the Demerger. Consummation of the sales under the Pre-Demerger
SPAs will be subject to, among other things, (i) execution of the Demerger
Agreement (as described in (5) below) and (ii) the absence of certain material
adverse changes in the assets, business, operations or financial condition of
the respective Non-Chemicals Businesses being sold. However, if such a material
adverse change occurs, Hanson nonetheless will be required to purchase, and the
Company Subsidiary nonetheless will be required to sell, the Non-Chemicals
Businesses in question and the purchase price for such Non-Chemicals Businesses
will be adjusted downward to reflect the decrease in the fair market value of
such Non-Chemicals Businesses resulting from such material adverse change. If
the parties to the Pre-Demerger SPAs disagree as to the amount of any such
decrease in the purchase price, the amount will be finally determined by
arbitration.
(3) On the day before the Dividend Payment Date, Hanson will purchase from
a Company Subsidiary certain of the Non-Chemicals Businesses pursuant to the
Pre-Demerger SPAs for cash and all or a portion of the proceeds of such sale,
together with cash balances and borrowings under the New Credit Facility, if
necessary, will be used to repay the Allocated Loan in the amount of $2.25
billion.
(4) Also on the day before the Dividend Payment Date, Company Subsidiaries
will enter into stock purchase agreements with Hanson (each, a 'Post-Demerger
SPA') for the sale by such Company Subsidiaries to Hanson of the Discontinued
Businesses, which will constitute the balance of the Non-Chemical Businesses, on
the fifth day following the Dividend Payment Date (expected to be October 6,
1996), for a cash purchase price equal to the fair market value of the
respective Discontinued Businesses as determined by independent investment
bankers retained by Hanson and the Company. The purchase price is presently
estimated to be $1.125 billion; it will be reduced dollar-for-dollar to the
extent of any non-operational dividends paid by the Discontinued Businesses
between June 30, 1996 and the date of sale. The assets and liabilities of the
Discontinued Businesses to be sold under the Post-Demerger SPAs are reflected in
the Company's Combined Financial Statements as discontinued operations because
they will be sold after the Demerger. Consummation of the sales under the
Post-Demerger SPAs will be subject to, among other things, (i) the Stock
Dividend having been paid on the Dividend Payment Date and (ii) the absence of
certain material adverse changes in the assets, business, operations or
financial condition of the Discontinued Businesses being sold. However, if such
a material adverse change occurs, Hanson nonetheless will be required to
purchase, and the Company Subsidiaries nonetheless will be required to sell, the
Discontinued Businesses in question and the purchase price for such Discontinued
Businesses will be adjusted downward to reflect the decrease in
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the fair market value of such Discontinued Businesses resulting from such
material adverse change. If the parties to the Post-Demerger SPAs disagree as to
the amount of any such decrease in the purchase price, the amount will be
finally determined by arbitration. In the Demerger Agreement, the Company and a
Company Subsidiary will agree to cause all or a portion of the sale proceeds
received pursuant to the Post-Demerger SPAs, together with cash balance and
borrowings under the New Credit Facility, if necessary, to be used to repay the
Hanson Loan in the amount of $1.9 billion. The Hanson Loan is not reflected in
the Company's Combined Financial Statements because such debt did not relate to
the Chemicals Businesses.
(5) On the Dividend Payment Date (expected to be October 1, 1996), pursuant
to a demerger agreement between Hanson, the Company and a Company Subsidiary
entered into on the previous day (the 'Demerger Agreement'), Hanson will
transfer the Chemicals Business to the Company in consideration of the Company's
issuance of shares representing all of its then outstanding Common Stock to
Hanson Shareholders on a pro rata basis on the Dividend Payment Date.
(6) On the fifth day following the Dividend Payment Date, Company
Subsidiaries will sell to Hanson the Discontinued Businesses pursuant to the
Post-Demerger SPAs for cash and all or a portion of the proceeds of such sales,
together with borrowings under the New Credit Facility and cash balances, will
be used to repay the Hanson Loan.
(7) The Demerger Agreement will provide for an adjustment (the 'Pro Forma
Net Debt Adjustment') based on an audit of the Company's external indebtedness
for borrowed money and indebtedness to Hanson and Hanson Subsidiaries, net of
cash and cash equivalents, as of the Dividend Payment Date after giving pro
forma effect to the transfers of the Discontinued Businesses pursuant to the
Post-Demerger SPAs and the Required Tender Offer (the 'Pro Forma Net Debt').
Pursuant to the Pro Forma Net Debt Adjustment, Hanson will agree to make a
payment to the Company or a Company Subsidiary equal to the amount, if any, by
which Pro Forma Net Debt exceeds a specified amount to be established by Hanson
prior to the Dividend Payment Date (which will be approximately $2 billion and
not more than $2.05 billion). The amount of cash actually received by the
Company Subsidiary from the sale of the Discontinued Businesses could be less
than the purchase price established in the Post-Demerger SPAs in the event of a
material adverse change in the Discontinued Businesses between the date of the
Post-Demerger SPAs and the fifth day following the Dividend Payment Date. The
Pro Forma Net Debt Adjustment will not reflect any such reduction in the
proceeds received by the Company Subsidiary from the sale of the Discontinued
Businesses due to a material adverse change affecting such businesses;
accordingly, such a reduction could increase the amount the Company would need
to borrow under the New Credit Facility to repay the Hanson Loan and could
thereby affect the actual amount of the Company's combined indebtedness, net of
cash.
(8) Within 30 days following the Dividend Payment Date, Hanson America will
provide the Required Notice to the holders of Exchangeable Securities.
MANNER OF EFFECTING THE STOCK DIVIDEND
The Dividend Ratio will be one share of Common Stock for every 70 Ordinary
Shares (other than Ordinary Shares represented by ADSs) and every 14 ADSs held
of record at the Dividend Record Date. Hanson Shareholders will not be required
to pay for, or to surrender or exchange Ordinary Shares or ADSs in order to
receive, shares of Common Stock in the Stock Dividend. All shares of Common
Stock received by Hanson Shareholders in connection with the Stock Dividend will
be fully paid and non-assessable. Hanson Shareholders do not have any appraisal
rights in connection with the Stock Dividend.
It is anticipated that during the period from and after September 27, 1996,
up to and including the Dividend Payment Date, ADSs are expected to trade on the
NYSE with due bills attached that will entitle a purchaser of ADSs during this
period to receive one share of Common Stock for each 14 ADSs so purchased. Up to
and including the Dividend Payment Date, Ordinary Shares will trade on the LSE
on a 'cum-entitlement' basis, meaning that a purchaser of Ordinary Shares will
be entitled to receive one share of Common Stock for each 70 Ordinary Shares so
purchased. If the Demerger Conditions are not satisfied and the Stock Dividend
is not paid, all such due bills attaching to ADSs and 'cum-entitlement' rights
of purchasers of Ordinary Shares will become null and void.
IN ORDER TO BE ENTITLED TO RECEIVE COMMON STOCK IN THE STOCK DIVIDEND,
SUBJECT TO SATISFACTION OF THE DEMERGER CONDITIONS, HANSON SHAREHOLDERS MUST BE
HOLDERS OF RECORD OF ORDINARY SHARES OR ADSS
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AT 7:30 A.M. LONDON TIME, 2:30 A.M. NEW YORK TIME ON THE DIVIDEND RECORD DATE,
WHICH IS EXPECTED TO BE OCTOBER 1, 1996.
The U.K. Dividend Agent is Lloyds Bank Registrars and the U.S. Dividend
Agent is Citibank, N.A.; their addresses and telephone numbers appear on the
back cover page of this Information Statement. The Dividend Agents will commence
mailing certificates evidencing the Common Stock on the Dividend Payment Date.
FRACTIONAL SHARES
No certificates representing Fractional Shares will be issued as part of
the Stock Dividend. In lieu of receiving Fractional Shares, each Hanson
Shareholder of record on the Dividend Record Date who would otherwise be
entitled to receive a Fractional Share, and purchasers of Hanson Shares with due
bills attached or 'cum-entitlement' rights, will receive cash for such
fractional interests. As soon as practicable after the Dividend Payment Date,
the U.S. Dividend Agent will aggregate and sell through a broker all fractional
interests of Common Stock on the NYSE at then prevailing market prices and
distribute the aggregate proceeds (net of brokerage fees) ratably to
shareholders entitled to them. Holders of ADSs entitled to Fractional Share
Proceeds will receive payment in U.S. dollars. Holders of Ordinary Shares
entitled to Fractional Share Proceeds will receive payment in pounds sterling,
with the U.S. dollar net sales proceeds being converted into pounds sterling as
soon as practicable after receipt at a spot rate fixed on the date of receipt
for value two U.K. business days later. See 'Certain Tax Considerations' below
for a discussion of the U.K. and U.S. federal income tax treatment of the sale
of fractional interests.
ODD-LOT SHARES
Each Eligible Hanson Shareholder may instruct the appropriate Dividend
Agent, acting as agent for such Eligible Hanson Shareholder, (i) to sell (or, in
the case of the U.K. Dividend Agent, to instruct the U.S. Dividend Agent to
sell) all, but not less than all, of such Odd-Lot Shares on the NYSE for such
holder's account for cash or (ii) to purchase (or, in the case of the U.K.
Dividend Agent, to instruct the U.S. Dividend Agent to purchase) for such
holder's account additional shares of Common Stock so as to 'round up' such
shareholder's holding to 100 shares of Common Stock. The Odd-Lot Program will
commence on the Dividend Payment Date and remain open for 60 days thereafter.
During this period, the U.S. Dividend Agent will periodically offset requests
from Eligible Hanson Shareholders who participate in the Odd-Lot Program who
wish to sell their odd-lot holdings of Common Stock against requests from other
Eligible Hanson Shareholders who wish to purchase additional shares to 'round
up' their odd lot holdings of Common Stock to 100 shares. The U.S. Dividend
Agent will sell any Odd-Lot Shares not taken up in such off-setting process, or
purchase any shares needed to satisfy requests for 'rounding up' that cannot be
satisfied through such off-setting process, in the open market. A shareholder
selling or buying Common Stock under the Odd-Lot Program will receive or pay, as
the case may be, the weighted average price for all shares of Common Stock sold
or purchased under the Odd-Lot Program in open-market transactions on the day
the shareholder's sale or purchase occurs, less or plus a small fee to cover
brokerage commissions. In the event, however, that sales and purchases of Common
Stock under the Odd-Lot Program are evenly matched for any given processing
interval, so that requested sales are exactly satisfied by 'rounding up'
purchases, the price at which shares shall be deemed to be sold or purchased
under the Odd-Lot Program will be the average of the high and low sale price for
the Common Stock on the day on which the participating shareholder's request was
offset against that of another participating shareholder, as reported in The
Wall Street Journal.
Holders of ADSs who elect to sell their Odd-Lot Shares or purchase
additional shares under the Odd-Lot Program will receive payment or be required
to pay for such shares, as the case may be, in U.S. dollars. Holders of Ordinary
Shares who elect to sell their Odd-Lot Shares or purchase additional shares
under the Odd-Lot Program will receive payment or pay for such shares, as the
case may be, in pounds sterling. The U.S. dollar net sales proceeds payable to
holders of Ordinary Shares will be converted into pounds sterling, and the
pounds sterling 'rounding-up' payment payable by such holders will be converted
into U.S. dollars, in each case, as soon as practicable after receipt at a spot
rate fixed on the date of receipt for value two U.K. business days later.
More detailed information and a form for use by Eligible Hanson
Shareholders will be mailed to such shareholders on the Dividend Payment Date or
as soon as practicable thereafter. A completed form must be postmarked for
receipt by, or delivered to, one of the Dividend Agents on or before
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December 2, 1996 for an Eligible Hanson Shareholder to elect to participate in
the Odd-Lot Program. Neither Hanson nor the Company will solicit or make any
recommendations to Eligible Hanson Shareholders to either sell or purchase
additional shares of Common Stock in the Odd-Lot Program. See 'Certain Tax
Considerations' for a discussion of the U.K. and U.S. federal income tax
treatment of the sale of Odd-Lot Shares.
The Company may consider implementing future programs similar to the
Odd-Lot Program from time to time depending upon market conditions, shareholder
interest and the cost of such programs.
RESULTS OF THE DEMERGER TRANSACTIONS
Following the Demerger Transactions, the Company will be a separate,
publicly-traded company that holds the Chemicals Business. Immediately after
payment of the Stock Dividend, based on the number of outstanding Ordinary
Shares and ADSs, the respective number of record holders thereof on July 31,
1996 and the Dividend Ratio, the Company expects to have 74,391,400 shares of
Common Stock outstanding and held by approximately 250,000 record holders
(excluding approximately 1,889,550 shares of restricted Common Stock that the
Company anticipates will be issued to executive officers and other key employees
and approximately 2,700 shares of Common Stock to be issued to non-employee
directors pursuant to the Stock Incentive Plan shortly after the Dividend
Payment Date). The actual number of shares of Common Stock to be distributed in
the Demerger will be determined as of the Dividend Record Date. The Demerger
Transactions, including the Stock Dividend, will not affect the number of
outstanding Ordinary Shares or ADSs or any rights of Hanson Shareholders.
Additional information concerning the Demerger and Hanson's proposed
demerger of its tobacco business is contained in the Hanson Shareholder
Circular, a copy of which accompanies this Information Statement.
LISTING AND TRADING OF THE COMMON STOCK
Application has been made to list the Common Stock on the NYSE under the
symbol 'MCH.' Prior to the Dividend Payment Date, there is not expected to be
any public trading market for the Common Stock, except as follows: beginning on
September 25, 1996, the Common Stock is expected to trade on the NYSE on a 'when
issued' basis for settlement of when issued Common Stock on October 7, 1996. The
term 'when issued' means trading in shares prior to the time certificates are
actually available or issued. If the Demerger Conditions are not satisfied and
the Stock Dividend is not paid, all such when issued trading will become null
and void. If the Demerger Conditions are satisfied and the Stock Dividend is
paid on the Dividend Payment Date, it is expected that regular way trading in
the Common Stock on the NYSE will commence at 9:30 a.m. (New York time) on
October 2, 1996, subject to official notice of issuance.
The Common Stock distributed to Hanson Shareholders will be freely
transferable, except for shares received by persons who may be deemed to be
'affiliates' of the Company under the Securities Act. Persons who may be deemed
to be affiliates of the Company after the Stock Dividend generally include
individuals or entities that control, are controlled by, or are under common
control with the Company and may include certain officers and directors of the
Company. Persons who are affiliates of the Company will be permitted to sell
their Common Stock only pursuant to an effective registration statement under
the Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemptions afforded by Section 4(1) of the
Securities Act and Rule 144 thereunder.
Certain United States subsidiaries of Hanson, including Quantum Chemical,
SCM Chemicals and Glidco, presently maintain tax qualified savings plans for the
benefit of their employees (the 'Company Defined Contribution Plans'). Certain
Hanson Subsidiaries maintain similar plans (the 'Hanson Defined Contribution
Plans'). The trustees for the Company Defined Contribution Plans invest employee
and matching employer contributions in various securities, including Ordinary
Shares and ADSs. Based upon the respective plans' ownership of Ordinary Shares
and ADSs on April 30, 1996, the Hanson Defined Contribution Plans and the
Company Defined Contribution Plans are expected to hold approximately 212,755
and 407,197 shares of Common Stock, respectively, and the Company Defined
Contribution Plans are expected to hold approximately 28,503,760 Ordinary Shares
(including Ordinary Shares represented by ADSs) immediately following the
Demerger. Additionally, other Hanson pension plans and Company pension plans are
expected to hold approximately 223,774 and 79,380, respectively, shares of
Common Stock. The trustees of the Hanson Defined Contribution Plans' and defined
benefit pension plans' trusts presently intend to review, after considering
legal and financial factors and the
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trustees' fiduciary duties under applicable law, whether to retain or dispose of
any or all shares of Common Stock issued to such trusts. The trustees of the
Company Defined Contribution Plans' and defined benefit pension plans' trusts
presently intend to review, after considering legal and financial factors and
the trustees' fiduciary duties under applicable law, whether to retain or
dispose of any or all Ordinary Shares (including Ordinary Shares represented by
ADSs) and whether to invest some or all of the net proceeds thereof in Common
Stock. Following such review, the trustees of the Hanson Defined Contribution
Plans and the Company Defined Contribution Plans will independently advise the
participants in such plans of their respective investment options. Accordingly,
Hanson and the Company cannot predict the timing of any such dispositions and
acquisitions of Common Stock and/or Ordinary Shares (including Ordinary Shares
represented by ADSs).
For a discussion of certain uncertainties that should be considered in
trading in the Common Stock, see 'Risk Factors -- Absence of Trading History for
the Common Stock.'
DIVIDEND POLICY
It is anticipated that commencing in first calendar quarter of 1997 the
Company will pay quarterly cash dividends, which on an annual basis will
initially aggregate (gross) $.60 per share of Common Stock. No such dividend has
been declared, however, and the payment of any and all dividends will be a
business decision to be made by the Board of Directors of the Company from time
to time based on the Company's earnings and financial position and such other
considerations as the Company Board considers relevant.
RELATIONSHIP BETWEEN THE COMPANY AND HANSON AFTER THE STOCK DIVIDEND
After the Dividend Payment Date, the Company and Hanson will operate
independently of each other as separate public companies. Neither the Company
nor Hanson will have any beneficial stock ownership interest in the other
(although (i) employee benefit plan and share trusts sponsored by the Company
and Hanson and/or certain of their respective subsidiaries will, in the near
term and possibly the long term, hold certain of the other company's shares,
(ii) certain Hanson Subsidiaries will hold shares of Common Stock in trust for
untraced shareholders and (iii) certain Company Subsidiaries will hold Ordinary
Shares in trust for certain untraced shareholders). All executives and employees
of Hanson Industries who join the Company, including William M. Landuyt and
Robert E. Lee, will cease to be executives or employees of Hanson Industries. On
the Dividend Payment Date, Mr. Landuyt will cease to be a director of Hanson.
Among the Company's non-executive directors will be The Rt. Hon. Kenneth Baker
CH MP, a non-executive director of Hanson, The Rt. Hon. The Lord Glenarthur, an
executive of Hanson, and Martin G. Taylor, a retired Vice Chairman of Hanson.
Similarly, the Company will operate independently of the two other public
companies that will be organized by Hanson in connection with the proposed
demergers of its tobacco and energy businesses. Neither the Company, on the one
hand, nor either of such other companies, on the other hand, are expected to
have any directors or executive officers in common, nor will they have any
beneficial stock ownership interest in the other (although (i) employee benefit
plan trusts sponsored by the Company and such other companies and/or certain of
their respective subsidiaries may hold certain of such other companies' shares
and (ii) the Company will hold shares of such companies in trust for certain
untraced shareholders).
Hanson and certain Hanson Subsidiaries will enter into a series of
agreements with the Company and certain Company Subsidiaries providing for the
transfer to the Company of the Chemicals Business and the transfer to Hanson of
the Non-Chemical Businesses. See 'Summary of the Demerger Transactions.' The
Company and certain Company Subsidiaries will also enter into agreements with
Hanson and certain Hanson Subsidiaries that will fix the respective
responsibilities of Hanson and the Company and their respective subsidiaries
regarding the following: cross-indemnification against certain liabilities,
including liabilities for taxes and discontinued operations; employee benefit
matters; and other miscellaneous matters. In addition, the Company will
indemnify Hanson against certain tax liabilities and penalties that could arise
from a breach of the Company's agreement with Hanson that the Company will not
take, or fail to take, during the five years following the Dividend Payment
Date, 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. See 'Risk Factors -- Possible Effects of
Dual Residence of the Company' and 'Certain Tax Considerations.' In addition,
holders of any Exchangeable Securities that remain outstanding after the
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Required Tender Offer will continue to have ADS Rights pursuant to the
Exchangeable Security Instruments.
After completion of the Demerger Transactions, any future business
relationships between the Company and Hanson (or between the Company and any of
the other public companies proposed to be demerged by Hanson) will be determined
through arm's-length negotiations. See 'Transactions and Agreements between the
Company and Hanson.'
REASONS FOR FURNISHING THIS INFORMATION STATEMENT
This Information Statement is being furnished by Hanson solely to provide
information to Hanson Shareholders in connection with the Hanson EGM and,
subject to the satisfaction of the Demerger Conditions, the receipt of Common
Stock pursuant to the Stock Dividend. It is not, and is not to be construed as,
an inducement or encouragement to buy or sell any securities of Hanson or the
Company, whether pursuant to the Odd-Lot Program or otherwise. The information
contained in this Information Statement is believed by Hanson to be accurate as
of the date set forth on its front cover. Changes may occur after that date, and
neither Hanson nor the Company will update the information except in the normal
course of their respective public disclosure practices.
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CERTAIN TAX CONSIDERATIONS
CERTAIN U.K. AND U.S. FEDERAL TAX CONSIDERATIONS FOR U.K. HOLDERS
The following is a summary of certain U.K. and U.S. federal tax
consequences of the receipt (pursuant to the Stock Dividend), the ownership and
the disposition of Common Stock by U.K. Holders. A 'U.K. Holder' is any person
who is a resident of the U.K. for U.K. tax purposes.
This summary is based upon current U.K. and U.S. law, practice, rulings and
court decisions, the current U.S./U.K. double taxation convention relating to
taxes on income and capital gains (the 'Treaty') and the current U.S./U.K.
double taxation convention relating to taxes on estates and gifts (the 'Estate
Tax Treaty'). All the foregoing are subject to change, and any such change could
affect the continuing validity of this summary.
This summary does not address the tax consequences to a U.K. Holder that
(i) is a citizen or resident of the United States for U.S. tax purposes, (ii)
conducts a trade or business in the United States through a permanent
establishment situated therein, or performs independent personal services from a
fixed base situated therein, where the holdings of the Common Stock are
effectively connected with such permanent establishment or fixed base, or (iii)
owns or controls, directly or indirectly (including by attribution from or
through related parties), at least 10% of the voting stock of the Company.
Likewise, this summary does not address all aspects of U.K. and U.S. federal
taxation that may be relevant to a particular U.K. Holder's tax position or to
U.K. Holders who may be subject to special tax rules, such as dealers in
securities, insurance companies or other financial institutions.
THE FOLLOWING SUMMARY OF MATERIAL TAX CONSEQUENCES FOR UNITED KINGDOM
HOLDERS IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO
ADDRESS ALL THE TAX CONSIDERATIONS THAT MAY BE RELEVANT TO A U.K. HOLDER. EACH
U.K. HOLDER OF ORDINARY SHARES IS URGED TO CONSULT ITS OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO SUCH U.K. HOLDER OF THE RECEIPT OF SHARES OF COMMON
STOCK IN THE STOCK DIVIDEND, AND THE OWNERSHIP AND DISPOSITION OF THOSE SHARES
OF COMMON STOCK.
DISTRIBUTION OF COMMON STOCK
The U.K. Inland Revenue has given clearance under Section 215(1) of the
Income and Corporation Taxes Act 1988 (the '1988 U.K. Act') confirming that the
Stock Dividend will qualify as an exempt distribution within the meaning of
Section 213 of the 1988 U.K. Act and under Section 138 of the Taxation of
Chargeable Gains Act 1992 so that the Stock Dividend will be treated as a
reorganization. Accordingly:
(1) A U.K. Holder will incur no U.K. income tax liability upon the
receipt of the Common Stock and no tax credit will arise;
(2) A U.K. Holder will not be treated as having made any disposal of
its Ordinary Shares and thus the U.K. Holder will incur no liability for
capital gains tax or corporation tax on chargeable gains;
(3) The aggregate capital gains base cost of the Common Stock and the
Ordinary Shares in the hands of a U.K. Holder immediately after the Stock
Dividend will be the same as the capital gains base cost at which the U.K.
Holder held its Ordinary Shares immediately before the Stock Dividend; and
such aggregate capital gains base cost will be allocated pro rata between
the Common Stock and the Ordinary Shares based upon their respective market
values (if the demerger of Hanson's tobacco business also occurs on the
Dividend Payment Date, such aggregate capital gains base cost will be
allocated pro rata among the Common Stock, the Ordinary Shares and the
shares in the demerged tobacco company based upon their respective market
values);
(4) A U.K. Holder who receives cash in lieu of a fractional share of
Common Stock will be treated as having (i) received that fractional share
in the Stock Dividend and then (ii) sold the fractional share for cash,
thereby making a partial disposal of its holding of Common Stock. The
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U.K. Holder may, depending on its particular circumstances, be liable for
U.K. capital gains tax or U.K. corporation tax on chargeable gains on such
sale; and
(5) Neither Hanson nor the Company will pay any U.K. advance
corporation tax ('ACT') on the Stock Dividend.
The U.K. Inland Revenue has given clearance under Section 707 of the 1988
U.K. Act confirming that no notice under Section 703 of the 1988 U.K. Act need
be given with regard to the transactions involved in the Stock Dividend.
TAXATION OF DIVIDENDS
For a discussion of the Company's dividend policy, see 'The Stock Dividend
and Other Demerger Transactions -- Dividend Policy.'
U.K. Tax Consequences. The Company will be resident in the U.K. for U.K.
tax purposes and thus will generally have to pay ACT to the U.K. Inland Revenue
in respect of dividends it pays. ACT is paid at the rate of 20% of the gross
dividend, and gives rise to a tax credit for shareholders who are individuals,
equal to the amount of the ACT paid. Normally, ACT would not be refundable to
the Company, although under the so-called foreign income dividend ('FID') rules,
if the dividend is paid out of the Company's non-U.K. source income, some or all
of the ACT may be refunded to the Company depending upon the level of foreign
tax credits attaching to the income out of which the dividend is paid. The
Company presently intends to avail itself of the benefits of the FID rules where
practicable.
A U.K. Holder that is a corporation will not be subject to U.K. corporation
tax with respect to a FID dividend paid by the Company. The FID dividend will
not, however, constitute franked investment income for such corporate U.K.
Holder.
A U.K. Holder that is an individual and receives a FID dividend will be
deemed to have paid U.K. income tax on such dividend at a tax rate of 20% of the
gross dividend. A U.K. Holder that pays tax at the higher rate (currently 40%)
will therefore have a further 20% tax liability. No U.K. Holder will be entitled
to claim a repayment of ACT with respect to the FID dividend. A U.K. Holder that
is tax exempt and normally entitled to reclaim ACT on other U.K. dividends will
not be able to do so with respect to a FID dividend.
A U.K. Holder that has a liability for U.K. income tax with respect to a
FID dividend from the Company will be entitled to a credit against such U.K.
income tax for the U.S. withholding tax, if any, that may be withheld from such
dividend. See 'United States Tax Consequences' below. A U.K. Holder that is a
corporation would incur no U.K. corporation tax liability with respect to a FID
dividend from the Company and thus would receive no benefit from such credit.
If the Company pays a dividend out of U.K. source income, the FID rules
will not apply. A U.K. Holder that is a corporation will not be subject to U.K.
corporation tax with respect to the dividend. Such a dividend will constitute
franked investment income for a corporate U.K. Holder.
A U.K. Holder that is an individual will be deemed to have paid U.K. income
tax on such dividend at a tax rate of 20% of the gross dividend. An individual
U.K. Holder that pays tax at the higher rate (currently 40%) will therefore have
a further 20% tax liability. An individual U.K. Holder that has no income tax
liability will be entitled to claim a repayment of ACT with respect to the
dividend. Similarly, a tax exempt U.K. Holder will be able to claim repayment of
ACT.
U.S. Federal Income Tax Consequences. Because the Company will be a United
States corporation, dividends the Company pays to a U.K. Holder will be subject
to withholding of U.S. federal income tax. Generally, the United States imposes
withholding on dividends at a rate of 30%. Under the Treaty, however, the rate
of withholding for an Eligible U.K. Holder (as defined below) is currently 15%.
An Eligible U.K. Holder is a U.K. Holder that is a beneficial owner of
Common Stock and of the dividend paid thereon and that satisfies the following
conditions: the U.K. Holder (i) is an individual or corporation that is a
resident of the U.K. for purposes of the Treaty (and, in the case of a
corporation, is not incorporated in the United States), (ii) is not a
corporation that controls, directly or indirectly, at least 10% of the voting
stock of the Company, (iii) does not hold the Common Stock in a manner that is
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effectively connected with a permanent establishment in the United States
through which such U.K. Holder conducts business or with a fixed base in the
United States from which such U.K. Holder performs independent personal
services, (iv) under certain circumstances, does not own 10% or more of the
Common Stock, and (v) under certain circumstances, is not an investment or
holding company 25% or more of the capital of which is owned, directly or
indirectly, by persons that are not individual residents of the U.K. or citizens
of the United States. If a U.K. Holder is a partnership, estate, or trust, the
reduced 15% withholding rate with respect to a dividend paid by the Company will
be available under the Treaty only to the extent that the dividend income
derived by the partnership, estate or trust is subject to U.K. tax as income of
a resident, either in its hands or in the hands of its partners, grantor or
beneficiaries.
Under current U.S. Treasury regulations (as currently interpreted), for
purposes of determining eligibility for the 15% withholding rate under the
Treaty, the Company ordinarily may presume that dividends paid to an address in
the U.K. are paid to a resident of the U.K. absent knowledge that such
presumption is not warranted. However, under recently proposed U.S. Treasury
regulations, which are generally proposed to be effective for dividends paid
after December 31, 1997 (the 'Proposed Regulations'), the 'address' policy
described in the preceding sentence would no longer be applicable. Instead,
under the Proposed Regulations, to claim the 15% withholding rate under the
Treaty, an Eligible U.K. Holder will be required to file with the Company or its
agent a beneficial owner withholding certificate (a revised version of the
current Form W-8) signed under penalties of perjury (a 'Certificate'). On the
Certificate, the Eligible U.K. Holder will have to provide, among other things,
its name, permanent residence address, and basis for reduced rate of withholding
claimed (including any applicable treaty provisions), but will not have to
provide a U.S. taxpayer identification number. The Certificate will remain valid
for three years or until such time as a change in circumstances makes any of the
information in the Certificate incorrect.
An Eligible U.K. Holder that incurs United States withholding at a rate in
excess of the 15% withholding rate applicable under the Treaty may obtain a
refund of such excess amounts by filing an appropriate claim for refund with the
United States Internal Revenue Service (the 'IRS').
TAXATION OF CAPITAL GAINS
U.K. Tax Consequences. A U.K. Holder that is resident or ordinarily
resident in the U.K. for U.K. tax purposes may, depending upon its particular
circumstances, be liable for U.K. capital gains tax or U.K. corporation tax on
chargeable gains upon a disposition of the Common Stock.
U.S. Federal Income Tax Consequences. A U.K. Holder generally will not be
subject to U.S. federal income tax with respect to any gain recognized upon the
disposition of Common Stock unless (i) the gain is effectively connected with
the conduct of a trade or business within the United States by the U.K. Holder,
(ii) in the case of a U.K. Holder who is an individual, the U.K. Holder is
present in the United States for 183 or more days in the taxable year of the
disposition and either (a) the individual's 'tax home' for United States federal
income tax purposes is in the United States (unless such gain is attributable to
a fixed place of business in a foreign country maintained by such individual and
has been subject to a foreign tax of at least 10%), or (b) the gain is
attributable to an office or other fixed place of business maintained in the
United States by the individual, (iii) the U.K. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates, or (iv) the Company is or has been a 'United States real property
holding corporation' within the meaning of Section 897(c)(2) of the Code at any
time within the shorter of the five-year period preceding such disposition or
such U.K. Holder's holding period, and such U.K. Holder directly or indirectly
held at any time during such period more than 5% of the Common Stock. The
Company is not and does not anticipate becoming a United States real property
holding corporation.
UNITED STATES ESTATE TAX
An individual who is domiciled in the U.K. for purposes of the Estate Tax
Treaty and who is not a national of or domiciled in the United States for
purposes of the Estate Tax Treaty generally will not be subject to United States
estate or gift tax with respect to the Common Stock on the individual's death or
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on a gift of the Common Stock during the individual's lifetime provided that any
applicable U.K. inheritance tax liability is paid unless the Common Stock is
part of the business property of a permanent establishment of the individual in
the United States or pertains to a fixed base of the individual in the United
States used for the performance of independent personal services. Common Stock
held in a generation-skipping trust or trust equivalent generally will not be
subject to U.S. estate or gift tax on the occasion of a generation-skipping
transfer if, at the time of the transfer, the deemed transferor was domiciled in
the U.K. and was not a national of the United States provided that any
applicable U.K. inheritance tax liability is paid unless the Common Stock is
part of the business property of a permanent establishment of the individual in
the United States or pertains to a fixed base of the individual in the United
States used for the performance of independent personal services. In the
exceptional case where the Common Stock is subject to both U.S. estate or gift
tax and U.K. inheritance tax, the Estate Tax Treaty generally provides for the
tax paid in the United States to be credited against tax payable in the U.K. or
for the tax paid in the U.K. to be credited against tax payable in the United
States based on priority rules set out in the Estate Tax Treaty.
UNITED STATES INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
The Company generally must report annually to the IRS and to each U.K.
Holder the amount of dividends paid, the name and address of the recipient, and
the amount of U.S. federal income tax withheld with respect to such U.K. Holder.
Copies of these information returns also may be made available under the Treaty
to the U.K. tax authorities.
U.S. backup withholding tax is a withholding tax imposed at the rate of 31%
on certain payments to persons who fail to establish their status as 'exempt
recipients' or fail to furnish the information required under the U.S.
information reporting requirements. Under current United States Treasury
regulations, the U.S. backup withholding tax generally will not apply to
dividends paid on the Common Stock to a U.K. Holder at an address outside the
United States. Under the Proposed Regulations, however, the 'address' policy
described in the preceding sentence will not apply. Instead, under the Proposed
Regulations, with certain exceptions, U.S. backup withholding will not apply to
dividends paid on the Common Stock to a U.K. Holder who has established its
status as a foreign person by providing a Certificate. For a description of the
Certificate, see 'Taxation of Dividends -- United States Federal Income Tax
Consequences.'
Under current United States Treasury regulations, the payment of proceeds
upon the disposition of Common Stock to or through the U.S. office of a broker
is subject to information reporting and backup withholding unless the owner
certifies its status as an 'exempt foreign person' under penalty of perjury or
otherwise establishes an exemption. Under current United States Treasury
regulations, the payment of proceeds upon the disposition of Common Stock to or
through a foreign office of a foreign broker generally will not be subject to
information reporting or backup withholding. However, in the case of the payment
of proceeds from the disposition of Common Stock to or through a foreign office
of a broker that is either (i) a 'United States person' within the meaning of
Section 7701(a)(30) of the Code (generally, a citizen or resident of the United
States or a United States corporation, partnership or trust), (ii) a 'controlled
foreign corporation' for United States federal income tax purposes, or (iii) a
foreign person 50% or more of whose gross income from all sources for a
specified three-year period is effectively connected with the conduct of a trade
or business within the United States, information reporting (but not backup
withholding) will apply to the payment unless the broker receives a statement
from the owner, signed under penalty of perjury, certifying its status as an
'exempt foreign person' or the broker has documentary evidence in its files that
the owner is an 'exempt foreign person,' and the broker has no actual knowledge
to the contrary and certain other conditions are met.
Under the Proposed Regulations, the payment of proceeds upon the
disposition of Common Stock will be subject to information reporting and backup
withholding requirements that are substantially similar to those imposed by the
current United States Treasury Regulations as described in the preceding
paragraph.
Any excess amounts withheld under the backup withholding rules from a
payment to a U.K. Holder will be allowed as a refund or credit against such U.K.
Holder's U.S. federal income tax provided that the appropriate claim for refund
is filed with the IRS.
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CERTAIN U.S. FEDERAL AND U.K. TAX CONSIDERATIONS FOR UNITED STATES HOLDERS
The following is a summary of the material U.S. federal and U.K. tax
consequences of the receipt (pursuant to the Stock Dividend), the ownership, and
the disposition of Common Stock by United States Holders. A 'United States
Holder' is (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the law of the
United States or of any state, or (iii) an estate or trust the income of which
is includible in gross income for United States federal income tax purposes
regardless of its source.
This summary is based upon current U.S. and U.K. law, practice, rulings and
court decisions, the Treaty and the Estate Tax Treaty. All the foregoing are
subject to change, and any such change could affect the continuing validity of
this summary.
This summary does not address the tax consequences to a United States
Holder that (i) is resident (or, in the case of an individual, ordinarily
resident) in the U.K. for U.K. tax purposes, (ii) conducts a trade or business
in the U.K. through a permanent establishment situated therein, or performs
independent personal services from a fixed base situated therein, and the
holding of the Common Stock is effectively connected with such permanent
establishment or fixed base, or (iii) owns or controls, directly or indirectly
(including by attribution from or through related parties), at least 10% of the
voting stock of the Company. Likewise, this summary does not address all aspects
of United States federal and U.K. taxation that may be relevant to a particular
United States Holder's tax position or to United States Holders who may be
subject to special tax rules, such as tax-exempt organizations, dealers in
securities, financial institutions, insurance companies, and taxpayers holding
Common Stock as part of a 'straddle,' 'hedge,' or 'conversion transaction.' This
summary does not address state and local taxation in the United States.
THE FOLLOWING SUMMARY OF MATERIAL TAX CONSEQUENCES FOR UNITED STATES
HOLDERS IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO
ADDRESS ALL THE TAX CONSIDERATIONS THAT MAY BE RELEVANT TO A UNITED STATES
HOLDER. EACH UNITED STATES HOLDER OF ORDINARY SHARES OR ADSS IS URGED TO CONSULT
ITS OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH UNITED STATES
HOLDER OF THE RECEIPT OF COMMON STOCK IN THE STOCK DIVIDEND, AND THE OWNERSHIP
AND DISPOSITION OF THAT COMMON STOCK.
DISTRIBUTION OF COMMON STOCK
U.S. Federal Income Tax Consequences. Hanson has received an opinion of
Fried, Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), special United States tax counsel to Hanson, that, for U.S.
federal income tax purposes, the Stock Dividend will qualify as a tax-free
distribution under Section 355 of the Code. Counsel's opinion does not address
any other U.S. federal income tax consequences. Counsel's opinion is based upon
the Demerger Transactions as contemplated as of the date hereof and relies upon,
among other things, certain assumptions and representations of the management of
Hanson and the Company, including representations relating to the business
purposes for the Demerger Transactions, dispositions of Common Stock following
the Stock Dividend, dispositions of assets of Hanson and the Company following
the Stock Dividend, and the structure of Hanson and the Company and their
respective businesses immediately following the Stock Dividend. Neither Hanson
nor the Company currently is aware of any facts or circumstances that would
cause such assumptions to be unreasonable or such representations to be untrue.
Consummation of the Demerger Transactions is not conditioned upon receipt of an
updated opinion of counsel on the Dividend Payment Date. Counsel's opinion does
not bind the IRS or a court and thus, in considering whether the Stock Dividend
qualifies as tax-free under Section 355 of the Code, the IRS or a court could
reach a conclusion contrary to that reached in the opinion. Hanson has not
sought an advance ruling from the IRS regarding the qualification of the Stock
Dividend under Section 355 of the Code. A copy of counsel's opinion has been
filed as an exhibit to the Registration Statement on Form 10 (the 'Registration
Statement') filed by the Company with the Securities and Exchange Commission
(the 'Commission'), of which this Information Statement is a part.
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If, as concluded in counsel's opinion, the Stock Dividend qualifies as a
tax-free distribution under Section 355 of the Code, then:
(1) No gain or loss will be recognized by (and no amount will be
included in the income of) a United States Holder upon the receipt of the
Common Stock;
(2) The aggregate tax basis of the Common Stock and the Ordinary
Shares or ADSs in the hands of a United States Holder immediately after the
Stock Dividend will be the same as the basis at which the United States
Holder held its Ordinary Shares or ADSs immediately before the Stock
Dividend, and such aggregate tax basis will be allocated between the Common
Stock and the Ordinary Shares or ADSs based upon their respective fair
market values immediately after the Stock Dividend (if the demerger of
Hanson's tobacco business also occurs on the Dividend Payment Date, such
aggregate tax basis will be allocated among the Common Stock, the Ordinary
Shares or ADSs and the shares in the demerged tobacco company based upon
their respective fair market values immediately after the Stock Dividend);
(3) Assuming the Ordinary Shares or ADSs are held as a capital asset,
the holding period for the Common Stock received in the Stock Dividend by a
United States Holder will include the period during which the United States
Holder held its Ordinary Shares or ADSs;
(4) A United States Holder who receives cash in lieu of a fractional
share of Common Stock will be treated as having (i) received that
fractional share in the Stock Dividend and then (ii) sold the fractional
share for cash. Accordingly, the United States Holder will recognize gain
or loss equal to the difference between its basis for that fractional share
(determined under (2) above) and the amount of cash received. The gain or
loss will be a capital gain or loss if the fractional share would have been
held by the United States Holder as a capital asset, and will be a
long-term capital gain or loss if the United States Holder held its
Ordinary Shares or ADSs for more than one year; and
(5) Neither Hanson nor the Company will recognize a gain or loss on
the Stock Dividend.
If the IRS were to assert successfully that the Stock Dividend does not
qualify as a tax-free distribution under Section 355 of the Code, each United
States Holder that receives Common Stock in the Stock Dividend would be treated
as having received a taxable distribution in an amount equal to the fair market
value of that Common Stock on the date of the Stock Dividend. Such taxable
distribution would be taxed first as a dividend to the extent of Hanson's
current and accumulated earnings and profits (as determined for U.S. federal
income tax purposes), then as a nontaxable return of capital to the extent of
the United States Holder's basis in its Ordinary Shares or ADSs, and finally as
capital gain (assuming the Ordinary Shares or ADSs are held as capital assets).
The United States Holder's basis in the Common Stock would equal the fair market
value of the Common Stock on the date of the Stock Dividend and such holder's
holding period for the Common Stock would commence on the day following the
Stock Dividend. Neither Hanson nor the Company will be subject to U.S. federal
income tax on the Stock Dividend.
Treasury regulations governing Section 355 of the Code require that each
United States Holder that receives Common Stock in the Stock Dividend attach a
statement to its federal income tax return for the taxable year in which the
Stock Dividend occurs, showing the applicability of Section 355 of the Code to
the Stock Dividend. Hanson will provide each United States Holder with the
information necessary to comply with this requirement.
U.K. Tax Consequences. The U.K. Inland Revenue has given clearance under
Section 215(1) of the 1988 U.K. Act confirming that the Stock Dividend will
qualify as an exempt distribution within the meaning of Section 213 of the 1988
U.K. Act. Accordingly, a United States Holder will incur no U.K. tax upon the
receipt of the Common Stock.
Neither Hanson nor the Company will pay any ACT on the Stock Dividend. As a
result, the provisions of the Treaty regarding normal dividend distributions
pursuant to which a United States Holder may receive a refund of ACT subject to
a deduction of 15% withholding tax, will not be applicable to the Stock
Dividend.
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TAXATION OF DIVIDENDS
For a discussion of the Company's dividend policy, see 'The Stock Dividend
and Other Demerger Transactions -- Dividend Policy.'
U.S. Federal Income Tax Consequences. Dividends paid by the Company with
respect to the Common Stock will be taxable to a United States Holder for U.S.
federal income tax purposes to the extent paid out of the Company's current or
accumulated earnings and profits. The amount of a dividend by the Company
generally will be deemed to equal the sum of the cash dividend paid (or the fair
market value of any non-cash property distributed), plus (because the Company
will be a resident of the U.K. for U.K. tax purposes) any Paid ACT (as defined
below) if the Company pays a non-FID dividend (as defined below). Subject to
certain limitations, the 15% U.K. Withholding Tax (as defined below) will be
treated for U.S. federal income tax purposes as a U.K. income tax on U.K. source
income and thus may be claimed as a credit (or a deduction) against the United
States Holder's U.S. federal income tax liability.
A U.S. corporation that receives dividends from the Company generally will
be eligible for the dividends received deduction allowed to U.S. corporations
under the Code.
U.K. Tax Consequences. The Company will be a resident of the U.K. for U.K.
tax purposes and thus will be subject to U.K. taxation. The U.K. tax
consequences of the payment of a dividend by the Company will largely depend on
whether or not the dividend is a FID dividend (i.e., a dividend under the
so-called foreign income dividend rules).
If the Company pays a dividend that is not a FID dividend (a 'non-FID
dividend'), the Company generally will have to pay ACT to the U.K. Inland
Revenue. The ACT rate currently is 20% of the gross dividend (the gross dividend
generally being the actual dividend plus the Paid ACT). Thus, if the Company
were to pay an $80 non-FID dividend, it generally would be required to pay ACT
of $20.
Any ACT the Company pays with respect to a non-FID dividend generally will
be nonrefundable to the Company. However, an Eligible U.S. Holder (as defined
below) who receives a non-FID dividend generally will be entitled under the
Treaty to receive from the U.K. Inland Revenue a refund of any ACT paid by the
Company with respect to such dividend (the 'Treaty Payment'). The Treaty Payment
generally will equal: (i) the ACT paid by the Company with respect to such
dividend (the 'Paid ACT'); reduced by (ii) a 15% withholding tax on the sum of
the dividend plus the Paid ACT (the '15% U.K. Withholding Tax'). For example, if
the Company were to pay an $80 non-FID dividend to an Eligible U.S. Holder and
pay $20 of ACT with respect to the dividend, the Eligible U.S. Holder would be
entitled to a Treaty Payment of $5 (i.e., the Paid ACT of $20, minus 15% of the
sum of the $80 dividend plus the $20 Paid ACT), resulting in a total receipt
(before U.S. taxes) of $85. (As noted immediately above under 'U.S. Federal
Income Tax Consequences,' the Eligible U.S. Holder in this example generally
would have taxable income for U.S. federal income tax purposes of $100 (i.e.,
the $80 dividend plus the Paid ACT of $20) and a $15 foreign tax credit or
deduction.)
If the Company pays a FID dividend: (i) the Company generally will be able
to obtain a refund of some or all of the ACT it paid with respect to such
dividend; and (ii) a United States Holder generally will not be subject to U.K.
tax on the FID dividend, but will receive no Treaty Payment with respect to the
FID dividend. The Company presently intends to avail itself of the benefits of
the FID dividend rules where practicable. See 'Certain U.K. and U.S. Federal Tax
Considerations for U.K. Holders -- Taxation of Dividends' above.
An 'Eligible U.S. Holder' is a U.S. Holder that is a beneficial owner of
Common Stock and of the dividend paid thereon and that satisfies the following
conditions: the U.S. Holder (i) is an individual or corporation that is a
resident of the U.S. for purposes of the Treaty (and, in the case of a
corporation, is not also a resident of the United Kingdom for U.K. tax
purposes), (ii) is not a corporation that either alone or together with one or
more associated corporations controls, directly or indirectly, at least 10% of
the voting stock of the Company, (iii) does not hold the Common Stock in a
manner that is effectively connected with a permanent establishment in the
United Kingdom through which such U.S. Holder conducts business or with a fixed
base in the United Kingdom, from which such U.S. Holder performs independent
personal services, (iv) under certain circumstances, is not exempt from federal
income tax on dividend income in the United States, (v) under certain
circumstances, does not own 10%
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of more of the Common Stock, and (vi) under certain circumstances, is not an
investment or holding company 25% or more of the capital of which is owned,
directly or indirectly, by persons that are not individual residents or citizens
of the United States. If a U.S. Holder is a partnership, estate or trust, the
Treaty Payment with respect to a non-FID dividend by the Company will be
available under the Treaty only to the extent that the dividend income derived
by the partnership, estate or trust is subject to U.S. tax as income of a
resident, either in its hands or in the hands of its partners, grantor or
beneficiaries.
The Company intends to attempt to establish with the U.K. Inland Revenue an
arrangement whereby, subject to certain exceptions, the Treaty Payment will be
remitted together with the associated dividend to an Eligible U.S. Holder
provided the Eligible U.S. Holder completes a declaration confirming entitlement
to the Treaty Payment. An Eligible U.S. Holder who does not come within these
arrangements and who wishes to claim a Treaty Payment must do so in the manner
and at the time prescribed in Revenue Procedure 80-18, 1980-1 C.B. 623, and
Revenue Procedure 81-58, 1981-2 C.B. 678 (the 'Revenue Procedures'). Under U.K.
law, claims for Treaty Payments normally must be made within 6 years following
the end of the U.K. year of assessment (generally, April 5th of each year) in
which the dividend is paid. The first such claim by an Eligible U.S. Holder for
a payment under the Revenue Procedures is made by sending the appropriate U.K.
form in duplicate to the Director of the Internal Revenue Service Center with
which the Eligible U.S. Holder's last federal income tax return was filed. If
the Eligible U.S. Holder qualifies as a U.S. resident, the IRS will certify the
form to that effect and forward it to the U.K. Inland Revenue. Forms may be
obtained by writing to the Internal Revenue Service, Assistant Commissioner
(International), 950 L'Enfant Plaza South, S.W., Washington, D.C. 20024,
Attention: Taxpayers Service Division. Because a refund claim is not considered
made until the U.K. Inland Revenue receives the appropriate form from the IRS,
forms should be sent to the IRS well before the end of the applicable limitation
period. Any claim under the Revenue Procedures after the first claim should be
filed directly with the Inland Revenue, F.I.C.O. International, Fitzroy House,
P.O. Box 46, Castle Meadow Road, Nottingham, NG2 1BD, England.
The Company intends, whenever practicable, to inform the holders of its
Common Stock whether a dividend paid by the Company on its Common Stock is or is
not a FID dividend.
TAXATION OF CAPITAL GAINS
U.S. Federal Income Tax Consequences. Upon the sale or exchange of Common
Stock, a United States Holder generally will recognize gain or loss for U.S.
federal income tax purposes equal to the difference between the United States
Holder's tax basis in the Common Stock and the amount realized. Such gain or
loss will be capital gain or loss if the Common Stock constituted a capital
asset in the hands of the United States Holder and will be long-term capital
gain or loss if the United States Holder held the Common Stock for more than one
year.
Subject to certain limitations, a United States Holder that is liable for
both U.K. tax (i.e., capital gains tax or U.K. corporation tax on chargeable
gains) and U.S. tax on a gain on the disposal of Common Stock generally will be
entitled to credit the U.K. tax against its United States federal income tax
liability in respect of such gain.
U.K. Tax Consequences. A United States Holder who is not resident or
ordinarily resident for tax purposes in the U.K. will not be liable for U.K. tax
on capital gains on the disposal of the Common Stock unless the United States
Holder carries on a trade or business in the U.K. through a branch or agency and
the Common Stock has been used, held or acquired for the purpose of such trade,
branch or agency.
U.K. INHERITANCE TAX
An individual who is domiciled in the United States for purposes of the
Estate Tax Treaty and who is not a national of or domiciled in the U.K. for
purposes of the Estate Tax Treaty generally will not be subject to U.K.
inheritance tax with respect to the Common Stock on the individual's death or on
a gift of the Common Stock during the individual's lifetime provided that any
applicable United States federal gift or estate tax liability is paid, unless
the Common Stock is part of the business property of a permanent establishment
of the individual in the U.K. or pertains to a fixed base of the individual in
the
33
<PAGE>
<PAGE>
U.K. used for the performance of independent personal services. Where the Common
Stock has been placed in trust by a settlor who, at the time of settlement, was
domiciled in the United States and was not a national of the U.K., the Common
Stock generally will not be subject to U.K. inheritance tax provided that any
applicable United States federal gift or estate tax liability is paid, unless
the Common Stock is part of the business property of a permanent establishment
of the individual in the U.K. or pertains to a fixed base of the individual in
the U.K. used for the performance of independent personal services. In the
exceptional case where the Common Stock is subject to both U.K. inheritance tax
and to U.S. federal gift or estate tax, the Estate Tax Treaty generally provides
for the tax paid in the U.K. to be credited against tax payable in the United
States or for the tax paid in the United States to be credited against tax
payable in the U.K. based on priority rules set out in the Estate Tax Treaty.
U.K. STAMP DUTY AND STAMP DUTY RESERVE TAX
A United States Holder will not be subject to U.K. Stamp Duty Reserve Tax
on the disposition of Common Stock, nor will it generally be necessary to pay
Stamp Duty on any such disposition, provided that any transfer of such Common
Stock is executed outside the U.K.
RIGHTS PLAN
Holders of Common Stock may, depending upon the circumstances, recognize
taxable income should the Rights become exercisable or upon the occurrence of
certain events thereafter. See 'Rights Plan.'
34
<PAGE>
<PAGE>
CAPITALIZATION
The following table, which is unaudited, sets forth, as of June 30, 1996,
the capitalization of the Company, as adjusted to reflect the Demerger
Transactions as if they occurred as of that date. This data should be read in
conjunction with 'The Stock Dividend and Other Demerger Transactions -- Summary
of the Demerger Transactions,' '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
Information Statement. See 'Index to Combined Financial Statements.'
<TABLE>
<CAPTION>
(IN MILLIONS)
AS OF JUNE 30, 1996
------------------------------------
ACTUAL ADJUSTMENTS AS ADJUSTED
------ ----------- -----------
<S> <C> <C> <C>
Short-term debt:
Notes payable.......................................................... $ 429 $-- $ 429
Other.................................................................. 11 -- 11
------ ----------- -----------
Total short-term debt............................................. $ 440 $-- $ 440
------ ----------- -----------
------ ----------- -----------
Long-term debt:
New Credit Facility.................................................... -- 622 622
Exchangeable Notes(3).................................................. 1,024 60 1,084
Hanson Indebtedness(1)................................................. 2,250 (2,250) --
Other.................................................................. 37 -- 37
------ ----------- -----------
Total long-term debt.............................................. $3,311 $(1,568) $ 1,743
------ ----------- -----------
------ ----------- -----------
Stockholders' equity:
Common Stock, 250,000,000 shares, par value $.01 per share authorized,
76,283,650 shares issued and outstanding (as adjusted)(2)............ $ -- $ 1 $ 1
Paid-in capital........................................................ -- 1,284 1,284
Invested capital....................................................... 627 (627) --
------ ----------- -----------
Total stockholders' equity........................................ $ 627 $ 658 $ 1,285
------ ----------- -----------
------ ----------- -----------
</TABLE>
- ------------
(1) The table reflects the Allocated Loan, which has been allocated to the
Company in the Combined Financial Statements because it relates directly to
the Chemicals Business. If the Requisite Consent is not received pursuant to
the Consent Solicitation and the Proposed Amendments to the Exchangeable
Security Instruments are not implemented, repayment of the Allocated Loan
will constitute an event of default thereunder. See 'Risk
Factors -- Potential Defaults under Exchangeable Securities.' As part of the
Demerger Transactions, the Company will also repay the $1.9 billion Hanson
Loan, which has not been allocated to the Company in the Combined Financial
Statements. Accordingly, the Hanson Loan and its subsequent repayment will
have no impact on the capitalization of the Company.
(2) Gives effect to the payment of the Stock Dividend and the expected issuance
shortly after the Dividend Payment Date pursuant to the Stock Incentive Plan
of approximately 1,889,550 shares of restricted Common Stock to the
Company's executive officers and other key employees and 2,700 shares of
Common Stock to the Company's non-employee directors. See 'Description of
Capital Stock -- Authorized Capital Stock' and 'Executive
Compensation -- Company Incentive Compensation and Benefit Plans.'
(3) Within 30 days following the Dividend Payment Date, as required by the
Exchangeable Note Indenture, the Company will provide the Required Notice
specifying that it will repurchase Exchangeable Securities from holders who
exercise their Change-in-Control Rights under the Exchangeable Security
Instruments for cash at 101% of the accreted value of the Exchangeable Notes
plus accrued interest. Such repurchases will be funded with additional
long-term borrowings under the New Credit Facility.
35
<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 June 30, 1996, June 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 annual 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. Historical financial data may not be indicative of the
Company's future performance as an independent company. Furthermore, 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
Information Statement. See 'Index to Combined 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.
<TABLE>
<CAPTION>
(IN MILLIONS)
SIX MONTHS ENDED THREE MONTHS
JUNE 30, YEAR ENDED ENDED FISCAL YEAR ENDED SEPTEMBER 30,
----------------------- DECEMBER 31, DECEMBER 31, -------------------------------------
1996 1995 1995 1994 1994 1993 1992 1991
------ ------- ------------ ------------ ------ ------- ------ ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................ $1,510 $ 2,067 $ 3,800 $ 908 $3,288 $ 862 $ 920 $ 941
Operating income......... 109 (1) 537 842 203 344 139 181 213
Income from continuing
operations............. 93 (1)(2) 205 331 84 66 103 138 160
Net (loss) income........ (3,111)(1)(2)(3) (178) 349 96 94 123 194 142
BALANCE SHEET DATA (AT PERIOD
END):
Total assets(4).......... $6,140 $10,138 $ 10,043 $ 10,024 $9,691 $10,135 $5,182 $1,704
Total liabilities........ 5,513 5,403 5,242 5,166 5,053 4,692 663 639
Invested capital(4)...... 627 4,735 4,801 4,858 4,638 5,443 4,519 1,065
OTHER DATA (WITH RESPECT TO
CONTINUING OPERATIONS):
Depreciation and
amortization........... $ 102 $ 122 $ 241 $ 59 $ 247 $ 44 $ 38 $ 21
Capital expenditures..... 153 107 276 30 109 28 43 59
</TABLE>
- ------------
(1) Includes the effects of a non-cash charge of $60 ($39 after-tax) to reduce
the carrying value of certain facilities employed in the sulfate-process
manufacturing of TiO2, as described in Note 3 to the Combined Financial
Statements of the Company.
(2) Includes the effects of an after tax gain of $80 resulting from the
Company's sale 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.
(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 $597 at June 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.
36
<PAGE>
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data reflect the
Demerger Transactions (including the Stock Dividend) as if all conditions to the
Demerger Transactions had been satisfied or waived, and all Demerger
Transactions had been completed as of June 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
JUNE 30, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS OF FIFTH DAY
PRO FORMA AS OF DIVIDEND PRO FORMA FOLLOWING DIVIDEND
ACTUAL ADJUSTMENTS PAYMENT DATE ADJUSTMENTS PAYMENT DATE
------ ----------- -------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........ $ 434 $ (321)(A) $ 113 $ 113
Trade receivables, net........... 513 513 513
Inventories...................... 442 442 442
Other current assets............. 153 (80)(A(4)) 73 73
Net assets of Discontinued
Businesses to be sold to
Hanson......................... 597 597 $ (597)(A(3)) 0
------ ------- -------
Total current assets........ 2,139 1,738 1,141
------ ------- -------
Property, plant and equipment, net.... 1,925 1,925 1,925
Investments and other assets.......... 286 2 (A(4)) 288 288
Goodwill.............................. 1,790 1,790 1,790
------ ------- -------
Total assets................ $6,140 $5,741 $5,144
------ ------- -------
------ ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable.................... $ 429 $ 429 $ 429
Current maturities of long-term
debt........................... 11 11 11
Trade accounts payable........... 155 155 155
Income taxes payable............. 50 50 50
Accrued expenses and other
liabilities.................... 547 547 547
------ ------- -------
Total current liabilities... 1,192 1,192 1,192
Non-current liabilities:
Long-term debt................... 3,311 (443)(A) 2,868 (1,125)(A(3)) 1,743
Deferred income taxes............ 230 (96)(A(5)) 134 134
Other liabilities................ 780 10 (A(9)) 790 790
------ ------- -------
Total liabilities........... 5,513 4,984 3,859
Invested capital/stockholders'
equity.............................. 627 130 (A) 757 528 (A(3)) 1,285 (B)
------ ------- -------
Total liabilities and
invested capital/
stockholders' equity...... $6,140 $5,741 $5,144
------ ------- -------
------ ------- -------
</TABLE>
(footnotes on following page)
37
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET:
(A) To reflect the effects on cash, debt and stockholders' equity of the
following transactions:
<TABLE>
<CAPTION>
STOCKHOLDERS'
CASH(1) DEBT(2) EQUITY
------- ------- -------------
<S> <C> <C> <C>
Actual at June 30, 1996............................................ $ 504 $(3,751) $ 627
Financing Costs(4)....................................... (5) -- (83)
Allocated Tax Attributes(5).............................. -- -- 96
Stock Incentive Awards(9)................................ -- -- (10)
Exchangeable Securities Adjustment(7).................... -- (60) (60)
Allocated Loan Payments(10).............................. (2,250) 2,250 --
New Borrowings(6)........................................ 622 (622) --
Capital Contribution(8).................................. 1,312 (1,125) 187
------- ------- -------------
Sale of Discontinued Businesses(3)....................... -- 1,125 528
------- ------- -------------
Pro forma as of the fifth day following the Dividend Payment
Date............................................................. $ 183 $(2,183) $ 1,285
------- ------- -------------
------- ------- -------------
</TABLE>
-----------------
(1) Cash includes, on an actual and pro forma basis, restricted cash of
$70 included in other current assets.
(2) Debt includes notes payable, current maturities of long-term debt and
long-term debt.
(3) To reflect the proceeds from the sale of the Discontinued Business
($1,125), all of which proceeds will be used to repay a portion of the
Hanson Loan. The proceeds from such sales are based on current
estimates of fair market values for the businesses to be sold assuming
no material adverse change occurs with respect to the Discontinued
Businesses which would decrease the proceeds of such sales. The
difference between the proceeds from the sale of Discontinued Business
and the underlying carrying value of the net assets of these
operations ($597 at June 30, 1996) has been reflected as a capital
transaction.
(4) To reflect the expected fees of $2 related to the New Credit Facility,
the cost of the Consent Solicitation of $3 and the write-off of $80 of
prepaid interest costs principally related to Hanson Indebtedness.
(5) To reflect the alternative minimum tax credits that are allocable to
the Company and are likely to be realized subsequent to the Demerger.
(6) To reflect the initial borrowings under the New Credit Facility.
(7) Within 30 days following the Dividend Payment Date, as required by the
Exchangeable Note Indenture, Hanson America will provide the Required
Notice specifying that it will repurchase Exchangeable Securities from
holders who exercise their Change-in-Control Rights in accordance with
the terms of the Exchangeable Securities Instruments and the Required
Notice for 101% of the accreted value of the Exchangeable Notes plus
accrued interest. At June 30, 1996, the carrying value of the
Exchangeable Notes plus accrued interest was approximately $1,024. The
difference between the amount payable pursuant to the exercise of
holders' Change-in-Control Rights of approximately $1,084 (assuming
100% exercise) and the carrying amount of the Exchangeable Securities
of approximately $1,024 will be included in the computation of the Pro
Forma Net Debt Adjustment.
(8) Net capital contribution from Hanson to arrive at net debt of $2.0
billion. The Demerger Agreement will provide for an adjustment
requiring a payment from Hanson to the Company or a Company Subsidiary
to the extent that the Company's combined indebtedness, net of cash
and cash equivalents, at the Dividend Payment Date, after giving pro
forma effect to the application of proceeds from the sale of the
Discontinued Businesses and the repurchase of Exchangeable Securities
pursuant to the exercise of holders' Change-in-Control Rights
(assuming 100% exercise) exceeds a specified amount to be established
by Hanson prior to the Dividend Payment Date (which will be
approximately $2.0 billion and not more than $2.05 billion). Such
adjustment, however, will not take into consideration any reduction in
the sales
(footnotes continued on next page)
38
<PAGE>
<PAGE>
(footnotes continued from previous page)
price of the Discontinued Businesses which may result from a material
adverse change occurring with respect to such businesses. For purposes
of calculating the Pro Forma Net Debt Adjustment as of June 30, 1996,
it has been assumed that there has not been a material adverse change
that would negatively affect the amount of anticipated proceeds from
such transactions.
(9) To reflect the expected non-cash compensation expense that will arise
as a result of the non-performance based portion of the expected
award, shortly following the Dividend Payment Date, of an aggregate of
approximately $16.1 ($10 after taxes) of restricted Common Stock to
executive officers and other key employees of the Company pursuant to
the Stock Incentive Plan. The expected award will vest in three equal
tranches in each of October 1999, 2000 and 2001. See 'Executive
Compensation -- Company Incentive Compensation and Benefit
Plans -- Stock Incentive Plan.'
(10) To reflect the repayment of the Allocated Loan on September 30, 1996
as part of the Demerger Transactions. If the Proposed Amendments to
the Exchangeable Security Instruments are not implemented, the
prepayment of the Allocated Loan will constitute an event of default
thereunder. See 'Risk Factors -- Potential Defaults under the
Exchangeable Securities.'
(B) The Company's management presently anticipates that the Company's pro forma
Invested Capital upon completion of the Demerger Transactions will not be
materially different than as reflected above. The actual amount, however,
will be dependent upon the actual net cash used or provided by the
operations of the Chemicals Business from July 1, 1996 through the Dividend
Payment Date, including capital expenditures, compared to that which is
anticipated, and whether or not there is a material adverse change in one
or more of the Discontinued Businesses requiring a downward adjustment of
the purchase price of the Discontinued Businesses to be sold on the fifth
day following the Dividend Payment Date. Accordingly, the Company's actual
Invested Capital upon completion of the Demerger Transactions may be
greater or less than as reflected above. See 'The Stock Dividend and Other
Demerger Transactions -- Summary of the Demerger Transactions.'
39
<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 (D)
------ ---------
Operating income.............................................................. $ 842 $ 776
Interest expense......................................................... 240 (83)(C) 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................................. $5.10 (F)
---------
---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
----------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C>
Net sales..................................................................... $1,510 $ $ 1,510
Operating costs and expenses:
Cost of products sold.................................................... 1,146 1,146
Depreciation and amortization............................................ 102 102
Selling, development and administrative expense.......................... 93 5 (B) 102
4 (D)
Impairment of assets..................................................... 60 60
------ ---------
Operating income.............................................................. $ 109 $ 100
Interest expense......................................................... 108 (36)(C) 72
Interest income.......................................................... (12) (12)
Gain on sale of Suburban Propane......................................... (212) (212)
Equity in earnings of Suburban Propane................................... (37) (37)
Other expense, net....................................................... 15 (17)(B) (2)
------ ---------
Income from continuing operations before provision for income taxes........... 247 291
Provision for income taxes.................................................... (154) (16)(E) (170)
------ ---------
Income from continuing operations............................................. $ 93 $ 121
------ ---------
------ ---------
Earnings per share from continuing operations................................. $ 1.62 (F)
---------
---------
</TABLE>
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 February, 1996.
(B) To reflect the estimated management, legal, accounting and investor
relations expenses associated with the Company's status as if it were an
independent publicly-traded company.
(C) To reflect (i) the interest expense for New Credit Facility borrowings at
an assumed rate of .35% over LIBOR per annum, (6.55% for the year ended
December 31, 1995 and 6.0% for the six months ended June 30, 1996); and
(ii) amortization of capitalized debt costs.
(D) To reflect the expected non-cash compensation expense that will arise as a
result of the performance based portion of the expected award, shortly
following the Dividend Payment Date, of an aggregate of approximately $47.5
of restricted Common Stock to executive officers and other key employees of
the Company pursuant to the Stock Incentive Plan. Such awards will vest in
three
(footnotes continued on next page)
40
<PAGE>
<PAGE>
(footnotes continued from previous page)
equal tranches, subject to the achievement of performance criteria to be
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 -- Stock Incentive Plan.'
(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 approximately 74,866,500 shares of Common Stock were outstanding.
This is based on (i) the number of outstanding Ordinary Shares and ADSs at
the close of business on June 30, 1996 and the Dividend Ratio and (ii) the
assumed issuance pursuant to the Stock Incentive Plan, shortly after the
Dividend Payment Date, of approximately 472,400 shares of restricted Common
Stock to executive officers and other key employees of the Company pursuant
to the Stock Incentive Plan (excluding approximately 1,417,150 additional
shares of restricted Common Stock to be subject to performance criteria
established by the Compensation Committee of the Company's Board of
Directors after the Demerger) and approximately 2,700 shares of Common
Stock to non-employee directors of the Company. See 'Executive
Compensation -- Company Incentive Compensation and Benefit Plans.'
41
<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.'
Basis of Presentation. The Company's Combined Financial Statements include
the assets and liabilities of the Chemicals Business and the Discontinued
Businesses, including the Allocated Loan. They do not include the assets and
liabilities of the businesses unrelated to the Chemicals Business that will be
sold prior to the Dividend Payment Date or the Hanson Loan. See Note 1 to the
Company's Combined Financial Statements.
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
will have 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. The fiscal year-end
of the Discontinued Businesses, which the Company will agree to sell to Hanson
on the fifth day following the Dividend Payment Date, will continue to be
September 30. Accordingly, in the discussion of the results of operations of the
Discontinued Businesses, presented below, results for the year ended September
30, 1995 are compared to those of fiscal 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.
RESULTS OF OPERATIONS
After giving effect (as of January 1, 1996) to the February 1996 sale of an
approximately 74% equity interest in Suburban Propane, the Chemicals Businesses'
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 aroma and flavor chemicals, which are produced by Glidco. As
shown in the table below, Suburban Propane 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.
42
<PAGE>
<PAGE>
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>
SIX MONTHS ENDED THREE MONTHS YEAR ENDED
JUNE 30, YEAR ENDED ENDED SEPTEMBER 30,
--------------------------- DECEMBER 31, DECEMBER 31, ---------------
1996 1995 1995 1994 1994 1993
------------ ------------ ------------ ------------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Quantum Chemical(1):
Polyethylene and related
products........................ $ 600 $ 771 $1,374 $327 $1,061 $ --
Acetyls and alcohol............... 203 263 461 105 347 --
Specialty polymer products........ 186 187 363 82 318 --
SCM Chemicals:
Titanium dioxide and related
products........................ 461 455 860 185 795 783
Glidco:
Aroma and flavor chemicals........ 60 51 103 24 89 79
------------ ------------ ------------ ------ ------ ------
1,510 1,727 3,161 723 2,610 862
Propane(2)............................. -- 340 639 185 678
------------ ------------ ------------ ------ ------ ------
Total Net Sales.............. $1,510 $2,067 $3,800 $908 $3,288 $ 862
------------ ------------ ------------ ------ ------ ------
------------ ------------ ------------ ------ ------ ------
OPERATING INCOME
Quantum Chemical(1):
Polyethylene and related
products........................ $ 44 $ 260 $ 380 $ 92 $ 23 $ --
Acetyls and alcohol............... 28 101 142 38 70 --
Specialty polymer products........ 23 36 59 13 42 --
SCM Chemicals:(3)
Titanium dioxide and related
products........................ (6) 86 177 27 106 113
Glidco:
Aroma and flavor chemicals........ 20 16 31 7 27 26
------------ ------------ ------------ ------ ------ ------
109 499 789 177 268 139
Propane(2)............................. -- 38 53 26 76 --
------------ ------------ ------------ ------ ------ ------
Total Operating Income....... $ 109 $ 537 $ 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
February 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.
(3) The six months ended June 30, 1996 includes a non-cash charge of $60 to
reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2, as described in Note 3 to the
Combined Financial Statements of the Company.
HISTORICAL CYCLICALITY OF SIGNIFICANT COMPONENTS OF THE CHEMICALS BUSINESS
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 smaller markets for aroma and flavor chemicals and
other specialty products are generally more stable in terms of industry demand,
selling prices and operating margins.
43
<PAGE>
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Polyethylene and Related Products
In the six months ended June 30, 1996, Quantum Chemical's polyethylene and
related operations contributed approximately 40% of the Company's revenues and
approximately 40% of its operating income with an operating margin of
approximately 7%. In 1995 and fiscal 1994, these 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. During the last 25 years, the
United States market for polyethlene has grown at an average annual rate of
approximately 4%. However, although demand has increased steadily, producers
have experienced alternating periods of inadequate capacity (including some due
to raw material shortages), 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, United States 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, polyethylene's
principal raw material, 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.
The restoration of lost ethylene supply, in addition to expanded polyethylene
industry capacity and inventory reduction by polyethylene users, caused selling
prices and operating margins to decline significantly from mid-1995 through the
first quarter of 1996. During the second quarter of 1996, increased export and
domestic demand and higher feedstock prices resulted in an increase in selling
prices and operating margins. There can be no assurance that future growth in
demand will be sufficient to absorb currently anticipated capacity increases in
the polyethylene industry (including ethylene capacity increases) without an
overall reduction in industry capacity utilization rates, which reductions have
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.'
TiO2 and Related Products
In the six months ended June 30, 1996, SCM Chemicals' TiO2 and related
operations contributed approximately 31% of the Company's revenues and generated
an operating loss of $6 million as a result of a $60 million non-recurring
charge to reduce the carrying value of certain assets employed in the
sulfate-process manufacturing of TiO2. Excluding this charge, this segment
contributed approximately 32% to operating income with an operating margin of
approximately 12%. In 1995 and fiscal 1994, 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, reducing sulfate-process manufacturing
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capacity both in the United Kingdom and the United States, delaying
chloride-process expansion programs in the United Kingdom and Australia and
announcing increases in global selling prices for TiO2 products effective
October 1, 1996. The Company presently expects to incur a charge in the range of
$15 million to $30 million in the quarter ending September 30, 1996 for the
costs of the program. As part of the program, SCM Chemicals will close its
10,000 tonne sulfate-process plant in Stallingborough, England and scale 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%). SCM Chemicals' sulfate-process manufacturing operations made
a negative contribution of $3 million, a positive contribution of $4 million and
a negative contribution of $1 million to operating income, respectively, in the
six months ended June 30, 1996 and in 1995 and fiscal 1994. See 'Business.'
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
The Company had operating income of $109 million for the six months ended
June 30, 1996, a decrease of $428 million (80%) from the six months ended June
30, 1995 and net sales of $1,510 million, a decrease of $557 million (27%). The
Company recorded a non-recurring non-cash pre-tax charge of $60 million during
the 1996 period to reduce the carrying value of certain facilities employed in
the sulfate-process manufacturing of TiO2 products. In addition, as a result of
the Company's sale of a 73.6% interest in Suburban Propane through an initial
public offering in February 1996, the Company's interest in the results of
Suburban's operations since January 1, 1996 have been reflected as Equity in
Earnings of Investee in the Combined Financial Statements. Suburban Propane
contributed $340 million to net sales and $38 million to operating income for
the six months ended June 30, 1995. Excluding Suburban Propane and the
non-recurring charge referred to above, the Company's net sales decreased $217
million (13%) and its operating income decreased $330 million (66%) from the
comparable period of the prior year. These decreases are primarily due to a 76%
reduction in operating income from Quantum Chemical (excluding propane
operations) to $95 million on a 19% decrease in net sales to $989 million, as
prices declined from their 1995 peak levels.
QUANTUM CHEMICAL. 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 31% lower than the comparable period of 1995 as a result of sluggish
economic conditions, excess industry capacity and declining ethylene prices.
Ethylene prices on the spot market declined over 43% during the first half of
1996 as industry supply problems were resolved and inventories were rebuilt.
Average selling prices for the period for acetyls and alcohol and specialty
polymers also declined 22% and 13%, respectively, compared to the comparable
period of 1995. Somewhat mitigating the impact of decreased selling prices on
operating income was a 14% increase in overall unit sales volume.
Net sales of polyethylene and related products were $600 million for the
six months ended June 30, 1996, a decrease of $171 million (22%). Operating
income decreased $216 million to $44 million, principally as a result of a 37%
reduction in average unit selling prices for polyethylene products. The lower
prices reflected competitive pressure arising from excess industry capacity, the
correction of ethylene inventory supplies and general economic softening. Within
this environment of declining selling prices and strong competition,
polyethylene unit volume for the period increased 10% to 1,676 million pounds,
principally from higher exports to the Far East.
The effective dates of polyethylene price increases announced in December
1995 and March 1996 were postponed to April and May 1996 with further price
increases announced for June, July and September of 1996. Supported by the
increased demand in export markets and increasing cost of feedstocks derived
from natural gas, an upturn in pricing is currently being realized with average
selling prices in the quarter ended June 30, 1996 up 10% compared to the prior
quarter. While average unit costs were relatively flat year on year, feedstock
costs for ethylene have risen dramatically as a result of colder than normal
winter temperatures increasing the demand for natural gas and restraining
deliveries. Consequently, ethylene pricing has begun to rise as industry
ethylene inventories decreased and derivative demand increased.
Net sales of acetyls and alcohols decreased $60 million (23%) to $203
million in the first half of 1996, while operating income decreased $73 million
(72%) to $28 million. The decline in operating
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income primarily resulted from decreased average selling prices, which were 22%
lower than during the comparable period of the prior year. 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 52%.
Vinyl acetate also experienced a 27% decline in average selling prices for the
period as export markets were affected by oversupply and weakened demand.
Reflecting this decreased demand, unit sales volume fell 2% during the 1996
period.
Net sales of specialty polymer products were $186 million for the 1996
period, a decrease of $1 million from 1995. Operating income decreased $13
million (36%) to $23 million. The decline in operating income resulted from a
13% decline in average selling prices caused by declining ethylene and
polyethylene prices and general slowness in the economy. Growth in the wire and
cable markets was principally responsible for a 24% 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 six months ended June 30, 1996, Quantum Chemical continued to
progress in its reengineering and cost reduction programs with 1996 savings thus
far of approximately $15 million toward a full year goal of $30 million. In
addition, several expansion and improvement projects proceeded on target, with a
new 480 million pound LLDPE plant at the La Porte facility scheduled for
completion in September 1996, a restart of 250 million pounds of LLDPE capacity
at the Morris facility completed in June 1996 and conversion of 300 million
pounds of LLDPE production capacity to 300 million pounds of HDPE at Port Arthur
scheduled for September 1996.
SCM CHEMICALS. SCM Chemicals' operating results for the first six months of
1996 decreased $92 million from $86 million in the comparable period in 1995.
The results for the first half of 1996 reflect a non-recurring charge of $60
million to reduce the carrying value of certain property, plant and equipment
employed by SCM Chemicals in its sulfate-process manufacturing of TiO2 caused by
changes in market conditions. The TiO2 industry has been undergoing severe price
competition, and as a consequence, global pricing has been deteriorating over
the past six months, particularly in the quarter ended June 30, 1996. The price
erosion is attributed to a confluence of market factors, including customer
de-stocking, consolidations in the paint and coatings industry, a weak paper
industry, increased TiO2 capacity, as well as a weak spring paint and coating
season, which all contributed to greater competition for market share. These
factors have had severe effects on SCM Chemicals' TiO2 sulfate-process products
which have higher production costs and lower selling prices than its
chloride-process products. SCM Chemicals traditional market for TiO2
sulfate-process products is the paper industry, where many customers have
converted to chloride-process products. SCM Chemicals' sulfate-process
manufacturing operations made a negative contribution of $3 million, a positive
contribution of $4 million and a negative contribution of $1 millon to operating
income, respectively, in the six months ended June 30, 1996 and in 1995 and
fiscal 1994. A cash-flow forecast of SCM Chemicals' sulfate-process operations
based on expected levels of pricing and sales volume considering current market
conditions indicated insufficient cash flows to recover its investment, and
required a write-down of the entire sulfate-process fixed assets of $60 million.
Excluding this non-recurring charge, income decreased $32 million (37%) to $54
million for the six months ended June 30, 1996. Net sales increased slightly to
$461 million compared to $455 million for the first half of 1995.
Apart from the non-recurring charge, the decline in operating income
primarily results from increased manufacturing costs due largely to increased
costs of titanium ore feedstocks, coke and utilities. Costs also increased as a
result of additional operating expenses, including depreciation, related to the
technology based TiO2 capacity expansion and the new environmental protection
facilities.
Sales volume for the six months ended June 30, 1996 increased only slightly
(1%) as overall demand was sluggish as a result of generally slow economies in
the United States and Europe. Average selling prices in U.S. dollar terms were
essentially unchanged for the six months ended June 30, 1996 compared to 1995 as
weak demand and high producer inventories resulted in severe industry-wide price
competition as producers attempted to maintain volume and market share.
Accordingly, average prices in the quarter ended June 30, 1996 declined 5% as
compared to the prior year's quarter. Geographically, price declines amounted to
3% in the United States, 5% in Europe and 10% in Asia/Pacific.
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In July 1996, in response to these deteriorating market conditions, SCM
Chemicals announced its intention to close its sulfate-process TiO2 plant in
Stallingborough, England and scale back production at its 66,000 tonne
sulfate-process facility in Baltimore, Maryland by approximately one-third. In
addition, completion of the expansion of the chloride-process TiO2 manufacturing
facility in the United Kingdom will be delayed six months until July 1998, and
while preparatory work continues, expenditures for the 111,000 tonne expansion
in Australia will be rephased until market conditions and trends improve.
Furthermore, a global price increase for TiO2 of $150 per tonne was announced
effective October 1, 1996 and cost containment measures and reengineering
efforts within SCM Chemicals will be undertaken to reduce operating costs.
During the six months ended June 30, 1996, SCM Chemicals' TiO2 plants
operated at 86.9% of capacity compared to 97.6% during the comparable period of
the prior year. Production downtime was scheduled during this period of market
weakness to complete the technology-based capacity improvements.
GLIDCO. Glidco continued its growth trend with record half year operating
income of $20 million, an increase of $4 million (25%) compared to the
comparable period in 1995. Net sales increased $9 million (18%) to $60 million.
This continued growth reflects a 4% increase in unit sales volume over 1995 as
worldwide demand for aroma chemicals continued to increase. Demand for Glidco's
production of aroma chemicals continued to match capacity, even with the
expansion of Glidco's plant capacity partially completed. The impact of this
strong demand more than offset significant increases in the cost of raw
materials (CST) (almost 67% on a unit basis). Reflecting Glidco's continued
emphasis on higher-margin intermediate and upgrade products, margins held steady
at 46% in the first half of both 1996 and 1995.
To continue to meet the growing worldwide demand for its products, Glidco's
ongoing 20% expansion plans are progressing on target.
DISCONTINUED BUSINESSES. The Company's Discontinued Businesses consist of
certain of Hanson's U.S. building materials businesses, operating under the name
'Cornerstone,' and materials handling businesses, operating under the name
'Grove Worldwide.' The results of operations of the Discontinued Businesses
included in the Company's combined results of operations for the six months
ended June 30, 1996 and June 30, 1995, are for the Discontinued Businesses' six
month periods ended March 31, 1996 and 1995, respectively. For the six months
ended March 31, 1996, on a combined basis, the Discontinued Businesses generated
sales of $889 million and pre-tax losses of $4.459 billion, increases of 21% and
decreases of $4.435 billion, respectively, compared to the comparable six months
of the prior year. Included in the results for the six months ended March 31,
1996, is a non-cash charge of $4.497 billion relating to the adoption of SFAS
121 on Cornerstone's aggregates-related assets. Excluding that write-down,
operating profits increased primarily due to a strong construction market with
favorable weather conditions allowing contracting projects to continue on
schedule. Grove Worldwide's operations also improved as increases in volume and
pricing reflected strong market conditions.
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.
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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. In late December 1995 and early January 1996, a number of
producers, including Quantum Chemical, announced price increases effective March
1, 1996. In April 1996, a number of producers, including Quantum Chemical,
announced additional price increases effective May 1, 1996. Given competitive
pressures to maintain volume, it is not possible to predict the extent, if any,
to which such price increases will be realized. 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.
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. As demand
continues to be weak in major markets, the Company expects that there will be
pressure to limit the extent of any price increases; accordingly, it is
uncertain when or to what extent such price increases will be realized.
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
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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 are on schedule for completion in 1996. In addition, plans are
underway to expand 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 aroma 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 15% 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%.
In order to meet expected worldwide demand growth in the aroma and flavor
chemicals industry, Glidco is implementing plans to increase capacity at its
facilities by an additional 20%, which are expected to be completed by June
1996. In addition, in January 1996, an office was established in Singapore to
serve the growing market in the Pacific Rim.
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.
DISCONTINUED BUSINESSES. The results of operations for the Discontinued
Businesses on a combined basis generated sales of $1.722 billion and operating
income of $40 million for fiscal 1995, increases of 8% and 3%, respectively,
compared to fiscal 1994. In general, these operations benefitted from favorable
construction markets in the United States. Cornerstone's contracting business
was the largest contributor to its improved results with increased volume,
including that from a recent acquisition, and reduced costs. Improved operating
results at Grove Worldwide were attributable to increased volumes, favorable
pricing and lower concessions compared to the prior year.
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.
Polyetheylene 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
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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.
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 aroma and
flavor chemicals continued to be strong worldwide with demand approaching
Glidco's capacity in certain products. Volume increased 2% 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. Suburban Propane contributed $76 million of operating
profits and $678 million of sales in fiscal 1994. 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.
DISCONTINUED BUSINESSES. The results of operations for the Discontinued
Businesses on a combined basis generated sales of $1.6 billion and operating
income of $39 million for fiscal 1994, decreases of 13% and 9%, respectively, as
compared to fiscal 1993. The improved operating results are primarily
attributable to improving market conditions for aggregates where volumes exceed
the prior year by 9%.
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.
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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 June 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 or its
United States affiliates. These arrangements will continue to be in effect until
the consummation of the Demerger Transactions, from which time the Company will
have 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 $176 million for the six
months ended June 30, 1996, compared with net cash provided of $439 million for
the comparable period of the prior year. The decrease results from a 69%
decrease in operating income, but excludes a non-cash after-tax charge of $3.206
billion to reflect an impairment of certain assets of the Discontinued
Businesses to be sold to Hanson and a non-recurring pre-tax charge of $60
million to reflect an impairment of certain assets of the TiO2 and related
products segment. Net cash provided by operating activities was $795 million for
1995, compared with net cash provided of $232 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 $587 million for the six
months ended June 30, 1996, compared with net cash used of $94 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 $46 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 $762 million for the six months
ended June 30, 1996, compared with net cash used of $360 million for the
comparable period of 1995. The increase principally relates to changes in the
level of net transactions with 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 New Credit Facility. Hanson America and the Company, as guarantor, have
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 N.A., as
documentation agent, and various participating banks for the provision of the
New Credit Facility to Hanson America and certain other Company Subsidiaries
designated from time to time by the Company (together with Hanson America, the
'Borrowing Subsidiaries'). A copy of the Credit Agreement governing the New
Credit Facility has been filed as an exhibit to the Registration Statement of
which this Information Statement is a part. The following description of the New
Credit Facility does not purport to be complete and is qualified in its entirety
by reference to such exhibit.
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The New Credit Facility consists of a five-year unsecured revolving credit
facility in an amount up to $2.25 billion. Borrowings under the New Credit
Facility will be comprised of both standby loans (i.e., committed revolving
credit loans) and uncommitted competitive loans offered by syndicated banks
through an auction mechanism. Standby loans and competitive loans may be
borrowed in either U.S. dollars or other currencies. The proceeds of the New
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 Securities pursuant to the Required
Tender Offer or otherwise and payments to be made to Hanson or Hanson
Subsidiaries pursuant to the Demerger Transactions.
The interest rates under the standby loans will be 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 Hanson America and guaranteed by the Company (or issued
directly by the Company) or, if not available, the indicative rating of the
Company by such rating agencies. Based on the current Ratings, the spread over
LIBOR is presently 22.5 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 will be payable to the lenders under the New 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 New Credit Facility may be repaid and then reborrowed. Based on
the current Ratings, the commitment fee is presently 12.5 basis points.
The loans under the New Credit Facility will be guaranteed by the Company.
However, since the Company's only assets will be the stock of its subsidiaries
and the Company will be completely reliant upon its subsidiaries for funds, in
the event the Borrowing Subsidiaries default on their payment obligations under
the New 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.
The Credit Agreement contains covenants and provisions that will 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 Hanson America) to incur indebtedness or issue
preferred stock. Hanson America intends to seek permission under the Credit
Agreement for certain Company Subsidiaries which hold Non-Chemicals Businesses
and which will be sold to Hanson pursuant to Pre-Demerger SPAs or Post-Demerger
SPAs to incur, prior to such sales, unsecured indebtedness not to exceed $600
million in the aggregate, which indebtedness will be subordinated to
indebtedness under the New Credit Facility prior to the closing of such sales.
In addition, the New Credit Facility requires: (i) the maintenance of
availability under the New Credit Facility and/or other sources of cash (which
need not be in the form of a committed credit facility) in an amount sufficient
to pay the outstanding principal and all other amounts owed in respect of the
Exchangeable Notes; and (ii) the repayment of the Hanson Loan on the fifth day
following the Dividend Payment Date.
The Credit Agreement requires the Company and Company Subsidiaries on a
consolidated basis to satisfy certain financial performance criteria.
Specifically, the Company and Company Subsidiaries will not be 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; and (ii) to allow
the Interest Coverage Ratio (as defined) for any period of four consecutive
fiscal quarters, commencing with the period ending September 30, 1996, to be
less than 3.5 to 1.
Events of default under the Credit Agreement include, in addition to
standard events of default, the failure of Hanson America to remain a direct or
indirect wholly owned subsidiary of the Company. Neither a default under the
Exchangeable Securities nor the declaration of the accreted value plus
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accrued interest of the Exchangeable Notes to be immediately due and payable, in
each case arising out of or relating to the Demerger, will constitute an event
of default under the Credit Agreement.
Hanson Indebtedness. The Hanson Indebtedness consists of the Hanson Loan
and the Allocated Loan and certain other indebtedness. The Hanson Loan is a $1.9
billion loan from Hanson Aruba N.V. to HM Anglo American Ltd. ('HM Anglo'),
which is presently scheduled to mature on October 15, 2003 and bears interest
payable quarterly at a rate equal to LIBOR plus 150 basis points. Such loan has
been reflected as a component of Invested Capital since it does not represent
debt directly related to the Chemicals Business. If the Demerger is consummated,
HM Anglo intends to prepay the Hanson Loan on the fifth day after the Dividend
Payment Date using all or a portion of the proceeds from the sale of the
Discontinued Businesses to Hanson, borrowings under the New Credit Facility and
cash balances.
The Allocated Loan is a $2.25 billion loan from Hanson Antilles N.V. to
Hanson America, which is presently scheduled to mature on October 15, 2003 and
bears interest at a rate of 7% per annum. Hanson America's obligations under the
Allocated Loan are subordinated to Hanson America's obligations under the
Exchangeable Securities and certain other debt obligations of Hanson America
that are expected to be repaid prior to the Demerger. Pursuant to the
Exchangeable Security Instruments, Hanson Antilles N.V. agreed that, for so long
as any Exchangeable Securities remain outstanding, it will not amend the
subordination provisions of the Allocated Loan in a manner adverse to the
holders of the Exchangeable Securities. If the Proposed Amendments are
implemented pursuant to the Consent Solicitation, the Allocated Loan will be
modified and the restrictions on amendments to the subordination provisions in
the Exchangeable Security Instruments will be eliminated so as to permit the
prepayment of the Allocated Loan prior to the Demerger. It is anticipated that
Hanson America will prepay the Allocated Loan even if the Proposed Amendments
are not implemented pursuant to the Consent Solicitation, which prepayment will
constitute a default under the Exchangeable Security Instruments as a result of
which the holders of Exchangeable Securities remaining outstanding at the time
of such prepayment could exercise certain rights under the Exchangeable Security
Instruments. The Company believes that it will have adequate cash resources and
credit lines including availability under the New Credit Facility, to repay the
Exchangeable Securities in the event they are declared due and payable. See
'Risk Factors -- Potential Defaults under Exchangeable Securities.'
Exchangeable Securities. Within 30 days after the Dividend Payment Date, as
required by the Exchangeable Note Indenture, Hanson America will provide the
Required Notice. The Company will use proceeds of the New Credit Facility to
purchase Exchangeable Securities from holders who exercise Change-in-Control
Rights at 101% of the then accreted value of the Exchangeable Notes plus accrued
interest.
Capital Expenditure Commitments. The Company made capital expenditures for
its continuing operations of $153 million, $276 million, $109 million and $28
million in the first half of 1996 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 $330 million
during 1996, including $160 million for production capacity expansion projects
at Quantum Chemical, $60 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 New Credit Facility and, possibly, under other credit facilities permitted
by the New Credit Facility.
CERTAIN ENVIRONMENTAL MATTERS
The Company's costs and operating expenses relating to environmental
matters relating to the Chemicals Businesses were approximately $67 million, $61
million and $60 million in 1995, fiscal 1994 and fiscal 1993, respectively, and
are expected to remain at approximately this level in 1996. This amount is
expected to be sufficient to 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 relating to the Chemicals Businesses were
approximately $22 million and $7 million in 1995 and fiscal 1994, respectively,
and are expected to total $40 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 is
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
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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 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, is between $130 million and $170 million and has accrued $168
million as of June 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. In addition, certain
Company Subsidiaries have contractual obligations to indemnify the purchasers of
certain discontinued operations against certain environmental liabilities and
the Company will agree to indemnify Hanson and the Hanson Subsidiaries against
certain of such contractual indemnification obligations pursuant to the Demerger
Transactions. See 'Transactions and Agreements between the Company and Hanson --
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 $32 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 litgation 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 half 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. Gains resulting from such transactions
aggregated $3 million in the first half of 1996, $13 million in 1995 and $2
million in each of fiscal 1994 and fiscal 1993.
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BUSINESS
The Company will be 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.
STRATEGY
The Company's strategy will be to maximize long-term cash flow, and thereby
enhance shareholder value, through improved efficiency at existing operations,
disciplined capital expenditures and selective acquisitions of other chemical
businesses. 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 will emphasize stock ownership by management and link 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
1996, they anticipate spending approximately $175 million and $60 million,
respectively, on such projects. These and other projects currently under
evaluation are expected to expand Quantum Chemical's linear low density
polyethylene and high density polyethylene production capacity by approximately
17% and 11%, respectively, Quantum Chemical's acetic acid capacity by 33% 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. SCM Chemicals announced in July 1996 a program to address market
conditions in the TiO2 industry by, among other things, reducing capacity of its
sulfate-process manufacturing facilities, delaying the expansion of its
Stallingborough, England chloride-process plant by six months and rephasing the
expansion of its Kemerton, Western Australia chloride-process plant to delay
start-up until such time as market conditions improve. Preparatory work on the
Kemerton plant expansion 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
$15 million and $30 million, principally due to the reengineering of Quantum
Chemical's manufacturing and distribution facilities, were achieved in the first
quarter of 1996 and in 1995, respectively, bringing the total savings since 1992
to approximately $115 million. 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 1996 to date, Glidco quadrupled its capacity
to produce the specialty aroma chemical dihydromyrcenol and increased its
linalool and geraniol capacity by 20% in order to meet growing worldwide demand
for these products. In addition, Glidco recently opened a sales office in
Singapore to enhance its ability to serve the Far East.
Emphasize Management Stock Ownership and Performance-Based Compensation.
In order to align the interests of the Company's management and stockholders,
the Company will establish guidelines for significant investment by management
in Common Stock. In addition, management's
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annual incentive compensation will be 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 expected to be made shortly following the Dividend Payment Date) will be
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 will seek 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.
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................... 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.
</TABLE>
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<TABLE>
<CAPTION>
PRODUCT USES
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
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
Aroma and Flavor Chemicals
Turpentine derivatives.................. Fragrance, flavor, pharmaceutical and industrial applications.
</TABLE>
QUANTUM CHEMICAL
The following table sets forth information concerning Quantum Chemical's
present and anticipated production capacity for certain of its products:
QUANTUM CHEMICAL RATED CAPACITY
(MILLIONS OF POUNDS PER ANNUM, EXCEPT AS INDICATED)
<TABLE>
<CAPTION>
1995 ANTICIPATED CAPACITY
PRODUCT CAPACITY BY DECEMBER 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.
** Millions of gallons.
*** By December 31, 1998.
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 Port Arthur and La Porte, Texas production complexes. In
addition, it manufactures LDPE at its Morris, Illinois and Clinton, Iowa
complexes, HDPE at its Clinton 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, which
excludes 250 million pounds of idled capacity at Morris) of 87% during 1995, 85%
during fiscal 1994 and 81% during fiscal 1993.
Quantum Chemical has initiated capital projects that are expected to
increase its production capacity with respect to LLDPE and HDPE by approximately
17% and 11%, respectively, in 1996.
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These projects include 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. It is anticipated that expenditures for these projects
will be funded by the Company's internally generated cash and borrowings under
the New Credit Facility and, possibly, under other credit facilities permitted
under the New Credit Facility.
Ethylene is the principal raw material used in the production of
polyethylene. Quantum Chemical is currently capable of producing a total of
approximately 3.5 billion pounds of ethylene per annum at its La Porte, Morris
and Clinton complexes. Through plant expansions and debottlenecking projects,
Quantum expects 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 $194
million, $143 million and $200 million in fiscal 1995, 1994 and 1993,
respectively. Sales of lesser quantities of excess ethylene into the spot market
during the same periods resulted in losses of $260 thousand, $6.4 million and
$16 million, respectively.
Quantum Chemical is currently participating in a feasibility study with
Lyondell Petrochemical Company, Union Carbide Corporation and Eastman Chemical
Company relating to a jointly owned ethylene cracker that would have an annual
capacity of 2 billion pounds and be scheduled to be operational in 2000. (A
cracker is a plant that produces ethylene through the pyrolytic decomposition of
hydrocarbon feedstocks. Virtually all commercial ethylene plants are crackers.)
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 million pounds per annum and its capital expenditure
commitment would be in the range of approximately $175 million to $225 million,
to be paid 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.'
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. In 1995, the top ten
customers accounted for approximately 16% of Quantum Chemical's net sales.
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.
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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 scheduled
to occur in October 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.
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.
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QUANTUM CHEMICAL'S MANUFACTURING INTEGRATION
The following chart is a simplified illustration of Quantum Chemical's
integration of manufacturing processes and material flows.
[FLOW CHART ILLUSTRATING QUANTUM CHEMICALS' MANUFACTURING INTEGRATION]
SCM CHEMICALS
TITANTIUM 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.
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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 has led to a $60 million write-down as
discussed in Note 3 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.
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.
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The following is a simplified illustration of SCM Chemicals' manufacturing
processes:
[FLOW CHART ILLUSTRATING SCM CHEMICALS' MANUFACTURING PROCESSES]
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 half 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 during 1996 and
1997 for an additional debottlenecking project at its Stallingborough
chloride-process plant that is expected to increase annual TiO2 capacity by
41,000 tonnes by July 1998. Although 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 worldwide prices and its completion date will likely be extended
past January 1999.
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Expenditures under a revised time frame will be funded by the Company's
internally generated cash and borrowings under the New Credit Facility and,
possibly, under other credit facilities permitted under the New 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, which is 39% owned by Hanson, 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. In 1995, the top ten customers accounted
for approximately 31% of SCM Chemicals' TiO2 sales. 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.
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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 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 3 to 10 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
AROMA AND FLAVOR CHEMICALS
Glidco is one of the world's leading producers of chemicals derived from
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 aroma 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 aroma chemical products, as well as the manufacturing facilities for
synthetic pine oil, anethole, methyl chavicol and a number of other aroma
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. 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 aroma
chemicals including citral, citronellol and ionones. In addition, in 1996, to
meet the growing 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 and anticipates spending approximately
$21 million on such projects, including construction of new fractionation
columns at its Jacksonville plant and additional aroma chemicals capacity at its
Brunswick facility, in 1996. It is anticipated that these expenditures will be
funded by the Company's internally generated cash and
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borrowings under the New Credit Facility and, possibly, under other credit
facilities permitted under the New Credit Facility.
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 apply proprietary technology made available by Glidco to permit pulp
mills to capture CST more efficiently and economically.
The major use of aroma 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 aroma
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 aroma chemicals is used,
which may affect demand for that particular product produced by the Company.
During 1995, Glidco's ten largest customers accounted for approximately 47% of
its total sales. 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 $21
million in the first half 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 Chemicals 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.
EQUITY INTEREST IN SUBURBAN PROPANE
A subsidiary of Quantum Chemical serves as general partner of Suburban
Propane, a Delaware limited partnership whose common units trade on the NYSE
under the symbol 'SPH'. In 1996, in contemplation of its initial public
offering, Suburban acquired, through the Suburban Operating Partnership, the
propane business and assets of Quantum Chemical's former Suburban Propane
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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 355 district locations in 41 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 527 million gallons during its fiscal year ended
September 30, 1995. 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 30, 1995,
Suburban Propane reported total revenues of approximately $633.6 million and net
income of approximately $30.2 million. At September 30, 1995, Suburban Propane
reported total assets of approximately $736.5 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 and the Suburban Operating Partnership. Quantum Chemical has
agreed, subject to certain limitations, to contribute up to $43.6 million, on a
revolving basis, to Suburban Propane 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, Suburban
Propane will be 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 as the
remaining two supervisors.
DISCONTINUED BUSINESSES
The Company's Discontinued Businesses, which Company Subsidiaries will
agree to sell to Hanson on the fifth day following the Stock Dividend Date,
consist of certain of Hanson's U.S. building materials (or 'aggregates') and
materials handling businesses.
AGGREGATES. The aggregates business, operating under the name
'Cornerstone', includes companies engaged in the production of aggregates
products and concrete products and companies engaged in construction
contracting. Aggregates products, comprised of crushed stone and sand and
gravel, can be used for a variety of single purpose applications, such as road
beds, or can be combined with other binder materials (e.g. with cement to
produce concrete, or with asphalt to produce hot mix asphalt, which are used
primarily in road construction). Cornerstone's operations are organized into
four groups: Benchmark Materials, with operations in Eastern and Midwestern
states; Gifford-Hill & Company, with operations in Texas and neighboring states;
Kaiser Materials, with operations in California, Nevada, Washington and Idaho;
and the Spectrum Construction group, with operations in the Mid-Atlantic states
and in the West. In fiscal 1995, these operating groups processed and marketed
aggregates products from 129 plants in 19 states. Benchmark Materials ranks as
the third largest producer of aggregates in the United States. Spectrum
Construction ranks among the top 40 construction companies in the United States
and among the top five of those specializing in highway construction.
Cornerstone also oversees and manages certain cement and aggregates operations
in the U.S. owned by Hanson's Kaiser Cement and Western Rock Products units. At
September 30, 1995, Cornerstone's operations had approximately 9,700 employees.
Due to the effect of varying construction seasons on Cornerstone's activities,
employment levels can vary significantly within the year, generally peaking in
the late summer.
MATERIALS HANDLING. The Materials Handling Group, operating under the name
'Grove Worldwide', is headquartered in Shady Grove, Pennsylvania, and has
manufacturing facilities in Shady Grove and Wilhelmshaven and Langenfeld
Germany. Grove Worldwide's operating businesses, Grove Crane and Grove Manlift,
offer a complete line of mobile hydraulic lifting equipment, including
self-propelled aerial work platforms. These products are used in applications
ranging from construction and transportation to mining, petro-chemicals and
plant maintenance. They are primarily marketed through a worldwide independent
distributor organization. At September 30, 1995, Grove Worldwide had
approximately 3,800 employees.
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EMPLOYEES
At December 31, 1995, the Company (excluding the Discontinued Businesses)
had approximately 6,700 full and part-time employees and contractors, of whom
approximately 5,750 were engaged in manufacturing, 400 were engaged in sales and
distribution and 500 had corporate and administrative responsibilities.
Approximately 15% of the Company's employees are represented by various labor
unions. Of the Company's 15 collective bargaining agreements, one (covering
approximately six employees) expires in 1996, 11 expire in 1997 and three expire
in 1998. The Company believes that the relations of its operating subsidiaries
with employees and unions are generally good.
ENVIRONMENTAL MATTERS
The Chemicals 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 relating to the Chemicals Businesses were approximately $67 million, $61
million and $60 million in 1995, fiscal 1994 and fiscal 1993, respectively, and
are expected to remain at approximately this level in 1996. This amount is
expected to be sufficient to 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 relating to the Chemicals Businesses were
approximately $22 million and $7 million in 1995 and fiscal 1994, respectively,
and are expected to total $40 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 is
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. Two
proceedings, or threatened proceedings, involve Quantum Chemical. One proceeding
relates to a Notice of Violation issued by the State of Texas alleging
violations of state air regulations at Quantum Chemical's LaPorte, Texas
facility. Although there presently is no demand for a monetary sanction, a civil
penalty in excess of $100,000 could result. In the second matter, the Illinois
Attorney General's Office has threatened to file a complaint seeking monetary
sanctions for releases into the environment 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
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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, is between $130 million and $170 million
and has accrued $168 million as of June 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. In
addition, certain Company Subsidiaries have contractual obligations to indemnify
the purchasers of certain discontinued operations against certain environmental
liabilities and the Company will agree to indemnify Hanson and the Hanson
Subsidiaries against certain of such contractual indemnification obligations
pursuant to the Demerger Transactions. See 'Transactions and Agreements between
the Company and Hanson -- 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 $32 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 litgation 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 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.
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PROPERTIES
The Company's operating subsidiaries own approximately 17 manufacturing
facilities, as well as other properties, and lease warehouses, stores, offices
and one other manufacturing facility.
<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; LLDPE
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
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..................................... Aroma and flavor chemicals
Brunswick, Georgia........................................ Aroma and flavor chemicals
</TABLE>
The Company believes that its properties are well maintained and are in
good operating condition.
69
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<PAGE>
LEGAL PROCEEDINGS
A former subsidiary of a Company Subsidiary has been named as a defendant
or third party defendant, together with other alleged past manufacturers of lead
pigments for use in paint and lead-based paint, 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 Michigan. 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. All of these cases (except the Pennsylvania case which is on appeal
following a judgment 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.
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 (a) 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 (b) 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. 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.
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<PAGE>
TRANSACTIONS AND AGREEMENTS BETWEEN THE COMPANY AND HANSON
In connection with the Demerger Transactions, the Company and Hanson will
enter into several agreements for the purpose of giving effect to the Stock
Dividend and defining their ongoing relationship. These agreements will not be
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, will
be effected on terms at least as favorable to the Company or to Hanson as could
have been obtained from unaffiliated third parties.
Following the Stock Dividend, 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 to be entered into between the Company and Hanson and their
respective subsidiaries. Certain of these agreements have been filed as exhibits
to the Registration Statement 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 the agreements described under 'The Stock Dividend and Other
Demerger Transactions -- Summary of the Demerger Transactions,' certain assets
and liabilities relating to the Non-Chemical Businesses will be transferred by
Company Subsidiaries to Hanson and assets and liabilities of the Chemicals
Business will be transferred by Hanson to the Company, which was incorporated
for that purpose in April 1996. Hanson and the Company and their respective
subsidiaries each will agree 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
will develop alternative approaches so that, to the maximum extent possible, the
Company and the Company Subsidiaries will receive the benefits of such permit or
license and will discharge the duties and bear the costs and risks thereunder.
The Company will 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. Hanson and the Company, however, believe that they will be
able to obtain all necessary consents and reissuances that are material to the
Company's business.
See 'The Stock Dividend and Other Demerger Transactions -- Summary of the
Demerger Transactions' for a description of the transactions contemplated by the
Demerger Agreements.
INDEMNIFICATION AGREEMENTS
In connection with the Demerger Transactions, Hanson and the Company and
certain of their respective subsidiaries will enter into indemnification
agreements (the 'Indemnification Agreements'). Pursuant to the Indemnification
Agreements, subject to certain exceptions, the Company and the Company
Subsidiaries will agree 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 this 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. Liability relating to
lead-paint litigation against which the Company will indemnify Hanson pursuant
to these arrangements. Hanson and the Hanson Subsidiaries will agree to
indemnify the Company and the Company Subsidiaries against all liabilities,
litigation and claims arising
71
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<PAGE>
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 this Information Statement other than those relating
generally to the Company and the Chemicals Business, and certain other
liabilities. In addition, the Company will agree 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 ACT at the rate
in effect on the Dividend Payment Date (currently 20% of the gross 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 (calculated 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 Dividend Payment Date and reduced by 20%
for each complete 12-month period that elapses between the Dividend Payment Date
and the first date on which the Company ceases to be centrally managed and
controlled in the United Kingdom). See 'Risk Factors -- 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 will share responsibility for such liability on a mutually
agreed basis consistent with the principles established in the Indemnification
Agreements.
The Indemnification Agreements will 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 will be governed by the Tax Sharing and Indemnification
Agreements described below.
TAX SHARING AND INDEMNIFICATION AGREEMENTS
HM Anglo American, Ltd. ('Anglo'), a subsidiary of Hanson that will be a
subsidiary of the Company after the Demerger, is the common parent of an
affiliated group of corporations that includes the U.S. Chemicals Business as
well as most of the U.S. Non-Chemical Businesses and files 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') will enter into
Tax Sharing and Indemnification 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
will be responsible for and will indemnify the Hanson Parties with respect to
(i) all federal tax liabilities and federal tax obligations of the Consolidated
Group for periods prior to the Dividend Payment Date (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 will
be responsible for and will 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 the Dividend Payment Date. The
Hanson Parties will indemnify the Company Parties with respect to (i) all tax
liabilities and tax obligations imposed upon Hanson Overseas Holdings Limited, a
subsidiary of Hanson that will be a subsidiary of the Company after the
Demerger, for periods prior to the Dividend Payment Date, 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 will enter into an agreement providing for the allocation of
retirement, medical, disability and other
72
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<PAGE>
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 will generally provide 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 shall assume 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 shall be 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 shall be 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 shall assume
liability and be responsible for all benefits accrued through completion of the
Demerger Transactions with respect to the Hanson Employees and their
beneficiaries.
HANSON INDEBTEDNESS
The Hanson Indebtedness consists of the Hanson Loan and the Allocated Loan.
For a description of these loans, see 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources.'
OTHER AGREEMENTS
The Company and the Company Subsidiaries and Hanson and the Hanson
Subsidiaries may also enter into certain other leases, operating agreements,
service agreements and other agreements that serve to define various aspects of
the relationship that will exist between the parties after the Demerger. These
agreements include a joint ownership agreement between a Hanson Subsidiary and
HM Anglo 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 an administrative services agreement between a Hanson
Subsidiary and two Company Subsidiaries, relating to the management of insurance
services. None of such agreements, if any, is expected to materially affect the
Company or its results of operations.
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MANAGEMENT
DIRECTORS
Upon the Demerger, the Company Board will consist of seven persons, who
will be 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 expected to become directors at that time. The Company intends
to select one additional non-employee director following the Demerger.
<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
The Rt. Hon. The Lord Glenarthur.......... 1998 Director
David J.P. Meachin........................ 1997 Director
Martin G. Taylor.......................... 1999 Director
</TABLE>
William M. Landuyt, 40, has served as Director, President and Chief
Executive Officer of Hanson Industries since June 1995 and as a Director of
Hanson since 1992. Mr. Landuyt served 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.
Robert E. Lee, 39, has served as Director, Senior Vice President and Chief
Operating Officer of Hanson Industries since June 1995 and as an Associate
Director of Hanson since 1992. Mr. Lee served as Vice President and Chief
Financial Officer of Hanson Industries from 1992 to June 1995, as Vice President
and Treasurer from 1990 to 1992 and as Treasurer 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, 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. Mr. Baker 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, Videotron Corporation Limited and Bell Cablemedia plc,
an adviser to Mercury plc and ICL plc.
Worley H. Clark, Jr., 64, served 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.
The Rt. Hon. The Lord Glenarthur, 51, has served as an executive of Hanson
since October 1989, including as Deputy Chairman of Hanson Pacific Limited since
March 1994. Lord Glenarthur served as United Kingdom Parliamentary
Under-Secretary of State at the Department of Health and Social Security from
1983 to 1985, as 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.
David J.P. Meachin, 55, 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.
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Martin G. Taylor, 61, served as an executive of Hanson since 1969, as a
Director of Hanson since 1976 and as Vice Chairman of Hanson since 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. Following
the demerger of Hanson's tobacco business, Mr. Taylor is expected to continue to
serve as chairman and a director of Imperial Investments Limited, the company
which will be the trustee and manager charged with the responsibility of
managing the pension assets of such business.
EXECUTIVE OFFICERS
The following individuals (in addition to Messrs. Landuyt and Lee) are
expected to serve as executive officers of the Company upon the Demerger:
<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
A. Mickelson Foster....................... Vice President -- Investor Relations
Francis V. Lloyd.......................... Vice President -- Tax
Christine F. Wubbolding................... Vice President and Treasurer
Marie S. Dreher........................... Corporate Controller
</TABLE>
Donald V. 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.
George W. 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.
Dr. Ronald H. 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.
George H. Hempstead, III, 52, has served as Senior Vice President -- Law
and Administration of Hanson Industries since June 1995, as an Associate
Director of Hanson since 1990 and as a Director of Hanson Industries since 1986.
Mr. Hempstead was Senior Vice President and General Counsel of Hanson Industries
from 1993 to June 1995 and Vice 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, a
director of Smith Corona Corporation and a director of Lynton Group Inc.
John E. Lushefski, 40, has served as Senior Vice President and Chief
Financial Officer of Hanson Industries since June 1995. 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.
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A. Mickelson Foster, 40, has served as Vice President -- Investor Relations
of Hanson Industries since August 1992. 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.
Francis V. Lloyd, 57, has served as Vice President -- Taxes of Hanson
Industries since 1993. Mr. Lloyd joined Hanson Industries in 1987 and was Senior
Director of Taxes of Hanson Industries from 1987 to 1993.
Christine F. Wubbolding, 44, has served as Vice President of Hanson
Industries since January 1996 and as Treasurer since June 1994. She joined
Hanson Industries in 1976 and held various financial positions, primarily in the
treasury area, prior to 1994.
Marie S. Dreher, 38, has served as Director of Planning and Budgeting of
Hanson Industries since November 1995. 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.
DIRECTORS' MEETINGS, COMMITTEES AND FEES
Following the Demerger, the Company Board is expected to establish two
standing committees, an Audit Committee and a Compensation Committee. Directors
who are also officers or employees of the Company will not be permitted to serve
on either committee. The functions of these standing committees will be as
follows:
Audit Committee. The Audit Committee will be responsible for matters
relating to accounting policies and practices, financial reporting and
internal controls. It will recommend to the Company's Board the appointment
of a firm of independent accountants to audit the Company's financial
statements and will review 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 will also review non-audit services
rendered by the Company's independent accountants and will periodically
meet with or receive reports from the Company's principal financial and
accounting officers.
Compensation Committee. The Compensation Committee will set the
compensation of all executive officers and administer the Stock Incentive
Plan and other incentive plans, including the granting of awards under such
plans. It will also review the competitiveness of management compensation
and benefit programs and principal employee relations policies and
procedures. It is intended that all of the members of the Compensation
Committee will be 'non-employee directors' within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the 'Exchange Act')
and will be 'outside directors' within the meaning of Section 162(m) of the
Code.
Directors who are also full-time employees of the Company will not receive
additional compensation for their services as directors. Non-employee directors
will receive an annual cash retainer of $30,000. In addition, pursuant to the
Stock Incentive Plan, each non-employee director serving on the thirtieth day
following the Dividend Payment Date will be automatically granted on such date
the number of shares of Common Stock determined by dividing $15,000 by the
average closing price of the Common Stock during the twenty business days
following the Dividend Payment Date 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 $15,000 by the fair
market value of the Common Stock on the business day immediately preceding such
date. Non-employee directors will be reimbursed for all reasonable expenses
incurred in connection with Board and Committee meetings. The Company will also
pay the premiums on directors' and officers' liability and travel accident
insurance policies insuring directors.
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EXECUTIVE COMPENSATION
HISTORICAL COMPENSATION
The following table sets forth certain information with respect to the
compensation for 1995, fiscal 1994 and fiscal 1993 of the individuals who are
expected to be the Company's five most highly compensated executive officers
(including the Chief Executive Officer) upon the Demerger. During the periods
presented, these individuals were compensated pursuant to Hanson's plans and
policies (except that, in fiscal 1993, Dr. Yocum was compensated pursuant to the
plans and policies of Quantum Chemical). All references in the following tables
to stock options relate to awards of options to purchase Ordinary Shares of
Hanson.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION SECURITIES LTIP ALL OTHER
NAME AND PRINCIPAL ------------------------------- UNDERLYING PAYOUTS COMPENSATION
POSITION(1) YEAR SALARY($) BONUS($) OPTIONS(#)(4) ($)(5) ($)(6)
- -------------------------------------------- ------ --------- -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
W. M. Landuyt .............................. 1995 676,218 99,000 365,000 -- 228,403(7)
Chairman and Chief 1994 489,251 139,276 164,746 -- 6,731
Executive Officer 1993 465,000 62,781 139,721 -- 6,080
R. E. Lee .................................. 1995 416,250 243,750 -- 59,228 17,071
President and Chief 1994 270,000 202,500 192,908 -- 17,018
Operating Officer 1993 240,000 50,000 92,805 -- 15,912
R. H. Yocum ................................ 1995 391,250 512,050(2) -- 49,949 172,382(8)
Chairman and Chief 1994 335,000 381,062 218,977 -- 3,198
Executive Officer of 1993 325,000 -- -- -- 4,077(8)
Quantum Chemical
D. V. Borst ................................ 1995 424,375 294,350 -- 64,346 13,840
Chairman and Chief 1994 404,250 164,126 130,343 -- 15,925
Executive Officer of 1993 385,000 153,615 52,137 -- 15,837
SCM Chemicals
G. W. Robbins .............................. 1995 334,998 438,900(3) -- 63,098 12,732
Chairman and Chief 1994 290,000 334,950 156,412 -- 12,220
Executive Officer of 1993 253,000 202,400 52,137 -- 12,297
Glidco
</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) Fiscal 1994 amounts include securities underlying options awarded during the
fourth quarter of calendar 1994, and in the case of Mr. Landuyt, includes
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.
(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.
(6) The amounts shown in this column include the matching employer contributions
made to the accounts of the named executive officers pursuant to Hanson
defined contribution plans (all of which were invested in ADSs pursuant to
the terms of the Plans), the dollar value of insurance
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
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 $1,997,654) pursuant to the change-in-control
provisions of employment agreements and benefit plans applicable to
directors and officers of Quantum Chemical as a result of its acquisition by
Hanson on September 30, 1993.
Following the Demerger, each of the individuals named above will continue
to receive his base salary at the annual rate set in October 1995, subject to
review by the Compensation Committee. It is expected that the Compensation
Committee will review executive compensation in December of each year,
commencing in December 1996. See ' -- Change of Control Agreements' below.
OPTION GRANTS IN 1995
The following table sets forth information with respect to Mr. Landuyt, the
only individual named in the Summary Compensation Table to receive option grants
during 1995 pursuant to Hanson plans.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM($)(2)(3)
-------------------------------------------------------------------- ----------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR (PENCE/SHARE)(1) DATE(2) 5% 10%
- -------------------------------- --------------------- ------------ ---------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
W. M. Landuyt................... 365,000 1.51% 189.5 6/18/99 196,547 417,939
</TABLE>
- ------------
(1) At the Noon Buying Rate in effect on March 29, 1996 of `L'1 to $1.526, the
exercise price of the options was approximately $2.89 per Ordinary Share.
The closing price of the Ordinary Shares on the LSE on March 29, 1996 was
192p (approximately $2.93).
(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. If
the Demerger does not occur, the expiration date of the options will be
December 20, 2005 and the potential realizable values will be as follows:
5% -- $663,796 and 10% -- $1,682,189.
(3) Potential gains are net of exercise price, but before taxes associated with
exercise. These potential gains represent certain assumed rates of
appreciation only, based on the rules and regulations of the Commission.
Actual gains, if any, on the exercise of stock options are dependent on the
future performance of the Ordinary Shares and overall market conditions. The
amounts reflected in this table may not necessarily be achieved.
OPTION EXERCISES IN 1995
The following table sets forth the number of Ordinary Shares covered by
both exercisable and unexercisable stock options held by each of the individuals
named in the Summary Compensation Table on December 31, 1995. Also reported are
the values for 'in-the-money' options, calculated as the
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excess of the value of Ordinary Shares as of December 31, 1995 over the
respective exercise prices of outstanding stock options.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES YEAR-END(#) YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. M. Landuyt.......................... -- -- 477,578 657,000 250,149 13,925
R. E. Lee.............................. -- -- 287,796 285,713 155,071 --
R. H. Yocum(1)......................... 129,360 161,326 643,785 218,977 478,885 --
D. V. Borst............................ -- -- 345,843 182,480 187,623 --
G. W. Robbins.......................... -- -- 222,103 208,549 88,948 --
</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 Hanson ADSs. For purposes of this table, Hanson 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 the Stock Dividend Date (other than options
held by U.K. employees of Company Subsidiaries) will immediately vest and will
be exercisable for Ordinary Shares until the later of the first anniversary of
the Stock Dividend Date 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. It is anticipated that adjustments to the number of Ordinary
Shares or ADSs subject to such options and to the exercise prices thereof will
be made in accordance with the provisions of the option plan under which the
options were granted to reflect the Stock Dividend and the further stock
dividends that are proposed for the demergers of Hanson's tobacco and energy
businesses. With respect to the options of U.K. employees of Company
Subsidiaries, which are governed by a separate Hanson plan, Hanson will seek
shareholder approval at the EGM for an amendment to such plan to provide for the
same adjustment to such options.
In fiscal 1993 and fiscal 1994, certain individuals who will become
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 $72,878 at the Noon Buying Rate on March 29, 1996) under such
plan. It is anticipated that the obligation to pay such amount will be assumed
by the Company pursuant to the Demerger Transactions and that such amount will
be paid at the same time as the remaining payouts are made under the Hanson 1993
LTIP.
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, it is expected that stock ownership
guidelines will be established for the 30 executive officers and
management-level employees of the Company and Company Subsidiaries who are
expected to receive initial awards of restricted stock pursuant to the Stock
Incentive Plan shortly following the Dividend
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<PAGE>
Payment Date. These executive officers and employees will be 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 is a description of the annual and long-term incentive
compensation and benefit plans of the Company and Company Subsidiaries that will
be continued or become effective after the Demerger. These plans are intended to
attract and retain employees and to reward such employees through emphasis on
performance and incentive criteria.
ANNUAL PERFORMANCE INCENTIVE PLAN
Prior to the Demerger, the Company's Board of Directors will adopt an
Annual Performance Incentive Plan (the 'Annual Plan'), which will be effective
commencing October 1, 1996 for the fourth calendar quarter of 1996 and for the
calendar year commencing January 1, 1997 and, subject to stockholder approval at
the Company's 1997 annual meeting, for the calendar years thereafter. The
purpose of 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. The following description
of the Annual Plan is intended only as a summary and is qualified in its
entirety by reference to the Annual Plan, which has been filed as an exhibit to
the Registration Statement of which this Information Statement is a part.
Participants in the Annual Plan will be eligible to receive an immediately
payable annual cash performance award ('Annual Performance Award') based on
attainment of specified performance goals to be 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 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.
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<PAGE>
<PAGE>
For the fourth calendar quarter of 1996, it is expected that the
Compensation Committee will set performance goals for such period utilizing a
similar methodology to that to be used for establishing annual levels and that
participants will be eligible to receive awards based on a pro rata portion of
applicable full-year goals.
It is expected that, upon the taking of certain corporate action following
the Demerger, 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 Company will continue in effect the 1996 LTIP, 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 following description of the 1996 LTIP is intended only as a summary
and is qualified in its entirety by reference to the 1996 LTIP, which has been
filed as an exhibit to the Registration Statement of which this Information
Statement is a part.
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
Prior to the Demerger, the Company's Board of Directors will adopt the
Long-Term Stock Incentive Plan (the 'Stock Incentive Plan') for effectiveness as
of the Dividend Payment Date. The following description of the Stock Incentive
Plan is intended only as a summary and is qualified in its entirety by reference
to the Stock Incentive Plan and the more detailed description of its provisions
annexed hereto as Annex B.
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
81
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<PAGE>
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
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 30
executive officers, it is expected that after the Demerger, 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 goals and measurement periods
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
shortly following the Demerger that options to acquire Common Stock be granted
to other key employees of the Company and the Company Subsidiaries who do not
receive awards of restricted stock shortly following the Dividend Payment Date.
Shortly after the Stock Dividend Payment Date, and a contemplated
ratification of the relevant portions of the Stock Incentive Plan by the new
Board of Directors of the Company, the Compensation Committee is expected to
award, without consideration (other than par value, if required by applicable
law), restricted stock having a potential maximum undiscounted aggregate fair
market value on the date of grant of approximately $63.5 million to
approximately 30 executive officers. The individuals named in the Summary
Compensation Table are expected to receive awards of restricted stock with a
potential maximum undiscounted fair market value at grant as follows: Mr.
Landuyt -- $10,000,000; Mr. Lee -- $7,000,000; and each of Messrs. Yocum, Borst
and Robbins -- $5,000,000. It is expected that (i) 25% of the initial awards of
restricted stock will vest in equal installments (i.e. 8 1/3% of the total
initial award) on each of the third, fourth and fifth anniversaries of the date
of the grant; (ii) 25% of the initial awards of 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 to be established by the
Compensation Committee at approximately the time of commencement of the period;
(iii) 25% of the initial awards of 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 to be established by the Compensation Committee at
approximately the time of commencement of such period; and (iv) 25% of the
initial awards of 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 to be established by the Compensation Committee at
approximately the time of commencement of such period. It is expected that the
performance goals will employ the same 'economic value added' formula as was
established for the 1996 LTIP. It is also anticipated that the restricted stock
awards will qualify as performance-based compensation under Section 162(m) of
the Code.
It is expected that the restricted stock awards will provide that, at the
end of the relevant performance period, 50% of the earned 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 had 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. It is expected that the restricted stock awards will provide
that if the executive's employment with the Company or, if applicable, the
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,
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(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. It is also expected that 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.
RETIREMENT PLANS
Each of the Company Subsidiaries sponsors its own pension benefit plans.
Following the Demerger, the Company intends to consider consolidation of such
plans.
Substantially all full-time United States non-union employees of the
Company and Company 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'):
CORPORATE RETIREMENT PLAN
<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
(footnotes continued on next page)
83
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<PAGE>
(footnotes continued from previous page)
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.
Messrs. Landuyt and Lee have 13 and 14 years of Credited Service,
respectively, under the Corporate Plans.
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').
QUANTUM RETIREMENT PLAN
<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 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.
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.
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
retirement plans (the 'SCM Retirement Plans') and the two Supplemental Executive
Retirement Plans
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(the 'SCM SERPS' and, collectively with the 'SCM Retirement Plans,' the 'SCM
Plans') are virtually identical.
SCM RETIREMENT 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 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 SERP 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).
Messrs. Borst and Robbins have 12 and 14 years of Credited Service,
respectively, under the SCM Plans.
CHANGE IN CONTROL AGREEMENTS
The following is a summary of the change in control agreements (the
'Agreements') that will be in effect as of the Demerger 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, or
will then be, employed (the 'Employer'), on the other hand. Subject to certain
surviving rights, the Agreements will terminate six years after the Demerger,
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
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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 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
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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 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.
It is expected that following the Demerger, Messrs. Landuyt, Lee, Yocum,
Borst and Robbins will continue to receive annual base salaries of $780,000,
$490,000, $410,000, $436,000 and $350,000, respectively, which are the existing
rates first established in October 1995, subject to annual review by the
Compensation Committee
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, the Company or the Company Subsidiaries, as the case may be,
will have Agreements with approximately 45 executive officers and management
employees of the Company and the Company Subsidiaries 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.
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PROJECTED SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth the projected beneficial ownership of Common
Stock immediately following the Dividend Payment Date by each of the Company's
directors, the executive officers who are expected to be the Company's five most
highly compensated executive officers in 1996 and all directors and executive
officers as a group, based upon information available to Hanson concerning
ownership of Ordinary Shares (including Ordinary Shares represented by ADSs) at
July 31, 1996. The projections assume the issuance of a total of 1,889,550
shares of restricted Common Stock pursuant to the Stock Incentive Plan shortly
after the Dividend Payment Date. The projections do not take into account any
shares of Common Stock that may be issued with respect to Ordinary Shares
acquired pursuant to the exercise of options to purchase Ordinary Shares
previously granted under Hanson compensation programs but not exercised as of
July 31, 1996. See 'Executive Compensation -- Company Incentive Compensation and
Benefit Plans -- Stock Incentive Plan.'
<TABLE>
<CAPTION>
NUMBER OF SHARES
PROJECTED TO BE % OF SHARES
NAME BENEFICIALLY OWNED OUTSTANDING
- ---------------------------------------------------------------------------- --------------------- ------------
<S> <C> <C>
William M. Landuyt.......................................................... 299,179(a) *
Robert E. Lee............................................................... 209,658(b) *
The Rt. Hon. Kenneth Baker CH MP............................................ 517 *
Worley H. Clark............................................................. 588 *
The Rt. Hon. The Lord Glenarthur............................................ 746 *
David J.P. Meachin.......................................................... 446 *
Martin G. Taylor............................................................ 9,017 *
Donald V. Borst............................................................. 153,185 *
George W. Robbins........................................................... 150,514(c) *
Ronald H. Yocum............................................................. 149,240 *
All directors and executive officers as a group (16 persons)................ 1,405,391 1.8%
</TABLE>
- ------------
* Represents less than 1%.
(a) Includes 885 shares held in Mr. Landuyt's spouse's name.
(b) Includes 6 shares owned directly by Mr. Lee's wife and 3 shares owned
directly by Mr. Lee's son, as to which Mr. Lee disclaims beneficial
ownership.
(c) Includes 71 shares held in a trust of which Mr. Robbins is trustee, as to
which Mr. Robbins disclaims beneficial ownership.
Following the Demerger, it is expected that stock ownership guidelines will
be established for the 30 executive officers and management-level employees of
the Company and Company Subsidiaries who are expected to receive grants of
restricted stock shortly after the Dividend Payment Date. Under these
guidelines, these individuals will be 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.'
Based upon information available to Hanson concerning the ownership of
Ordinary Shares (including Ordinary Shares represented by ADSs) at June 30,
1996, no person is projected to own beneficially more than 5% of the outstanding
Common Stock on the Dividend Payment Date.
Based upon the respective plans' ownership of Ordinary Shares and ADSs on
April 30, 1996, the Hanson Defined Contribution Plans and the Company Defined
Contribution Plans are expected to hold approximately 212,755 and 407,197 shares
of Common Stock, respectively, and the Company Defined Contribution Plans are
expected to hold approximately 28,503,760 Ordinary Shares (including Ordinary
Shares represented by ADSs) immediately following the Demerger. Additionally,
other Hanson pension plans and Company pension plans are expected to hold
approximately 223,774 and 79,380, respectively, shares of Common Stock. The
trustees of the Hanson Defined Contribution Plans' trusts presently intend to
review, after considering legal and financial factors and the trustees'
fiduciary duties under applicable law, whether to retain or dispose of any or
all shares of Common Stock issued to such trusts. The trustees of the Company
Defined Contribution Plans' and benefit plans' trusts presently intend to
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review, after considering legal and financial factors and the trustees'
fiduciary duties under applicable law, whether to retain or dispose of any or
all Ordinary Shares (including Ordinary Shares represented by ADSs) and whether
to invest the net proceeds thereof in Common Stock. Following such review, the
trustees of the Hanson Defined Contribution Plans and benefit plans and the
Company Defined Contribution Plans and benefit plans will independently advise
the participants in such plans of their respective investment options.
Accordingly, Hanson and the Company cannot predict the timing of any such
dispositions and acquisitions of Common Stock and/or Ordinary Shares (including
Ordinary Shares represented by ADSs), if any.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock that the Company
presently has authority to issue is 1,000 shares of Common Stock. Under the
Amended and Restated Certificate of Incorporation of the Company that will be in
effect on the Dividend Payment Date, the form of which is attached as Annex A to
this Information Statement (the 'Certificate of Incorporation'), the Company
will have authority to issue a total of 250,000,000 shares of all classes of
stock, of which 25,000,000 may be shares of Preferred Stock and 225,000,000 may
be shares of Common Stock.
Based on the number of Ordinary Shares outstanding as of July 31, 1996 and
the Dividend Ratio, it is expected that approximately 74,391,400 shares of
Common Stock will be issued to Hanson Shareholders in the Stock Dividend. See
'The Stock Dividend and Other Demerger Transactions.' For a description of
certain additional shares of restricted Common Stock expected to be issued to
directors and officers of the Company shortly after the Dividend Payment Date,
see 'Executive Compensation.' All the shares of Common Stock to be issued to
Hanson Shareholders in the Stock Dividend will be fully paid and non-assessable.
The Common Stock to be issued will constitute all the shares of capital stock of
the Company that will be outstanding immediately after the Stock Dividend.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders. Holders of Common Stock do not have cumulative
voting rights in the election of directors. The first annual meeting of
shareholders is expected to be held during the second quarter of 1997.
Holders of Common Stock do not have subscription, redemption or conversion
privileges. Subject to the preferences or other rights of any Preferred Stock
that may be issued from time to time, holders of Common Stock are entitled to
participate ratably in dividends on the Common Stock as declared by the
Company's Board of Directors. Holders of Common Stock are entitled to share
ratably in all assets available for distribution to stockholders in the event of
the liquidation or dissolution of the Company, subject to distribution of the
preferential amount, if any, to be distributed to holders of Preferred Stock.
PREFERRED STOCK
The Certificate of Incorporation that will be in effect on the Dividend
Payment Date will authorize the Company Board, without any vote or action by the
holders of Common Stock, to issue up to 25,000,000 shares of Preferred Stock
from time to time in one or more series. The Company Board is authorized to
determine the number of shares and designation of any series of Preferred Stock
and the dividend rights, dividend rate, conversion rights and terms, voting
rights (full or limited, if any), redemption rights and terms, liquidation
preferences and sinking fund terms of any series of Preferred Stock. Issuances
of Preferred Stock would be subject to the applicable rules of the NYSE or other
organizations on whose systems the stock of the Company may then be quoted or
listed. Depending upon the terms of Preferred Stock established by the Company
Board, any or all series of Preferred Stock could have preference over the
Common Stock with respect to dividends and other distributions and upon
liquidation of the Company. Issuance of any such shares with voting powers, or
issuance of additional shares of Common Stock, would dilute the voting power of
the outstanding Common Stock.
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The Company has no present plans to issue any Preferred Stock, except that the
Rights Agreement provides for the issuance of shares of Series A Junior
Preferred Stock ('Series A Preferred Stock') under the circumstances provided
for in the Rights Agreement, upon the exercise of the Rights issued thereunder.
See 'Rights Plan.'
NO PREEMPTIVE RIGHTS
No holder of any capital stock of the Company authorized at the Dividend
Payment Date will have any preemptive right to subscribe for or purchase any
securities of any class or kind of the Company.
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company of New York will be the transfer agent and
registrar for the Common Stock commencing upon the Dividend Payment Date.
RIGHTS PLAN
Each presently outstanding share of Common Stock has attached to it, and
each share of Common Stock to be issued from and after the date of this
Information Statement (including Common Stock that will trade on a 'when-issued'
basis) will have attached to it, one Right issued pursuant to the Rights
Agreement until the Rights expire. Each Right entitles the registered holder to
purchase from the Company one one-hundredth (1/100) of a share of Series A
Preferred Stock at an initial price of $33.63 per one one-hundredth (1/100) of a
share (the 'Exercise Price'). Unless earlier redeemed, the Rights will expire at
the close of business on the date of the Company's second annual meeting of
stockholders following the Dividend Payment Date (the 'Stated Expiration Time')
and the Rights Agreement will not be extended or renewed beyond this date
without the approval of the Company's stockholders.
The Rights, unless earlier redeemed by the Company Board or extended or
modified as described above, become exercisable by each record holder thereof,
other than the Acquiring Person (as defined below), upon the close of business
on the day (the 'Rights Distribution Date') which is the earlier of (i) the
tenth day following a public announcement that a person or group of affiliated
or associated persons, with certain exceptions set forth below, has acquired
beneficial ownership of 15% or more of the outstanding voting stock of the
Company (an 'Acquiring Person') and (ii) the tenth business day (or such later
date as may be determined by the Company Board prior to such time as any person
or group of affiliated or associated persons becomes an Acquiring Person) after
the date of the commencement or announcement of a person's or group's intention
to commence a tender or exchange offer, the consummation of which would result
in the ownership of 15% or more of the Company's outstanding voting stock (even
if no shares are actually purchased pursuant to such offer); prior thereto,
however, the Rights will not be exercisable, will not be represented by a
separate certificate, and will not be transferable apart from the Common Stock.
An Acquiring Person does not include (A) prior to the Dividend Payment Date, the
Company's nominee stockholders, (B) the Company, (C) any Company Subsidiary, (D)
any employee benefit plan or employee stock plan of the Company or any Company
Subsidiary, or any trust or other entity organized, appointed, established or
holding Common Stock for, or pursuant to the terms of, any such plan, or (E) any
person or group whose ownership of 15% or more of the shares of voting stock of
the Company then outstanding results solely from (i) any action or transaction
or transactions approved by the Company Board before such person or group became
an Acquiring Person, or (ii) a reduction in the number of issued and outstanding
shares of voting stock of the Company pursuant to a transaction or transactions
approved by the Company Board (provided that any person or group that does not
become an Acquiring Person by reason of clause (i) or (ii) above shall become an
Acquiring Person upon acquisition of an additional 1% of the Company's voting
stock unless such acquisition of additional voting stock will not result in such
person or group becoming an Acquiring Person by reason of such clause (i) or
(ii)). For purposes of the foregoing, outstanding voting stock of the Company
includes voting stock that trades on a 'when issued' basis on a national
securities exchange (such as the NYSE), on the National Association of
Securities Dealers' Automated Quotation System or otherwise.
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The Rights Agreement provides that when a person or group of affiliated or
associated persons becomes an Acquiring Person (other than pursuant to a
Qualifying Tender Offer (as defined below)), such Acquiring Person's Rights will
thereupon become null and void.
The Rights Agreement provides that until the Rights Distribution Date, the
Rights will be transferred with, and only with, the Common Stock. Until the
Rights Distribution Date (or earlier redemption or expiration of the Rights),
Common Stock certificates will contain a legend incorporating the Rights
Agreement by reference. Until the Rights Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any of
the Common Stock certificates will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. As soon as
practicable following the Rights Distribution Date, separate certificates
evidencing the Rights ('Rights Certificates') will be mailed to holders of
record of the Common Stock as of the close of business on the Rights
Distribution Date and such separate certificates alone will evidence the Rights
from and after the Rights Distribution Date.
The Series A Preferred Stock is nonredeemable and, unless otherwise
provided in connection with the creation of a subsequent series of Preferred
Stock, subordinate to any other series of the Company's Preferred Stock. The
Series A Preferred Stock may not be issued except upon the exercise of the
Rights. Each share of Series A Preferred Stock will be entitled to receive when,
as and if declared, a quarterly dividend in an amount equal to the greater of
$.10 per share or 100 times the cash dividends declared on the Common Stock. In
addition, the Series A Preferred Stock is entitled to 100 times any non-cash
dividends (other than dividends payable in equity securities) declared on the
Common Stock, in like kind. In the event of the liquidation of the Company, the
holders of Series A Preferred Stock will be entitled to receive a payment in an
amount equal to the greater of $33.63 per one one-hundredth share or 100 times
the payment made per share of Common Stock. Each share of Series A Preferred
Stock will have 100 votes, voting together with the Common Stock. In the event
of any merger, consolidation or other transaction in which Common Stock is
changed, exchanged or converted, each shares of Series A Preferred Stock will be
entitled to receive 100 times the amount received per share of Common Stock. The
rights of Series A Preferred Stock as to dividends, liquidation and voting are
protected by anti-dilution provisions.
The number of shares of Series A Preferred Stock issuable upon exercise of
the Rights is subject to certain adjustments from time to time in the event of a
stock dividend on, or a subdivision, combination or issuance of capital stock in
a reclassification of, the Common Stock. The Exercise Price for the Rights is
subject to adjustment in certain circumstances, including certain distributions
of cash or other property to holders of Common Stock.
Unless the Rights are earlier redeemed, in the event that, at any time on
or after the Rights Distribution Date (except for any transaction approved by a
majority of the Continuing Directors (as defined in the Rights Agreement)), the
Company were to be acquired in a merger or other business combination (in which
any Common Stock is changed or converted into, or exchanged for, other
securities or assets), or more than 50% of the assets or earning power of the
Company and Company Subsidiaries (taken as a whole) were to be sold or
transferred in one or a series of related transactions, the Rights Agreement
provides that proper provision will be made so that each holder of record of a
Right, other than the Acquiring Person, will, from and after such date have the
right to receive, upon payment of the Exercise Price, that number of shares of
common stock of the acquiring company having a market value at the time of such
transaction equal to two times the Exercise Price. In addition, unless the
Rights are earlier redeemed, in the event that a person or group becomes the
beneficial owner of 15% or more of the Company's voting stock (other than
pursuant to a tender or exchange offer (a 'Qualifying Tender Offer') for all
outstanding shares of Common Stock that is approved by the Company Board, after
taking into account the long-term value of the Company and all other factors
they consider relevant), the Rights Agreement provides that proper provision
will be made so that each holder of record of a Right, other than the Acquiring
Person, will thereafter have the right to receive, upon payment of the Exercise
Price, that number of shares of the Series A Preferred Stock having a market
value at the time of the transaction equal to two times the Exercise Price (such
market value to be determined with reference to the market value of the Common
Stock as provided in the Rights Agreement).
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Fractions of shares of Series A Preferred Stock (other than fractions which
are integral multiples of one one-hundredth of a share) may, at the election of
the Company be, evidenced by depositary receipts. The Company may also issue
cash in lieu of fractional shares which are not integral multiples of one
one-hundredth of a share.
At any time on or prior to the close of business on the earlier of (i) the
tenth day after the time that a person has become an Acquiring Person (or such
later date as a majority of the Company Board and a majority of the Continuing
Directors may determine), and (ii) the Stated Expiration Time, the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right,
subject to adjustment (the 'Redemption Price'). The Rights may be redeemed after
the time that any Person has become an Acquiring Person (other than pursuant to
a Qualifying Tender Offer) only if approved by a majority of the Continuing
Directors. Immediately upon the effective time of the action of the Company
Board authorizing redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
For as long as the Rights are then redeemable, the Company may, except with
respect to the Redemption Price or shortening the Stated Expiration Time, amend
the Rights in any manner, including an amendment to extend the time period in
which the Rights may be redeemed provided, however, that any amendment to extend
the time period in which the Rights may be redeemed shall be subject to
stockholder approval. At any time when the Rights are not then redeemable, the
Company may amend the Rights in any manner that does not materially adversely
affect the interests of holders of the Rights as such. Amendments to the Rights
Agreement from and after the time that any Person becomes an Acquiring Person
(other than pursuant to a Qualifying Tender Offer) require the approval of a
majority of the Continuing Directors (as provided in the Rights Agreement).
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends. Holders of Common Stock may, depending upon the
circumstances, recognize taxable income should the Rights become exercisable or
upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Commission as an
exhibit to the Registration Statement. This summary description of the Rights
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement which is incorporated in this summary description herein by
reference.
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION, BY-LAWS AND DELAWARE STATUTORY LAW
GENERAL
The provisions of the Certificate of Incorporation, the Company's By-Laws
and Delaware statutory law described in this section may delay or make more
difficult acquisitions or changes of control of the Company not approved by the
Company Board. Such provisions could have the effect of discouraging third
parties from making proposals involving an acquisition or change of control of
the Company, although such proposals, if made, might be considered desirable by
a majority of the Company's stockholders. Such provisions may also have the
effect of making it more difficult for third parties to cause the replacement of
the current management of the Company without the concurrence of the Company
Board.
A copy of the Certificate of Incorporation is attached to this Information
Statement as Annex A and is incorporated herein by reference. The following
description of certain provisions of the Certificate of Incorporation and the
By-Laws does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Certificate of Incorporation and the By-Laws.
CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation provides for the Company Board, effective
upon completion of the Demerger Transactions, to be divided into three classes
of directors serving staggered three-year terms.
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As a result, approximately one third of the Company Board will be elected each
year. See 'Management -- Directors.'
The Company believes that a classified board will help to assure the
continuity and stability of the Company Board, and its business strategies and
policies as determined by the Company Board, because a majority of the directors
at any given time will have prior experience as directors of the Company. This
provision should also help to ensure that the Company Board, if confronted with
an unsolicited proposal from a third party that has acquired a block of the
Company's Common Stock, will have sufficient time to review the proposal, to
consider appropriate alternatives and to seek the best available result for all
stockholders.
This provision could prevent a party who acquires control of a majority of
the outstanding Common Stock from obtaining control of the Company Board until
the second annual stockholders' meeting following the date the acquiror obtains
the controlling stock interest, could have the effect of discouraging a
potential acquiror from making a tender offer or otherwise attempting to obtain
control of the Company and could thus increase the likelihood that incumbent
directors will retain their positions.
NUMBER OF DIRECTORS; REMOVAL; VACANCIES
The Certificate of Incorporation and the By-Laws provide that the number of
directors shall not be less than three and shall be determined from time to time
exclusively by a vote of a majority of the Company Board then in office. The
Certificate of Incorporation also provides that the Company Board shall have the
exclusive right to fill vacancies, including vacancies created by expansion of
the Company Board. Furthermore, except as may be provided in a resolution or
resolutions of the Company Board providing for any class or series of Preferred
Stock with respect to any directors elected by the holders of such class or
series, directors may be removed by shareholders only for cause and only by the
affirmative vote of at least 66 2/3% of the voting power of all of the shares of
the Company's capital stock then entitled to vote generally in the election of
directors, voting together as a single class. These provisions, in conjunction
with the provision of the Certificate of Incorporation authorizing the Company
Board to fill vacant directorships, could prevent stockholders from removing
incumbent directors without cause and filling the resulting vacancies with their
own nominees.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The Certificate of Incorporation provides that, except as may be provided
in a resolution or resolutions of the Company Board providing for any class or
series of Preferred Stock, stockholder action can be taken only at an annual or
special meeting of stockholders and cannot be taken by written consent in lieu
of a meeting. The Certificate of Incorporation also provides that special
meetings of the stockholders can only be called pursuant to a resolution
approved by a majority of the Company Board then in office. Stockholders are not
permitted to call a special meeting of stockholders.
ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS
The By-Laws establish an advance notice procedure for stockholder proposals
to be brought before a meeting of stockholders of the Company and for
nominations by stockholders of candidates for election as directors at an annual
meeting or a special meeting at which directors are to be elected. Subject to
any other applicable requirements, including, without limitation, Rule 14a-8
under the Exchange Act, only such business may be conducted at a meeting of
stockholders as has been brought before the meeting by, or at the direction of,
the Company Board, or by a stockholder who has given to the Secretary of the
Company timely written notice, in proper form, of the stockholder's intention to
bring that business before the meeting. The presiding officer at such meeting
has the authority to make such determinations. Only persons who are nominated
by, or at the direction of, the Company Board, or who are nominated by a
stockholder who has given timely written notice, in proper form, to the
Secretary prior to a meeting at which directors are to be elected will be
eligible for election as directors of the Company.
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To be timely, notice of nominations or other business to be brought before
an annual meeting must be received by the Secretary of the Company at the
principal executive office of the Company no later than 60 days prior to the
date of such annual meeting. Similarly, notice of nominations or other business
to be brought before a special meeting must be delivered to the Secretary at the
principal executive office of the Company no later than the close of business on
the 15th day following the day on which notice of the date of a special meeting
of stockholders was given.
The notice of any nomination for election as a director must set forth the
name, date of birth, business and residence address of the person or persons to
be nominated; the business experience during the past five years of such person
or persons; whether such person or persons are or have ever been at any time
directors, officers or owners of 5% or more of any class of capital stock,
partnership interest or other equity interest of any corporation, partnership or
other entity; any directorships held by such person or persons in any company
with a class of securities registered pursuant to Section 12 of the Exchange Act
or subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940, as
amended; and whether, in the last five years, such person or persons are or have
been convicted in a criminal proceeding or have been subject to a judgment,
order, finding or decree of any federal, state or other governmental entity,
concerning any violation of federal, state or other law, or any proceeding in
bankruptcy, which conviction, order, finding, decree or proceeding may be
material to an evaluation of the ability or integrity of the nominee; and, the
consent of each such person to serve as a director if elected. The person
submitting the notice of nomination, and any person acting in concert with such
person, must provide their names and business addresses, the name and address
under which they appear on the Company's books (if they so appear), and the
class and number of shares of the Company's capital stock that are beneficially
owned by them.
AMENDMENTS TO BY-LAWS
The Certificate of Incorporation provides that the Company Board or the
holders of at least 66 2/3% of the voting power of all shares of the Company's
capital stock then entitled to vote generally in the election of directors,
voting together as a single class, have the power to amend or repeal the
Company's By-Laws.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Any proposal to amend, alter, change or repeal any provision of the
Certificate of Incorporation, except as may be provided in a resolution or
resolutions of the Company Board providing for any class or series of Preferred
Stock and which relate to such class or series of Preferred Stock, requires
approval by the affirmative vote of both a majority of the members of the
Company Board then in office and a majority vote of the voting power of all of
the shares of the Company's capital stock entitled to vote generally in the
election of directors, voting together as a single class. Notwithstanding the
foregoing, any proposal to amend, alter, change or repeal the provisions of the
Certificate of Incorporation relating to (i) the classification of the Company
Board, (ii) removal of Directors, (iii) the prohibition of stockholder action by
written consent or stockholder calls for special meetings, (iv) amendment of
By-Laws, or (v) amendment of the Certificate of Incorporation requires approval
by the affirmative vote of 66 2/3% of the voting power of all of the shares of
the Company's capital stock entitled to vote generally in the election of
directors, voting together as a single class.
PREFERRED STOCK AND ADDITIONAL COMMON STOCK
Under the Certificate of Incorporation, the Company Board will have the
authority to provide by Board resolution for the issuance of shares of one or
more series of Preferred Stock. The Company Board is authorized to fix by
resolution the terms and conditions of each such other series. See 'Description
of Capital Stock -- Preferred Stock.'
The Company believes that the availability of the Company's Preferred
Stock, in each case issuable in series, and additional shares of Common Stock
could facilitate certain financings and acquisitions and provide a means for
meeting other corporate needs which might arise. The authorized shares of the
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Company's Preferred Stock, as well as authorized but unissued shares of Common
Stock will be available for issuance without further action by the Company's
stockholders, unless stockholder action is required by applicable law or the
rules of any stock exchange on which any series of the Company's capital stock
may then be listed.
These provisions give the Company Board the power to approve the issuance
of a series of Preferred Stock, or an additional series of Common Stock, of the
Company that could, depending on its terms, either impede or facilitate the
completion of a merger, tender offer or other takeover attempt. For example, the
issuance of new shares of Preferred Stock might impede a business combination if
the terms of those shares include voting rights which would enable a holder to
block business combinations; the issuance of new shares might facilitate a
business combination if those shares have general voting rights sufficient to
cause an applicable percentage vote requirement to be satisfied.
Moreover, the Series A Preferred Stock is issuable under the circumstances
provided for in the Rights Agreement upon exercise of the Rights. See 'Rights
Plan.'
DELAWARE BUSINESS COMBINATION STATUTE
Section 203 of the DGCL, as amended ('Section 203'), provides that, subject
to certain exceptions specified therein, an 'interested stockholder' of a
Delaware corporation shall not engage in any business combination with the
corporation for a three-year period following the date that such stockholder
becomes an 'interested stockholder' unless (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an 'interested
stockholder', (ii) upon consummation of the transaction which resulted in the
stockholder becoming an 'interested stockholder,' the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares), or (iii) on or
subsequent to such date, the business combination is approved by the board of
directors of the corporation and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the 'interested stockholder.' Except as
otherwise specified in Section 203, an 'interested stockholder' is defined to
include (x) any person that is the owner of 15% or more of the outstanding
voting stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within three years immediately prior to the relevant
date and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an 'interested stockholder' to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Certificate of Incorporation does not exclude the Company from
the restrictions imposed under Section 203. The provisions of Section 203 may
encourage companies interested in acquiring the Company to negotiate in advance
with the Company Board, since the stockholder approval requirement would be
avoided if a majority of the directors then in office approve either the
business combination or the transaction which results in the stockholder
becoming an 'interested stockholder.' Such provisions also may have the effect
of preventing changes in the management of the Company. It is possible that such
provisions could make it more difficult to accomplish transactions which
stockholders may otherwise deem to be in their best interests.
LIMITATION ON LIABILITY AND INDEMNIFICATION
OF OFFICERS AND DIRECTORS
LIMITATION ON LIABILITY OF DIRECTORS
Pursuant to authority conferred by Section 102 of the DGCL, Article VII of
the Company's Certificate of Incorporation ('Article VII') eliminates the
personal liability of the Company's directors to the Company or its stockholders
for monetary damages for breach of fiduciary duty, including without limitation
directors serving on committees of the Board of Directors. Directors remain
liable for (i) any breach of the duty of loyalty to the Company or its
stockholders, (ii) any act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law, (iii) any violation
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of Section 174 of the DGCL, which proscribes the payment of dividends and stock
purchases or redemptions under certain circumstances, and (iv) any transaction
from which directors derive an improper personal benefit.
Article VII further provides that any future repeal or amendment of its
terms will not adversely affect any rights of directors existing thereunder with
respect to acts or omissions occurring prior to such repeal or amendment.
Article VII also incorporates any future amendments to Delaware law which
further eliminate or limit the liability of directors.
INDEMNIFICATION AND INSURANCE
In accordance with Section 145 of the DGCL, which provides for the
indemnification of directors, officers and employees under certain
circumstances, Article XIV ('Article XIV') of the Company's By-Laws grants the
Company's directors, officers and employees a right to indemnification for all
expenses, liabilities and losses relating to civil, criminal, administrative or
investigative proceedings to which they are a party (i) by reason of the fact
that they are or were directors, officers or employees of the Company or (ii) by
reason of the fact that, while they are or were directors, officers or employees
of the Company, they are or were serving at the request of the Company as
directors, officers, members, employees, fiduciaries or agents of another
corporation, partnership, joint venture, trust or enterprise. Article XIV of the
By-Laws further provides for the mandatory advancement of expenses incurred by
officers and directors in defending such proceedings in advance of their final
disposition upon delivery to the Company by the indemnitee of an undertaking to
repay all amounts so advanced if it is ultimately determined that such
indemnitee is not entitled to be indemnified under Article XIV. The Company may
not indemnify or make advance payments to any person in connection with
proceedings initiated against the Company by such person without the
authorization of the Company Board, except with respect to counterclaims,
cross-claims, third-party claims or as otherwise ordered by a court of competent
jurisdiction.
In addition, Article XIV provides that directors and officers therein
described shall be indemnified to the fullest extent permitted by Section 145 of
the DGCL, or any successor provisions or amendments thereunder. In the event
that any such successor provisions or amendments provide indemnification rights
broader than permitted prior thereto, Article XIV allows such broader
indemnification rights to apply retroactively with respect to any predating
alleged action or inaction and also allows the indemnification to continue after
an indemnitee has ceased to be a director or officer of the corporation and to
inure to the benefit of the indemnitee's heirs, executors and administrators.
Article XIV further provides that the right to indemnification is not
exclusive of any other right which any indemnitee may have or thereafter acquire
under any statute, the Certificate of Incorporation or By-Laws, any agreement or
vote of stockholders or disinterested directors or otherwise, and allows the
Company to indemnify and advance expenses to any person whom the corporation has
the power to indemnify under the DGCL or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted for directors and officers and controlling persons pursuant to
the foregoing provisions, the Company has been advised that, in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
The Company's By-Laws authorize the Company to purchase insurance for
directors, officers and employees of the Company, and persons who serve at the
request of the Company as directors, officers, members, employees, fiduciaries
or agents of other enterprises against any expense, liability or loss incurred
in such capacity, whether or not the Company would have the power to indemnify
such persons against such expense or liability under the By-Laws. The Company
intends to maintain insurance coverage for its officers and directors as well as
insurance coverage to reimburse the Company for potential costs of its corporate
indemnification of directors and officers.
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COMPARATIVE RIGHTS OF SHAREHOLDERS UNDER ENGLISH
AND DELAWARE LAW
As a result of the Stock Dividend, holders of Ordinary Shares and ADSs of
Hanson, a public limited company incorporated under the laws of England, will
receive shares of Common Stock of the Company, a Delaware corporation. The
following is a summary of material differences between the rights of
shareholders of the Company and the rights of shareholders of Hanson arising
from the differences between the corporate laws of Delaware and England. For
information as to where the governing instruments of the Company and Hanson may
be obtained, see 'Additional Information.'
Pursuant to Section 14 of the Exchange Act and the rules promulgated
thereunder (the 'Proxy Rules'), the Company will be required to comply with
certain notice and disclosure requirements relating to the solicitation of
proxies in respect of shareholder meetings. As a foreign private issuer, Hanson
is not subject to the Proxy Rules. However, Hanson is subject to the Rules of
the LSE regulating notices of shareholder meetings and solicitation of proxies.
Under the applicable LSE requirements, notice of a shareholder meeting is
normally accompanied by a shareholder circular (or, in the case of an annual
general meeting, by an annual report and accounts) containing an explanation of
the purpose of the meeting and the Board's recommendations with respect to
actions to be taken. All such communications are sent by Hanson to holders of
Hanson ADSs at the same time as they are sent to holders of Hanson Ordinary
Shares. As a foreign private issuer with securities listed on the NYSE and
registered under Section 12 of the Exchange Act, Hanson is also required under
the Exchange Act to file publicly with the Commission and the NYSE annual
reports and other information.
VOTING RIGHTS
Under English law, the voting rights of shareholders are governed by a
company's articles of association, subject to the statutory right of
shareholders to demand a poll (a vote by the number of shares held) at a general
meeting. Cumulative voting is essentially unknown under English law. Two
shareholders present in person constitute a quorum for purposes of a general
meeting of a public company, unless the company's articles of association
specify otherwise. Hanson's Articles of Association specify that three
shareholders present in person constitute a quorum.
Under the DGCL, each shareholder is entitled to one vote per share unless
the certificate of incorporation provides otherwise. In addition, the
certificate of incorporation may provide for cumulative voting at all elections
of directors of the corporation. Under the Certificate of Incorporation and
By-Laws, holders of the Common Stock are entitled to one vote per share on all
matters, and cumulative voting is not permitted. Under the Certificate of
Incorporation, a quorum consists of a majority of the shares entitled to vote,
unless otherwise required by law.
ACTIONS BY WRITTEN CONSENT
Under English law, a company's articles of association may provide that a
resolution in writing executed by or on behalf of each shareholder who would
have been entitled to vote upon it if it had been proposed at a general meeting
at which he was present will be as effectual as if it had been passed at a
general meeting properly convened and held. Hanson's Articles of Association do
not contain any such provision.
Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at any meeting of
stockholders may instead be taken without a meeting, without prior notice and a
vote, if a written consent setting forth the action taken is signed by holders
of outstanding stock having at least the number of votes that would be required
to authorize such action at a meeting of stockholders at which all shares
entitled to vote thereon were present and voting and a prompt notice of the
action so taken is provided to those stockholders who have not consented in
writing. The Company's Certificate of Incorporation does not allow action by
written consent.
SOURCES AND PAYMENT OF DIVIDENDS
Under English law, a company may pay dividends on its ordinary shares,
subject to the prior rights of holders of its preferred shares, only out of its
distributable profits (accumulated, realized profits less accumulated, realized
losses) and not out of share capital, which includes share premiums (paid-in
surplus). Amounts credited to the share premium account (representing the excess
of the consideration for the issue of outstanding shares over the aggregate par
value of such shares) may not be paid out as
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cash dividends but may be used, among other things, to pay up unissued shares
which may then be distributed to shareholders in proportion to their holdings.
In addition, a public company such as Hanson may make a distribution at any time
only if, at that time and immediately after such distribution, the amount of its
net assets is not less than the aggregate of its called-up (i.e., issued and
paid-up) share capital and undistributable reserves.
The DGCL permits the payment of dividends on capital stock, subject to any
restrictions contained in the certificate of incorporation, out of a
corporation's surplus (the excess of net assets over capital) or, in case there
is no surplus, out of net profits for the current and/or preceding fiscal year.
If the capital of the corporation is diminished to an amount less than the
aggregate amount of capital represented by the outstanding stock having a
preference on the distribution of assets, then dividends may not be declared and
paid out of such net profits until the deficiency in the amount of capital
represented by the preferred shares shall have been repaired.
RIGHTS OF PURCHASE AND REDEMPTION
Under English law, a company may issue redeemable shares if authorized by
its articles of association and subject to the conditions stated therein. Such
shares may be redeemed only if fully paid and, in the case of public companies,
only, subject as provided below, out of distributable profits or the proceeds of
a new issue of shares made for the purpose of the redemption. Where redeemable
shares are redeemed wholly out of profits, the amount by which the par value of
the company's issued share capital is diminished must be transferred to the
capital redemption reserve, which is generally treated as paid-up share capital.
In addition, any amount payable on redemption of any redeemable shares in excess
of the par value thereof may be paid out of the proceeds of a fresh issue of
shares up to an amount equal to whichever is the lesser of the aggregate of the
premiums received by the company on the issue of those shares or the amount of
the company's share premium account as at the time of the redemption including
any sum transferred to that account in respect of premiums on the new issue. A
company may purchase its own shares, including any redeemable shares, if
authorized by its articles of association and provided that such purchase has
been previously approved by an ordinary resolution of its shareholders in the
case of an on-market purchase or a special resolution in other cases. The above
provisions that apply to redemption of redeemable shares apply also to purchases
of shares. The LSE, on which the Ordinary Shares of Hanson are listed, requires
that purchases within a period of 12 months of 15% or more of a company's share
capital must be made by way of a tender or partial offer to all shareholders, in
the case of a tender offer, at a stated maximum price. Notice of a tender offer
must be given by advertising in two U.K. national newspapers at least seven days
before the offer closes. Purchases below the 15% threshold may be made through
the market in the ordinary way provided that the price is not more than 5% above
the average of the middle market quotations taken from the LSE Daily Official
List for the ten trading days before the purchase date or by way of an off-
market purchase negotiated with one or more shareholders.
Under the DGCL, a corporation may purchase or redeem shares of any class of
its capital stock, but subject to the restrictions on dividends and other
distributions described above under 'Sources and Payment of Dividends.' If the
certificate of incorporation prohibits the reissue of acquired shares, the
number of authorized shares is reduced by the number of shares acquired,
effective upon the issuance of a certificate of amendment.
SPECIAL MEETING OF SHAREHOLDERS
Under English law, an extraordinary general meeting of shareholders may be
called by the board of directors or (notwithstanding any provision to the
contrary in a company's articles of association) by a request by shareholders
holding not less than one-tenth of the paid-up capital of the company carrying
voting rights at general meetings. An ordinary resolution requires 14 clear
days' notice, and requires a majority vote of those present and voting. An
extraordinary resolution requires 14 clear days' notice and a three-quarters
majority vote of those present and voting. A special resolution requires 21
clear days' notice and a three-quarters majority vote of those present and
voting. An annual general meeting requires 21 clear days' notice regardless of
the type of resolution to be proposed thereat. The term 'clear days' notice'
means calendar days and excludes the date of mailing, the deemed date of receipt
of such notice (which if sent by first-class mail, is normally the day following
such mailing), and the date of the meeting itself. 'Extraordinary resolutions'
are relatively unusual and are confined to certain
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matters out of the ordinary course of business such as a proposal to wind up the
affairs of the company or to remove a director. Proposals which are the normal
subject of 'special resolutions' generally involve proposals to change the name
of the company, to alter its capital structure in certain respects, to change or
amend the rights of shareholders, to permit the company to issue new shares for
cash without applying the shareholders' preemptive rights and to amend the
company's objects (purpose clause) and articles of association and to carry out
certain other matters where either the company's articles of association or
English law prescribe that a 'special resolution' is required. All other
proposals relating to the ordinary course of the company's business such as the
election of directors would be the subject of an 'ordinary resolution.'
Under the DGCL, a special meeting of shareholders may be called only by the
board of directors, the president or by such person or persons as may be
authorized by the certificate of incorporation or By-Laws. The Certificate of
Incorporation provides that a special meeting of stockholders can only be called
pursuant to a resolution approved by a majority of the Company Board then in
office.
RIGHTS OF APPRAISAL
While English law does not generally provide for appraisal rights, if a
shareholder applies to a court as described under 'Shareholders' Votes on
Certain Reorganizations' below, the court may specify such terms for the
acquisition as it considers appropriate.
Under the DGCL, except as otherwise provided by the DGCL, stockholders who
continuously hold their shares through the effective date of a merger or
consolidation, who perfect their appraisal rights in the manner provided by the
DGCL, and who neither vote in favor of the merger or consolidation or otherwise
consent thereto in writing, are entitled to receive payment of the 'fair value'
of their shares in the event of a merger or consolidation.
PREEMPTIVE RIGHTS
Under English law, the issue for cash of equity securities (securities
which with respect to dividends or capital carry a right to participate beyond a
specified amount), or rights to subscribe for or convert into equity securities,
must be offered in the first instance to the existing equity shareholders in
proportion to the respective nominal values of their holdings, unless a special
resolution has been passed in a general meeting of shareholders to the contrary.
As is the custom of many English companies listed on the LSE, at its annual
general meeting each year Hanson proposes a resolution to authorize the Hanson
Board to allot up to a specified amount of share capital for cash otherwise than
pro rata to its existing shareholders.
Unless the certificate of incorporation expressly provides otherwise,
shareholders of a Delaware corporation have no preemptive rights. The
Certificate of Incorporation does not provide for preemptive rights.
AMENDMENT OF GOVERNING INSTRUMENTS
Under English law, the shareholders have the authority to alter, delete,
substitute or add to most provisions of a company's memorandum and all
provisions of its articles of association by a vote of not less than
three-quarters of the shareholders entitled to attend and vote and who do attend
and vote, either in person or by proxy, at a general meeting subject, in the
case of certain alterations to the memorandum or the articles of association, to
the right of dissenting shareholders to apply to the courts to cancel the
alterations. Under English law, the board of directors is not authorized to
change the memorandum or the articles of association. Amendments affecting the
rights of the holders of any class of shares may, depending on the rights
attached to such class and the nature of the amendments, also require approval
of the classes affected in separate class meetings.
Under the DGCL, a proposed charter amendment requires an affirmative vote
of a majority of the outstanding stock entitled to vote thereon and a majority
of the outstanding stock of each class entitled to vote thereon. Any proposal to
amend, alter, change or repeal any provision of the Certificate of Incorporation
requires approval by the affirmative vote of both a majority of the members of
the Company Board then in office and a majority vote of the voting power of all
of the shares of the Company's capital stock entitled to vote generally in the
election of directors except that any proposal to amend, alter, change or repeal
the provisions of the Certificate of Incorporation relating to the
classification of the Company Board or those provisions prohibiting stockholder
action by written
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consent or stockholder calls for special meetings, requires approval by the
affirmative vote of both a majority of the directors then in office and 66 2/3%
of the voting power of all of the shares of the Company's capital stock entitled
to vote generally in the election of directors. Under the DGCL, the by-laws of a
corporation generally may be amended or repealed by the affirmative vote of the
holders of a majority of the shares present at the meeting and entitled to vote
thereon. The Certificate of Incorporation provides that the Company's By-Laws
may only be altered, amended or repealed by the Company Board or the affirmative
vote of the holders of at least 66 2/3% of the voting power of all shares of the
Company's capital stock then entitled to vote generally in the election of
directors voting together as a single class.
SHAREHOLDERS' VOTES ON CERTAIN REORGANIZATIONS
Shareholder approval is usually required under the rules of the LSE for an
acquisition or disposition by a listed company, such as Hanson, if the net
assets of the company or business to be acquired or disposed of represent 25% or
more of the net asset value of the company or 25% or more of the value of the
company on any of the various other criteria prescribed by the listing rules of
the LSE. Where the size of the acquisition or disposal falls below that level,
certain information may nevertheless be required to be published or circulated
to shareholders. Shareholder approval may also be required for an acquisition or
disposal of assets between a listed company and certain related parties
including (i) directors of the company or its subsidiaries, (ii) holders of 10%
of the nominal value of any class of the company's or any holding company's or
subsidiary's shares having the right to vote in all circumstances at general
meetings of the relevant company, or (iii) any associate of (i) or (ii).
The Companies Acts of 1985 and 1989 (collectively, the 'Companies Act')
provides for schemes of arrangement which are arrangements or compromises
between a company and any class of its shareholders (or any class of its
creditors) and are used for certain types of reconstructions, amalgamations,
capital reorganizations or takeovers. They require the approval at a special
meeting of the company of a majority in number of the shareholders representing
75% of the relevant class of shares present and voting, either in person or by
proxy, and the sanction of the courts. Once so approved and sanctioned, all
shareholders of the relevant class are bound by the terms of the scheme; a
dissenting shareholder would have no rights comparable to dissenters' rights
described below. The Companies Act also provides that where a take-over offer
(as defined therein) is made for the shares of a company incorporated in the
U.K. and, within four months of the date of the offer the offeror has, by virtue
of acceptances of the offer, acquired or contracted to acquire not less than
nine-tenths in value of the shares to which the offer relates, the offeror may,
within two months of reaching the nine-tenths level, by notice require
shareholders who do not accept the offer to transfer their shares on the terms
of the offer. A dissenting shareholder may apply to the court within six weeks
of the date on which such notice was given objecting to the transfer or its
proposed terms. The court is unlikely (absent fraud or oppression) to exercise
its discretion to order that the acquisition not take effect, but it may specify
such terms of the transfer as it finds appropriate. A minority shareholder is
also entitled in these circumstances to require the offeror to acquire his
shares on the terms of the offer.
Generally, under the DGCL, the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote on the matter is required to
approve mergers, consolidations, and any sales, leases or exchanges of all or
substantially all of the assets of a corporation. The Certificate of
Incorporation does not contain any provisions relating to business combinations.
For a description of certain 'anti-takeover' provisions of the DGCL and the
Certificate of Incorporation, see 'Purposes and Effects of Certain Provisions of
the Company's Certificate of Incorporation, By-Laws and Delaware Statutory Law.'
RIGHTS OF INSPECTION
Except when closed in accordance with the provisions of the Companies Act,
the register and index of names of shareholders of an English public company may
be inspected during business hours by its shareholders, including, in the case
of Hanson, holders of Hanson ADSs, without charge and by other persons upon
payment of a charge, and copies may be obtained on payment of a charge. The
shareholders of an English public company, including, in the case of Hanson,
holders of Hanson ADSs, may, without charge, also inspect the minutes of
meetings of the shareholders during business hours and obtain copies upon
payment of a charge. The published annual accounts of an English public company
100
<PAGE>
<PAGE>
are required to be laid before the shareholders in general meeting and a
shareholder is entitled to a copy of such accounts. The shareholders of Hanson
including the holders of Hanson ADSs have no rights to inspect the accounting
records of the company or minutes of meetings of directors. Certain registers
required to be kept by the company are open to public inspection and service
contracts of directors of the company (which have more than twelve months
unexpired or require more than twelve months' notice to terminate) must be
available for inspection during business hours. Rights of inspection during
business hours mean that the company must make the register, index or document
available for inspection for not less than two hours during the period between
9:00 a.m. and 5:00 p.m. on each business day. The rules of the LSE require the
service contracts of directors to be open for inspection at certain times for
periods longer than two hours.
The DGCL allows any shareholder, upon written demand under oath, to inspect
the corporation's stock ledger, a list of its stockholders and its other books
and records during regular business hours, subject to payment of a reasonable
charge for copies of any documents furnished to such shareholder, and provided
that the request is made in good faith and for a purpose reasonably related to
such person's interest as a shareholder.
CLASSIFICATION OF THE BOARD OF DIRECTORS
English law permits a company to provide for the classification of the
board of directors with respect to the time for which directors severally hold
office. Hanson's Articles of Association do not provide for such classification
of the Hanson Board. Hanson's Articles of Association require that, at every
annual general meeting, one-third (or the nearest number to but not exceeding
one-third) of the directors will retire from office and that all vacant
directorships may be filled at that meeting. The directors to retire in each
year are the directors who have been longest in office since their last election
or appointment. Although this tri-annual rotation of directors is similar to a
classified board, it is different in that any director who is a member of the
one-third of directors who have been longest in office since their last election
or appointment at the time of the annual general meeting will retire from office
regardless of the actual year of such director's last appointment. A retiring
director is eligible for re-election. However, if at any annual general meeting,
the place of a retiring director is not filled, the retiring director, if
willing to act, is deemed to have been re-elected, unless at such meeting it is
resolved not to fill such vacated office, or unless a motion for his re-election
shall have been put to the meeting and lost. A director appointed since the last
annual general meeting holds office only until the next annual general meeting
following his appointment, when he will retire, but will be eligible for re-
election. No person other than a director retiring at an annual general meeting
will, unless recommended by the directors for election, be eligible for the
office of director at the annual general meeting unless, not less than three nor
more than 14 days before the day appointed for the meeting, the Secretary of
Hanson has received written notice from a shareholder duly qualified to be
present and vote at the meeting of his intention to propose such person for
election and written notice, signed by the person to be proposed of his
willingness to be elected. The Board may from time to time appoint one or more
of its number for any corporate office for such period on such terms as it deems
fit.
Under the DGCL, the certificate of incorporation of a Delaware corporation
may provide for the classification of the board of directors in order to stagger
the terms of directors. The term 'classified board' generally means the
specification of selected board seats for a term of more than one year, with
different classes of board seats coming up for election each year. The Company
will have a classified board of directors. See 'Purposes and Effects of Certain
Provisions of the Company's Certificate of incorporation, By-Laws and Delaware
Statutory Law -- Classified Board of Directors.'
REMOVAL OF DIRECTORS
Under the Companies Act, shareholders of an English public company have the
right to remove a director by ordinary resolution of which special notice (28
clear days) has been given to the company, irrespective of the provisions of the
articles of association of the company.
Under the DGCL, the entire board of directors or any individual director
may be removed from office with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors. If the
stockholders are entitled to cumulative voting in the election of directors, if
less than the entire board is removed, no individual director may be removed
without cause if the number of votes cast against his removal would be
sufficient if cumulatively voted to elect him to the
101
<PAGE>
<PAGE>
board. If the board of directors is classified, a director may be removed by a
vote of stockholders only for cause, unless the certificate of incorporation
provides otherwise. As the Company's Certificate of Incorporation provides for a
classified board (and does not provide for removal of directors without cause),
the restrictions on removing directors for cause described above are applicable.
See 'Purposes and Effects of Certain Provisions of the Company's Certificate of
Incorporation, By-Laws and Delaware Statutory Law -- Number of Directors;
Removal; Vacancies.'
VACANCIES ON THE BOARD OF DIRECTORS
Under English law, shareholders of an English public company may, by
ordinary resolution at a meeting at which any director retires by rotation,
appoint a person who is willing to be a director either to fill a vacancy or as
an additional director. The board of directors also has the power to appoint a
director to fill a vacancy or as an additional director, subject to such
conditions as may be set out in the company's articles of association, provided
that such appointment will only last until the next following annual general
meeting of the company at which the director concerned may be re-elected.
As permitted under the DGCL, the board of directors may increase or
decrease the number of directors and fill any vacancy on the board, including
vacancies resulting from an increase in the number of directors. Under the
Certificate of Incorporation and By-Laws, in case of vacancy among the
directors, the remaining directors, although less than a quorum, by an
affirmative vote of a majority thereof, may fill such vacancy. See 'Purposes and
Effects of Certain Provisions of the Company's Certificate of Incorporation,
By-Laws and Delaware Statutory Law -- Number of Directors; Removal; Vacancies.'
LIABILITY OF DIRECTORS AND OFFICERS
English law does not permit a company to exempt any director, or other
officer of the company or any person employed by the company as auditor, from
any liability which by virtue of any rule of law would otherwise attach to him
in respect of any negligence, default, breach of duty or breach of trust of
which he may be guilty in relation to the company.
The DGCL permits a Delaware corporation to include in its certificate of
incorporation a provision that would eliminate a director's or officer's
monetary liability for breaches of his fiduciary duty in a lawsuit by or on
behalf of the corporation or in an action by stockholders of the corporation,
provided that such provision may not eliminate or limit the liability of a
director (i) for any breach of the duty of loyalty to the corporation or its
stockholders, (ii) for any act or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or stock purchases and redemptions under certain
circumstances, or (iv) for any transaction from which the director derived an
improper personal benefit. The Certificate of Incorporation contains the
foregoing provision. See 'Limitation on Liability and Indemnification of
Officers and Directors -- Limitation on Liability of Directors.'
INDEMNIFICATION OF DIRECTORS AND OFFICERS
English law does not permit a company to indemnify a director, or an
officer of the company or any person employed by the company as auditor, against
any liability which by virtue of any rule of law would otherwise attach to him
in respect of negligence, default, breach of duty or breach of trust in relation
to the company except liability incurred by such director, officer or auditor in
defending any legal proceedings (whether civil or criminal) in which judgment is
given in his favor or in which he is acquitted or in certain instances where,
although he is liable, a court finds that such director, officer or auditor
acted honestly and reasonably and that having regard to all the circumstances he
ought fairly to be excused and relief is granted by the court. Section 310 of
the Companies Act enables companies to purchase and maintain insurance for
directors, officers and auditors against any liability which would otherwise
attach to them in respect of any negligence, default, breach of duty or breach
of trust in relation to the company.
The DGCL provides that a corporation may, and in certain circumstances,
must, indemnify its directors and officers for expenses, judgments or
settlements actually and reasonably incurred by them in connection with suits
and other legal actions or proceedings if they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the corporation and, in the case of a criminal proceeding, had no reasonable
cause to believe their conduct was unlawful. The DGCL also permits a corporation
to advance expenses to directors and officers. Further, the DGCL
102
<PAGE>
<PAGE>
provides that an indemnity provision in the articles of incorporation or in a
shareholder-approved bylaw or resolution can require the indemnification of
directors and officers for all conduct except willful misconduct and knowing
violation of criminal law. The Certificate of Incorporation requires
indemnification of directors and officers to the fullest extent permitted by the
DGCL. See 'Limitation on Liability and Indemnification of Officers and
Directors -- Indemnification and Insurance.'
SHAREHOLDERS' SUITS
In addition to having the right to institute a lawsuit on behalf of the
company in certain limited circumstances under English law, Section 459 of the
Companies Act permits an individual shareholder to apply for a court order where
the company's affairs are being or have been conducted in a manner unfairly
prejudicial to the interests of the shareholders generally or some part of the
shareholders, including at least such shareholder, or when any actual or
proposed act or omission of the company is or would be so prejudicial. A court
when granting relief has wide discretion, including authorizing civil
proceedings to be brought in the name of the company by a shareholder on such
terms as the court may direct. Except in these limited respects, English law
does not permit class-action lawsuits by shareholders on behalf of the company
or on behalf of other shareholders.
Under the DGCL, a shareholder may institute a lawsuit against one or more
directors, either on his own behalf, or derivatively on behalf of the
corporation.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
10 under the Exchange Act with respect to the Common Stock being received by the
Hanson Shareholders in the Stock Dividend. This Information Statement does not
contain all of the information set forth in the Form 10 Registration Statement
and the exhibits thereto, to which reference is hereby made. Statements made in
this Information Statement as to the contents of any contract, agreement or
other documents referred to herein are not necessarily complete. With respect to
each such contract, agreement or other documents filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement and the
exhibits thereto filed by the Company with the Commission may be inspected at
the public reference facilities of the Commission listed below.
After the Dividend Payment Date, the Company will be subject to the
information requirements of the Exchange Act, and in accordance therewith will
file reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at its principal
offices at 450 Fifth Street, N.W., Washington, D.C. 10549, and at its regional
offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048 or reviewed through the Commission's Electronic Data Gathering, Analysis,
and Retrieval System, which is publicly available through the Commission's Web
site (http://www.sec.gov). Copies of such material may be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. Application has been made to list the Common Stock
on the NYSE and, if and when such Common Stock commences trading on the NYSE,
such reports, proxy statements and other information concerning the Company will
be available for inspection at the NYSE, 20 Broad Street, New York, New York
10005.
------------------------
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by independent accountants,
beginning with an Annual Report on Form 10-K for the year ended December 31,
1996.
103
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<PAGE>
MILLENNIUM CHEMICALS INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<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 LLP (SCM Chemicals Limited)................................................... F-4
Combined Balance Sheets -- June 30, 1996, December 31, 1995 and 1994.................................. F-5
Combined Statements of Operations -- Six Months Ended June 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 -- Six Months Ended June 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 -- Six Months Ended June 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-27
QUANTUM CHEMICAL CORPORATION -- CONSOLIDATED FINANCIAL STATEMENTS:
Report of Price Waterhouse LLP........................................................................ F-28
Consolidated Statement of Operations -- Nine Months Ended September 30, 1993.......................... F-29
Consolidated Statement of Cash Flows -- Nine Months Ended September 30, 1993.......................... F-30
Notes to Consolidated Financial Statements............................................................ F-31
REGISTRANT ONLY FINANCIAL STATEMENT:
Report of Price Waterhouse LLP........................................................................ F-36
Balance Sheet......................................................................................... F-37
Note to Balance Sheet................................................................................. F-37
</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, 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
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,
JUNE 30, JUNE 30, ------------------------
1996 (NOTE 2) 1996 1995 1994
------------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 113 $ 434 $ 412 $ 367
Trade receivables, net................................. 513 513 502 515
Inventories............................................ 442 442 554 462
Other current assets................................... 73 153 221 224
Net assets of Discontinued Businesses to be sold to
Hanson............................................... 0 597 3,772 --
------------- ----------- ----------- -----------
Total current assets.............................. 1,141 2,139 5,461 1,568
------------- ----------- ----------- -----------
Property, plant and equipment, net.......................... 1,925 1,925 2,262 2,153
Investments and other assets................................ 288 286 278 451
Net assets of Discontinued Businesses to be sold to
Hanson.................................................... -- -- -- 3,757
Goodwill.................................................... 1,790 1,790 2,042 2,095
------------- ----------- ----------- -----------
Total assets...................................... $ 5,144 $ 6,140 $ 10,043 $ 10,024
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
LIABILITES AND INVESTED CAPITAL
Current liabilities:
Notes payable.......................................... $ 429 $ 429 $ 113 $ 247
Current maturities of long-term debt................... 11 11 11 5
Trade accounts payable................................. 155 155 178 147
Income taxes payable................................... 50 50 -- (108)
Accrued expenses and other liabilities................. 547 547 575 544
------------- ----------- ----------- -----------
Total current liabilities......................... 1,192 1,192 877 835
Non-current liabilities:
Long-term debt......................................... 1,743 3,311 3,304 3,274
Deferred income taxes.................................. 134 230 171 136
Other liabilities...................................... 790 780 890 921
------------- ----------- ----------- -----------
Total liabilities................................. 3,859 5,513 5,242 5,166
------------- ----------- ----------- -----------
Commitments and contingencies (Notes 9 & 10)
Stockholders' Equity/Invested capital....................... 1,285 627 4,801 4,858
------------- ----------- ----------- -----------
Total liabilities and invested capital............ $ 5,144 $ 6,140 $ 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>
SIX MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
JUNE 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*................................... $ 1,510 $2,067 $3,800 $908 $3,288 $862
Less operating costs and expenses:
Cost of products sold................... 1,146 1,295 2,458 589 2,470 595
Depreciation and amortization........... 102 122 241 59 247 44
Selling, development and administrative
expenses.............................. 93 113 259 57 227 84
Impairment of assets.................... 60 -- -- -- -- --
------- ------ ------ ---- ------ ----
Operating income................... 109 537 842 203 344 139
Interest expense, primarily to a related
party...................................... 108 122 240 60 206 14
Interest income.............................. (12) (15) (25) (5) (19) (24)
Gain on sale of Suburban Propane............. (212) -- -- -- -- --
Equity in earnings of Suburban Propane....... (37) -- -- -- -- --
Other expense, net........................... 15 79 73 5 26 (2)
------- ------ ------ ---- ------ ----
Income from continuing operations
before provision for income
taxes............................ 247 351 554 143 131 151
Provision for income taxes................... (154) (146) (223) (59) (65) (48)
------- ------ ------ ---- ------ ----
Income from continuing
operations....................... 93 205 331 84 66 103
(Loss)/income from discontinued operations
(net of income taxes of ($1,286), ($3),
$22, $5, $11 and $23)...................... (3,204) (27) 18 12 28 20
------- ------ ------ ---- ------ ----
Net (loss) income.................. $(3,111) $ 178 $ 349 $ 96 $ 94 $123
------- ------ ------ ---- ------ ----
------- ------ ------ ---- ------ ----
</TABLE>
- ------------
* Net of federal excise tax of $26, $23, $49, $11, $48 and $0.
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).................................................................................. (3,111)
Net transactions with affiliates (unaudited)............................................................ (1,084)
Translation adjustment (unaudited)...................................................................... 21
-------
Balance at June 30, 1996 (unaudited).................................................................... $ 627
-------
-------
</TABLE>
See notes to combined financial statements.
F-7
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS FISCAL YEAR ENDED
ENDED JUNE 30, YEAR ENDED ENDED SEPTEMBER 30,
---------------- DECEMBER 31, DECEMBER 31, ----------------
1996 1995 1995 1994 1994 1993
------- ----- ------------ ------------ ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations..................... $ 93 $ 205 $ 331 $ 84 $ 66 $ 103
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 102 122 241 59 247 44
Impairment of assets............................. 60 -- -- -- -- --
Provision for deferred income taxes.............. 62 34 35 17 178 8
Gain on sale of business......................... (212) -- -- -- -- --
Changes in assets and liabilities:
(Increase) decrease in trade receivables......... (11) (48) 13 (29) (90) 16
Decrease (increase) in inventories............... 78 (2) (92) (46) 97 (29)
Decrease (increase) in other current assets...... 27 (13) 8 (150) 41 8
(Increase) decrease in investments and other
assets......................................... (25) (70) 173 (129) 206 (73)
(Decrease) increase in trade accounts payable.... 8 (4) 32 5 (18) (2)
Increase (decrease) in accrued expenses and other
liabilities and income taxes payable........... 59 254 86 33 (272) (40)
(Decrease) increase in other liabilities......... (65) (39) (32) 26 (227) 156
Other -- net..................................... -- -- -- 6 4 2
------- ----- -------- ------ ------- -----
Net cash provided by (used in) operating
activities................................ 176 439 795 (124) 232 193
Cash flows from investing activities:
Capital expenditures.................................. (153) (107) (276) (30) (109) (28)
Proceeds from sale of business........................ 733
Proceeds from sale of fixed assets.................... 7 13 30 5 16 1
------- ----- -------- ------ ------- -----
Cash provided by (used in) investing
activities................................ 587 (94) (246) (25) (93) (27)
Cash flows from financing activities:
Dividend to parent.................................... -- -- (1,617) -- -- --
Net transactions with affiliates...................... (1,084) (326) 1,212 136 (912) 8
Proceeds from long-term debt.......................... 6 -- 40 29 3,205 15
Repayment of long-term debt........................... -- (4) (4) (26) (2,658) --
Increase (decrease) in notes payable.................. 316 (30) (134) 29 143 (87)
------- ----- -------- ------ ------- -----
Cash (used in) provided by financing
activities................................ (762) (360) (503) 168 (222) (64)
------- ----- -------- ------ ------- -----
Effect of exchange rate changes on cash.................... 21 25 (1) (12) 13 (22)
------- ----- -------- ------ ------- -----
Increase (decrease) in cash and cash
equivalents.................................... 22 10 45 7 (70) 80
Cash and cash equivalents at beginning of period........... 412 367 367 360 430 350
------- ----- -------- ------ ------- -----
Cash and cash equivalents at end of period....... $ 434 $ 377 $ 412 $ 367 $ 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, expected to be October 1, 1996 (the
'Dividend Payment Date'). At June 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 owns currently and upon completion of the
Demerger referred to below will own, but which will be sold shortly thereafter
as discussed below.
As part of the Demerger transactions, on the day before the Dividend
Payment Date, the Company will enter 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 currently has legal ownership for cash
aggregating their fair market value (presently estimated at approximately $1.125
billion). The sales proceeds are subject to downward adjustment in the event of
a material adverse change occurring with respect to the businesses' operations
through the date the transactions are completed which would effect the fair
market value of such businesses. 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
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
received aggregate proceeds from the sale of common units and issuance of
Suburban notes of approximately $830, resulting in a pre-tax gain of $212. The
Company will retain a combined subordinated and general partnership interest of
26.4% in Suburban Propane Partners 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 $12 and $17 for the six months ended June
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 June 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 Note 4 and Note 5.
NOTE 2 -- PRO FORMA FINANCIAL DATA (UNAUDITED)
Presented together with the historical Combined Balance Sheet at June 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. Such transactions include (i) the transfer of the Non-Chemicals
Businesses to Hanson and the repayment of the Allocated Loan (as defined in Note
6) prior to the Dividend Payment Date, (ii) the transfer of the Discontinued
Businesses to Hanson and repayment of the Hanson Loan on the fifth day following
the Dividend Payment Date and (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 $2.0 billion. These transactions
will change the
F-10
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 2 -- PRO FORMA FINANCIAL DATA (UNAUDITED) -- CONTINUED
capitalization of the Company upon Demerger. The following details the
capitalization of the Company on a historical and pro forma basis as of June 30,
1996.
<TABLE>
<CAPTION>
(IN MILLIONS)
AS OF JUNE 30, 1996
-------------------
ACTUAL PRO FORMA
------ ---------
(UNAUDITED)
<S> <C> <C>
Short-term debt:
Notes payable.......................................................................... $ 429 $ 429
Other.................................................................................. 11 11
------ ---------
Total short-term.................................................................. $ 440 $ 440
------ ---------
------ ---------
Long-term debt:
New Credit Facility.................................................................... -- 622
Exchangeable Notes(a).................................................................. 1,024 1,084
Allocated Loan......................................................................... 2,250 --
Other.................................................................................. 37 37
------ ---------
Total long-term debt.............................................................. $3,311 $ 1,743
------ ---------
------ ---------
Stockholders' equity:
Common Stock, 250,000,000 shares, par value $.01 per share authorized, 76,283,650
shares issued and outstanding (as adjusted)........................................... $ -- $ 1
Paid-in capital........................................................................ -- 1,284
Invested capital....................................................................... 627 --
------ ---------
Total stockholders' equity........................................................ $ 627 $ 1,285
------ ---------
------ ---------
</TABLE>
- ------------
(a) Within 30 days after the Dividend Payment Date, a subsidiary of the Company
is obligated to provide notice to the holders of the Exchangeable Notes
specifying that it will repurchase such 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 additional long-term borrowings under the
New Credit Facility.
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 Equivalents: Cash equivalents represent investments in short-term
deposits and commercial paper with banks which have original maturities of
ninety days or less. Approximately $321 at June 30, 1996 is represented by
sterling denominated deposits carried at current exchange rates.
Trade Receivables: Trade receivables consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------
1996 1995 1994
----------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables.......................... $ 525 $518 $530
Allowance for doubtful accounts............ (12) (16) (15)
----------- ---- ----
$ 513 $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 $27, $22 and
$17 less than the amount of such inventories valued at current cost at June 30,
1996 and December 31, 1995 and 1994, respectively.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------
1996 1995 1994
----------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Finished products.......................... $ 237 $337 $261
In-Process products........................ 15 17 19
Raw materials.............................. 134 144 138
Other inventories.......................... 56 56 44
----------- ---- ----
$ 442 $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.
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------
1996 1995 1994
----------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Land and buildings........................................... $ 285 $ 341 $ 313
Machinery and equipment...................................... 2,335 2,612 2,364
Leasehold improvements....................................... 4 6 6
----------- ------ ------
2,624 2,959 2,683
Allowance for depreciation and amortization.................. 699 697 530
----------- ------ ------
$ 1,925 $2,262 $2,153
----------- ------ ------
----------- ------ ------
</TABLE>
F-12
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
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 June 30, 1996. Accumulated amortization aggregated $152, $149
and $96 at June 30, 1996, December 31, 1995 and 1994, respectively. Amortization
of goodwill amounted to $23 and $29 for the six months ended June 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 six months ended June 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 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
F-13
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
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 $750.
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 $21 and $21 for the six months ended
June 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 not utilized forward exchange
contracts, currency swaps or other derivative products to hedge its risk in
foreign or other operations, or for speculative purposes.
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. Shortly after the Stock Dividend
Date, and the contemplated ratification of the relevant portions of the Stock
Incentive Plan by the Board of Directors of the Company, the Compensation
Committee of the Company's Board of Directors is expected to award restricted
stock having a potential maximum undiscounted fair market value on the date of
grant of approximately $63.5 to approximately 30 executive officers. The vesting
schedule for the
F-14
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
expected 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, the Compensation Committee, upon recommendation of management, will
annually make awards of restricted stock to senior managers of the Company that
employs the same 'economic value added' performance goals.
NOTE 4 -- IMPAIRMENT OF LONG-LIVED ASSETS
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 six months ended June 30, 1996, the Company recorded a $60
non-cash charge ($39 after income taxes) 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. 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 reduce
operations at these facilities and accrue for additional closure costs. (See
Note 12 -- Subsequent Events).
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
F-15
<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
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,
JUNE 30, ------------------
1996 1995 1994
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Current assets............................................... $ 652 $ 710 $ 584
Non-current assets........................................... 2,397 7,126 7,126
Current liabilities.......................................... (349) (364) (346)
Non-current liabilities...................................... (2,103) (3,700) (3,607)
----------- ------- -------
Net assets of Discontinued Businesses to be sold to Hanson... $ 597 $ 3,772 $ 3,757
----------- ------- -------
----------- ------- -------
</TABLE>
The following represents the results of operations of the Discontinued
Businesses.
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED JUNE 30, YEAR ENDED ENDED SEPTEMBER 30,
------------------- DECEMBER 31, --------------------------------
1996 1995 1995 1994 1993
------- -------- ------------ ------------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales........................... $ 889 $735 $1,722 $1,589 $1,835
------- -------- ------------ ------- ----------
Pre-tax (loss) income........... (4,490 ) (30) 40 39 43
Tax (benefit) provision......... (1,286 ) (3) 22 11 23
------- -------- ------------ ------- ----------
Net (loss) income............... $(3,204) $(27) $ 18 $ 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 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.
F-16
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 6 -- INCOME TAXES
Combined income from continuing operations before income taxes consists of
the following:
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED JUNE 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......... $ 220 $310 $473 $133 $ 102 $122
Foreign............... 27 41 81 10 29 29
----------- -------- ------ ------ ---------- ----------
$ 247 $351 $554 $143 $ 131 $151
----------- -------- ------ ------ ---------- ----------
----------- -------- ------ ------ ---------- ----------
</TABLE>
The components of income taxes are:
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED JUNE 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............... $ 55 $ 62 $145 $ 27 $ (127) $ 1
Deferred.............. (1,217) 55 54 30 188 45
Foreign income taxes....... 11 15 29 4 8 14
State and local income
taxes.................... 19 11 17 3 7 11
----------- -------- ------ ------ ---------- ----------
$(1,132) $143 $245 $ 64 $ 76 $ 71
----------- -------- ------ ------ ---------- ----------
----------- -------- ------ ------ ---------- ----------
</TABLE>
Income taxes is included in the financial statements as follows:
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED JUNE 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...... $ 154 $146 $223 $ 59 $ 65 $ 48
Discontinued Operations.... (1,286) (3) 22 5 11 23
----------- -------- ------ --- --- ---
$(1,132) $143 $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>
SIX MONTHS FISCAL YEAR
ENDED JUNE 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.......................... 19.0 -- -- -- -- --
State and local income taxes, net of
federal benefit................... 4.6 4.5 4.2 4.5 3.0 2.2
Provision for nondeductible
expenses, primarily goodwill
amortization...................... 3.2 3.2 4.0 3.4 15.8 0.5
Non-taxable foreign interest
income............................ (1.3) (1.0) (1.2) (1.2) (4.2) (5.0)
Utilization of net operating
losses............................ (0.7) (3.3) (3.3) (4.0) -- --
Other............................... 2.6 3.2 1.6 3.6 (0.7) 0.2
----------- -------- ----- ----- ----- -----
Effective income tax rate for
continuing operations............. 62.4 41.6 40.3 41.3 48.9 31.9
----------- -------- ----- ----- ----- -----
----------- -------- ----- ----- ----- -----
Discontinued operations effective
income tax rate................... (28.6) 10.8 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.
At June 30, 1996, certain subsidiaries of the Company had available
operating loss carryforwards aggregating $12 expiring in the years 1998 through
2008, all of which are subject to certain limitations on their use.
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,
JUNE 30, ------------
1996 1995 1994
----------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Environmental and legal obligations................................... $ 35 $ 38 $ 26
Other postretirement benefits and pension obligations................. 71 118 116
Net operating loss carryforwards...................................... 5 70 115
Other accruals........................................................ 166 111 112
----------- ---- ----
Total deferred tax assets........................................ 277 337 369
----------- ---- ----
Deferred tax liabilities:
Excess of book over tax basis in property, plant and equipment........ 379 470 467
Other................................................................. 118 28 28
----------- ---- ----
Total deferred tax liabilities................................... 497 498 495
----------- ---- ----
Net deferred tax liabilities ($10 in 1996, 1995 and 1994
classified in current assets).................................. $ 220 $161 $126
----------- ---- ----
----------- ---- ----
</TABLE>
F-18
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 6 -- INCOME TAXES -- CONTINUED
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.
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,
JUNE 30, ----------------
1996 1995 1994
----------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
2.39% Senior Exchangeable Discount Notes, Due 2001 (net of unamortized
discount of $231, $251 and $291)..................................... $ 1,024 $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%..... 48 61 65
Less current maturities of long-term debt.............................. (11) (11) (5)
----------- ------ ------
$ 3,311 $3,304 $3,274
----------- ------ ------
----------- ------ ------
</TABLE>
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 of June 30, 1996, the fair
market value of the notes was $1,077 based upon the June 30, 1996 trading price
of $858 per $1,000 principal amount at maturity with a yield to maturity of
7.3%. 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. The repurchase of
these notes will be funded with long-term borrowings under the New Credit
Facility.
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.
F-19
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 7 -- LONG-TERM DEBT AND CREDIT ARRANGEMENTS -- CONTINUED
On June 30, 1996, December 31, 1995 and 1994, the Company had outstanding
notes payable of $429, $113 and $247, respectively, bearing interest at average
rates of approximately 6.1% with maturities of thirty days or less.
At June 30, 1996, the Company and its subsidiaries had outstanding standby
letters of credit amounting to $122.
The maturities of long-term debt during the next five years are as follows:
1996 -- $11, 1997 -- $5, 1998 -- $13, 1999 -- $2, and 2000 -- $17.
Interest paid for the six months ended June 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 $18, $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:
<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>
F-20
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 8 -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- CONTINUED
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>
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>
F-21
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 8 -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- CONTINUED
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 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 $170 and has accrued $168, net of an agreed $28
insurance recovery, as of June 30, 1996.
The Company has various contractual obligations to purchase raw materials
used in its production of polyethylene, titanium dioxide and aroma 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
aroma 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.
F-22
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 9 -- COMMITMENTS AND CONTINGENCIES -- CONTINUED
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
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 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................. $ 26 $ 22 $ 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 aroma and flavor chemicals, which are produced by Glidco.
The following is a summary of the Company's continuing operations by
industry segment and geographic area:
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
JUNE 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....................... $ 600 $ 771 $1,374 $ 327 $ 1,061 $ --
Acetyls and alcohol.............. 203 263 461 105 347 --
Specialty polymer products....... 186 187 363 82 318 --
------ ------ ------------ ------------ ------- -------
Subtotal.................... 989 1,221 2,198 514 1,726 --
SCM Chemicals:
Titanium dioxide and related
products....................... 461 455 860 185 795 783
Glidco:
Aroma and flavor chemicals....... 60 51 103 24 89 79
------ ------ ------------ ------------ ------- -------
1,510 1,727 3,161 723 2,610 862
------ ------ ------------ ------------ ------- -------
Propane(2)............................ -- 340 639 185 678 --
------ ------ ------------ ------------ ------- -------
Total....................... $1,510 $2,067 $3,800 $ 908 $ 3,288 $ 862
------ ------ ------------ ------------ ------- -------
------ ------ ------------ ------------ ------- -------
</TABLE>
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
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
JUNE 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... $ 44 $260 $380 $ 92 $ 23 $ --
Acetyls and alcohol................. 28 101 142 38 70 --
Specialty polymer products.......... 23 36 59 13 42 --
----------- ------ ------ ------ ---- ----
Subtotal....................... 95 397 581 143 135 --
SCM Chemicals(3):
Titanium dioxide and related
products.......................... (6) 86 177 27 106 113
Glidco:
Aroma and flavor chemicals.......... 20 16 31 7 27 26
----------- ------ ------ ------ ---- ----
109 499 789 177 268 139
----------- ------ ------ ------ ---- ----
Propane(2)............................... -- 38 53 26 76 --
----------- ------ ------ ------ ---- ----
Total.......................... $ 109 $537 $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 February
1996, the Company sold a 73.6% interest in 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 six months ended June 30, 1996 includes a non-cash charge of $60 to
reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2 as described in Note 4.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------
1996 1995 1994
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Quantum Chemical:
Polyethylene and related products........................................ $ 2,617 $ 2,622 $ 2,676
Acetyls and alcohol...................................................... 743 704 681
Specialty polymer products............................................... 465 448 414
----------- ------- -------
Subtotal............................................................ 3,825 3,774 3,771
SCM Chemicals:
Titanium dioxide and related products.................................... 906 907 733
Glidco:
Aroma and flavor chemicals............................................... 85 77 56
Propane....................................................................... -- 733 731
Businesses held for sale...................................................... 597 3,772 3,757
Corporate(a).................................................................. 727 780 976
----------- ------- -------
Total............................................................... $ 6,140 $10,043 $10,024
----------- ------- -------
----------- ------- -------
</TABLE>
- ------------
(a) Corporate assets consist primarily of cash and cash equivalents, prepaid
interest to an affiliate and other assets.
F-24
<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>
SIX MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
JUNE 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..... $ 51 $ 55 $109 $ 28 $113 $ --
Acetyls and alcohol................... 13 15 31 6 32 --
Specialty polymer products............ 10 11 21 5 24 --
----------- ----------- ------ --- ------ ------
Subtotal......................... 74 81 161 39 169 --
SCM Chemicals:
Titanium dioxide and related
products............................ 26 22 42 10 40 39
Glidco:
Aroma and flavor chemicals............ 2 2 3 1 3 4
Propane.................................... -- 17 34 9 34 --
Corporate.................................. -- -- 1 -- 1 1
----------- ----------- ------ --- ------ ------
Total............................ $ 102 $ 122 $241 $ 59 $247 $ 44
----------- ----------- ------ --- ------ ------
----------- ----------- ------ --- ------ ------
CAPITAL EXPENDITURES:
Quantum Chemical:
Polyethylene and related products..... $ 73 $ 20 $ 62 $ 7 $ 28 $ --
Acetyls and alcohol................... 34 9 30 5 11 --
Specialty polymer products............ 2 6 13 2 2 --
----------- ----------- ------ --- ------ ------
Subtotal......................... 109 35 105 14 41 --
SCM Chemicals:
Titanium dioxide and related
products............................ 38 52 124 7 41 24
Glidco:
Aroma and flavor chemicals............ 6 6 17 3 7 2
Propane.................................... -- 14 29 6 19 --
Corporate.................................. -- -- 1 -- 1 2
----------- ----------- ------ --- ------ ------
Total............................ $ 153 $ 107 $276 $ 30 $109 $ 28
----------- ----------- ------ --- ------ ------
----------- ----------- ------ --- ------ ------
</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>
SIX MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
JUNE 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:
United States......................... $1,328 $1,878 $3,462 $840 $2,992 $578
Foreign............................... 194 195 368 82 322 309(1)
Inter-area elimination................ (12) (6) (30) (14) (26) (25)
------ ------ ------------ ------ ------ ----
Total............................ $1,510 $2,067 $3,800 $908 $3,288 $862
------ ------ ------------ ------ ------ ----
------ ------ ------------ ------ ------ ----
Operating income:
United States......................... $ 72 $ 486 $ 743 $188 $ 297 $106
Foreign............................... 37 51 99 15 47 33
------ ------ ------------ ------ ------ ----
Total............................ $ 109 $ 537 $ 842 $203 $ 344 $139
------ ------ ------------ ------ ------ ----
------ ------ ------------ ------ ------ ----
</TABLE>
- ------------
(1) $194 is attributable to Europe and $115 to Asia/Pacific.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------
1996 1995 1994
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Identifiable assets:
United States -- Continuing......................................... $4,717 $ 5,525 $ 5,607
-- Discontinued..................................... 597 3,772 3,757
Foreign............................................................. 826 746 660
------------ ------- -------
Total.......................................................... $6,140 $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.
Export sales from the United States for the six months ended June 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
$331, $376, $379, $80, $277 and $60, respectively.
NOTE 12 -- SUBSEQUENT EVENTS
As a result of continued 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 sulfide -- 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 previously reduced by $60 in the six
months ended June 30, 1996 as a result of evaluating the recoverability of such
assets under the unfavorable market conditions existing at that time. In
addition, other costs associated with the implementation of this plan are being
finalized and are expected to range from $15 - $30. The Company will accrue for
the costs of the plan implementation in the quarter ended September 30, 1996.
F-26
<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 A
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
Six months ended June 30, 1996
Deducted from asset accounts:
Allowance for doubtful accounts....... 16 (4)(a)(b) 12
</TABLE>
- ------------
(a) Uncollectible accounts written off, net of recoveries
(b) Sale of Suburban Propane
F-27
<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-28
<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-29
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
<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-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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-36
<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. To date the Company has
had no activity.
F-37
<PAGE>
<PAGE>
ANNEX A
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MILLENNIUM CHEMICALS INC.
This document constitutes an amendment and restatement of the original
Certificate of Incorporation of Millennium Chemicals Inc. (the 'Corporation'),
which was filed with the Secretary of State of Delaware on April 17, 1996. This
Amended and Restated Certificate of Incorporation was duly adopted in accordance
with the provisions of Sections 245(c) and 242 of the Delaware General
Corporation Law.
ARTICLE I
NAME
The name of the Corporation is Millennium Chemicals Inc.
ARTICLE II
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, 19801. The name of its registered agent at
that address in the State of Delaware is The Corporation Trust Company.
ARTICLE III
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law ('Delaware Law'). It shall have all powers that may now
or hereafter be lawful for a corporation to exercise under the Delaware Law.
ARTICLE IV
CAPITAL STOCK
SECTION 4.1. Total Number of Shares of Stock. The total number of shares of
capital stock of all classes that the Corporation shall have authority to issue
is 250,000,000 (Two Hundred Fifty Million) shares. The authorized capital stock
is divided into 25,000,000 (Twenty-Five Million) shares of preferred stock, of
the par value of $.01 each (the 'Preferred Stock'), and 225,000,000 (Two Hundred
Twenty-Five Million) shares of common stock, of the par value of $.01 each (the
'Common Stock').
SECTION 4.2. Preferred Stock. (a) The shares of Preferred Stock of the
Corporation may be issued from time to time in one or more classes or series
thereof, the shares of each such class or series thereof to have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as are stated and expressed
herein or in the resolution or resolutions providing for the issue of such class
or series, adopted by the board of directors of the Corporation (the 'Board of
Directors') as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of Directors,
subject to the provisions of this Article IV and to the limitations prescribed
by the Delaware Law, to authorize the issue of one or more classes, or series
thereof, of Preferred Stock and with respect to each such class or series to fix
by resolution or resolutions providing for the issue of such class or series the
voting powers, full or limited, if any, of the shares of such class or series
and the designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof. The
authority of
A-1
<PAGE>
<PAGE>
the Board of Directors with respect to each class or series thereof shall
include, but not be limited to, the determination or fixing of the following:
(i) the maximum number of shares to constitute such class or series,
which may subsequently be increased or decreased by resolutions of the
Board of Directors unless otherwise provided in the resolution providing
for the issue of such class or series, the distinctive designation thereof
and the stated value thereof if different than the par value thereof;
(ii) the dividend rate of such class or series, the conditions and
dates upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes
of stock or any other series of any class of stock of the Corporation, and
whether such dividends shall be cumulative or noncumulative;
(iii) whether the shares of such class or series shall be subject to
redemption, in whole or in part, and if made subject to such redemption the
times, prices and other terms and conditions of such redemption, including
whether or not such redemption may occur at the option of the Corporation
or at the option of the holder or holders thereof or upon the happening of
a specified event;
(iv) the terms and amount of any sinking fund established for the
purchase or redemption of the shares of such class or series;
(v) whether or not the shares of such class or series shall be
convertible into or exchangeable for shares of any other class or classes
of any stock or any other series of any class of stock of the Corporation,
and, if provision is made for conversion or exchange, the times, prices,
rates, adjustments, and other terms and conditions of such conversion or
exchange;
(vi) the extent, if any, to which the holders of shares of such class
or series shall be entitled to vote with respect to the election of
directors or otherwise;
(vii) the restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(viii) the rights of the holders of the shares of such class or series
upon the dissolution of, or upon the subsequent distribution of assets of,
the Corporation; and
(ix) the manner in which any facts ascertainable outside the
resolution or resolutions providing for the issue of such class or series
shall operate upon the voting powers, designations, preferences, rights,
and qualifications, limitations or restrictions of such class or series.
SECTION 4.3. Common Stock. The shares of Common Stock of the Corporation
shall be of one and the same class. The holders of Common Stock shall have one
vote per share of Common Stock on all matters on which holders of Common Stock
are entitled to vote.
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. Powers of the Board of Directors. The business and affairs of
the Corporation shall be managed by or under the direction of its Board of
Directors which shall consist of not less than three members. In furtherance,
and not in limitation, of the powers conferred by the laws of the State of
Delaware, the Board of Directors is expressly authorized to:
(a) adopt, amend, alter, change or repeal the By-Laws of the
Corporation; provided, however, that no By-Laws hereafter adopted shall
invalidate any prior act of the directors that would have been valid if
such new By-Laws had not been adopted;
(b) determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage and direct the
business and affairs of the Corporation, including the power to designate
and empower committees of the Board of Directors, to elect, appoint and
empower the officers and other agents of the Corporation, and to determine
the time and place of, the notice requirements for, Board meetings, as well
as quorum and voting requirements for, and the manner of taking, Board
action; and
A-2
<PAGE>
<PAGE>
(c) exercise all such powers and do all such acts as may be exercised
or done by the Corporation, subject to the provisions of the Delaware Law,
this Certificate of Incorporation, and the By-Laws of the Corporation.
SECTION 5.2. Number of Directors. The number of directors constituting the
Board of Directors shall be determined from time to time exclusively by a vote
of a majority of the Board of Directors in office at the time of such vote.
SECTION 5.3. Classified Board of Directors. The directors shall be divided
into three classes, with each class to be as nearly equal in number as
reasonably possible, and with the initial term of office of the first class of
directors to expire at the 1997 annual meeting of stockholders, the initial term
of office of the second class of directors to expire at the 1998 annual meeting
of stockholders and the initial term of office of the third class of directors
to expire at the 1999 annual meeting of stockholders, in each case upon the
election and qualification of their successors. Commencing with the 1997 annual
meeting of stockholders, directors elected to succeed those directors whose
terms have thereupon expired shall be elected to a term of office to expire at
the third succeeding annual meeting of stockholders after their election, and
upon the election and qualification of their successors. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain or attain the number of directors in each class as
nearly equal as reasonably possible, but in no case will a decrease in the
number of directors shorten the term of any incumbent director.
SECTION 5.4. Vacancies. Any vacancies in the Board of Directors for any
reason and any newly created directorship resulting by reason of any increase in
the number of directors may be filled only by the Board of Directors, acting by
a majority of the remaining directors then in office, although less than a
quorum, or by a sole remaining director, and any directors so appointed shall
hold office until the next election of the class for which such directors have
been chosen and until their successors are elected and qualified.
SECTION 5.5. Removal of Directors. Except as may be provided in a
resolution or resolutions providing for any class or series of Preferred Stock
pursuant to Article IV hereof with respect to any directors elected by the
holders of such class or series, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause, and only by the
affirmative vote of the holders of at least 66 2/3% of the voting power of all
of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
ARTICLE VI
STOCKHOLDER ACTIONS AND MEETINGS OF STOCKHOLDERS
Except as may be provided in a resolution or resolutions providing for any
class or series of Preferred Stock pursuant to Article IV hereof, any action
required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of such holders and may not
be effected by any written consent in lieu of a meeting by such holders. Special
meetings of stockholders of the Corporation may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the members of the
Board of Directors then in office. Elections of directors need not be by written
ballot, unless otherwise provided in the By-Laws. For purposes of all meetings
of stockholders, a quorum shall consist of a majority of the shares entitled to
vote at such meeting of stockholders, unless otherwise required by law.
ARTICLE VII
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, including
without limitation directors serving on committees of the Board of Directors;
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware Law is amended
hereafter to authorize corporate
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action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware Law, as so amended. Any amendment,
repeal or modification of this Article VII shall not adversely affect any right
or protection of a director of the Corporation existing hereunder with respect
to any act or omission occurring prior to such amendment, repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
The Board of Directors shall have the power to adopt, amend, alter, change
or repeal any By-Laws of the Corporation. In addition, the stockholders of the
Corporation may adopt, amend, alter, change or repeal any By-Laws of the
Corporation by the affirmative vote of the holders of at least 66 2/3% of the
voting power of all of the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors, voting together as a
single class (notwithstanding the fact that a lesser percentage may be specified
by Delaware Law).
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation hereby reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in any manner
permitted by Delaware Law and all rights and powers conferred upon stockholders,
directors and officers herein are granted subject to this reservation. Except as
may be provided in a resolution or resolutions providing for any class or series
of Preferred Stock pursuant to Article IV hereof and which relate to such class
or series of Preferred Stock, any such amendment, alteration, change or repeal
shall require the affirmative vote of both (a) a majority of the members of the
Board of Directors then in office and (b) a majority of the voting power of all
of the shares of capital stock of the Corporation entitled to vote generally in
the election of directors, voting together as a single class; except that any
proposal to amend, alter, change or repeal the provisions of Section 5.3,
Section 5.5, Article VI, Article VIII and this Article IX shall require the
affirmative vote of 66 2/3% of the voting power of all of the shares of capital
stock entitled to vote generally in the election of directors, voting together
as a single class.
ARTICLE X
SEVERABILITY
In the event that any of the provisions of this Certificate of
Incorporation (including any provision within a single Section, paragraph or
sentence) are held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the fullest extent permitted by law.
THE UNDERSIGNED, being the President of the Corporation, for the purpose of
amending and restating the Certificate of Incorporation of the Corporation
pursuant to Delaware Law, does make this Certificate, hereby declaring and
certifying that this is the act and deed of the Corporation and that the facts
herein stated are true, and accordingly have hereunto set my hand as of the 20th
day of August, 1996.
.....................................
Derek C. Bonham, President
ATTEST:
.....................................
Graham Dransfield, Secretary
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ANNEX B
MILLENNIUM CHEMICALS INC. LONG TERM STOCK INCENTIVE PLAN
BACKGROUND
In July 1996, for effectiveness as of the Dividend Payment Date, the Board
of Directors and the stockholders of the Company approved the Millennium
Chemicals Inc. Long Term Stock Incentive Plan (the 'Stock Incentive Plan'). The
following description of the Stock Incentive Plan is intended only as a summary
and is qualified in its entirety by reference to the Stock Incentive Plan which
is attached hereto as part of this Annex B.
PURPOSE
The purpose of the Stock Incentive Plan is to enhance the profitability and
value of the Company and its affiliates for the benefit of their 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 stockholders.
ELIGIBILITY
All employees of the Company and Company Subsidiaries are eligible to be
granted awards under the Stock Incentive Plan. Subsidiary shall mean
subsidiaries within the meaning of Section 424(f) of the Code. In addition,
non-employee directors of the Company will receive annual non-discretionary
awards of Common Stock under the Stock Incentive Plan as a portion of their
retainer fee, but are not eligible for other awards thereunder.
ADMINISTRATION
Upon completion of the Demerger Transactions, the Stock Incentive Plan will
be administered by the Compensation Committee of the Board of Directors of the
Company which is intended to be comprised solely of two or more directors
qualifying as 'outside directors' under Section 162(m) of the Code and
'non-employee' directors under Rule 16b-3 of the Exchange Act. The Compensation
Committee will have full authority and discretion, subject to the terms of the
Stock Incentive Plan, to determine those individuals eligible to receive awards
and the amount and type of awards. Terms and conditions of awards will be set
forth in written grant agreements, the terms of which will be consistent with
the terms of the Stock Incentive Plan. Awards under the Stock Incentive Plan may
not be made on or after the tenth anniversary of the date of its adoption, but
awards granted prior to such date may extend beyond that date.
AVAILABLE SHARES AND OTHER UNITS
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 maximum number of
shares of Common Stock subject to stock options that may be granted to any
individual under the Stock Incentive Plan shall be 50,000 for any fiscal year of
the Company during the term of the Stock Incentive Plan.
The maximum value at grant of performance units which may be awarded under
the Stock Incentive Plan to any individual shall be $5,000,000 (and may not be
converted for reference purposes pursuant to the terms of the Stock Incentive
Plan to more than 200,000 shares of Common Stock) during any fiscal year of the
Company. Growth in performance units shall be based on the growth in the
referenced Common Stock, each unit being referenced to one share of Common
Stock. A performance unit shall be charged against available shares under the
Stock Incentive Plan at the time the unit dollar
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value measurement is converted to a referenced number of shares of Common Stock,
as discussed below.
The maximum number of performance shares which may be awarded under the
Stock Incentive Plan to any individual shall be 50,000 during any fiscal year of
the Company.
The maximum number of shares of restricted stock for which the lapse of
restrictions is subject to the attainment of performance goals which may be
granted under this Stock Incentive Plan to any individual shall be 50,000 shares
during any fiscal year of the Company other than fiscal 1996 and with regard to
any new employee the fiscal year in which the individual initially commences
employment. With respect to fiscal 1996 and the fiscal year in which an
individual commences employment, the maximum number of shares of restricted
stock for which the lapse of the relevant restrictions is subject to attainment
of preestablished goals shall be 400,000 shares. There are no annual individual
Participant limitations on restricted stock for which the lapse of the relevant
restrictions is not subject to attainment of preestablished performance goals.
The maximum number of shares of Common Stock subject to any stock
appreciation right which may be granted under the Stock Incentive Plan to any
individual shall be 15,000 shares during any fiscal year of the Company. If a
stock appreciation right or a limited stock appreciation right is granted in
tandem with a stock option, it shall apply against the individual limits for
both stock options and stock appreciation rights, but only once against the
maximum number of shares available under the Stock Incentive Plan.
In general, upon the termination, cancellation or expiration of an award,
the unissued shares of Common Stock subject to such awards will again be
available for awards under the Stock Incentive Plan, but will still count
against the individual specified limits.
AMENDMENTS
The Stock Incentive Plan provides that it may be amended by the Board of
Directors, except that no such amendment, without stockholder approval to the
extent such approval is required by the applicable provisions of Rule 16b-3 of
the Exchange Act or for the exception for performance-based compensation under
Section 162(m) of the Code or to the extent applicable to incentive stock
options, Section 422 of the Code, may increase the aggregate number of shares of
Common Stock reserved for awards or the maximum individual limits for any fiscal
year, change the classification of employees and non-employee directors eligible
to receive awards, decrease the minimum option price of any option, extend the
maximum option period under the Stock Incentive Plan, change any rights with
respect to non-employee directors, materially alter the performance criteria for
the award of restricted stock, performance units, or performance shares or to
make any other change that requires stockholder approval under the applicable
provisions of Rule 16b-3 of the Exchange Act, the exemption for
performance-based compensation under Section 162(m) of the Code or to the extent
applicable to incentive stock options, Section 422 of the Code. Notwithstanding
the foregoing, the Stock Incentive Plan provides that in no event may the plan
be amended without the approval of the stockholders of the Company in accordance
with the applicable laws of the state of Delaware to increase the aggregate
number of shares of Common Stock that may be issued under the plan, decrease the
minimum option price of any option, or to make any other amendment that would
require stockholder approval under the rules of any exchange or system on which
the Company's securities are listed or traded at the request of the Company.
TYPES OF AWARDS
The Stock Incentive Plan provides for the grant of any or all of the
following types of awards to eligible employees: (i) stock options, including
incentive stock options and non-qualified stock options; (ii) stock appreciation
rights, in tandem with stock options or freestanding; (iii) restricted stock;
(iv) performance units; and (v) performance shares. In addition, the Stock
Incentive Plan provides for the non-discretionary award of Common Stock to
non-employee directors of the Company as a portion of their annual retainer fee.
Each of these types of awards is discussed in more detail below. Awards may be
granted singly, in combination, or in tandem, as determined by the Compensation
Committee.
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Stock Options. Under the Stock Incentive Plan, the Compensation Committee
may grant awards in the form of options to purchase shares of the Company's
Common Stock. Options may be in the form of incentive stock options or
non-qualified stock options. The Compensation Committee will, with regard to
each stock option, determine the number of shares subject to the option, the
term of the option (which shall not exceed ten years, provided, however, that
the term of an incentive stock option granted to a ten percent stockholder of
the Company shall not exceed five years), the exercise price per share of stock
subject to the option, the vesting schedule (if any), and the other material
terms of the option. No option may have an exercise price less than the Fair
Market Value of the Common Stock at the time of grant (or, in the case of an
incentive stock option granted to a ten percent stockholder of the Company, 110
percent of Fair Market Value). Notwithstanding the foregoing, if an option is
modified, extended or renewed and, thereby, deemed to be the issuance of a new
option under the Code, the exercise price of the option may continue to be the
original exercise price even if less than the Fair Market Value of the Common
Stock at the time of such modification, extension or renewal.
The option price upon exercise may, to the extent determined by the
Compensation Committee at or after the time of grant, be paid by a participant
in cash, in shares of Common Stock owned by the participant (free and clear of
any liens and encumbrances), in shares of restricted stock valued at fair market
value on the payment date as determined by the Compensation Committee (without
regard to any forfeiture restrictions applicable to restricted stock), by a
reduction in the number of shares of Common Stock issuable upon exercise of the
option or by such other method as is approved by the Compensation Committee. If
an option is exercised by delivery of shares of restricted stock, the shares of
Common Stock acquired pursuant to the exercise of the option will generally be
subject to the same restrictions as were applicable to such restricted stock.
All options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Compensation Committee. The Compensation
Committee may at any time offer to buy an option previously granted on such
terms and conditions as the Compensation Committee shall establish. The
Compensation Committee may in its discretion reprice options or substitute
options with lower exercise prices in exchange for outstanding options that are
not incentive stock options, provided that the exercise price of substitute
options or repriced options shall not be less than the Fair Market Value at the
time of such repricing or substitution. Options may also, at the discretion of
the Compensation Committee, provide for 'reloads,' whereby a new option is
granted for the same number of shares as the number of shares of Common Stock or
restricted stock used by the participant to pay the option price upon exercise.
Restricted Stock. The Stock Incentive Plan authorizes the Compensation
Committee to award shares of restricted stock. A recipient of restricted stock
may be required to pay the par value of such shares to receive such restricted
stock. Upon the award of restricted stock, the recipient has all rights of a
stockholder with respect to the shares, other than the right to receive
dividends currently and the right to tender such shares, unless so specified by
the Compensation Committee at the time of grant, subject to the conditions and
restrictions generally applicable to restricted stock or specifically set forth
in the recipient's restricted stock award agreement. Unless otherwise determined
by the Committee at grant, payment of dividends, if any, shall be deferred until
the date that the relevant share of restricted stock vests.
Recipients of restricted stock are required to enter into a restricted
stock award agreement with the Company which states that the restrictions to
which the shares are subject and the criteria or date or dates on which such
restrictions will lapse. Within these limits, based on service, attainment of
objective performance goals, and such other factors as the Compensation
Committee may determine in its sole discretion, or a combination thereof, the
Compensation Committee may provide for the lapse of such restrictions in
installments in whole or in part or may accelerate or waive such restrictions at
any time.
If the lapse of the relevant restriction is based on the attainment of
objective performance goals, the Compensation Committee shall establish the
goals, formulae or standards and the applicable vesting percentage for the
restricted stock awards applicable to participants. These performance goals
shall be based on one or more of the following criteria: (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 in any case a subsidiary,
division, or other operational unit of the Company); (ii) the attainment of
certain target levels of, or a specified
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increase in, operational cash flow of the Company (or a subsidiary, division, or
other operational unit of the Company); (iii) the achievement of a certain level
of, reduction of, or other specified objectives with regard to limiting the
level of increase in, all or a portion of, the Company's bank debt or other
long-term or short-term public or private debt or other similar financial
obligations of the Company, which may be calculated net of such cash balances
and/or other offsets and adjustments as may be established by the Compensation
Committee; (iv) the attainment of a specified percentage increase in earnings
per share or earnings per share from continuing operations of the Company (or a
subsidiary, division or other operational unit of the Company); (v) the
attainment of certain target levels of, or a specified percentage increase in,
revenues, net income or earnings before income tax of the Company (or a
subsidiary, division, or other operational unit of the Company); (vi) the
attainment of certain target levels of, or a specified increase in, return on
capital employed or return on invested capital of the Company (or any
subsidiary, division or other operational unit of the Company); (vii) the
attainment of certain target levels of, or a percentage increase in, after-tax
or pre-tax return on stockholders' equity of the Company (or any subsidiary,
division or other operational unit of the Company); (viii) 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); (ix) the
attainment of certain target levels in the Fair Market Value of the shares of
the Company's Common Stock; and (x) the growth in the value of an investment in
the Common Stock assuming the reinvestment of dividends. In addition, such
performance goals may be based upon the attainment of specified levels of
Company (or subsidiary, division or other operational unit of the Company)
performance under one or more of the measures described above relative to the
performance of other corporations.
Performance Units and Performance Shares. Under the Stock Incentive Plan,
the Compensation Committee may grant performance shares to eligible employees
entitling them to receive a fixed number of shares of Common Stock or the cash
equivalent thereof, as determined by the Compensation Committee, upon the
attainment of performance goals established by the Compensation Committee based
on a specified performance period from among those set forth with regard to
restricted stock above. The Compensation Committee may also grant performance
units to eligible employees entitling them to receive a value payable in cash or
shares of Common Stock, as determined by or with the consent of the Compensation
Committee, upon the attainment of performance goals established by the
Compensation Committee for a specified performance cycle from among those set
forth with regard to restricted stock above. Performance units shall be awarded
in a dollar amount and shall be converted for calculation purposes of growth in
value to shares of Common Stock based on the Fair Market Value of the shares of
Common Stock at the close of trading on the New York Stock Exchange on the first
business day following the announcement of the annual financial results of the
Company for the fiscal year of the Company immediately preceding the fiscal year
of the commencement of the measurement period for the performance cycle,
provided that the Compensation Committee may provide with regard to any grant
that the minimum price for such conversion shall be the Fair Market Value on the
date of grant and further that the price for grants made in the first fiscal
year of the Company shall be based on the Fair Market Value at the time of
grant.
At the time of any award of performance shares or performance units the
Compensation Committee may also award eligible employees the right to receive
the cash value of any dividends and other distributions that would have been
received had the eligible employee held each vested share of Common Stock of the
earned Performance Share Award or Performance Unit Award from the last day of
the first year of the performance period until the actual distribution of the
related share of Common Stock or cash value thereof to the eligible employee.
Such amounts, if awarded, shall be paid to the eligible employee as and when the
shares of Common Stock or cash value thereof are distributed to the eligible
employee.
The Compensation Committee may subject such grants of performance shares
and performance units to such vesting and forfeiture conditions as it deems
appropriate.
Stock Appreciation Rights ('SARs'). The Stock Incentive Plan authorizes the
Compensation Committee to grant SARs either with a stock option ('Tandem SARs')
or independent of a stock option ('Non-Tandem SARs'). An SAR is a right to
receive a payment either in cash or Common
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Stock as the Compensation Committee may determine, equal in value to the excess
of the Fair Market Value of a share of Common Stock on the date of exercise over
the reference price per share of Common Stock established in connection with the
grant of the SAR. The reference price per share covered by an SAR will be the
per share exercise price of the related option in the case of a Tandem SAR and
will be the per share Fair Market Value of the Common Stock on the date of grant
in the case of a Non-Tandem SAR.
A Tandem SAR may be granted at the time of the grant of the related stock
option or, if the related stock option is a non-qualified stock option, at any
time thereafter during the term of the stock option. A Tandem SAR generally may
be exercised at and only at the times and to the extent the related stock option
is exercisable. A Tandem SAR is exercised by surrendering the same portion of
the related option. A Tandem SAR expires upon the termination of the related
stock option.
A Non-Tandem SAR will be exercisable as provided by the Compensation
Committee and will have such other terms and conditions as the Compensation
Committee may determine. A Non-Tandem SAR may have a term no longer than 10
years from its date of grant. A Non-Tandem SAR is subject to acceleration of
vesting or immediate termination upon termination of employment in certain
circumstances.
The Compensation Committee is also authorized to grant 'limited SARs,'
either as Tandem SARs or Non-Tandem SARs. Limited SARs would become exercisable
only upon the occurrence of a Change in Control (as defined in the Stock
Incentive Plan) or such other event as the Compensation Committee may designate
at the time of grant or thereafter.
Awards to Non-Employee Directors. The Stock Incentive Plan provides for
nondiscretionary annual awards of Common Stock to non-employee directors as a
portion of their annual directors' retainer fee. Each non-employee director
serving as a director on the thirtieth day following of the consummation of the
Demerger Transactions will be awarded on such date (the 'Initial Grant Date')
the number of shares of Common Stock determined by dividing $15,000 by the
average closing price of the Common Stock during the twenty (20) business days
following the consummation of the Demerger Transactions. On each October 1, of
each calendar year after the calendar year in which the Demerger occurs, each
non-employee director serving as a director 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 at the close of the New York Stock
Exchange on the day prior to such date. Each non-employee director who commences
to serve as a director after the Initial Grant Date and not on an October 1 on
which a grant is being made shall automatically be granted on the date of
commencement of service as a director a number of shares of Common Stock
determined by dividing $15,000 by the Fair Market Value at the close of the New
York Stock Exchange on the day prior to such date and multiplying the resulting
number of shares by a ratio where the numerator is the number of days until the
next October 1 and the denominator is 365.
CHANGE IN CONTROL
Unless determined otherwise by the Compensation Committee at the time of
grant, upon a Change in Control (as defined in the Stock Incentive Plan), all
vesting and forfeiture conditions, restrictions and limitations in effect with
respect to any outstanding award will immediately lapse and any unvested awards
will automatically become 100% vested. However, unless otherwise determined by
the Compensation Committee at the time of grant or thereafter, no acceleration
of exercisability shall occur with regard to certain options that the
Compensation Committee reasonably determines in good faith prior to a Change in
Control will be honored or assumed or new rights substituted therefor by a
participant's employer immediately following the Change in Control. The
Compensation Committee may also, in its sole discretion, provide for accelerated
vesting of an award in connection with a termination of employment during the
Pre-Change in Control Period (as defined in the Stock Incentive Plan).
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MISCELLANEOUS
Subject to limited post-employment exercise periods and vesting in certain
instances, both of which are within the discretion of the Compensation
Committee, awards to a participant under the Stock Incentive Plan are forfeited
upon any termination of employment. Participants required to file reports under
Section 16(a) of the Exchange Act may be limited to certain specific exercise,
election or holding periods with respect to the awards granted to them under the
Stock Incentive Plan. Awards (other than unrestricted stock awards) will be
nonassignable (except by will or the laws of descent and distribution) and will
have such terms and will terminate upon such conditions as may be contained in
individual awards.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal U.S. federal income tax
consequences with respect to awards under the Stock Incentive Plan is based on
statutory authority and judicial and administrative interpretations as of the
date of this Information Statement, which are subject to change at any time
(possibly with retroactive effect). This discussion is limited to the U.S.
federal income tax consequences to individuals who are citizens or residents of
the U.S. other than those individuals who are taxed on a residence basis in a
foreign country. The U.S. federal income tax law is technical and complex and
the discussion below represents only a general summary.
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND
DOES NOT PURPORT TO ADDRESS ALL THE TAX CONSIDERATIONS THAT MAY BE RELEVANT.
EACH RECIPIENT OF A GRANT IS URGED TO CONSULT HIS OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO SUCH GRANTEE OF THE GRANT.
Options. No income will be recognized by the recipient at the time of the
grant of a non-qualified stock option.
On exercise of a non-qualified stock option (and provided the Common Stock
issued is not restricted stock), the amount by which the fair market value of
the Common Stock on the date of exercise exceeds the option exercise price will
be taxable to the recipient as ordinary income. The subsequent disposition of
shares acquired upon exercise of a non-qualified stock option will ordinarily
result in a capital gain or loss. If the Common Stock is restricted stock, the
rules described below with regard to restricted stock will apply.
A recipient who is an officer or director of the Company or a beneficial
owner of more than ten percent (10%) of any class of registered equity
securities of the Company should consult with his or her tax advisor as to
whether, as a result of Section 16(b) of the Exchange Act and the rules and
regulations thereunder, the timing of income recognition is deferred for any
period following the exercise of a non-qualified stock option (the 'Deferral
Period'). If there is a Deferral Period, absent a written election (pursuant to
Section 83(b) of the Code) filed with the Internal Revenue Service within 30
days after the date of transfer of the shares of Common Stock pursuant to the
exercise of the non-qualified stock option to include in income, as of the
transfer date, the excess (on such date) of the fair market value of such shares
over their exercise price, recognition of income by the recipient could, in
certain instances, be deferred until the expiration of the Deferral Period.
The ordinary income recognized with respect to the transfer of shares upon
exercise of a non-qualified option under the Stock Incentive Plan will be
subject to both wage withholding and employment taxes.
A recipient's tax basis in the shares of Common Stock received on exercise
of a non-qualified stock option will be equal to the amount of any cash paid on
exercise, plus the amount of ordinary income recognized by such individual as a
result of the receipt of such shares. The holding period for such shares for
purposes of determining short or long-term capital gains would begin just after
the transfer of the shares, or, in the case of an officer or beneficial owner of
more than ten percent (10%) of any class of registered equity securities of the
Company who does not elect to be taxed as of the exercise date, just after the
expiration of the Deferral Period, if any.
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If a recipient exercises a non-qualified stock option by delivering other
shares of Common Stock previously owned by the recipient, the recipient will not
recognize gain or loss with respect to the exchange of such shares, even if
their then fair market value is different from the recipient's tax basis. The
recipient, however, will be taxed as described above with respect to the
exercise of the non-qualified option as if he or she had paid the exercise price
in cash, and the Company likewise generally will be entitled to an equivalent
tax deduction. So long as the recipient receives a separate identifiable stock
certificate therefor, the tax basis and the holding period for that number of
shares of Common Stock received on such exercise that is equal to the number of
shares surrendered on such exercise will be equal to the tax basis and include
the holding period of those shares surrendered. The recipient's tax basis and
holding period for the additional shares received on exercise of the option paid
for, in whole or in part, with shares of Common Stock will be the same as if the
recipient had exercised the option solely for cash.
The Company generally will be entitled, subject to the possible application
of Sections 162(m) and 280G of the Code as discussed below, to a deduction in
connection with the recipient's exercise of a non-qualified stock option in an
amount equal to the income recognized by the recipient.
A participant who is granted an incentive stock option generally does not
realize any taxable income at the time of the grant or exercise of the option.
Similarly, the Company generally is not entitled to any tax deduction at the
time of the grant or exercise of the option. The aggregate fair market value of
Common Stock (determined at the date of grant) with respect to which incentive
stock options can be exercisable for the first time by a recipient during any
calendar year cannot exceed $100,000. Any excess will be treated as a
non-qualified option. If (i) the participant makes no disposition of the shares
acquired pursuant to an incentive stock option within two years from the date of
grant or within one year from the exercise of the option, and (ii) at all times
during the period beginning on the date of the grant of the option and ending on
the day three months before the date of such exercise, the participant was an
employee of either the Company or its subsidiaries, any gain or loss realized on
a subsequent disposition of the shares will be treated as a long-term capital
gain or loss. Under such circumstances, the Company will not be entitled to any
deduction for federal income tax purposes. If the participant disposes of the
shares before the later of such dates or was not employed by the Company or its
subsidiaries during the entire applicable period, the participant will have
ordinary income equal to the difference between the exercise price of the shares
and the market value of the shares on the date of exercise, and the Company will
be entitled to a corresponding tax deduction, subject to the application of
Section 162(m) of the Code and Section 280G of the Code.
Stock Appreciation Rights. The grant of an SAR will produce no U.S. federal
tax consequences for the participant or the Company. The exercise of an SAR
results in taxable income to the participant equal to the difference between the
reference price of the SAR and the market price of the Common Stock on the date
of exercise, and a corresponding tax deduction to the Company subject to the
application of Section 162(m) of the Code and Section 280G of the Code.
Restricted Stock. An eligible employee receiving restricted stock may elect
under Section 83(b) of the Code, to include in ordinary income, as compensation
at the time restricted stock is first issued, the excess of the fair market
value of such shares at the time of issuance over the amount paid, if any, by
the recipient for such shares. Unless a Section 83(b) election is timely made by
the recipient (no later than the expiration of the 30 day period following the
time of issuance), no taxable income will be recognized by the recipient of a
restricted stock award until such shares are no longer subject to a substantial
risk of forfeiture (the 'Restrictions'). However, when the Restrictions or the
risk of forfeiture lapses, the recipient will recognize ordinary income in an
amount equal to the excess of the fair market value of the Common Stock on the
date of lapse over the amount paid, if any, by the recipient for such shares.
The ordinary income recognized by a recipient with respect to restricted stock
awarded will be subject to both wage withholding and employment taxes.
If a Section 83(b) election is made, any dividends received on shares which
are subject to Restrictions will be treated as dividend income. If a recipient
does not make an election under Section 83(b), dividends received on the Common
Stock prior to the time the Restrictions on such shares lapse will be treated as
additional compensation, and not dividend income, for federal income tax
purposes,
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and, except in the case of a non-employee director, will be subject to wage
withholding and employment taxes.
A recipient's tax basis in restricted stock received pursuant to the Stock
Incentive Plan will be equal to the sum of the price paid for such shares, if
any, and the amount of ordinary income recognized by such recipient with respect
to the receipt of such shares or the lapse of Restrictions thereon. The
recipient's holding period for such shares for purposes of determining gain or
loss on subsequent sale will begin immediately after the transfer of such shares
to the recipient, if a Section 83(b) election is made with respect to such
shares, or immediately after the Restrictions on such shares lapse, if no
Section 83(b) election is made.
In general, a deduction will be allowed to the Company for federal income
tax purposes (subject to the application of Section 162(m) of the Code and
Section 280G of the Code) in an amount equal to the ordinary income recognized
by an employee or former employee with respect to restricted stock awarded
pursuant to the Stock Incentive Plan.
If, subsequent to the lapse of Restrictions on his or her Common Stock, the
recipient sells such shares, the difference, if any, between the amount realized
from such sale and the tax basis of such shares to the holder will ordinarily
result in capital gain or loss.
If a Section 83(b) election is made and, before the Restrictions on the
shares lapse, the shares which are subject to such election are in effect
forfeited, (i) no deduction would be allowed to such recipient for the amount
included in the income of such recipient by reason of such Section 83(b)
election, and (ii) the recipient would realize a loss in an amount equal to the
excess, if any, of the amount paid by the recipient for such shares over the
amount received by the recipient upon forfeiture (which loss would ordinarily be
a capital loss). In such event, the Company would be required to include in its
income the amount of any deduction previously allowable to it in connection with
the transfer of such shares. A recipient would realize gain in an amount equal
to the excess, if any, of the amount received by the recipient upon such resale
or forfeiture over the recipient's tax basis in such shares (which gain would
ordinarily be capital gain). Other rules could apply if the resale of the
recipient's shares were treated under Section 302 of the Code as a distribution
taxable as a dividend, rather than as a sale of the recipient's shares.
Performance Units and Performance Shares. In the case of a recipient
receiving performance units or performance shares, the executive will not be
taxed at the time of grant of the performance unit or performance shares. If the
performance targets and the other requirements for a payment of a performance
unit are achieved, the executive will receive distributions of Common Stock
and/or cash. The recipient will recognize ordinary income in an amount equal to
any cash received, if any, and the fair market value of the Common Stock on the
date of receipt. The ordinary income recognized by a recipient will be subject
to both wage withholding and employment taxes.
A recipient's tax basis in any shares received will be equal to the sum of
the amount of ordinary income recognized by such recipient with respect to the
receipt of such shares. The recipient's holding period for such shares for
purposes of determining gain or loss on subsequent sale will begin immediately
after the transfer of such shares to the recipient.
In general, a deduction will be allowed to the Company for federal income
tax purposes (subject to the possible application of Section 162(m) of the Code
and Section 280G of the Code) in an amount equal to the ordinary income
recognized by a recipient.
If the recipient sells such shares, the difference, if any, between the
amount realized from such sale and the tax basis of such shares to the holder
will ordinarily result in capital gain or loss.
Director's Common Stock. The fair market value of the award of shares of
Common Stock generally will be includible in the non-employee director's income
as ordinary income at the time of the award. The recipient should consult with
his or her tax advisor with regard to any exception to the general rule. The
Company will be entitled to a deduction for the value of such award when the
non-employee director recognizes income, but such amounts are not subject to
wage withholding or employment taxes by the Company.
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Parachute Payments. In the event that the payment of any award under the
Stock Incentive Plan is accelerated because of a change in ownership (as defined
in Code Section 280G(b)(2)) and such payment of an award, either alone or
together with any other payments made to the recipient, constitute excess
parachute payments under Section 280G of the Code, then, subject to certain
exceptions, a portion of such payments would be nondeductible to the Company and
the recipient would be subject to a 20% excise tax on such portion of the
payment.
Code Section 162(m). Section 162(m) of the Code denies a deduction to any
publicly held corporation for compensation paid to certain 'covered employees'
in a taxable year to the extent that such compensation exceeds $1,000,000.
'Covered employees' are a Company's chief executive officer on the last day of
the taxable year and any other individual whose compensation is required to be
reported to stockholders under the Exchange Act by reason of being among the
four most highly compensated officers (other than the chief executive officer)
for the taxable year and who are employed on the last day of the taxable year.
Compensation paid under certain qualified performance based compensation
arrangements, which (among other things) provide for compensation based on pre-
established performance goals established by a compensation committee that is
comprised solely of two or more 'outside directors', is not considered in
determining whether a 'covered employee's' compensation exceeds $1,000,000.
While it is intended that certain awards under the Stock Incentive Plan will
satisfy the requirements of Section 162(m) of the Code for performance based
compensation so that the income recognized in connection with the awards
thereunder will not be included in a 'covered employee's' compensation for the
purpose of determining whether such covered recipient's compensation exceeds
$1,000,000, given the limited guidance that exists, the effect of Section 162(m)
of the Code on the deductibility of such 'covered employee' compensation cannot
be ascertained with certainty. As a result, notwithstanding the foregoing
discussion, no assurance can be given as to the deductibility of the 'covered
employee' compensation under Section 162(m) of the Code.
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MILLENNIUM CHEMICALS INC.
LONG TERM STOCK INCENTIVE PLAN
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I PURPOSE.......................................................................... B-12
ARTICLE II DEFINITIONS...................................................................... B-12
ARTICLE III ADMINISTRATION................................................................... B-15
ARTICLE IV SHARE AND OTHER LIMITATIONS...................................................... B-16
ARTICLE V ELIGIBILITY...................................................................... B-19
ARTICLE VI EMPLOYEE STOCK OPTION GRANTS..................................................... B-19
ARTICLE VII RESTRICTED STOCK AWARDS.......................................................... B-21
ARTICLE VIII STOCK APPRECIATION RIGHTS........................................................ B-23
ARTICLE IX PERFORMANCE SHARES............................................................... B-26
ARTICLE X PERFORMANCE UNITS................................................................ B-27
ARTICLE XI NON-EMPLOYEE DIRECTOR COMMON STOCK AWARDS........................................ B-28
ARTICLE XII NON-TRANSFERABILITY.............................................................. B-29
ARTICLE XIII CHANGE IN CONTROL PROVISIONS..................................................... B-29
ARTICLE XIV TERMINATION OR AMENDMENT OF THE PLAN............................................. B-31
ARTICLE XV UNFUNDED PLAN.................................................................... B-32
ARTICLE XVI GENERAL PROVISIONS............................................................... B-32
ARTICLE XVII EFFECTIVE DATE OF PLAN........................................................... B-33
ARTICLE XVIII TERM OF PLAN..................................................................... B-33
ARTICLE XIX NAME OF PLAN..................................................................... B-33
EXHIBIT A PERFORMANCE CRITERIA............................................................. A-1
</TABLE>
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MILLENNIUM CHEMICALS INC.
LONG TERM STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of this Millennium Chemicals Inc. Long Term Stock Incentive
Plan (the 'Plan') is to enhance the profitability and value of Millennium
Chemicals Inc. (the 'Company') and its affiliates for the benefit of their
stockholders by enabling the Company (i) to offer employees of the Company and
Designated 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.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1. 'Award' shall mean any award under this Plan of any Stock Option,
Restricted Stock, Stock Appreciation Right, Performance Unit, Performance
Share, or, solely as provided in Article XI, Common Stock. All Awards,
other than Common Stock awarded pursuant to Article XI, shall be confirmed
by, and subject to the terms of, a written agreement executed by the
Company and the Participant.
2.2. 'Board' shall mean the Board of Directors of the Company.
2.3. 'Cause' shall mean, with respect to a Participant's Termination
of Employment, (i) in the case where there is no employment agreement,
change in control agreement or similar agreement in effect between the
Company or a Designated Subsidiary and the Participant at the time of the
relevant grant or award, or where there is an employment agreement, change
in control agreement or similar agreement in effect at the time of the
relevant grant or award but such agreement either does not define cause (or
words of like import) or a 'cause' termination would not be permitted under
such agreement at that time because other conditions were not satisfied,
termination due to a Participant's dishonesty, fraud, insubordination,
willful misconduct, refusal to perform services (for any reason other than
illness or incapacity) or materially unsatisfactory performance of his or
her duties for the Company or a Designated Subsidiary; or (ii) in the case
where there is an employment agreement, change in control agreement or
similar agreement in effect between the Company or a Designated Subsidiary
and the Participant at the time of the relevant grant or award that defines
cause (or words of like import) and a 'cause' termination would be
permitted under such agreement at that time, termination that is or would
be deemed to be for 'cause' (or words of like import) as defined under such
agreement; provided, that with regard to any agreement that conditions
'cause' on occurrence of a change in control, such definition of 'cause'
shall not apply until a change in control actually takes place and then
only with regard to a termination thereafter.
2.4. 'Change in Control' shall have the meaning set forth in Article
XIII.
2.5. 'Code' shall mean the Internal Revenue Code of 1986, as amended.
Any reference to any section of the Code shall also be a reference to any
successor provision.
2.6. 'Committee' shall mean a committee of the Board appointed from
time to time by the Board, which committee shall be intended to consist of
two or more non-employee directors, each of whom shall be, to the extent
required by Rule 16b-3 (as defined herein) and Section 162(m) of the Code
(as defined herein), a non-employee director as defined in Rule 16b-3 and
an outside director as defined under Section 162(m) of the Code, except
that, if and to the extent that no Committee exists which has the authority
to administer the Plan, the functions of the Committee
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shall be exercised by the Board. If for any reason the appointed Committee
does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code,
such noncompliance with the requirements of Rule 16b-3 or Section 162(m) of
the Code shall not affect the validity of the awards, grants,
interpretations or other actions of the Committee.
2.7. 'Common Stock' means the Common Stock, $.01 par value per share,
of the Company.
2.8. 'Designated Subsidiary' shall mean any subsidiary of the Company
within the meaning of Section 424(f) of the Code.
2.9. 'Disability' shall mean total and permanent disability, as
defined in Section 22(e)(3) of the Code.
2.10. 'Effective Date' shall mean the effective date of the Plan as
defined in Article XVII.
2.11. 'Eligible Employees' shall mean the employees of the Company and
the Designated Subsidiaries who are eligible pursuant to Section 5.1 to be
granted Awards under this Plan.
2.12. 'Exchange Act' shall mean the Securities Exchange Act of 1934.
2.13. 'Fair Market Value' for purposes of this Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the last sales price reported for
the Common Stock on the applicable date (i) as reported by the principal
national securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities exchange, as
quoted on an automated quotation system sponsored by the National
Association of Securities Dealers. If the Common Stock is not readily
tradable on a national securities exchange or any system sponsored by the
National Association of Securities Dealers, its Fair Market Value shall be
set in good faith by the Committee on the advice of a registered investment
adviser (as defined under the Investment Advisers Act of 1940). For
purposes of the grant of any Award (other than a Performance Unit Award
granted in a dollar amount), the applicable date shall be the date for
which the last sales price is available at the time of grant. For purposes
of the conversion of a monetary Performance Unit Award to an aggregate
number of shares of Common Stock for reference purposes, the applicable
date shall be the date determined by the Committee in accordance with
Section 10.1. For purposes of the exercise of any Stock Appreciation Right
the applicable date shall be the date a notice of exercise is received by
the Committee or, if not a day on which the applicable market is open, the
next day that it is open.
2.14. 'Good Reason' shall mean, with respect to a Participant's
Termination of Employment, (i) in the case where there is no employment
agreement, change in control or similar agreement in effect between the
Company or a Designated Subsidiary and the Participant at the time of the
relevant grant or award, or where there is an employment agreement, change
in control or similar agreement in effect at the time of the relevant grant
or award, but such agreement either does not define good reason (or words
of like import) or a good reason termination would not be permitted under
such agreement at that time because other conditions were not satisfied, a
voluntary termination due to 'good reason,' as the Committee, in its sole
discretion, decides to treat as a Good Reason termination; or (ii) in the
case where there is an employment agreement, change in control or similar
agreement in effect, between the Company or a Designated Subsidiary and the
Participant at the time of the relevant grant or award that defines good
reason (or words of like import) and a good reason termination would be
permitted under such agreement at that time, termination due to 'good
reason' (or words of like import) as specifically provided in such
agreement; provided, that with regard to any agreement that conditions
'good reason' on occurrence of a change in control, such definition of
'good reason' shall not apply until a change in control actually takes
place and then only with regard to a termination thereafter.
2.15. 'Incentive Stock Option' shall mean any Stock Option awarded
under this Plan intended to be and designated as an 'Incentive Stock
Option' within the meaning of Section 422 of the Code.
2.16. 'Non-Qualified Stock Option' shall mean any Stock Option awarded
under this Plan that is not an Incentive Stock Option.
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2.17. 'Participant' shall mean the following persons to whom an Award
has been made pursuant to this Plan: Eligible Employees of the Company and
Designated Subsidiaries and non-employee directors of the Company;
provided, however, that non-employee directors shall be Participants for
purposes of the Plan solely with respect to awards of shares of Common
Stock pursuant to Article XI.
2.18. 'Performance Cycle' shall have the meaning set forth in Section
10.1.
2.19. 'Performance Period' shall have the meaning set forth in Section
9.1.
2.20. 'Performance Share' shall mean an Award made pursuant to Article
IX of this Plan of the right to receive Common Stock or, as determined by
the Committee in its sole discretion, cash of an equivalent value at the
end of a specified Performance Period or thereafter.
2.21. 'Performance Unit' shall mean an Award made pursuant to Article
X of this Plan of the right to receive an amount payable in cash or Common
Stock or a combination of both at the end of a specified Performance Cycle
or thereafter.
2.22. 'Restricted Stock' shall mean an award of shares of Common Stock
under the Plan that is subject to restrictions under Article VII.
2.23. 'Restriction Period' shall have the meaning set forth in
Subsection 7.3(a) with respect to Restricted Stock for Eligible Employees.
2.24. 'Retirement' with respect to a Participant's Termination of
Employment shall mean a Termination of Employment without Cause from the
Company and/or a Designated Subsidiary by a Participant who has attained
(i) at least age sixty-five (65); (ii) at least age sixty-two (62) and
performed ten (10) or more years of service with the Company (or its
predecessors) and/or a Designated Subsidiary; or (iii) such earlier date
after age fifty-five (55) as approved by the Committee with regard to such
Participant. With respect to a Participant's Termination of Directorship,
Retirement shall mean the failure to stand for reelection or the failure to
be reelected after a Participant has attained age sixty-five (65).
2.25. 'Rule 16b-3' shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.26. 'Section 162(m) of the Code' shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any
Treasury regulations thereunder.
2.27. 'Stock Appreciation Right' shall mean the right pursuant to an
Award granted under Article VIII. A Tandem Stock Appreciation Right shall
mean the right to surrender to the Company all (or a portion) of a Stock
Option in exchange for an amount in cash or stock equal to the excess of
(i) the Fair Market Value, on the date such Stock Option (or such portion
thereof) is surrendered, of the Common Stock covered by such Stock Option
(or such portion thereof), over (ii) the aggregate exercise price of such
Stock Option (or such portion thereof). A Non-Tandem Stock Appreciation
Right shall mean the right to receive an amount in cash or stock equal to
the excess of (x) the Fair Market Value of a share of Common Stock on of
the date such right is exercised, over (y) the aggregate exercise price of
such right, otherwise than on surrender of a Stock Option.
2.28. 'Stock Option' or 'Option' shall mean any Option to purchase
shares of Common Stock granted to Eligible Employees pursuant to Article
VI.
2.29. 'Ten Percent Stockholder' shall mean a person owning stock of
the Company possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, as defined in Section
422 of the Code.
2.30. 'Termination of Directorship' shall mean, with respect to a
non-employee director, that the non-employee director has ceased to be a
director of the Company.
2.31. 'Termination of Employment' shall mean (i) a termination of
service (for reasons other than a military or personal leave of absence
granted by the Company) of a Participant from the Company and its
Designated Subsidiaries; or (ii) when an entity which is employing a
Participant
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ceases to be a Designated Subsidiary, unless the Participant thereupon
becomes employed by the Company or another Designated Subsidiary.
2.32. 'Transfer' or 'Transferred' shall mean anticipate, alienate,
attach, sell, assign, pledge, encumber, charge or otherwise transfer.
2.33. 'Withholding Election' shall have the meaning set forth in
Section 16.4.
ARTICLE III
ADMINISTRATION
3.1. The Committee. The Plan shall be administered and interpreted by the
Committee.
3.2. Awards. The Committee shall have full authority to grant, pursuant to
the terms of this Plan: (i) Stock Options, (ii) Restricted Stock, (iii) Stock
Appreciation Rights, both Tandem and Non-Tandem, (iv) Performance Shares and (v)
Performance Units to Eligible Employees. Common Stock shall be granted to
non-employee directors of the Company pursuant to Article XI. In particular, the
Committee shall have the authority:
(a) to select the Eligible Employees to whom Stock Options, Restricted
Stock, Stock Appreciation Rights, Performance Shares and Performance Units
may from time to time be granted hereunder;
(b) to determine whether and to what extent Stock Options, Restricted
Stock, Stock Appreciation Rights, Performance Shares and Performance Units
or any combination thereof, are to be granted hereunder to one or more
Eligible Employees;
(c) to determine, in accordance with the terms of this Plan, the
number of shares of Common Stock to be covered by each Award to an Eligible
Employee granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Award granted hereunder to an Eligible Employee
(including, but not limited to, the share price, any restriction or
limitation, any vesting schedule or acceleration thereof, or any forfeiture
restrictions or waiver thereof, regarding any Stock Option or other Award,
and the shares of Common Stock relating thereto, based on such factors, if
any, as the Committee shall determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash, Common Stock and/or Restricted Stock under
Subsection 6.3(d);
(f) to determine whether, to what extent and under what circumstances
to provide loans (which shall be on a recourse basis and shall bear a
reasonable rate of interest) to Eligible Employees in order to exercise
Options under the Plan;
(g) to determine whether a Stock Appreciation Right is Tandem or
Non-Tandem; and
(h) to determine whether to require an Eligible Employee, as a
condition of the granting of any Award, to not sell or otherwise dispose of
shares acquired pursuant to the exercise of an Option or as an Award for a
period of time as determined by the Committee, in its sole discretion,
following the date of the acquisition of such Option or Award.
3.3. Guidelines. Subject to Article XIV hereof, the Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing this Plan and perform all acts, including the delegation
of its administrative responsibilities, as it shall, from time to time, deem
advisable; to construe and interpret the terms and provisions of this Plan and
any Award issued under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in this Plan or
in any agreement relating thereto in the manner and to the extent it shall deem
necessary to carry this Plan into effect but only to the extent any such action
would be permitted under the applicable provisions of both Rule 16b-3 and
Section 162(m) of the Code. The Committee may adopt special guidelines and
provisions for persons who are residing in, or subject to, the taxes of,
countries other than the United States to comply with applicable tax and
securities laws. To the extent applicable,
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this Plan is intended to comply with Section 162(m) of the Code and the
applicable requirements of Rule 16b-3 and shall be limited, construed and
interpreted in a manner so as to comply therewith.
3.4. Decisions Final. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board, or the
Committee (or any of its members) arising out of or in connection with the Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective heirs, executors, administrators,
successors and assigns.
3.5. Reliance on Counsel. The Company, the Board or the Committee may
consult with legal counsel, who may be counsel for the Company or other counsel,
with respect to its obligations or duties hereunder, or with respect to any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6. Procedures. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee shall hold
meetings, subject to the By-Laws of the Company, at such times and places as it
shall deem advisable. A majority of the Committee members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by all the
Committee members in accordance with the By-Laws of the Company, shall be fully
as effective as if it had been made by a vote at a meeting duly called and held.
The Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
3.7. Designation of Consultants/Liability.
(a) The Committee may designate employees of the Company and professional
advisors to assist the Committee in the administration of the Plan and may grant
authority to employees to execute agreements or other documents on behalf of the
Committee.
(b) The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
or Board in the engagement of any such counsel, consultant or agent shall be
paid by the Company. The Committee, its members and any person designated
pursuant to paragraph (a) above shall not be liable for any action or
determination made in good faith with respect to the Plan. To the maximum extent
permitted by applicable law, no officer of the Company or member or former
member of the Committee or of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Award granted
under it. To the maximum extent permitted by applicable law or the Certificate
of Incorporation or By-Laws of the Company and to the extent not covered by
insurance, each officer and member or former member of the Committee or of the
Board shall be indemnified and held harmless by the Company against any cost or
expense (including reasonable fees of counsel reasonably acceptable to the
Company) or liability (including any sum paid in settlement of a claim with the
approval of the Company), and advanced amounts necessary to pay the foregoing at
the earliest time and to the fullest extent permitted, arising out of any act or
omission to act in connection with the Plan, except to the extent arising out of
such officer's, member's or former member's own fraud or bad faith. Such
indemnification shall be in addition to any rights of indemnification the
officers, directors or members or former officers, directors or members may have
under applicable law or under the Certificate of Incorporation or By-Laws of the
Company or Designated Subsidiary. Notwithstanding anything else herein, this
indemnification will not apply to the actions or determinations made by an
individual with regard to Awards granted to him or her under this Plan.
ARTICLE IV
SHARE AND OTHER LIMITATIONS
4.1. Shares.
(a) General Limitation. The aggregate number of shares of Common Stock
which may be issued or used for reference purposes under this Plan or with
respect to which other Awards may be granted shall
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not exceed 3,909,000 shares (subject to any increase or decrease pursuant to
Section 4.2) which may be either authorized and unissued Common Stock or Common
Stock held in or acquired for the treasury of the Company. If any Option or
Stock Appreciation Right granted under this Plan expires, terminates or is
cancelled for any reason without having been exercised in full or, with respect
to Options, the Company repurchases any Option pursuant to Section 6.3(f), the
number of shares of Common Stock underlying the repurchased Option, and/or the
number of shares of Common Stock underlying any unexercised Stock Appreciation
Right or Option shall again be available for the purposes of Awards under the
Plan. If any shares of Restricted Stock awarded under this Plan to a Participant
are forfeited or repurchased by the Company for any reason, the number of
forfeited or repurchased shares of Restricted Stock shall again be available for
the purposes of Awards under the Plan. If any Performance Shares or Performance
Units awarded under this Plan are forfeited, the number of shares of Common
Stock underlying the forfeited Performance Shares or Performance Units shall
again be available for purposes of Awards under the Plan. If a Tandem Stock
Appreciation Right or a limited Stock Appreciation Right is granted in tandem
with an Option, such grant shall only apply once against the maximum number of
shares of Common Stock which may be issued under this Plan.
(b) Individual Participant Limitations. (i) The maximum number of shares of
Common Stock subject to any Option which may be granted under this Plan during
any fiscal year of the Company to each Eligible Employee shall be 50,000 shares
(subject to any increase or decrease pursuant to Section 4.2).
(ii) The maximum number of shares of Restricted Stock for which the
lapse of the relevant Restriction Period is subject to the attainment of
preestablished performance goals in accordance with Section 7.3(a)(ii)
herein which may be granted under this Plan to each Eligible Employee shall
be 50,000 shares (subject to any increase or decrease pursuant to Section
4.2) during any fiscal year of the Company other than fiscal 1996, and with
regard to any new employee, the fiscal year in which such Eligible Employee
initially commences employment with the Company and its Designated
Subsidiaries. With respect to fiscal 1996 and the fiscal year in which an
Eligible Employee initially commences employment with the Company and its
Designated Subsidiaries, but only with regard to such Eligible Employee,
the maximum number of shares of Restricted Stock for which the lapse of the
relevant Restriction Period is subject to the attainment of preestablished
performance goals in accordance with Section 7.3(a)(ii) herein shall be
400,000 shares (subject to any increase or decrease pursuant to Section
4.2). There are no annual individual Eligible Employee share limitations on
Restricted Stock for which the lapse of the relevant Restriction Period is
not subject to attainment of preestablished performance goals in accordance
with Section 7.3(a)(ii) herein.
(iii) The maximum number of shares of Common Stock subject to any
Stock Appreciation Right which may be granted under this Plan during any
fiscal year of the Company to each Eligible Employee shall be 15,000 shares
(subject to any increase or decrease pursuant to Section 4.2). If a Tandem
Stock Appreciation Right or limited Stock Appreciation Right is granted in
tandem with an Option it shall apply against the Eligible Employee's
individual share limitations for both Stock Appreciation Rights and
Options.
(iv) The maximum value at grant of Performance Units which may be
granted under this Plan during any fiscal year of the Company to each
Eligible Employee shall be $5,000,000 (and may not be converted for
reference purposes to more than 200,000 shares of Common Stock (subject to
any increase or decrease pursuant to Section 4.2)). Each Performance Unit
shall be referenced to one (1) share of Common Stock and shall be charged
against the available shares under this Plan at the time the unit value
measurement is converted to a referenced number of shares of Common Stock
in accordance with Section 10.1.
(v) The maximum number of Performance Shares which may be granted
under this Plan during any fiscal year of the Company to each Eligible
Employee shall be 50,000 shares (subject to any increase or decrease
pursuant to Section 4.2).
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4.2. Changes.
(a) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, or Designated Subsidiaries, any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting Common
Stock, the dissolution or liquidation of the Company or Designated Subsidiaries,
any sale or transfer of all or part of its assets or business or any other
corporate act or proceeding.
(b) In the event of any such change in the capital structure or business of
the Company by reason of any stock dividend or distribution, stock split or
reverse stock split, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, distribution with respect to its
outstanding Common Stock or capital stock other than Common Stock,
reclassification of its capital stock, issuance of warrants or options to
purchase any Common Stock or securities convertible into Common Stock, any sale
or Transfer of all or part of the Company's assets or business, or any similar
change affecting the Company's capital structure or business, then the aggregate
number and kind of shares which thereafter may be issued under this Plan, the
number and kind of shares or other property (including cash) to be issued upon
exercise of an outstanding Option or other Awards granted under this Plan and
the purchase price thereof shall be appropriately adjusted consistent with such
change in such manner as the Committee may deem equitable to prevent substantial
dilution or enlargement of the rights granted to, or available for, Participants
under this Plan, and any such adjustment determined by the Committee in good
faith shall be binding and conclusive on the Company and all Participants and
employees and their respective heirs, executors, administrators, successors and
assigns.
(c) Fractional shares of Common Stock resulting from any adjustment in
Options or Awards pursuant to Section 4.2(a) or (b) shall be aggregated until,
and eliminated at, the time of exercise by rounding-down for fractions less than
one-half ( 1/2) and rounding-up for fractions equal to or greater than one-half
( 1/2). No cash settlements shall be made with respect to fractional shares
eliminated by rounding. Notice of any adjustment shall be given by the Committee
to each Participant whose Option or Award has been adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.
(d) In the event of a merger or consolidation in which the Company is not
the surviving entity or in the event of any transaction that results in the
acquisition of substantially all of the Company's outstanding Common Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or transfer of all or substantially all of
the Company's assets (all of the foregoing being referred to as 'Acquisition
Events'), then the Committee may, in its sole discretion, terminate all
outstanding Options and Stock Appreciation Rights of Eligible Employees,
effective as of the date of the Acquisition Event, by delivering notice of
termination to each such Participant at least twenty (20) days prior to the date
of consummation of the Acquisition Event; provided, that during the period from
the date on which such notice of termination is delivered to the consummation of
the Acquisition Event, each such Participant shall have the right to exercise in
full all of his or her Options and Stock Appreciation Rights that are then
outstanding (without regard to any limitations on exercisability otherwise
contained in the Option or Award Agreements) but contingent on occurrence of the
Acquisition Event, and, provided that, if the Acquisition Event does not take
place within a specified period after giving such notice for any reason
whatsoever, the notice and exercise shall be null and void.
Notwithstanding the foregoing and solely to the extent required by Section
16 of the Exchange Act, at the discretion of the Committee, the provisions
contained in this subsection shall be adjusted as they apply to Options and
Stock Appreciation Rights granted to Eligible Employees within six (6) months
before the occurrence of an Acquisition Event if the holder of such Award is
subject to the reporting requirements of Section 16(a) of the Exchange Act in
such manner as determined by the Committee, including without limitation,
terminating Options and Stock Appreciation Rights at specific dates after the
Acquisition Event, in order to give the holder the benefit of the Option. If an
Acquisition Event occurs, to the extent the Committee does not terminate the
outstanding Options and Stock Appreciation Rights pursuant to this Section
4.2(d), then the provisions of Section 4.2(b) shall apply.
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4.3. Purchase Price. Notwithstanding any provision of this Plan to the
contrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
ARTICLE V
ELIGIBILITY
5.1. All employees of the Company and its Designated Subsidiaries are
eligible to be granted Options, Restricted Stock, Stock Appreciation Rights,
Performance Shares and Performance Units under this Plan. Eligibility under this
Plan shall be determined by the Committee.
5.2. Non-employee directors of the Company are only eligible to receive an
Award of Common Stock in accordance with Article XI of the Plan.
ARTICLE VI
EMPLOYEE STOCK OPTION GRANTS
6.1. Options. Each Stock Option granted hereunder shall be one of two
types: (i) an Incentive Stock Option intended to satisfy the requirements of
Section 422 of the Code or (ii) a Non-Qualified Stock Option.
6.2. Grants. The Committee shall have the authority to grant to any
Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not qualify as an
Incentive Stock Option (whether because of its provisions or the time or manner
of its exercise or otherwise), such Stock Option or the portion thereof which
does not qualify, shall constitute a separate Non-Qualified Stock Option.
6.3. Terms of Options. Options granted under this Plan shall be subject to
the following terms and conditions, and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under an Incentive Stock Option shall be determined by the
Committee at the time of grant but shall not be less than 100% of the Fair
Market Value of the share of Common Stock at the time of grant; provided,
however, if an Incentive Stock Option is granted to a Ten Percent
Stockholder, the purchase price shall be no less than 110% of the Fair
Market value of the Common Stock. The purchase price of shares of Common
Stock subject to a Non-Qualified Stock Option shall be determined by the
Committee but shall not be less than the 100% of the Fair Market Value of
the Common Stock at the time of grant. Notwithstanding the foregoing, if an
Option is modified, extended or renewed and, thereby, deemed to be the
issuance of a new Option under the Code, the exercise price of an Option
may continue to be the original exercise price even if less than the Fair
Market Value of the Common Stock at the time of such modification,
extension or renewal.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10)
years after the date the Option is granted, provided, however, the term of
an Incentive Stock Option granted to a Ten Percent Stockholder may not
exceed five (5) years.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee at grant. If the Committee provides, in its discretion, that
any Stock Option is exercisable subject to certain limitations (including,
without limitation, that it is exercisable only in installments or within
certain time periods), the Committee may waive such limitations on the
exercisability at any time at or after grant in whole or in part
(including, without limitation, that the Committee may waive the
installment exercise provisions or accelerate the time at which Options may
be exercised), based on such factors, if any, as the Committee shall
determine, in its sole discretion.
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(d) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (c) above, Stock Options
may be exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in full
of the purchase price in such form, or such other arrangement for the
satisfaction of the purchase price, as the Committee may accept. If and to
the extent determined by the Committee in its sole discretion at or after
grant, payment in full or in part may also be made in the form of Common
Stock withheld from the shares to be received on the exercise of a Stock
Option hereunder, Common Stock owned by the Participant (and for which the
Participant has good title free and clear of any liens and encumbrances) or
Restricted Stock based, in each case, on the Fair Market Value of the Stock
on the payment date as determined by the Committee (without regard to any
forfeiture restrictions applicable to such Restricted Stock). No shares of
Common Stock shall be issued until payment, as provided herein, therefor
has been made or provided for. If payment in full or in part has been made
in the form of Restricted Stock, an equivalent number of shares of Common
Stock issued on exercise of the Option shall be subject to the same
restrictions and conditions, during the remainder of the Restriction
Period, applicable to the Restricted Stock surrendered therefor.
(e) Incentive Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Eligible Employee during any calendar year under
the Plan and/or any other stock option plan of the Company or any
subsidiary or parent corporation (within the meaning of Section 424(e) of
the Code) exceeds $100,000, such Options shall be treated as Options which
are not Incentive Stock Options.
Should the foregoing provision not be necessary in order for the Stock
Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of the stockholders of the
Company.
(f) Buy Out and Settlement Provisions. The Committee may at any time
on behalf of the Company offer to buy out an Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
(g) Form, Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, an Option
shall be evidenced by such form of agreement or grant as is approved by the
Committee, and the Committee may modify, extend or renew outstanding
Options granted under the Plan (provided that the rights of a Participant
are not reduced without his consent), or accept the surrender of
outstanding Options (up to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised).
(h) Other Terms and Conditions. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms
of the Plan, as the Committee shall deem appropriate including, without
limitation, permitting 'reloads' such that the same number of Options are
granted as the number of Options exercised, shares used to pay for the
exercise price of Options or shares used to pay withholding taxes
('Reloads'). With respect to Reloads, the exercise price of the new Stock
Option shall be the Fair Market Value on the date of the 'reload' and the
term of the Stock Option shall be the same as the remaining term of the
Options that are exercised, if applicable, or such other exercise price and
term as determined by the Committee.
6.4. Termination of Employment. The following rules apply with regard to
Options upon the Termination of Employment of a Participant:
(a) Termination by Reason of Death. If a Participant's Termination of
Employment is by reason of death, any Stock Option held by such
Participant, unless otherwise determined by the Committee at grant or, if
no rights of the Participant's estate are reduced, thereafter, may be
exercised, to the extent exercisable at the Participant's death, by the
legal representative of the estate, at any time within a period of one (1)
year from the date of such death, but in no event beyond the expiration of
the stated term of such Stock Option.
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(b) Termination by Reason of Disability. If a Participant's
Termination of Employment is by reason of Disability, any Stock Option held
by such Participant, unless otherwise determined by the Committee at grant
or, if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at the Participant's termination, by
the Participant (or the legal representative of the Participant's estate if
the Participant dies after termination) at any time within a period of one
(1) year from the date of such termination, but in no event beyond the
expiration of the stated term of such Stock Option.
(c) Termination by Reason of Retirement. If a Participant's
Termination of Employment is by reason of Retirement, any Stock Option held
by such Participant, unless otherwise determined by the Committee at grant,
or, if no rights of the Participant are reduced, thereafter, shall be fully
vested and may thereafter be exercised by the Participant at any time
within a period of one (1) year from the date of such termination, but in
no event beyond the expiration of the stated term of such Stock Option;
provided, however, that, if the Participant dies within such exercise
period, any unexercised Stock Option held by such Participant shall
thereafter be exercisable, to the extent to which it was exercisable at the
time of death, for a period of one (1) year (or such other period as the
Committee may specify at grant or, if no rights of the Participant's estate
are reduced, thereafter) from the date of such death, but in no event
beyond the expiration of the stated term of such Stock Option.
(d) Involuntary Termination Without Cause or Termination for Good
Reason. If a Participant's Termination of Employment is by involuntary
termination without Cause or for Good Reason, any Stock Option held by such
Participant, unless otherwise determined by the Committee at grant or, if
no rights of the Participant are reduced, thereafter, may be exercised, to
the extent exercisable at termination, by the Participant at any time
within a period of ninety (90) days from the date of such termination, but
in no event beyond the expiration of the stated term of such Stock Option.
(e) Termination Without Good Reason. If a Participant's Termination of
Employment is voluntary but without Good Reason and occurs prior to, or
more than ninety (90) days after, the occurrence of an event which would be
grounds for Termination of Employment by the Company for Cause (without
regard to any notice or cure period requirements), any Stock Option held by
such Participant, unless otherwise determined by the Committee at grant or,
if no rights of the Participant are reduced, thereafter, may be exercised,
to the extent exercisable at termination, by the Participant at any time
within a period of thirty (30) days from the date of such termination, but
in no event beyond the expiration of the stated term of such Stock Option.
(f) Other Termination. Unless otherwise determined by the Committee at
grant or, if no rights of the Participant are reduced, thereafter, if a
Participant's Termination of Employment is for any reason other than death,
Disability, Retirement, Good Reason, involuntary termination without Cause
or voluntary termination as provided in subsection (e) above, any Stock
Option held by such Participant shall thereupon terminate and expire as of
the date of termination, provided that (unless the Committee determines a
different period upon grant or, if, no rights of the Participant are
reduced, thereafter) in the event the termination is for Cause or is a
voluntary termination without Good Reason within ninety (90) days after
occurrence of an event which would be grounds for Termination of Employment
by the Company for Cause (without regard to any notice or cure period
requirement), any Stock Option held by the Participant at the time of
occurrence of the event which would be grounds for Termination of
Employment by the Company for Cause shall be deemed to have terminated and
expired upon occurrence of the event which would be grounds for Termination
of Employment by the Company for Cause.
ARTICLE VII
RESTRICTED STOCK AWARDS
7.1. Awards of Restricted Stock. Shares of Restricted Stock may be issued
to Eligible Employees either alone or in addition to other Awards granted under
the Plan. The Committee shall determine the eligible persons to whom, and the
time or times at which, grants of Restricted Stock will be made, the number of
shares to be awarded, the price (if any) to be paid by the recipient (subject to
Section 7.2),
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the time or times within which such Awards may be subject to forfeiture, the
vesting schedule and rights to acceleration thereof, and all other terms and
conditions of the Awards. The Committee may condition the grant of Restricted
Stock upon the attainment of specified performance goals or such other factors
as the Committee may determine, in its sole discretion.
7.2. Awards and Certificates. The prospective Participant selected to
receive a Restricted Stock Award shall not have any rights with respect to such
Award, unless and until such Participant has delivered a fully executed copy of
the Restricted Stock Award agreement evidencing the Award to the Company and has
otherwise complied with the applicable terms and conditions of such Award.
Further, such Award shall be subject to the following conditions:
(a) Purchase Price. The purchase price of Restricted Stock shall be
fixed by the Committee. Subject to Section 4.3, the purchase price for
shares of Restricted Stock may be zero to the extent permitted by
applicable law, and, to the extent not so permitted, such purchase price
may not be less than par value.
(b) Acceptance. Awards of Restricted Stock must be accepted within a
period of ninety (90) days (or such shorter period as the Committee may
specify at grant) after the Award date, by executing a Restricted Stock
Award agreement and by paying whatever price (if any) the Committee has
designated thereunder.
(c) Legend. Each Participant receiving a Restricted Stock Award shall
be issued a stock certificate in respect of such shares of Restricted
Stock, unless the Committee elects to use another system, such as book
entries by the transfer agent, as evidencing ownership of a Restricted
Stock Award. Such certificate shall be registered in the name of such
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
'The anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge of the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of the
Millennium Chemicals Inc. (the 'Company') Long Term Stock Incentive Plan
and an Agreement entered into between the registered owner and the Company
dated . Copies of such Plan and Agreement are on file at the
principal office of the Company.'
(d) Custody. The Committee may require that any stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock Award, the Participant shall have delivered a duly signed
stock power, endorsed in blank, relating to the Common Stock covered by
such Award.
7.3. Restrictions and Conditions on Restricted Stock Awards. The shares of
Restricted Stock awarded pursuant to this Plan shall be subject to Article XII
and the following restrictions and conditions:
(a) Restriction Period; Vesting and Acceleration of Vesting. (i) The
Participant shall not be permitted to Transfer shares of Restricted Stock
awarded under this Plan during a period set by the Committee (the
'Restriction Period') commencing with the date of such Award, as set forth
in the Restricted Stock Award agreement and such agreement shall set forth
a vesting schedule and any events which would accelerate vesting of the
shares of Restricted Stock. Within these limits, based on service,
attainment of objective performance goals established pursuant to Section
7.3(a)(ii) below and/or such other factors or criteria as the Committee may
determine in its sole discretion, the Committee may provide for the lapse
of such restrictions in installments in whole or in part, or may accelerate
the vesting of all or any part of any Restricted Stock Award and/or waive
the deferral limitations for all or any part of any Restricted Stock Award.
(ii) Objective Performance Goals, Formulae or Standards (the
'Performance Goals'). If the lapse of restrictions is based on the
attainment of Performance Goals, the Committee shall establish the
objective Performance Goals and the applicable vesting percentage of the
Restricted Stock Award applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable fiscal
year or at such later date as otherwise determined by the Committee and
while the outcome of the Performance Goals are substantially uncertain.
Such Performance Goals may incorporate provisions for disregarding (or
adjusting for)
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changes in accounting methods, corporate transactions (including,
without limitation, dispositions and acquisitions) and other similar
type events or circumstances. With regard to a Restricted Stock Award
that is intended to comply with Section 162(m) of the Code, to the
extent any such provision would create impermissible discretion under
Section 162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the Performance
Criteria set forth in Exhibit A hereto.
(b) Rights as Stockholder. Except as provided in this subsection (b)
and subsection (a) above and as otherwise determined by the Committee, the
Participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a holder of shares of Common Stock of the Company
including, without limitation, the right to receive any dividends, the
right to vote such shares and, subject to and conditioned upon the full
vesting of shares of Restricted Stock, the right to tender such shares.
Notwithstanding the foregoing, the payment of dividends shall be deferred
until, and conditioned upon, the expiration of the applicable Restriction
Period, unless the Committee, in its sole discretion, specifies otherwise
at the time of the Award.
(c) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the certificates for such shares shall be delivered to
the Participant. All legends shall be removed from said certificates at the
time of delivery to the Participant except as otherwise required by
applicable law.
7.4. Termination of Employment for Restricted Stock. Subject to the
applicable provisions of the Restricted Stock Award agreement and this Plan,
upon a Participant's Termination of Employment for any reason during the
relevant Restriction Period, all Restricted Stock still subject to restriction
will vest or be forfeited in accordance with the terms and conditions
established by the Committee at grant or thereafter.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1. Tandem Stock Appreciation Rights. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option (a 'Reference Stock
Option') granted under this Plan ('Tandem Stock Appreciation Rights'). In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Reference Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of the grant
of such Reference Stock Option.
8.2. Terms and Conditions of Tandem Stock Appreciation Rights. Tandem Stock
Appreciation Rights shall be subject to such terms and conditions, not
inconsistent with the provisions of this Plan, as shall be determined from time
to time by the Committee, including Article XII and the following:
(a) Term. A Tandem Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Stock Option shall terminate
and no longer be exercisable upon the termination or exercise of the
Reference Stock Option, except that, unless otherwise determined by the
Committee, in its sole discretion, at the time of grant, a Tandem Stock
Appreciation Right granted with respect to less than the full number of
shares covered by the Reference Stock Option shall not be reduced until and
then only to the extent the exercise or termination of the Reference Stock
Option causes the number of shares covered by the Tandem Stock Appreciation
Right to exceed the number of shares remaining available and unexercised
under the Reference Stock Option.
(b) Exercisability. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Reference
Stock Options to which they relate shall be exercisable in accordance with
the provisions of Article VI and this Article VIII.
(c) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by an optionee by surrendering the applicable portion of the
Reference Stock Option. Upon such exercise and surrender, the Participant
shall be entitled to receive an amount determined in the manner prescribed
in this Section 8.2. Stock Options which have been so surrendered, in whole
or in part,
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shall no longer be exercisable to the extent the related Tandem Stock
Appreciation Rights have been exercised.
(d) Payment. Upon the exercise of a Tandem Stock Appreciation Right a
Participant shall be entitled to receive up to, but no more than, an amount
in cash and/or Common Stock (as chosen by the Committee in its sole
discretion) equal in value to the excess of the Fair Market Value of one
share of Common Stock over the option price per share specified in the
Reference Stock Option multiplied by the number of shares in respect of
which the Tandem Stock Appreciation Right shall have been exercised, with
the Committee having the right to determine the form of payment.
(e) Deemed Exercise of Reference Stock Option. Upon the exercise of a
Tandem Stock Appreciation Right, the Reference Stock Option or part thereof
to which such Stock Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set forth in Article IV of
the Plan on the number of shares of Common Stock to be issued under the
Plan.
8.3. Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Options granted under
this Plan.
8.4. Terms and Conditions of Non-Tandem Stock Appreciation Rights.
Non-Tandem Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by the Committee, including Article XII and the
following:
(a) Term. The term of each Non-Tandem Stock Appreciation Right shall
be fixed by the Committee, but shall not be greater than ten (10) years
after the date the right is granted.
(b) Exercisability. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee at grant. If the Committee
provides, in its discretion, that any such right is exercisable subject to
certain limitations (including, without limitation, that it is exercisable
only in installments or within certain time periods), the Committee may
waive such limitation on the exercisability at any time at or after grant
in whole or in part (including, without limitation, that the Committee may
waive the installment exercise provisions or accelerate the time at which
rights may be exercised), based on such factors, if any, as the Committee
shall determine, in its sole discretion.
(c) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (b) above, Non-Tandem
Stock Appreciation Rights may be exercised in whole or in part at any time
during the option term, by giving written notice of exercise to the Company
specifying the number of Non-Tandem Stock Appreciation Rights to be
exercised.
(d) Payment. Upon the exercise of a Non-Tandem Stock Appreciation
Right a Participant shall be entitled to receive, for each right exercised,
up to, but no more than, an amount in cash and/or Common Stock (as chosen
by the Committee in its sole discretion) equal in value to the excess of
the Fair Market Value of one share of Common Stock on the date the right is
exercised over the Fair Market Value of one (1) share of Common Stock on
the date the right was awarded to the Participant.
8.5. Exercise of Tandem and Non-Tandem Stock Appreciation Rights. A
Participant required to file reports under Section 16(a) of the Exchange Act
with respect to securities of the Company may exercise his or her Stock
Appreciation Right, provided, that solely to the extent required by Section 16
of the Exchange Act it is made (i) during the period beginning on the third
business day following the date of release for publication of the quarterly or
annual summary statements of sales and earnings of the Company and ending on the
twelfth business day following such date, (ii) pursuant to an irrevocable
election made at least six (6) months in advance of the exercise date, or (iii)
during any other period in which such election or exercise may be made under the
applicable provisions of Rule 16b-3.
8.6. Limited Stock Appreciation Rights. The Committee may, in its sole
discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as a
general Stock Appreciation Right or as a limited Stock Appreciation Right.
Limited Stock Appreciation Rights may be exercised only upon the occurrence of a
Change in Control or such other event as the Committee may, in its sole
discretion, designate at the time of grant or thereafter. Upon the exercise of
limited Stock Appreciation Rights,
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except as otherwise provided in an Award agreement, the Participant shall
receive in cash or Common Stock, as determined by the Committee, an amount equal
to the amount (1) set forth in Section 8.2(d) with respect to Tandem Stock
Appreciation Rights or (2) set forth in Section 8.4(d) with respect to
Non-Tandem Stock Appreciation Rights.
8.7. Termination of Employment. The following rules apply with regard to
Stock Appreciation Rights upon the Termination of Employment of a Participant:
(a) Termination by Death. If a Participant's Termination of Employment
is by reason of death, any Stock Appreciation Right held by such
Participant, unless otherwise determined by the Committee at grant or if no
rights of the Participant's estate are reduced, thereafter, may be
exercised, to the extent exercisable at the Participant's death, by the
legal representative of the estate, at any time within a period of one (1)
year from the date of such death or until the expiration of the stated term
of such Stock Appreciation Right, whichever period is the shorter.
(b) Termination by Reason of Disability. If a Participant's
Termination of Employment is by reason of Disability, any Stock
Appreciation Right held by such participant, unless otherwise determined by
the Committee at grant or, if no rights of the Participant are reduced,
thereafter, may be exercised, to the extent exercisable at the
Participant's termination, by the Participant (or the legal representative
of the Participant's estate if the Participant dies after termination) at
any time within a period of one (1) year from the date of such termination
or until the expiration of the stated term of such Stock Appreciation
Right, whichever period is the shorter.
(c) Termination by Reason of Retirement. If a Participant's
Termination of Employment is by reason of Retirement, any Stock
Appreciation Right held by such Participant, unless otherwise determined by
the Committee at grant or, if no rights of the Participant are reduced,
thereafter, shall be fully vested and may thereafter be exercised by the
Participant at any time within a period of one (1) year from the date of
such termination or until the expiration of the stated term of such right,
whichever period is the shorter; provided, however, that, if the
Participant dies within such one (1) year period, any unexercised
Non-Tandem Stock Appreciation Right held by such Participant shall
thereafter be exercisable, to the extent to which it was exercisable at the
time of death, for a period of one (1) year (or such other period as the
Committee may specify at grant or if no rights of the Participant are
reduced, thereafter) from the date of such death or until the expiration of
the stated term of such right, whichever period is the shorter.
(d) Involuntary Termination Without Cause or Termination for Good
Reason. If a Participant's Termination of Employment is by involuntary
termination without Cause or for Good Reason, any Stock Appreciation Right
held by such participant, unless otherwise determined by the Committee at
grant or if no rights of the participant are reduced, thereafter, may be
exercised, to the extent exercisable at termination, by the Participant at
any time within a period of ninety (90) days from the date of such
termination or until the expiration of the stated term of such right,
whichever period is shorter.
(e) Termination Without Good Reason. If a Participant's Termination of
Employment is voluntary but without Good Reason and occurs prior to, or
more than ninety (90) days after, the occurrence of an event which would be
grounds for Termination of Employment by the Company for Cause (without
regard to any notice or cure period requirements), any Stock Appreciation
Right held by such Participant, unless greater or lesser exercise rights
are provided by the Committee at the time of grant or, if no rights of the
participant are reduced, thereafter, may be exercised, to the extent
exercisable at termination, by the Participant at any time within a period
of thirty (30) days from the date of such termination, but in no event
beyond the expiration of the stated term of such Stock Appreciation Right.
(f) Other Termination. Unless otherwise determined by the Committee at
grant or if no rights of the Participant are reduced, thereafter, if a
Participant's Termination of Employment is for any reason other than death,
Disability, Retirement, Good Reason, involuntary termination without Cause
or voluntary termination as provided in subsection (e) above, any Stock
Appreciation Right held by such Participant shall thereupon terminate and
expire as of the date of termination, provided, that (unless the Committee
determines a different period upon grant or, if, no rights of
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the Participant are reduced, thereafter) in the event the termination is
for Cause or is a voluntary termination without Good Reason within ninety
(90) days after occurrence of an event which would be grounds for
Termination of Employment by the Company for Cause (without regard to any
notice or cure period requirement), any Stock Appreciation Right held by
the Participant at the time of the occurrence of the event which would be
grounds for Termination of Employment by the Company for Cause shall be
deemed to have terminated and expired upon occurrence of the event which
would be grounds for Termination of Employment by the Company for Cause.
ARTICLE IX
PERFORMANCE SHARES
9.1. Award of Performance Shares. Performance Shares may be awarded either
alone or in addition to other Awards granted under this Plan. The Committee
shall, in its sole discretion, determine the Eligible Employees to whom and the
time or times at which such Performance Shares shall be awarded to any person,
the duration of the period (the 'Performance Period') during which, and the
conditions under which, a Participant's right to Performance Shares will be
vested and the other terms and conditions of the Award in addition to those set
forth in Section 9.2.
Each Performance Share awarded shall be referenced to one (1) share of
Common Stock. Except as otherwise provided herein, the Committee shall condition
the right to payment of any Performance Share Award upon the attainment of
objective Performance Goals established pursuant to Section 9.2(c) below and
such other nonperformance based factors or criteria as the Committee may
determine in its sole discretion.
9.2. Terms and Conditions. The prospective Participant selected to receive
Performance Shares shall not have any rights with respect to such Awards, unless
and until such Participant has delivered a fully executed copy of a Performance
Share Award agreement evidencing the Award to the Company and has otherwise
complied with Article XII hereof and the following terms and conditions:
(a) Earning of Performance Share Award. At the expiration of the
applicable Performance Period, the Committee shall determine the extent to
which the Performance Goals established pursuant to Section 9.2(c) are
achieved and the percentage of each Performance Share Award that has been
earned.
(b) Payment. Following the Committee's determination in accordance
with subsection (a) above, shares of Common Stock or, as determined by the
Committee in its sole discretion, the cash equivalent of such shares shall
be delivered to the Eligible Employee, or his legal representative, in an
amount equal to such Eligible Employee's earned Performance Share Award.
Notwithstanding the foregoing, the Committee may, in its sole discretion
and in accordance with Section 162(m) of the Code, award an amount less
than the earned Performance Share Award and/or subject the payment of all
or part of any Performance Share Award to additional vesting and forfeiture
conditions as it deems appropriate.
(c) Objective Performance Goals, Formulae or Standards (the
'Performance Goals'). The Committee shall establish the objective
Performance Goals for the earning of Performance Shares based on a
Performance Period applicable to each Participant or class of Participants
in writing prior to the beginning of the applicable Performance Period or
at such later date as permitted under Section 162(m) of the Code and while
the outcome of the Performance Goals are substantially uncertain. Such
Performance Goals may incorporate, if and only to the extent permitted
under Section 162(m) of the Code, provisions for disregarding (or adjusting
for) changes in accounting methods, corporate transactions (including,
without limitation, dispositions and acquisitions) and other similar type
events or circumstances. To the extent any such provision would create
impermissible discretion under Section 162(m) of the Code or otherwise
violate Section 162(m) of the Code, such provision shall be of no force or
effect. The applicable Performance Goals shall be based on one or more of
the Performance Criteria set forth in Exhibit A hereto.
(d) Dividends and Other Distributions. At the time of any Award of
Performance Shares, the Committee may, in its sole discretion, Award an
Eligible Employee the right to receive the cash
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value of any dividends and other distributions that would have been
received had the Eligible Employee held each share of Common Stock
referenced by the earned Performance Share Award from the last day of the
first year of the Performance Period until the actual distribution of the
related share of Common Stock or cash value thereof to the Eligible
Employee. Such amounts, if awarded, shall be paid to the Eligible Employee
as and when the shares of Common Stock or cash value thereof are
distributed to the Eligible Employee and shall be credited with interest
from the first day of the second year of the Performance Period until such
amounts and any earnings thereon are distributed. The applicable rate of
interest shall be determined by the Committee in its sole discretion;
provided, that for each fiscal year or part thereof the applicable interest
rate shall not be greater than a rate equal to the 4-year U.S. Government
Security rate on the first day of each applicable fiscal year.
(e) Termination of Employment. Subject to the applicable provisions of
the Performance Share Award agreement and this Plan, upon a Participant's
Termination of Employment for any reason during the Performance Period or
thereafter, the Committee may, in its sole discretion and, to the extent
applicable, to the extent permitted under Section 162(m) of the Code,
accelerate the vesting and payment of a Performance Share Award.
ARTICLE X
PERFORMANCE UNITS
10.1. Awards of Performance Units. Performance Units may be awarded either
alone or in addition to other Awards granted under this Plan. The Committee
shall, in its sole discretion, determine the Eligible Employees to whom and the
time or times at which such Performance Units shall be awarded to any person,
the duration of the period (the 'Performance Cycle') during which, and the
conditions under which, a Participant's right to Performance Units will be
vested and the other terms and conditions of the Award in addition to those set
forth in Section 10.2.
Performance Units shall be awarded in a dollar amount determined by the
Committee and shall be converted for calculation purposes of growth in value to
a referenced number of shares of Common Stock based on the Fair Market Value of
shares of Common Stock at the close of trading on the New York Stock Exchange on
the first business day following the announcement of the annual financial
results of the Company for the fiscal year of the Company immediately preceding
the fiscal year of the commencement of the relevant Performance Cycle, provided
that the Committee may provide that the minimum price for such conversion shall
be the Fair Market Value on the date of grant and further provided that the
price for grants made in the first fiscal year of the Company shall be based on
the Fair Market Value at the time of grant.
Each Performance Unit shall be referenced to one (1) share of Common Stock.
Except as otherwise provided herein, the Committee shall condition the right to
payment of any Performance Unit Award upon the attainment of objective
performance goals established pursuant to Section 10.2(c) below and such other
nonperformance based factors or criteria as the Committee may determine in its
sole discretion. The cash value of any fractional Performance Unit Award
subsequent to conversion to shares of Common Stock shall be treated as a
Dividend or Other Distribution under Section 10.2(d) to the extent any portion
of the Performance Unit Award is earned.
10.2. Terms and Conditions. The prospective Participant selected to receive
Performance Units shall not have any rights with respect to such Awards, unless
and until such Participant has delivered a fully executed copy of a Performance
Unit Award agreement evidencing the Award to the Company and has otherwise
complied with Article XII hereof and the following terms and conditions:
(a) Earning of Performance Unit Award. At the expiration of the
applicable Performance Cycle, the Committee shall determine the extent to
which the Performance Goals established pursuant to Section 10.2(c) are
achieved and the percentage of each Performance Unit Award that has been
earned.
(b) Payment. Following the Committee's determination in accordance
with subsection (a) above, cash and/or shares of Common Stock, as
determined by the Committee in its sole discretion, shall be delivered to
the Eligible Employee, or his legal representative, in an amount equal to
such
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Eligible Employee's earned Performance Unit Award. Notwithstanding the
foregoing, the Committee may, in its sole discretion and, to the extent
applicable, to the extent permitted under Section 162(m) of the Code, award
an amount less than the earned Performance Unit Award and/or subject the
payment of all or part of any Performance Unit Award to additional vesting
and forfeiture conditions as it deems appropriate.
(c) Performance Goals. The Committee shall establish the objective
Performance Goals for the earnings of Performance Units based on a
Performance Cycle applicable to each Participant or class of Participants
in writing prior to the beginning of the applicable Performance Cycle or at
such later date as permitted under Section 162(m) of the Code and while the
outcome of the Performance Goals are substantially uncertain. Such
Performance Goals may incorporate, if and only to the extent permitted
under Section 162(m) of the Code, provisions for disregarding (or adjusting
for) changes in accounting methods, corporate transactions (including,
without limitation, dispositions and acquisitions) and other similar type
events or circumstances. To the extent any such provision would create
impermissible discretion under Section 162(m) of the Code or otherwise
violate Section 162(m) of the Code, such provision shall be of no force or
effect. The applicable Performance Goals shall be based on one or more of
the Performance Criteria set forth in Exhibit A hereto.
(d) Dividends and Other Distributions. At the time of any Award of
Performance Units, the Committee may, in its sole discretion, Award an
Eligible Employee the right to receive the cash value of any dividends and
other distributions that would have been received had the Eligible Employee
held each share of Common Stock referenced by the earned Performance Unit
Award from the last day of the first year of the Performance Cycle until
the actual distribution of the related share of Common Stock or cash value
thereof to the Eligible Employee. Such amounts, if awarded, shall be paid
to the Eligible Employee as and when the shares of Common Stock or cash
value thereof are distributed to the Eligible Employee and shall be
credited with interest from the first day of the second year of the
Performance Cycle until such amounts and any earnings thereon are
distributed. The applicable rate of interest shall be determined by the
Committee in its sole discretion; provided, that for each fiscal year or
part thereof the applicable interest rate shall not be greater than a rate
equal to the 4-year U.S. Government Security rate on the first day of each
applicable fiscal year.
(e) Termination of Employment. Subject to the applicable provisions of
the Performance Unit Award agreement and this Plan, upon a Participant's
Termination of Employment for any reason during the Performance Cycle or
thereafter, the Committee may, in its sole discretion and, to the extent
applicable, to the extent permitted under Section 162(m) of the Code,
accelerate the vesting and payment of a Performance Unit Award.
ARTICLE XI
NON-EMPLOYEE DIRECTOR COMMON STOCK AWARDS
11.1. Common Stock Award for Non-Employee Directors. A nondiscretionary
annual award of shares of Common Stock shall be made under this Plan to
non-employee directors of the Company as a portion of their annual retainer fee.
Except with respect to such award of shares of Common Stock granted pursuant to
this Article XI, no other Awards under the Plan shall be made available to or
granted to non-employee directors. Notwithstanding anything contained herein to
the contrary, the following provisions shall apply to the award of shares of
Common Stock to non-employee directors:
(a) Annual Awards. (i) On the thirtieth (30th) day following the
consummation of the spinoff of the Company to shareholders of Hanson PLC
pursuant to a demerger (the 'Initial Grant Date'), each non-employee
director who is a director of the Company for the period following the
consummation of the demerger transactions through the Initial Grant Date
shall receive an Award of Common Stock pursuant to the Plan determined by
dividing $15,000 by the average closing price of the Common Stock during
the first twenty (20) business days following the consummation of the
demerger transactions on which the Common Stock is listed on the New York
Stock Exchange.
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(ii) On each October 1 of each calendar year following the calendar
year in which the consummation of the spinoff of the Company occurs,
each non-employee director who is director of the Company on such date
shall receive an Award of Common Stock determined by dividing $15,000 by
the Fair Market Value of the Common Stock.
(iii) Each non-employee director who begins service as a director
on the Board (even if previously an employee director) after the Initial
Grant Date and not on an October 1st on which a grant is being made
shall receive on the first day of such service an Award of Common Stock
determined by dividing $15,000 by the Fair Market Value of the Common
Stock and multiplying the resulting number of shares by a ratio the
numerator of which is the number of days until the next October 1st and
the denominator of which is 365.
(iv) In the event that a quotient, as determining pursuant to this
Section 11.1, is other than a whole number of shares of Common Stock,
the value of any fractional share of Common Stock shall be paid to the
non-employee director in cash. If any date of grant specified above is a
date on which the New York Stock Exchange is not open for trading, the
applicable grant shall be made on the first day thereafter on which the
New York Stock Exchange is open for trading.
(b) Purchase Price. The purchase price of a share of Common Stock
shall be zero to the extent permitted by applicable law, and, to the extent
not so permitted, such purchase price may not be less than par value.
(c) Legend. Each non-employee director receiving shares of Common
Stock under this Article XI shall be issued a stock certificate in respect
of such shares of Common Stock. Such certificate shall be registered in the
name of such non-employee director, and shall bear an appropriate legend,
to the extent required by applicable law as the Company may determine upon
advice of counsel, referring to the legal restrictions applicable to such
shares. An Award of shares of Common Stock shall be subject to the
requirements of Section 16.1.
ARTICLE XII
NON-TRANSFERABILITY
No Stock Option, Stock Appreciation Right, Performance Unit or Performance
Share shall be Transferable by the Participant otherwise than by will or by the
laws of descent and distribution. All Stock Options and all Stock Appreciation
Rights shall be exercisable, during the Participant's lifetime, only by the
Participant. Tandem Stock Appreciation Rights shall be Transferable, to the
extent permitted above, only with the underlying Stock Option. Shares of
Restricted Stock under Article VII may not be Transferred prior to the date on
which shares are issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses. No Award shall, except as
otherwise specifically provided by law or herein, be Transferable in any manner,
and any attempt to Transfer any such Award shall be void, and no such Award
shall in any manner be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person who shall be entitled to such
Award, nor shall it be subject to attachment or legal process for or against
such person.
ARTICLE XIII
CHANGE IN CONTROL PROVISIONS
13.1. Benefits. In the event of a Change in Control of the Company (as
defined below), except as otherwise provided by the Committee upon the grant of
an Award, the Participant shall be entitled to the following benefits:
(a) Subject to paragraph (c) below with regard to Options granted to
Eligible Employees, all outstanding Stock Options and the related Tandem
Stock Appreciation Rights and Non-Tandem Stock Appreciation Rights of such
Participant granted prior to the Change in Control shall be fully vested
and immediately exercisable in their entirety. The Committee, in its sole
discretion, may provide for the purchase of any such Stock Options by the
Company or Designated Subsidiary for an amount of cash equal to the excess
of the Change in Control price (as defined below) of the
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shares of Common Stock covered by such Stock Options, over the aggregate
exercise price of such Stock Options. For purposes of this Section 13.1,
Change in Control price shall mean the higher of (i) the highest price per
share of Common Stock paid in any transaction related to a Change in
Control of the Company, or (ii) the highest Fair Market Value per share of
Common Stock at any time during the sixty (60) day period preceding a
Change in Control.
(b) The restrictions to which any shares of Restricted Stock of such
Participant granted prior to the Change in Control are subject shall lapse
as if the applicable Restriction Period had ended upon such Change in
Control. Furthermore, the conditions required for vesting of any unvested
Performance Units and/or Performance Shares shall be deemed to be satisfied
upon such Change in Control.
(c) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise at the time an Option is granted to an
Eligible Employee hereunder or thereafter, no acceleration of
exercisability shall occur with respect to such Option if the Committee
reasonably determines in good faith, prior to the occurrence of the Change
in Control, that the Options shall be honored or assumed, or new rights
substituted therefor (each such honored, assumed or substituted option
hereinafter called an 'Alternative Option'), by a Participant's employer
(or the parent or a subsidiary of such employer) immediately following the
Change in Control, provided that any such Alternative Option must meet the
following criteria:
(i) the Alternative Option must be based on stock which is traded
on an established securities market, or which will be so traded within
thirty (30) days of the Change in Control;
(ii) the Alternative Option must provide such Participant with
rights and entitlements substantially equivalent to or better than the
rights, terms and conditions applicable under such Option, including,
but not limited to, an identical or better exercise schedule; and
(iii) the Alternative Option must have economic value substantially
equivalent to the value of such Option (determined at the time of the
Change in Control).
For purposes of Incentive Stock Options, any assumed or substituted
Option shall comply with the requirements of Treasury regulation SS1.425-1
(and any amendments thereto).
(d) Notwithstanding anything else herein, the Committee may, in its
sole discretion, provide for accelerated vesting of an Award upon a
Termination of Employment during the Pre-Change in Control Period. Unless
otherwise determined by the Committee, the Pre-Change in Control Period
shall be the one-hundred and eighty (180) day period prior to a Change in
Control.
13.2. Change in Control. A 'Change in Control' shall be deemed to have
occurred:
(a) upon any 'person' as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of Common Stock of
the Company), becoming the owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power
of the Company's then outstanding securities;
(b) during any period of two consecutive years (not including any
period prior to the date of the consummation of the spinoff of the Company
to shareholders of Hanson PLC pursuant to a demerger), individuals who at
the beginning of such period constitute the Board of Directors, 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
paragraph (a), (c), or (d) of this section or a director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) 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 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
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two-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;
(c) upon the merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no person (other than those covered by the exceptions
in (a) above) acquires more than twenty-five percent (25%) of the combined
voting power of the Company's then outstanding securities shall not
constitute a Change in Control of the Company; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets other than
the sale of all or substantially all of the assets of the Company to a
person or persons who beneficially own, directly or indirectly, at least
fifty percent (50%) or more of the combined voting power of the outstanding
voting securities of the Company at the time of the sale.
ARTICLE XIV
TERMINATION OR AMENDMENT OF THE PLAN
14.1. Termination or Amendment. Notwithstanding any other provision of this
Plan, the Board may at any time, and from time to time, amend, in whole or in
part, any or all of the provisions of the Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article XVI), or suspend or terminate it entirely, retroactively
or otherwise; provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to Awards
granted prior to such amendment, suspension or termination, may not be impaired
without the consent of such Participant and, provided further, without the
approval of the stockholders of the Company in accordance with the laws of the
State of Delaware, to the extent required by the applicable provisions of Rule
16b-3 or under Section 162(m) of the Code, or to the extent applicable to
Incentive Stock Options, Section 422 of the Code, no amendment may be made which
would (i) increase the aggregate number of shares of Common Stock that may be
issued under this Plan; (ii) increase the maximum individual Participant
limitations for a fiscal year under Section 4.1(b); (iii) change the
classification of employees and non-employee directors eligible to receive
Awards under this Plan; (iv) decrease the minimum option price of any Stock
Option; (v) extend the maximum option period under Section 6.3; (vi) change any
rights under the Plan with regard to non-employee directors; (vii) materially
alter the Performance Criteria for the Award of Restricted Stock, Performance
Units or Performance Shares as set forth in Exhibit A; or (viii) require
stockholder approval in order for the Plan to continue to comply with the
applicable provisions of Rule 16b-3, Section 162(m) of the Code or, to the
extent applicable to Incentive Stock Options, Section 422 of the Code. In no
event may the Plan be amended without the approval of the stockholders of the
Company in accordance with the applicable laws of the State of Delaware to
increase the aggregate number of shares of Common Stock that may be issued under
the Plan, decrease the minimum option price of any Stock Option, or to make any
other amendment that would require stockholder approval under the rules of any
exchange or system on which the Company's securities are listed or traded at the
request of the Company.
Except with respect to the award of Common Stock to non-employee directors
under Article XI, which award shall be final when made, the Committee may amend
the terms of any Award theretofore granted, prospectively or retroactively, but,
subject to Article IV above or as otherwise specifically provided herein, no
such amendment or other action by the Committee shall impair the rights of any
holder without the holder's consent.
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ARTICLE XV
UNFUNDED PLAN
15.1. Unfunded Status of Plan. This Plan is intended to constitute an
'unfunded' plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE XVI
GENERAL PROVISIONS
16.1. Legend. The Committee may require each person receiving shares
pursuant to an Award under the Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by this Plan, the
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on Transfer.
All certificates for shares of Common Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed or any national securities association system upon whose system the
Stock is then quoted, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.
16.2. Other Plans. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
16.3. No Right to Employment/Directorship. Neither this Plan nor the grant
of any Award hereunder shall give any Participant or other employee any right
with respect to continuance of employment by the Company or any subsidiary, nor
shall they be a limitation in any way on the right of the Company or any
subsidiary by which an employee is employed to terminate his employment at any
time. Neither this Plan nor the grant of any Award hereunder shall impose any
obligations on the Company to retain any Participant as a director nor shall it
impose on the part of any Participant any obligation to remain as a director of
the Company.
16.4. Withholding of Taxes. The Company shall have the right to deduct from
any payment to be made to a Participant, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld. Upon the vesting of Restricted Stock, or upon
making an election under Code Section 83(b), a Participant shall pay all
required withholding to the Company.
The Committee may permit any such withholding obligation with regard to any
Eligible Employee to be satisfied by reducing the number of shares of Common
Stock otherwise deliverable or by delivering shares of Common Stock already
owned. An Eligible Employee required to file reports under Section 16(a) of the
Exchange Act with respect to securities of the Company may elect to have a
sufficient number of shares of Common Stock withheld to fulfill such tax
obligations (hereinafter a 'Withholding Election') only if the election complies
with such conditions, if any, as are necessary to prevent the withholding of
such shares from being subject to the applicable provisions of Section 16(b) of
the Exchange Act. To the extent necessary under then current law, such
conditions shall include the following: (x) the Withholding Election shall be
subject to the disapproval of the Committee and (y) the Withholding Election is
made (i) during the period beginning on the third business day following the
date of release for publication of the quarterly or annual summary statements of
sales and earnings of the Company and ending on the twelfth business day
following such date or is made in advance but takes effect during such period,
(ii) six (6) months before the Stock Award becomes taxable, or (iii) during any
other period in which a Withholding Election may be made under the applicable
provisions
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of Rule 16b-3 promulgated pursuant to the Act. Any fraction of a share of Common
Stock required to satisfy such tax obligations shall be disregarded and the
amount due shall be paid instead in cash by the Participant.
16.5. Listing and Other Conditions.
(a) As long as the Common Stock is listed on a national securities exchange
or system sponsored by a national securities association, the issue of any
shares of Common Stock pursuant to an Award shall be conditioned upon such
shares being listed on such exchange or system. The Company shall have no
obligation to issue such shares unless and until such shares are so listed, and
the right to exercise any Option with respect to such shares shall be suspended
until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that any
sale or delivery of shares of Common Stock pursuant to an Award is or may in the
circumstances be unlawful or result in the imposition of excise taxes on the
Company under the statutes, rules or regulations of any applicable jurisdiction,
the Company shall have no obligation to make such sale or delivery, or to make
any application or to effect or to maintain any qualification or registration
under the Securities Act of 1933, as amended, or otherwise with respect to
shares of Common Stock or Awards, and the right to exercise any Option shall be
suspended until, in the opinion of said counsel, such sale or delivery shall be
lawful or will not result in the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section 16.5,
any Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension, but no such suspension shall extend the term of any Option.
16.6. Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
16.7. Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
16.8. Other Benefits. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its subsidiaries nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
16.9. Costs. The Company shall bear all expenses included in administering
this Plan, including expenses of issuing Common Stock pursuant to any Awards
hereunder.
16.10. No Right to Same Benefits. The provisions of Awards need not be the
same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
16.11. Death/Disability. The Committee may in its discretion require the
transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may also require that the agreement of the transferee to be bound by
all of the terms and conditions of the Plan.
16.12. Section 16(b) of the Exchange Act. All elections and transactions
under the Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with any applicable exemptive
condition under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act, as it may deem necessary or proper for the administration
and operation of the Plan and the transaction of business thereunder.
16.13. Severability of Provisions. If any provision of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
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16.14. Headings and Captions. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
ARTICLE XVII
EFFECTIVE DATE OF PLAN
The Plan shall become effective upon adoption by the Board and approval of
the Plan by the stockholders in accordance with the requirements of the laws of
the State of Delaware or such later date as provided in the adopting resolution;
provided, that no Stock Options, Stock Appreciation Rights, Performance Shares,
Performance Units or Restricted Stock for which the lapse of the relevant
Restriction Period is subject to the attainment of preestablished performance
goals shall be granted after the Company's first annual stockholders' meeting
held after October 1, 1997, unless at such meeting the Plan provisions
applicable to Stock Options, Stock Appreciation Rights, Performance Shares,
Performance Units and Restricted Stock for which the lapse of the relevant
Restriction Period is subject to attainment of preestablished performance goals
are approved by the stockholders to the extent required to qualify such awards
under Section 162(m) of the Code.
ARTICLE XVIII
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan is adopted or the date of
stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date.
ARTICLE XIX
NAME OF PLAN
This Plan shall be known as the Millennium Chemicals Inc. Long Term Stock
Incentive Plan.
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EXHIBIT A
TO THE PLAN
PERFORMANCE CRITERIA
Performance Goals established for purposes of the vesting of
performance-based Awards of Restricted Stock, Performance Units and/or
Performance Shares shall be based on one or more of the following performance
criteria ('Performance Criteria'): (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 in any case 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
achievement of a certain level of, reduction of, or other specified objectives
with regard to limiting the level of increase in, all or a portion of, the
Company's bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of such cash balances and/or other offsets and adjustments as may be established
by the Committee; (iv) the attainment of a specified percentage increase in
earnings per share or earnings per share from continuing operations of the
Company (or a subsidiary, division or other operational unit of the Company);
(v) the attainment of certain target levels of, or a specified percentage
increase in, revenues, net income or earnings before income tax of the Company
(or a subsidiary, division, or other operational unit of the Company); (vi) the
attainment of certain target levels of, or a specified increase in return on
capital employed or return on invested capital of the Company (or any
subsidiary, division, or other operational unit of the Company); (vii) the
attainment of certain target levels of, or a percentage increase in, after-tax
or pre-tax return on stockholders' equity of the Company (or any subsidiary,
division or other operational unit of the Company); (viii) 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); (ix) the
attainment of certain target levels in the Fair Market Value of the shares of
Common Stock; and (x) the growth in the value of an investment in the Common
Stock assuming the reinvestment of dividends.
In addition, such Performance Criteria may be based upon the attainment of
specified levels of Company (or subsidiary, division or other operational unit
of the Company) performance under one or more of the measures described above
relative to the performance of other corporations. To the extent permitted under
Section 162(m) of the Code, but only to the extent permitted under Section
162(m) of the Code (including, without limitation, compliance with any
requirements for stockholder approval), the Committee may: (i) designate
additional business criteria on which the Performance Goals may be based or (ii)
adjust, modify or amend the aforementioned business criteria.
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The Information Agents for the Stock Dividend are:
<TABLE>
<S> <C>
GEORGESON & COMPANY INC. LLOYDS BANK REGISTRARS
Georgeson & Co. The Causeway
Wall Street Plaza Worthing
New York, NY 10005 West Sussex BN99 6DA
Telephone: 1-800-223-2064 Telephone: 0800 211211
The Dividend Agents are:
CITIBANK N.A. LLOYDS BANK REGISTRARS
c/o Citicorp Data Distribution, Inc. The Causeway
P.O. Box 308 Worthing
Paramus, NJ 07653 West Sussex BN99 6DA
Attention: Shareholder Services Telephone: 0800 211211
Telephone: 1-800-422-2066
</TABLE>
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as 'r'
The British pound symbol shall be expressed as 'L'
Chemistry notation that normally includes subscript shall be expressed entirely
in baseline characters, e.g. titanium dioxide (TiO2)
<PAGE>
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Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
MILLENNIUM CHEMICALS INC.
(a Delaware corporation)
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. (a) All annual meetings of the
Stockholders for the election of directors shall be held at such place as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. Special meetings of Stockholders for any other purpose
may be held at such time and place 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 or, during such time as the certificate of
incorporation of the Corporation (the "Certificate of Incorporation") provides
for a classified Board of Directors, that class of directors the term of which
shall expire at the meeting, 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. A written waiver of any such notice signed by the
person entitled thereto, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
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(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 2. 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, shall be
called by the Chairman, President or Secretary only at the request in writing of
a majority of the Board of Directors then in office. 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 more than
sixty days prior to the date of the meeting, to each Stockholder entitled to
vote at such meeting. Special meetings may be held at such place as shall be
designated by the Board of Directors. 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, other than procedural matters and matters relating to the conduct
of the meeting, 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
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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 the Delaware General Corporation Law ("Delaware
Law") or by the Certificate of Incorporation. Unless these By-Laws otherwise
require, when a meeting is adjourned to another time or place, whether or not a
quorum is present, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. 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 Delaware 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 and keep
the minutes thereof, 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. The order of business at all meetings of
stockholders shall be as determined by the Chairman 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
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such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period) and, unless Delaware Law or the
Certificate of Incorporation (including resolutions designating any class or
series of preferred stock pursuant to Article IV of 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 directors. 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) Where a separate vote by a class or classes, a majority of
the outstanding shares of such 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 Certificate of Incorporation.
SECTION 6. Inspector of Election. 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
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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.
SECTION 7. Stockholder Proposals and Nominations. (a) No
proposal for a stockholder vote shall be submitted by a stockholder (a
"Stockholder Proposal") to the Corporation's stockholders unless the stockholder
submitting such proposal (the "Proponent") shall have filed a written notice
setting forth with particularity (i) the names and business addresses of the
Proponent and all persons or entities (collectively, the "Persons") acting in
concert with the Proponent; (ii) the name and address of the Proponent and the
Persons identified in clause (i), as they appear on the Corporation's books (if
they so appear); (iii) the class and number of shares of the Corporation
beneficially owned by the Proponent and the Persons identified in clause (i);
(iv) a description of the Stockholder Proposal containing all material
information relating thereto; and (v) such other information as the Board of
Directors reasonably determines is necessary or appropriate to enable the Board
of Directors and stockholders of the Corporation to consider the Stockholder
Proposal. The presiding officer at any stockholders' meeting may determine that
any Stockholder Proposal was not made in accordance with the procedures
prescribed in these By-Laws or is otherwise not in accordance with law, and if
it is so determined, such officer shall so declare at the meeting and the
Stockholder Proposal shall be disregarded.
(b) Only persons who are selected and recommended by the Board
of Directors or the committee of the Board of Directors designated to make
nominations (if any), or who are nominated by stockholders in accordance with
the procedures set forth in this Section 7, shall be eligible for election, or
qualified to serve, as directors. Nominations of individuals for election to the
Board of Directors of the Corporation at any annual meeting or any special
meeting of stockholders at which directors are to be elected may be made by any
stockholder of the Corporation entitled to vote for the election of directors at
that meeting by compliance with the procedures set forth in this Section 7.
Nominations by stockholders shall be made by written notice (a "Nomination
Notice"), which shall set forth (i) as to each individual nominated, (A) the
name, date of birth, business address and residence address of such individual;
(B) the business experience during the past five years of
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such nominee, including his or her principal occupations and employment during
such period, the name and principal business of any corporation or other
organization in which such occupations and employment were carried on, and such
other information as to the nature of his or her responsibilities and level of
professional competence as may be sufficient to permit assessment of his or her
prior business experience; (C) whether the nominee is or has ever been at any
time a director, officer or owner of 5% or more of any class of capital stock,
partnership interests or other equity interest of any corporation, partnership
or other entity; (D) any directorships held by such nominee in any company with
a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended; and (E) whether, in the last five
years, such nominee has been convicted in a criminal proceeding or has been
subject to a judgment, order, finding or decree of any federal, state or other
governmental entity, concerning any violation of federal, state or other law, or
any proceeding in bankruptcy, which conviction, order, finding, decree or
proceeding may be material to an evaluation of the ability or integrity of the
nominee; and (ii) as to the Person submitting the Nomination Notice and any
Person acting in concert with such Person, (x) the name and business address of
such Person, (y) the name and address of such Person as they appear on the
Corporation's books (if they so appear), and (z) the class and number of shares
of the Corporation that are beneficially owned by such Person. A written consent
to being named in a proxy statement as a nominee, and to serve as a director if
elected, signed by the nominee, shall be filed with any Nomination Notice. If
the presiding officer at any stockholders' meeting determines that a nomination
was not made in accordance with the procedures prescribed by these By-Laws, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
(c) Stockholder Proposals and Nomination Notices shall be
delivered to the Secretary at the principal executive office of the Corporation
60 days or more before the date of the stockholders' meeting if such Stockholder
Proposal or Nomination Notice is to be submitted at an annual stockholders'
meeting. Stockholder Proposals and Nomination Notices shall be delivered to the
Secretary at the principal executive office of the Corporation no later than the
close of business on the 15th day following the day
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on which notice of the date of a special meeting of stockholders was given if
the Stockholder Proposal or Nomination Notice is to be submitted at a special
stockholders' meeting.
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. The Board of Directors shall exercise exclusive strategic control of
the Corporation and shall not delegate its policy-making powers. The Board of
Directors shall be exclusively responsible for the Corporation's major
acquisition and disposal strategies (but it need not necessarily be involved in
the implementation of particular transactions which do not require its
involvement), dividend policy, the review and approval of decisions over funding
issues and the approval of annual budgets and profit targets for the Corporation
as a whole. The Board of Directors shall be provided with detailed information
about each item on the agenda of all meetings of the Board of Directors in
advance of each meeting, although it is recognised that in exceptional
circumstances a meeting of the Board of Directors may have to be called at such
short notice that this is not possible. Minutes of the Board of Directors shall
record sufficient of the discussion and comment to evidence the decision-making
processes of meetings 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 such
number as may be fixed from time to time by the Board of Directors, but shall be
not less than three. 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
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refers to the total number of directors which the Corporation would have if
there were no vacancies.
(b) 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 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. When a meeting
is adjourned to another time or place, whether or not a quorum is present,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Board of Directors may transact any business which might have been
transacted at the original meeting. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting, from time to time, without notice other than announcement at the
meeting, until a quorum is present.
SECTION 4. Places of Meetings. Meetings of the Board of
Directors shall be held exclusively within the United Kingdom except that the
Board of Directors may at any time meet at any place, whether or not within the
United Kingdom, in order to consider whether a meeting of the Board of Directors
may take place outside the United Kingdom, having regard to:
(a) the requirements of Inland Revenue Statement of Practice,
SP 1-90 (as in force at the date of the adoption of these By-Laws); and
(b) the agenda of the proposed meeting and the powers of the
Board of Directors that will or may be exercised at such meeting.
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If, having considered the aforementioned matters, the Board of
Directors determine that such meeting could take place without causing the
Corporation to cease to be centrally managed and controlled in the United
Kingdom, such meeting may then take place outside the United Kingdom. This
procedure must be repeated on each occasion that it is proposed that a meeting
shall take place outside the United Kingdom.
The particular place of a meeting within the United Kingdom may
from time to time be fixed by resolution of the Board of Directors, or may be
specified in the notice of meeting. The particular place of a meeting outside
the United Kingdom may be specified in the notice of meeting.
SECTION 5. Annual Meeting. At the next regular 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.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times as the Board of Directors shall from time
to time by resolution determine. After the place and time of regular meetings of
the Board of Directors shall have been determined and notice thereof shall have
been once given to each member of the Board of Directors, regular meetings may
be held without further notice being given.
SECTION 7. Special Meetings. Notice of the date, time and
place of each special meeting shall be mailed by regular mail to each director
at his designated address at least six days before the meeting; or sent by
overnight courier to each director at his designated address at least two days
before the meeting (with delivery scheduled to occur no later than the day
before the meeting); or given orally by telephone or other means, or by
telegraph or telecopy, or by any other means comparable to any of the foregoing,
to each director at his designated address at least 24 hours before the meeting;
provided, however, that if less than five days' notice is provided and one third
of the members of the Board of Directors then in office object in writing prior
to or at the commencement of the meeting, such meeting shall be postponed until
five days after such notice was given pursuant to this sentence (or such short
period to which a majority of those who objected in writing agree), provided
that notice of such postponed meeting shall
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be given in accordance with this Section 7. The notice of the special meeting
shall state the general purpose of the meeting, but other routine business may
be conducted at the special meeting without such matter being stated in the
notice. Only meetings of the Board of Directors which are duly called pursuant
to this Section and Section 6 and Section 7 of this Article shall constitute
official meetings of the Board of Directors and no other actions shall
constitute meetings of the Board of Directors for purposes of these By-Laws.
SECTION 8. 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 9. 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 Chairman or Secretary, unless otherwise specified in
the resignation. Directors may be removed only in the manner provided in the
Certificate of Incorporation.
SECTION 10. 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.
SECTION 11. Preferred Directors. Notwithstanding anything else
contained herein, whenever the holders of one or more classes or series of
Preferred Stock shall have the right, voting separately as a class or series, to
elect directors, the election, term of office, filling of vacancies, removal and
other features of such directorships shall be governed by the terms of the
resolutions applicable thereto adopted by the Board of Directors pursuant to the
Certificate of Incorporation, and such directors so elected shall not be subject
to the provisions of this Article II unless otherwise provided herein.
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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 one 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, subject to the provisions of Article II,
Section 1 of these By-Laws, 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 adopted 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, subject to
the provisions of Sections 3 and 4 of Article II. 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. 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
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the Corporation, which shall include a President and a Secretary, and may
include, by election or appointment, a Chairman of the Board, 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 until their respective successors have been elected and
qualified or their earlier death, resignation or removal. The remuneration 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 the Board of Directors. Any vacancy in any office
shall be filled in such manner as the Board of Directors shall determine.
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. The Chairman of the Board of Directors, if there be one, shall be the
chief executive officer of the Corporation and shall preside at all meetings of
the Stockholders and 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 Chairman of the Board 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 Chairman of the Board shall see that all orders and resolutions
of the Board of Directors are carried into effect and shall perform
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such additional duties that usually pertain to the office of chief executive
officer.
(b) If there be no Chairman of the Board, the President shall
be the chief executive officer and shall exercise the powers listed in (a)
above. Otherwise, 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 or the Chairman
of the Board.
(c) A Vice 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 Chairman of
the Board 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, the Chairman of the
Board 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, the Chairman of the
Board 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, the Chairman of the
Board 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
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may be attested by the signature of the Secretary or any other officer.
(f) Any assistant officer shall have the same duties and
authority as the officer whom such assistant officer assists and, in addition,
such other duties and authority as the Board of Directors, the Chairman of the
Board or President shall from time to time assign.
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.
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ARTICLE VI
Books and Records
SECTION 1. Location. The books and records of the Corporation
may be kept at such place or places 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 kept 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
Stockholder 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.
(b) 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
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paragraph (a) 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 any 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 or all of the signatures on any such certificate may be a facsimile. 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 such person were such
officer, transfer agent or registrar at the date of issue.
SECTION 2. Record Ownership. The name of the holder of record
of the shares represented thereby, with the number of such shares and the date
of issue thereof, shall be entered on the books of the Corporation. The
Corporation shall be entitled to treat the holder of record of any share of
stock as the holder in fact thereof, and accordingly shall not be bound to
recognize any equitable or other claim
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to or interest in any share on the part of any other person, whether or not it
shall have express or other notice thereof, except as required by Delaware Law.
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 3. Transfer of Record Ownership. Transfer of stock
shall be made on the books of the Corporation only by direction of the person
named in the certificate or such person's attorney, lawfully constituted in
writing, and only upon the surrender of the certificate therefor and a written
assignment of the shares evidenced thereby, which certificate shall be canceled
before the new certificate is issued.
SECTION 4. 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 5. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate 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.
SECTION 6. Transfer Agents; Registrants; Rules Respecting
Certificates. The Board of Directors may appoint, or authorize any officer or
officers to appoint, one or more transfer agents and one or more registrars. The
Board of Directors may make such further rules and regulations as it may deem
expedient concerning the issue, trans-
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fer and registration of stock certificates of the Corporation.
ARTICLE VIII
Dividends
Subject to the provisions of Delaware Law and the Certificate
of Incorporation, the Board of Directors shall have full power to declare and
pay dividends on the capital stock of the Corporation. 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, may determine for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
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.
ARTICLE X
Corporate Seal
The corporate seal shall be in form of 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.
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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 December 31.
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
By-Laws may be adopted, amended or repealed by either the
Board of Directors or the affirmative vote of the holders of at least 66 2/3% of
the voting power of all shares of the Corporation's capital stock then entitled
to vote generally in the election of directors.
ARTICLE XIV
Indemnification
SECTION 1. Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact (a) that he or she is or was a director or officer of the Corporation, or
(b) that he or she, being at the time a director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer,
member, employee, fiduciary or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including
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service with respect to an employee benefit plan (collectively, "another
enterprise" or "other enterprise"), shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by Delaware Law as the same
exists or may hereafter be amended (but, in the case of any such amendment, with
respect to alleged action or inaction occurring prior to such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto, against all expense,
liability and loss (including, without limitation, attorneys' and other
professionals' fees and expenses, claims, judgments, fines, ERISA excise taxes
or penalties and amounts paid in settlement) actually and reasonably incurred or
suffered by such person in connection therewith ("Losses"). Without diminishing
the scope of indemnification provided by this Section 1, such persons shall also
be entitled to the further rights set forth below.
SECTION 2. Actions, Suits Or Proceedings Other Than Those By
Or In The Right Of The Corporation. Subject to the terms and conditions of this
Article, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any Proceeding (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 or employee of the Corporation, or, being at the time a
director, officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, member, employee, fiduciary
or agent of another enterprise, against all Losses, actually and reasonably
incurred or suffered by such person in connection with such 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 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 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 3. Actions, Suits Or Proceedings By Or In The Right Of
The Corporation. Subject to the terms and conditions of this Article, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made
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a party to any Proceeding by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer or employee of the Corporation, or being at the time a
director, officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, member, employee, fiduciary
or agent of another enterprise against all Losses actually and reasonably
incurred or suffered 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 that 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 4. Authorization of Indemnification. Any
indemnification under this Article (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification of a person is proper in the circumstances because such
person has met the applicable standard of conduct required by Section 1 or set
forth in Section 2 or 3 of this Article, as the case may be. Such determination
shall be made in a reasonably prompt manner (i) by the Board of Directors by a
majority vote of directors who were not parties to such action, suit or
proceeding, whether or not they constitute a quorum of the Board of Directors,
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, (iii) by the stockholders or
(iv) as Delaware Law may otherwise permit. 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.
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SECTION 5. Good Faith Defined. For purposes of any
determination under Section 4 of this Article, a person shall be deemed to have
acted in good faith if the action is based on (a) the records or books of
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another enterprise in the
course of their duties 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 selected with
reasonable care by the Corporation or the other enterprise. The provisions of
this Section 5 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.
SECTION 6. Proceedings Initiated by Indemnified Persons.
Notwithstanding any provisions of this Article to the contrary, the Corporation
shall not indemnify any person or make advance payments in respect of Losses to
any person pursuant to this Article in connection with any Proceeding (or
portion thereof) initiated against the Corporation by such person unless such
Proceeding (or portion thereof) is authorized by the Board of Directors or its
designee; provided, however, that this prohibition shall not apply to a
counterclaim, cross-claim or third-party claim brought in any Proceeding or to
any claims provided for in Section 7 of this Article.
SECTION 7. Indemnification By A Court. Notwithstanding any
contrary determination in the specific case under Section 4 of this Article, and
notwithstanding the absence of any determination thereunder, any director,
officer or employee may apply to any court of competent jurisdiction for
indemnification to the extent otherwise permissible under Section 1, 2 or 3 of
this Article. Notice of any application for indemnification pursuant to this
Section 7 shall be given to the Corporation promptly upon the filing of such
application.
SECTION 8. Losses Payable In Advance. Losses reasonably
incurred by an officer or director in defending any threatened or pending
Proceeding shall be paid by the Corporation in advance of the final disposition
of such Proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall
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ultimately be determined that such person is not entitled to be indemnified by
the Corporation as authorized in this Article. Losses shall be reasonably
documented by the officer or director and required payments shall be made
promptly by the Corporation. Losses incurred by other employees may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
SECTION 9. Non-exclusivity and Survival of Indemnification.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under the
Certificate of Incorporation, 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. The
provisions of this Article shall not be deemed to preclude the indemnification
of any person who is not specified in Section 1, 2 or 3 of this Article but whom
the Corporation has the power or obligation to indemnify under the provisions of
Delaware Law, or otherwise. The rights conferred by this Article shall continue
as to a person who has ceased to be a director, officer or employee and shall
inure to the benefit of such person and the heirs, executors, administrators and
other comparable legal representatives of such person. The rights conferred in
this Article 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. No rights are conferred in this Article for the
benefit of any person (including, without limitation, officers, directors and
employees of subsidiaries of the Corporation) in any capacity other than as
explicitly set forth herein.
SECTION 10. Meaning of certain terms in connection with
Employee Benefit Plans, etc. For purposes of this Article, 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 or employee of the Corporation which
imposes duties on, or involves services by, such director, officer or employee,
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
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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.
SECTION 11. 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 or employee of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, member, employee,
fiduciary or agent of another 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.
Dated: July 25, 1996
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Exhibit 3.3
FORM OF RIGHTS AGREEMENT
================================================================================
MILLENNIUM CHEMICALS INC.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
as Rights Agent
-------
Rights Agreement
Dated as of , 1996
================================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Certain Definitions.................................................................... 2
2. Appointment of Rights Agent............................................................ 15
3. Issuance of Right Certificates......................................................... 15
4. Form of Right Certificates............................................................. 20
5. Countersignature and Registration...................................................... 21
6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates........................................................... 23
7. Exercise of Rights; Exercise Price; Expiration Date
of Rights........................................................................... 25
8. Cancellation and Destruction of Right Certificates..................................... 31
9. Reservation and Availability of Shares of
Preferred Stock..................................................................... 31
10. Preferred Stock Record Date........................................................... 34
11. Adjustment of Exercise Price or Number of Shares...................................... 35
12. Certification of Adjusted Exercise Price or Number
of Shares........................................................................... 46
13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.................................................................... 47
14. Fractional Rights and Fractional Shares............................................... 55
15. Rights of Action...................................................................... 57
16. Agreement of Right Holders............................................................ 58
17. Right Certificate Holder Not Deemed a Stockholder..................................... 59
18. Concerning the Rights Agent........................................................... 60
</TABLE>
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<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
19. Merger or Consolidation of, or Change in Name of,
the Rights Agent.................................................................... 61
20. Duties of Rights Agent................................................................ 63
21. Change of Rights Agent................................................................ 67
22. Issuance of New Right Certificates.................................................... 69
23. Redemption............................................................................ 70
24. Notice of Proposed Actions............................................................ 73
25. Notices............................................................................... 75
26. Supplements and Amendments............................................................ 76
27. Determination and Actions by the Board of Directors
of the Company, etc................................................................. 78
28. Successors............................................................................ 79
29. Benefits of this Rights Agreement..................................................... 79
30. Delaware Contract..................................................................... 80
31. Counterparts.......................................................................... 80
32. Descriptive Headings.................................................................. 80
33. Severability.......................................................................... 80
</TABLE>
Exhibit A -- Summary of Rights
Exhibit B -- Form of Right Certificate
Exhibit C -- Form of Certificate of Designations of
Series A Junior Preferred Stock
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RIGHTS AGREEMENT
Agreement, dated as of , 1996, by and between MILLENNIUM
CHEMICALS INC., a Delaware corporation (the "Company"), and FIRST CHICAGO
TRUST COMPANY OF NEW YORK, as Rights Agent (the "Rights Agent").
W I T N E S S E T H :
WHEREAS, on , 1996, the Board of Directors of the Company
authorized the issuance of, and declared a dividend payable in, one right (a
"Right") for each share of Common Stock, $0.01 par value per share, of the
Company outstanding as of the close of business on , 1996 (the "Record
Date"), each such Right representing the right to purchase one one-hundredth of
a share of Series A Junior Preferred Stock of the Company ("Preferred Stock")
having the rights and preferences set forth in the form of Certificate of
Designations attached hereto as Exhibit C authorized by the Board of Directors
of the Company on , 1996, upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, the Board of Directors of the Company further authorized
the issuance of one Right (subject to adjustment) with respect to each share of
Common Stock which
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may be issued between the Record Date and the Expiration Date (as such term is
hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Rights
Agreement, the following terms shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such
term is hereinafter defined) and Associates (as such term is hereinafter
defined) of such Person, is the Beneficial Owner (as such term is
hereinafter defined) of less than 15% of the outstanding Voting Stock
(as such term is hereinafter defined) of the Company either on the date
hereof or any date hereafter and prior to becoming an Acquiring Person
and becomes the Beneficial Owner of 15% or more of the Voting Stock of
the Company then outstanding; provided that, an Acquiring Person shall
not include (i) an Exempt Person (as such term is hereinafter defined)
or (ii) any Person, together with all Affiliates and Associates of such
Person, who or which would be an Acquiring Person solely by reason of
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(A) being the Beneficial Owner of shares of Voting Stock of the Company,
the Beneficial Ownership of which was acquired by such Person pursuant
to any action or transaction or series of related actions or
transactions approved by the Board of Directors before such Person
otherwise became an Acquiring Person or (B) a reduction in the number of
issued and outstanding shares of Voting Stock of the Company pursuant to
a transaction or a series of related transactions approved by the Board
of Directors of the Company; provided further, that in the event such
Person described in this clause (ii) does not become an Acquiring Person
by reason of subclause (A) or (B) of this clause (ii), such Person
nonetheless shall become an Acquiring Person in the event such Person
thereafter acquires Beneficial Ownership of an additional 1% of the
Voting Stock of the Company, unless the acquisition of such additional
Voting Stock would not result in such Person becoming an Acquiring
Person by reason of subclause (A) or (B) of this clause (ii).
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith (but only if at the time of such determination
by the Board of Directors there are then in office not less than two
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Continuing Directors and such action is approved by a majority of the
Continuing Directors then in office) that a Person who would otherwise
be an "Acquiring Person" as defined pursuant to the foregoing provisions
of this paragraph (a) has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring
Person" as defined pursuant to the foregoing provisions of this
paragraph (a), then such Person shall not be deemed an "Acquiring
Person" for any purposes of this Rights Agreement.
(b) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), as in effect on the
date of this Rights Agreement.
(c) "Associate" of a Person (as such term is hereinafter defined)
shall mean (i) with respect to a corporation, any officer or director
thereof or of any Subsidiary (as such term is hereinafter defined)
thereof, or any Beneficial Owner (as such term is hereinafter defined)
of 10% or more of any class of equity security thereof, (ii) with
respect to an
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association, any officer or director thereof or of a Subsidiary thereof,
(iii) with respect to a partnership, any general partner thereof or any
limited partner thereof who is, directly or indirectly, the Beneficial
Owner of a 10% ownership interest therein, (iv) with respect to a
business trust, any officer or trustee thereof or of any Subsidiary
thereof, (v) with respect to any other trust or an estate, any trustee,
executor or similar fiduciary or any Person who has a 10% or greater
interest as a beneficiary in the income from or principal of such trust
or estate, (vi) with respect to a natural person, any relative or spouse
of such person, or any relative of such spouse, who has the same home as
such person, and (vii) any Affiliate of such Person.
(d) A person shall be deemed the "Beneficial Owner" of, or to
"Beneficially Own", any securities (and correlative terms shall have
correlative meanings):
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly, for
purposes of Section 13(d) of the Exchange Act and Regulations 13D
and 13G thereunder (or any comparable or
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successor law or regulation), in each case as in
effect on the date hereof; or
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or the
fulfillment of a condition or both) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, other rights (other than these Rights),
warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"Beneficially Own", securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's
Affiliates or Associates until such tendered securities are
accepted for purchase or exchange or (B) the right to vote, alone
or in concert with others, pursuant to any agreement, arrangement
or understanding (whether or not in writing); provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or
to "Beneficially Own", any securities if the agreement,
arrangement or understanding to
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vote such security (1) arises solely from a revocable proxy or
consent given in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act and (2) is not at the time
reportable by such Person on a Schedule 13D report under the
Exchange Act (or any comparable or successor report), other than
by reference to a proxy or consent solicitation being conducted
by such Person; or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except as described in clause (B) of
subparagraph (ii) of this paragraph (d)) or disposing of any
securities of the Company; provided, however, that for purposes
of determining Beneficial Ownership of securities under this
Rights Agreement, officers and directors of the Company solely by
reason of their status as such shall not constitute a group
(notwithstanding that they may be Associates of
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one another or may be deemed to constitute a group for purposes
of Section 13(d) of the Exchange Act and Regulations 13D and 13G
thereunder (or any comparable or successor law or regulation))
and shall not be deemed to own shares owned by another officer or
director of the Company.
Notwithstanding anything in this paragraph (d) to the
contrary, a Person shall not be deemed the "Beneficial Owner" of,
or to "Beneficially Own," any security beneficially owned by
another Person solely by reason of an agreement, arrangement or
understanding with such other Person for the purposes of: (x)
soliciting the Company's stockholders for the election of
director nominees or any other stockholder resolution, the
formation of and membership on any committee for the purpose of
promoting or opposing any stockholder resolution or for electing
a slate of nominees to the Company's Board of Directors, service
on such a slate of nominees, or agreement to a slate of director
nominees, provided that such other Person retains the right at
any time to withdraw as a nominee or member of any such
committee, and to withhold or revoke any vote or
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proxy for or against any such stockholder resolution or for such
slate of nominees; (y) entering into revocable voting agreements
or the granting or solicitation of revocable proxies with respect
to any of the matters described in the foregoing clause (x); or
(z) the sharing of expenses and the indemnification against
expenses and liabilities by any such other Person with respect to
expenses incurred or conduct occurring during the time such other
Person is a nominee or a member of any such committee described
in the foregoing clause (x). Further, notwithstanding anything in
this paragraph (d) to the contrary, a Person engaged in the
business of underwriting securities shall not be deemed the
"Beneficial Owner" of, or to "Beneficially Own," any securities
acquired in good faith in a firm commitment underwriting until
the expiration of forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
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(f) "Close of Business" on any given date shall mean 5:00 P.M.,
New York City time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., New York City time, on
the next succeeding Business Day.
(g) "Common Stock" when used with reference to the Company shall
collectively mean the Common Stock, $0.01 par value per share, of the
Company. "Common Stock" when used with reference to any Person other
than the Company which shall be organized in corporate form shall mean
the capital stock or other equity security with the greatest per share
voting power of such Person. "Common Stock" when used with reference to
any Person other than the Company which shall not be organized in
corporate form shall mean units of beneficial interest which shall
represent the right to participate in profits, losses, deductions and
credits of such Person and which shall be entitled to exercise the
greatest voting power per unit of such Person.
(h) "Continuing Director" shall mean any member of the Board of
Directors, while such person is a member of the Board of Directors, who
is not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative or nominee of an
10
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<PAGE>
Acquiring Person or of any such Affiliate or Associate, and who either
(i) was a member of the Board of Directors prior to the time that any
Person became an Acquiring Person (other than pursuant to a Qualifying
Tender Offer) or (ii) subsequently became a member of the Board of
Directors, and whose nomination for election or election to the Board of
Directors was recommended or approved by a majority of the Continuing
Directors then on the Board of Directors.
(i) "Distribution Date" shall have the meaning set forth in
Section 3(b) hereof.
(j) "Dividend Payment Date" shall mean the date on which Hanson
PLC pays a stock dividend to the holders of its Ordinary Shares of 25p
each consisting of, in the aggregate, all of the issued and outstanding
shares of Common Stock of the Company.
(k) "Exchange Act" shall have the meaning set forth in Section
1(b) hereof.
(l) "Exempt Person" shall mean (i) prior to the Dividend Payment
Date, Derek C. Bonham, Andrew J. H. Dougal and Graham Dransfield, (ii)
the Company, (iii) any Subsidiary of the Company or (iv) any employee
benefit plan or employee stock plan of the Company or any Subsidiary of
the Company, or any trust or other
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<PAGE>
entity organized, appointed, established or holding Common Stock for or
pursuant to the terms of any such plan.
(m) "Exercise Price" shall have the meaning set forth in Sections
4 and 7(b) hereof.
(n) "Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(o) "Fair Market Value" of any property shall mean the fair
market value of such property as determined in accordance with Section
11(b) hereof.
(p) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(q) "NASDAQ" shall have the meaning set forth in Section 9(b)
hereof.
(r) "Person" shall mean any individual, firm, corporation or
other entity.
(s) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(t) "Qualifying Tender Offer" shall mean a tender or exchange
offer for all outstanding shares of Common Stock of the Company approved
by a majority of the Board of Directors (provided that at the time of
such approval of the Board of Directors there are then in office not
less than two Continuing Directors and such
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offer is approved by a majority of the Continuing Directors then in
office), after taking into account the potential long-term value of the
Company and all other factors that they consider relevant.
(u) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(v) "Right Certificate" shall have the meaning set forth in
Section 3(d) hereof.
(w) "Stock Acquisition Date" shall mean the first date on which
there shall be a public announcement by the Company or an Acquiring
Person that an Acquiring Person has become such (which, for purposes of
this definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) or such earlier date as a
majority of the Continuing Directors shall become aware of the existence
of an Acquiring Person.
(x) "Subsidiary" of a Person shall mean any corporation or other
entity of which securities or other ownership interests having voting
power sufficient to elect a majority of the board of directors or other
persons performing similar functions are beneficially owned, directly or
indirectly, by such
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Person or by any corporation or other entity that is otherwise
controlled by such Person.
(y) "Summary of Rights" shall have the meaning set forth in
Section 3(a) hereof.
(z) "Trading Day" shall have the meaning set forth in Section
11(b) hereof.
(aa) "Transfer Tax" shall mean any tax or charge, including any
documentary stamp tax, imposed or collected by any governmental or
regulatory authority in respect of any transfer of any security,
instrument or right, including Rights, shares of Common Stock and shares
of Preferred Stock.
(ab) "Voting Stock" shall mean (i) the Common Stock of the
Company and (ii) any other shares of capital stock of the Company
entitled to vote generally in the election of directors or entitled to
vote together with the Common Stock in respect of any merger,
consolidation, sale of all or substantially all of the Company's assets,
liquidation, dissolution or winding up. For purposes of this Rights
Agreement, Voting Stock shall include securities of the type referred to
in clauses (i) and (ii) above that trade on a "when issued" basis on a
national securities exchange or on the NASDAQ. For purposes of this
Rights
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Agreement, a stated percentage of the Voting Stock shall mean a number
of shares of the Voting Stock as shall equal in voting power that stated
percentage of the total voting power of the then outstanding shares of
Voting Stock in the election of a majority of the Board of Directors or
in respect of any merger, consolidation, sale of all or substantially
all of the Company's assets, liquidation, dissolution or winding up.
Any determination required to be made by the Board of Directors of the Company
for purposes of applying the definitions contained in this Section 1 shall be
made by the Board of Directors in its good faith judgment, which determination
shall be binding on the Rights Agent and the holders of the Rights.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issuance of Right Certificates.
(a) On the Record Date (or as soon as practicable thereafter),
the Company or the Rights Agent shall send a
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copy of a Summary of Rights, in substantially the form attached hereto as
Exhibit A (the "Summary of Rights"), by first class mail, postage prepaid, to
each record holder of the Common Stock as of the close of business on the Record
Date, at the address of such holder shown on the records of the Company.
(b) Until the close of business on the day which is the earlier
of (i) the tenth day after the Stock Acquisition Date or (ii) the tenth business
day (or such later date as may be determined by action of the Board of Directors
(but only if at the time of such determination there are then in office not less
than two Continuing Directors and such action is approved by a majority of the
Continuing Directors then in office) prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement by any Person (other than
an Exempt Person) of, or the first public announcement of the intent of any
Person (other than an Exempt Person) to commence, a tender or exchange offer
upon the successful consummation of which such Person, together with its
Affiliates and Associates, would be the Beneficial Owner of 15% or more of the
then outstanding shares of Voting Stock of the Company (irrespective of whether
any shares are actually purchased pursuant to any such offer) (the earlier of
such dates being
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herein referred to as the "Distribution Date"), (x) the Rights shall be
evidenced by the certificates for Common Stock registered in the name of the
holders of Common Stock (together with, in the case of certificates for Common
Stock outstanding as of the Record Date, the Summary of Rights) and not by
separate Right certificates and the record holders of such certificates for
Common Stock shall be the record holders of the Rights represented thereby and
(y) each Right shall be transferable only simultaneously and together with the
transfer of a share of Common Stock (subject to adjustment as hereinafter
provided). Until the Distribution Date (or, if earlier, the Expiration Date),
the surrender for transfer of any certificate for Common Stock shall constitute
the surrender for transfer of the Right or Rights associated with the Common
Stock evidenced thereby, whether or not accompanied by a copy of the Summary of
Rights.
(c) Rights shall be issued in respect of all shares of Common
Stock that become outstanding after the Record Date but prior to the earlier of
the Distribution Date and the Expiration Date and, in certain circumstances
provided in Section 3(e) hereof and Section 22 hereof, may be issued in respect
of shares of Common Stock that become outstanding after the Distribution Date.
Certificates for
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Common Stock (including, without limitation, certificates issued upon original
issuance, disposition from the Company's treasury or transfer or exchange of
Common Stock) after the Record Date but prior to the earlier of the Distribution
Date and the Expiration Date (or, in certain circumstances as provided in
Section 3(e) hereof and Section 22 hereof, after the Distribution Date) shall
have impressed, printed, written or stamped thereon or otherwise affixed thereto
the following legend:
This certificate also evidences and entitles the holder hereof to
the same number of Rights (subject to adjustment) as the number of
shares of Common Stock represented by this certificate, such Rights
being on the terms provided under the Rights Agreement between
Millennium Chemicals Inc. and First Chicago Trust Company of New York
(the "Rights Agent"), dated as of , 1996, as it may be
amended from time to time (the "Rights Agreement"), the terms of which
are incorporated herein by reference and a copy of which is on file at
the principal executive offices of Millennium Chemicals Inc. Under
certain circumstances, as set forth in the Rights Agreement, such Rights
shall be evidenced by separate certificates and shall no longer be
evidenced by this certificate. Millennium Chemicals Inc. shall mail
to the registered holder of this certificate a copy of the Rights
Agreement without charge within five days after receipt of a written
request therefor. Under certain circumstances as provided in Section
7(e) of the Rights Agreement, Rights issued to or Beneficially Owned by
Acquiring Persons or their Affiliates or Associates (as such terms are
defined in the Rights Agreement) or any subsequent holder of such Rights
shall be null and void and may not be transferred to any Person.
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(d) As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send), by first class mail, postage prepaid, to each record holder of the Common
Stock as of the close of business on the Distribution Date, as shown by the
records of the Company, at the address of such holder shown on such records, a
certificate in the form provided by Section 4 hereof (a "Right Certificate"),
evidencing one Right (subject to adjustment as provided herein) for each share
of Common Stock so held. As of and after the Distribution Date, the Rights shall
be evidenced solely by Right Certificates and may be transferred by the transfer
of the Right Certificate as permitted hereby, separately and apart from any
transfer of one or more shares of Common Stock.
(e) In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Date and prior to the
Expiration Date, the Company (i) shall, with respect to shares of Common Stock
so issued or sold (x) pursuant to the exercise of stock options or under any
employee plan or arrangement or (y) upon the exercise, conversion or exchange of
other securities issued by the Company prior to the Distribution Date and (ii)
may, in any
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other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided that no such Right
Certificate shall be issued if, and to the extent that, (i) the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Right Certificate would be issued or (ii) appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.
Section 4. Form of Right Certificates. The Right Certificates
(and the forms of election to purchase shares, certificate and assignment to be
printed on the reverse thereof), when, as and if issued, shall be substantially
in the form set forth in Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Common Stock or the Rights may from time to time be listed
or as the Company may deem appropriate to conform to usage or otherwise and as
are not inconsistent with the provisions of this Rights Agreement.
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Subject to the provisions of Section 22 hereof, Right Certificates evidencing
Rights whenever issued, (i) shall be dated as of the date of issuance of the
Rights they represent and (ii) subject to adjustment from time to time as
provided herein, on their face shall entitle the holders thereof to purchase
such number of shares (including fractional shares which are integral multiples
of one-hundredth of a share) of Preferred Stock as shall be set forth therein at
the price payable upon exercise of a Right provided by Section 7(b) hereof as
the same may from time to time be adjusted as provided herein (the "Exercise
Price").
Section 5. Countersignature and Registration.
(a) Each Right Certificate shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President, either
manually or by facsimile signature, and have affixed thereto the Company's seal
or a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. Each Right
Certificate shall be countersigned by the Rights Agent either manually or by
facsimile signature and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
Right Certificate shall cease to be such officer of the Company before
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countersignature by the Rights Agent and issuance and delivery of the
certificate by the Company, such Right Certificate, nevertheless, may be
countersigned by the Rights Agent and issued and delivered with the same force
and effect as though the person who signed such Right Certificates had not
ceased to be such officer of the Company. Any Right Certificate may be signed on
behalf of the Company by any person who, on the date of the execution of such
Right Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office or one or more offices designated
as the appropriate place for surrender of Right Certificates upon exercise or
transfer, and in such other locations as may be required by law, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
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Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Section 7(e), 7(f) and 14
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the Expiration Date, any Right Certificate,
may be (i) transferred or (ii) split up, combined or exchanged for one or more
other Right Certificates, entitling the registered holder to purchase a like
number of shares of Preferred Stock as the Right Certificate or Rights
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer any Right Certificate shall surrender the Right
Certificate at the office of the Rights Agent designated for the surrender of
Right Certificates with the form of certificate and assignment on the reverse
side thereof duly endorsed (or enclosed with such Right Certificate a written
instrument of transfer in form satisfactory to the Company and the Rights
Agent), duly executed by the registered holder thereof or his attorney duly
authorized in writing, and with such signature duly guaranteed. Any registered
holder desiring to split up, combine or exchange any Right Certificate shall
make such request in writing delivered to the Rights Agent,
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and shall surrender the Right Certificate to be split up, combined or exchanged
at the office of the Rights Agent designated therefor. Thereupon, the Rights
Agent shall countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any Transfer Tax that
may be imposed in connection with any transfer, split up, combination or
exchange of any Right Certificates.
(b) Subject to the provisions of Section 7(e), 7(f) and 14
hereof, upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them and, if requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, or upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company shall issue and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
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Section 7. Exercise of Rights; Exercise Price; Expiration Date of
Rights.
(a) The Rights shall not be exercisable until, and shall become
exercisable on, the Distribution Date (unless otherwise provided herein,
including, without limitation, the restrictions on exercisability set forth in
Section 7(e) and 23(a) hereof). Except as otherwise provided herein, the Rights
may be exercised, in whole or in part, at any time commencing with the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certificate on the reverse side thereof duly executed
(with signatures duly guaranteed), to the Rights Agent at the principal office
of the Rights Agent in New York, New York, together with payment of the Exercise
Price for each Right exercised, subject to adjustment as hereinafter provided,
at or prior to the Close of Business on the earlier of: (i) the date of the
second annual meeting of the Company's stockholders after the Dividend Payment
Date (the "Final Expiration Date") and (ii) the date on which the Rights are
redeemed as provided in Section 23 hereof. (The earlier of the Final Expiration
Date and the date referred to in clause (ii) above shall be herein referred to
as the "Expiration Date").
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(b) The Exercise Price shall initially be $33.63 for each one
one-hundredth (1/100) of a share of Preferred Stock issued pursuant to the
exercise of a Right. The Exercise Price and the number of shares of Preferred
Stock or other securities to be acquired upon exercise of a Right shall be
subject to adjustment from time to time as provided in Sections 11 and 13
hereof. The Exercise Price shall be payable in lawful money of the United States
of America, in accordance with paragraph (c) below.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights with the form of election to
purchase duly executed, accompanied by payment by certified check, cashier's
check, bank draft or money order payable to the Company or the Rights Agent of
the Exercise Price for the shares to be purchased and an amount equal to any
applicable Transfer Tax required to be paid by the holder of the Right
Certificate in accordance with Section 9(e) hereof, the Rights Agent shall
thereupon promptly (i) requisition from any transfer agent of the Preferred
Stock of the Company one or more certificates representing the number of shares
of Preferred Stock to be so purchased, and the Company hereby authorizes and
directs such transfer agent to comply with all such requests, (ii) as provided
in Section 14(b), at the election
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of the Company, cause depositary receipts to be issued in lieu of fractional
shares of Preferred Stock, (iii) if the election provided for in the immediately
preceding clause (ii) has not been made, requisition from the Company the amount
of cash to be paid in lieu of the issuance of fractional shares in accordance
with Section 14(b) hereof, (iv) after receipt of such Preferred Stock
certificates and, if applicable, depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (v) when appropriate, after receipt, promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate; provided,
however, that in the case of a purchase of securities, other than Preferred
Stock, pursuant to Section 13 hereof, the Rights Agent shall promptly take the
appropriate actions corresponding in such case to that referred to in the
foregoing clauses (i) through (v) of this Section 7(c). Notwithstanding the
foregoing provisions of this Section 7(c), the Company may suspend the issuance
of shares of Preferred Stock upon exercise of a Right for a reasonable period,
not in excess of 90 days, during which the Company seeks to register under the
Securities Act of 1933, as amended (the "Act"), and any applicable securities
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law of any other jurisdiction, the shares of Preferred Stock to be issued
pursuant to the Rights; provided, however, that nothing contained in this
Section 7(c) shall relieve the Company of its obligations under Sections 9(c)
and 9(d) hereof.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or his
assign, subject to the provisions of Section 14(a) hereof.
(e) Notwithstanding any provision of this Rights Agreement to the
contrary, from and after the time (the "invalidation time") when any Person
first becomes an Acquiring Person, other than pursuant to a Qualifying Tender
Offer, any Rights that are beneficially owned by (x) such Acquiring Person (or
any Associate or Affiliate of such Acquiring Person), (y) a transferee of such
Acquiring Person (or any such Associate or Affiliate) who becomes a transferee
after the invalidation time or (z) a transferee of such Acquiring Person (or any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the invalidation time pursuant to either (I) a transfer
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from the Acquiring Person to holders of its equity securities or to any Person
with whom it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of this Section 7(e), and
subsequent transferees of such Persons referred to in clause (y) and (z) above,
shall be void without any further action and any holder of such Rights shall
thereafter have no rights whatsoever with respect to such Rights under any
provision of this Rights Agreement. The Company shall use all reasonable efforts
to ensure that the provisions of this Section 7(e) are complied with, but shall
have no liability to any holder of Right Certificates or any other Person as a
result of its failure to make any determination with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder. No Right
Certificate shall be issued pursuant to Section 3 hereof that represents Rights
beneficially owned by an Acquiring Person whose Rights would be void pursuant to
the provisions of this Section 7(e) or any Associate or Affiliate thereof; no
Right Certificate shall be issued at any time upon the transfer of any Rights to
an Acquiring Person whose Rights would be void pursuant
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to the provisions of this Section 7(e) or any Associate or Affiliate thereof or
to any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the provisions of this Section 7(e) shall
be cancelled. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) are complied with, but shall have no liability
to any holder of Right Certificates or other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or its Affiliates
and Associates or any transferee of any of them hereunder.
(f) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate following the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
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Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall
cancel and retire, any Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Shares of Preferred
Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or out of authorized and issued shares of Preferred Stock held
in its
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treasury, such number of shares of Preferred Stock as will from time to time be
sufficient to permit the exercise in full of all outstanding Rights.
(b) The Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares of Preferred Stock
issued or reserved for issuance in accordance with this Rights Agreement to be
listed, upon official notice of issuance, upon the principal national securities
exchange, if any, upon which the Common Stock is listed or, if the principal
market for the Common Stock is not on any national securities exchange, to be
eligible for quotation in the National Association of Securities Dealers'
Automated Quotation System or any successor thereto or other comparable
quotation system ("NASDAQ").
(c) The Company covenants and agrees that it will take all such
action as may be necessary to insure that all shares of Preferred Stock
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Exercise Price in
respect thereof), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) The Company shall use its best efforts to (i) file, as soon
as practicable following the occurrence of
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the event described in Section 11(a)(ii), or as soon as is required by law
following the Distribution Date, as the case may be, a registration statement
under the Act, with respect to the shares of Preferred Stock purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for Preferred Stock, and
(B) the date of the expiration of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety days, the issuance of shares
of Preferred Stock upon exercise of a Right in order to prepare and file a
registration statement under the Act and permit it to become effective. The
Company will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights. Notwithstanding any provision
of this Rights Agreement to the contrary, the Rights shall not be exercisable in
any jurisdiction unless the requisite qualification in such jurisdiction shall
have been obtained and until a
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registration statement under the Act (if required) shall have been declared
effective.
(e) The Company covenants and agrees that it will pay when due
and payable any and all federal and state Transfer Taxes which may be payable in
respect of the issuance or delivery of the Right Certificates or of any shares
of Preferred Stock issued or delivered upon the exercise of Rights. The Company
shall not, however, be required to pay any Transfer Tax which may be payable in
respect of any transfer or delivery of a Right Certificate to a Person other
than, or the issuance or delivery of certificates for Preferred Stock upon
exercise of Rights in a name other than that of, the registered holder of the
Right Certificate, and the Company shall not be required to issue or deliver a
Right Certificate or certificate for Preferred Stock to a Person other than such
registered holder until any such Transfer Tax shall have been paid (any such
Transfer Tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such Transfer Tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose
name any certificate for shares of Preferred Stock is issued upon the exercise
of Rights shall for all
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purposes be deemed to have become the holder of record of the Preferred Stock
represented thereby on, and such certificate shall be dated as of, the date upon
which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Exercise Price (and any applicable Transfer Taxes) was made;
provided, however, that, if the date of such surrender and payment is a date
upon which the Preferred Stock transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated as of, the next succeeding Business Day on which
the Preferred Stock transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Right Certificate, as
such, shall not be entitled to any rights of a stockholder of the Company with
respect to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price or Number of Shares. The
Exercise Price and the number of shares of Preferred Stock which may be
purchased upon
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exercise of a Right are subject to adjustment from time to time as provided in
this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Rights Agreement (A) declare or pay any dividend on Common Stock payable
in shares of Common Stock, (B) subdivide or split the outstanding shares of
Common Stock into a greater number of shares or (C) combine or consolidate the
outstanding shares of Common Stock into a smaller number of shares or effect a
reverse split of the outstanding shares of Common Stock or (D) issue any shares
of its capital stock in a reclassification of the Common Stock (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then and in each such event
the number of shares of Preferred Stock issuable upon the exercise of a Right
after the record date for such event (if one shall have been established or, if
not, after the date of such event) shall be the number of shares of Preferred
Stock issuable immediately prior to such event multiplied by a fraction the
numerator of which is the number of Rights outstanding immediately prior to such
event and the denominator of which is the number of Rights outstanding
immediately after such event and the Exercise Price after such event shall be
the Exercise Price in effect
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immediately prior to such event multiplied by such fraction. If an event occurs
which would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).
(ii) In the event that any Person (other than an Exempt Person),
alone or together with its Affiliates and Associates, shall become an Acquiring
Person, except pursuant to a Qualifying Tender Offer, then, subject to the last
sentence of Section 23(a) and except as otherwise provided in this Section 11,
each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive upon exercise of such Right in accordance
with the terms of this Rights Agreement and payment of the Exercise Price, the
greater of (1) the number of one one-hundredths of a share of Preferred Stock
for which such Right was exercisable immediately prior to the first occurrence
of the event described in this Section 11(a)(ii) or (2) such number of one
one-hundredths of a share of Preferred Stock, based on the per share Fair Market
Value of the Preferred Stock (determined pursuant to Section 11(b) hereof) on
the date of such first occurrence, having a value equal to twice the Exercise
Price; provided, however,
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that if the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13 hereof, then only the
provisions of Section 13 hereof shall apply and no adjustment shall be made
pursuant to this Section 11(a)(ii).
(iii) In the event that the Company does not have available
sufficient authorized but unissued Preferred Stock to permit the adjustments
required pursuant to the foregoing subparagraph (i) or the exercise in full of
the Rights in accordance with the foregoing subparagraph (ii), the Company shall
take all such action as may be necessary to authorize and reserve for issuance
such number of additional shares of Preferred Stock as may from time to time be
required to be issued upon the exercise in full of all Rights from time to time
outstanding and, if necessary, shall use its best efforts to obtain stockholder
approval thereof. In lieu of issuing shares of Preferred Stock in accordance
with the foregoing subparagraphs (i) and (ii), the Company may, if the Board of
Directors determines (but only if at the time of such determination by the Board
of Directors there are then in office not less than two Continuing Directors and
such action is approved by a majority of the Continuing Directors then in
office) that such action is necessary or appropriate and not contrary to the
interests of holders of
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Rights, elect to issue or pay, upon the exercise of the Rights, cash, property,
shares of Preferred or Common Stock, or any combination thereof, having an
aggregate Fair Market Value equal to the Fair Market Value of the shares of
Preferred Stock which otherwise would have been issuable pursuant to Section
11(a)(ii), which Fair Market Value shall be determined by an investment banking
firm selected by the Board of Directors (but only if at the time of such
selection there are then in office not less than two Continuing Directors and
such selection is approved by a majority of the Continuing Directors then in
office). For purposes of the preceding sentence, the Fair Market Value of the
Preferred Stock shall be as determined pursuant to Section 11(b). Subject to
Section 23 hereof, any such election by the Board of Directors of the Company
must be made and publicly announced within thirty (30) days after the date on
which the event described in Section 11(a)(ii) occurs.
(b) For the purpose of this Rights Agreement, the "Fair Market
Value" of any share of Preferred Stock, Common Stock or any other stock or any
Right or other security or any other property on any date shall be determined as
provided in this Section 11(b). In the case of a publicly-traded stock or other
security, the Fair Market Value on any
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date shall be deemed to be the average of the daily closing prices per share of
such stock or per unit of such other security for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the Fair Market Value per share of any
share of Common Stock is determined during a period which includes any date that
is within 30 Trading Days after (i) the ex-dividend date for a dividend or
distribution on such stock payable in shares of Common Stock or securities
convertible into shares of Common Stock, or (ii) the effective date of any
subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then, and in each such case, the Fair Market
Value shall be appropriately adjusted by the Board of Directors of the Company
to take into account ex-dividend or post-effective date trading. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way (in either case, as reported in the applicable transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange), or, if the securities are not listed or admitted to trading on
the New York Stock Exchange, as reported in the applicable
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transaction reporting system with respect to securities listed on the principal
national securities exchange on which such security is listed or admitted to
trading; or, if not listed or admitted to trading on any national securities
exchange, the last quoted price (or, if not so quoted, the average of the high
bid and low asked prices) in the over-the-counter market, as reported by the
NASDAQ or such other system then in use; or, if no bids for such security are
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such security
selected by the Board of Directors of the Company. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which such
security is listed or admitted to trading is open for the transaction of
business or, if such security is not listed or admitted to trading on any
national securities exchange, a Business Day. If a security is not publicly held
or not so listed or traded, "Fair Market Value" shall mean the fair value per
share of stock or per other unit of such other security, as determined by an
independent investment banking firm experienced in the valuation of securities
selected in good faith by the Board of Directors of the Company, or, if no such
investment banking firm is, in the good faith judgment of the Board of
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Directors, available to make such determination, in good faith by the Board of
Directors of the Company; provided, however, that for purposes of making the
adjustment provided for by Section 11(a)(ii) hereof, the Fair Market Value of a
share of Preferred Stock shall not be less than 100% of the product of the Fair
Market Value of a share of Common Stock multiplied by the higher of the then
Dividend Multiple or Vote Multiple applicable to the Preferred Stock (as defined
in the Certificate of Designations relating to the Preferred Stock) and shall
not exceed 105% of the product of the then Fair Market Value of a share of
Common Stock multiplied by the higher of the then Dividend Multiple or Vote
Multiple applicable to the Preferred Stock. In the case of property other than
securities, the "Fair Market Value" thereof shall be determined in good faith by
the Board of Directors of the Company based upon such appraisals or valuation
reports of such independent experts as the Board of Directors of the Company
shall in good faith determine to be appropriate in accordance with good business
practices and the interests of the holders of Rights. Any such determination of
Fair Market Value shall be described in a statement filed with the Rights Agent
and shall be binding upon the Rights Agent.
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(c) All calculations under this Section 11 shall be made to the
nearest cent or to the nearest one one-hundredth of a share, as the case may be.
(d) Irrespective of any adjustment or change in the Exercise
Price or the number of shares of Preferred Stock issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Exercise Price and the number of shares to be issued
upon exercise of the Rights as in the initial Right Certificates issued
hereunder but, nevertheless, shall represent the Rights as so adjusted.
(e) Before taking any action that would cause an adjustment
reducing the purchase price per whole share of Preferred Stock upon exercise of
the Rights below the then par value, if any, of the shares of Preferred Stock,
the Company shall use its best efforts to take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Preferred
Stock at such adjusted purchase price per share.
(f) Anything in this Section 11 to the contrary notwithstanding,
in the event of any reclassification of stock of the Company or any
recapitalization, reorganization or partial liquidation of the Company or
similar
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transaction, the Company shall be entitled to make such further adjustments in
the number of shares of Preferred Stock which may be acquired upon exercise of
the Rights, and such adjustments in the Exercise Price therefor, in addition to
those adjustments expressly required by the other paragraphs of this Section 11,
as the Board of Directors of the Company shall determine to be necessary or
appropriate in order for the holders of the Rights in such event to be treated
equitably and in accordance with the purpose and intent of this Rights Agreement
or in order that any such event shall not, but for such adjustment, in the
opinion of counsel to the Company, result in the stockholders of the Company
being subject to any United States federal income tax liability by reason
thereof.
(g) In the event the Company shall at any time after the Record
Date make any distribution on the shares of Common Stock of the Company, whether
by way of a dividend or a reclassification of stock, a recapitalization,
reorganization or partial liquidation of the Company or otherwise, in cash or
any debt security, debt instrument, real or personal property or any other
property (other than any shares of Common Stock or other capital stock of the
Company and other than any right or warrant to acquire any such shares,
including any debt security convertible into or
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exchangeable for any such share, at less than the Fair Market Value of such
shares) and the amount of such cash dividend or the Fair Market Value of such
debt security, debt instrument or property exceeds 150% of the aggregate amount
of the cash dividends declared or paid on the Common Stock of the Company in the
15-month period immediately preceding such distribution, then and in each such
event, unless such distribution is part of or is made in connection with a
transaction to which Section 11(a)(ii) or Section 13 hereof applies, the
Exercise Price shall be reduced by an amount equal to the cash or the Fair
Market Value of such distribution, as the case may be, per share of Common Stock
of the Company. For purposes hereof, the Fair Market Value of any property
distributed to the holders of shares of Common Stock of the Company shall be the
Fair Market Value of such property as determined by an independent investment
banking firm experienced in the valuation of securities or the other property so
distributed, as the case may be, selected in good faith by the Board of
Directors of the Company, or, if no such investment banking firm is in the good
faith judgment of the Board of Directors available to make such determination,
in good faith by the Board of Directors of the Company, whose determination
shall be final
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and binding on the Company, the Rights Agent and the holders of Rights.
Section 12. Certification of Adjusted Exercise Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11, 13 or 23(c),
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts giving rise to such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity of or the force
or effect of the requirement for such adjustment. Any adjustment to be made
pursuant to Section 11, 13 or 23(c) of this Rights Agreement shall be effective
as of the date of the event giving rise to such adjustment. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
adjustment unless and until it shall have received such certificate.
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Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.
(a) Except for any transaction approved by the Board of
Directors (but only if at the time of such approval by the Board of Directors
there are then in office not less than two Continuing Directors and such action
is approved by a majority of the Continuing Directors then in office), in the
event that, at any time on or after the Distribution Date, (x) the Company
shall, directly or indirectly, consolidate with, or merge with and into, any
other Person or Persons (other than an Exempt Person) and the Company shall not
be the surviving or continuing corporation of such consolidation or merger, or
(y) any Person or Persons (other than an Exempt Person) shall, directly or
indirectly, consolidate with, or merge with and into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person (other than an Exempt Person) or
of the Company or cash or any other property, or (z) the Company or one or more
of its Subsidiaries shall, directly or indirectly, sell or otherwise transfer to
any other Person or any Affiliate or
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Associate of such Person, in one or more transactions, or the Company or one or
more of its Subsidiaries shall sell or otherwise transfer to any Persons in one
or a series of related transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole), then, on the first occurrence of any such event, proper
provision shall be made so that (i) each holder of record of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to receive,
upon the exercise thereof and payment of the Exercise Price in accordance with
the terms of this Rights Agreement, such number of shares of validly issued,
fully paid, non-assessable and freely tradeable Common Stock of the Principal
Party (as defined herein), not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall, based on the Fair Market Value
of the Common Stock of the Principal Party on the date of the Consummation of
such consolidation, merger, sale or transfer, equal twice the Exercise Price;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such consolidation, merger, sale or transfer, all the obligations and
duties of the Company pursuant to this Rights Agreement; (iii) the term
"Company" for all purposes of this Rights Agreement shall thereafter
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be deemed to refer to such Principal Party; (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock in accordance with the provisions of
Section 9 hereof applicable to the reservation of Preferred Stock) in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its shares of Common Stock thereafter deliverable upon the exercise of the
Rights; provided, however, that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all of the assets, recapitalization,
reclassification of shares, reorganization or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall thereupon be
entitled to receive, upon exercise of a Right and payment of the Exercise Price,
such cash, shares, rights, warrants and other property which such holder would
have been entitled to receive had it, at the time of such transaction, owned the
shares of Common Stock of the Principal Party purchasable upon the exercise of a
Right, and such Principal Party shall take such steps (including, but not
limited to, reservation of shares of stock) as may be necessary to permit the
subsequent exercise of the Rights
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in accordance with the terms hereof for such cash, shares, rights, warrants and
other property and (v) the provisions of Section 11(a)(ii) hereof shall be of no
effect following the occurrence of any event described in clause (x), (y) or (z)
above of this Section 13(a).
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (x) or (y)
of the first sentence of Section 13(a) hereof: (A) the Person that is
the issuer of the securities into which shares of Common Stock of the
Company are changed or otherwise exchanged or converted in such merger
or consolidation, or, if there is more than one such issuer, the issuer
of the Common Stock of which has the greatest market value or (B) if no
securities are so issued, (x) the Person that is the other party to the
merger or consolidation and that survives such merger or consolidation,
or, if there is more than one such Person, the Person the Common Stock
of which has the greatest market value or (y) if the Person that is the
other party to the merger or consolidation does not survive the merger
or consolidation, the Person that does survive the merger or
consolidation (including the Company if it survives); and
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(ii) in the case of any transaction described in (z) of the
first sentence in Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant
to such transaction or transactions, or, if each Person that is a party
to such transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person receiving the
greatest portion of the assets or earning power cannot be determined,
whichever of such Persons as is the issuer of Common Stock having the
greatest market value of shares outstanding; provided, however, that in
any such case, if the Common Stock of such Person is not at such time
and has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of
which is and has been so registered, the term "Principal Party" shall
refer to such other Person, or if such Person is a Subsidiary, directly
or indirectly, of more than one Person, the Common Stocks of all of
which are and have been so registered, the term "Principal Party" shall
refer to whichever of such
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Persons is the issuer of the Common Stock having the greatest market
value of shares outstanding.
(c) The Company shall not consummate any consolidation, merger or
sale or transfer of assets or earning power referred to in Section 13(a) unless
the Principal Party shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance to permit
exercise in full of all Rights in accordance with this Section 13 and unless
prior thereto the Company and the Principal Party involved therein shall have
executed and delivered to the Rights Agent an agreement confirming that the
Principal Party shall, upon consummation of such consolidation, merger or sale
or transfer of assets or earning power, assume this Rights Agreement in
accordance with Section 13(a) hereof and that all rights of first refusal or
preemptive rights in respect of the issuance of shares of Common Stock of the
Principal Party upon exercise of outstanding Rights have been waived and that
such transaction shall not result in a default by the Principal Party under this
Rights Agreement, and further providing that, as soon as practicable after the
date of any consolidation, merger or sale or transfer of assets or earning power
referred to in Section 13(a) hereof, the Principal Party will:
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(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, use its best efforts to cause such
registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Act) until the date of expiration of the Rights,
and similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on
a national securities exchange or to meet the eligibility requirements
for quotation on NASDAQ; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under
the Exchange Act. In the event that any of the transactions described in
Section 13(a) hereof shall occur at any time after the occurrence of a
transaction described in Section 11(a)(ii) hereof, the Rights which
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have not theretofore been exercised shall, subject to the provisions of
Section 7(e) hereof, thereafter be exercisable in the manner described
in Section 13(a).
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, shares of Common Stock of such Principal Party at less than the then Fair
Market Value per share (determined pursuant to Section 11(b) hereof) or
securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then Fair Market Value (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special tax or similar
payment in connection with the issuance to any holder of a Right of Common Stock
of such Principal Party pursuant to the provisions of this Section 13, then, in
such event, the Company shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the
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provision in question of such Principal Party shall have been canceled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights
(i.e., Rights to acquire less than one one-hundredth of a share of Preferred
Stock), unless such fractional Rights result from a transaction referred to in
Section 11(a)(i) hereof. If the Company shall determine not to issue such
fractional Rights, then, in lieu of such fractional Rights, there shall be paid
to the holders of record of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the Fair Market Value of a whole Right.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one-hundredth of a share) upon exercise of the Rights or to distribute
certificates
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which evidence fractional shares (other than fractions which are integral
multiples of one-hundredth of a share). In lieu of issuing fractions of shares
of Preferred Stock, the Company may, at its election, issue depositary receipts
evidencing fractions of shares pursuant to an appropriate agreement between the
Company and a depositary selected by it, provided that such agreement shall
provide that the holders of such depositary receipts shall have all of the
rights, privileges and preferences to which they would be entitled as owners of
the Preferred Stock. With respect to fractional shares that are not integral
multiples of one-hundredth of a share, if the Company does not issue such
fractional shares or depositary receipts in lieu thereof, there shall be paid to
the holders of record of Right Certificates at the time such Right Certificates
are exercised as herein provided an amount in cash equal to the same fraction of
the Fair Market Value of a share of Preferred Stock.
(c) The holder of a Right by the acceptance of a Right expressly
waives his right to receive any fractional Right or any fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share) upon exercise of a Right.
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Section 15. Rights of Action. All rights of action in respect of
this Rights Agreement, except the rights of action given to the Rights Agent in
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the holders of record of the
Common Stock); and any holder of record of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Rights Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Rights Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this Rights
Agreement.
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Section 16. Agreement of Right Holders. Each holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be evidenced
by the certificates for Common Stock registered in the name of the
holders of Common Stock (together, as applicable, with the Summary of
Rights), which certificates for Common Stock shall also constitute
certificates for Rights, and not by separate Right Certificates, and
each Right shall be transferable only simultaneously and together with
the transfer of shares of Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of
transfer; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby
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(notwithstanding any notations of ownership or writing on the Right
Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any
notice to the contrary; and
(d) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or a beneficial interest in a Right
or other Person as a result of its inability to perform any of its
obligations under this Rights Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court
of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company shall use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as
possible.
Section 17. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right Certificate
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shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of Preferred Stock or any other securities which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 24 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify
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the Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted to be done by the Rights
Agent in connection with the acceptance and administration of this Rights
Agreement, including the cost and expenses of defending against any claim of
liability relating to the Rights or this Rights Agreement.
(b) The Rights Agent shall be protected against, and shall incur
no liability for or in respect of, any action taken, suffered or omitted by it
in connection with its administration of this Rights Agreement in reliance upon
any Right Certificate or certificate for Preferred Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons.
Section 19. Merger or Consolidation of, or Change in Name of, the
Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any
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merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any corporation succeeding to the corporate trust or stock
transfer business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Rights Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Rights Agreement any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
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(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; in case at
that time any of the Right Certificates shall not have been countersigned, the
Rights Agent may countersign such Right Certificates either in its prior name or
in its changed name; in all such cases such Right Certificates shall have the
full force provided in the Right Certificates and in this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Rights Agreement upon the following
terms and conditions, by all of which the Company and the holders of Right
Certificates by their acceptance thereof shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it
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necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman of the Board, the President or any Vice President and by the
Treasurer or the Secretary of the Company and delivered to the Rights Agent. Any
such certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Rights
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Rights Agreement or in
the Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Rights
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Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Rights Agreement or in any Right Certificate; nor shall it be responsible for
any adjustment required under the provisions of Section 11 or 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after receipt of a certificate describing any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock to be issued
pursuant to this Rights Agreement or any Right Certificate or as to whether any
shares of Preferred Stock will, when issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
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required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of the Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President or any Vice President or the Secretary or
the Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any
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duty hereunder either itself or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Stock and the Preferred Stock by registered or
certified mail. The Company may remove the Rights Agent or any successor Rights
Agent (with or without cause) upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and the Preferred Stock by registered or certified
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
Notwithstanding the foregoing provisions of this Section 21, in no event shall
the resignation or removal of a Rights Agent be effective until a successor
Rights Agent shall have been appointed and have
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accepted such appointment. If the Company shall fail to make such appointment
within a period of 30 days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company), then the
incumbent Rights Agent or the holder of record of any Right Certificate may
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (a) a corporation organized and doing business under the laws of
the United States or of any state thereof, in good standing, which is authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination in the conduct of its corporate trust or
stock transfer business by federal or state authorities and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $5,000,000 or (b) an Affiliate controlled by a corporation described in
clause (a) of this sentence. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed, but the
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predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and Preferred Stock, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Notwithstanding the foregoing provisions, in the event of resignation, removal
or incapacity of the Rights Agent, the Company shall have the authority to act
as the Rights Agent until a successor Rights Agent shall have assumed the duties
of the Rights Agent hereunder.
Section 22. Issuance of New Right Certificates. Notwithstanding
any of the provisions of this Rights Agreement or of the Rights to the contrary,
the Company may, at its option, issue new Right Certificates evidencing Rights
in such form as may be approved by its Board of
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Directors to reflect any adjustment or change in the Exercise Price per share
and the number or kind or class of shares of stock or other securities or
property purchasable under the Right Certificates made in accordance with the
provisions of this Rights Agreement.
Section 23. Redemption.
(a) The Company may, at its option, but only by the vote of a
majority of the Board of Directors, redeem all but not less than all of the then
outstanding Rights, at any time prior to the Close of Business on the earlier of
(i) the tenth day following the Stock Acquisition Date (subject to extension by
the Company as provided in Section 26 hereof) or (ii) the Final Expiration Date,
at a redemption price of $.01 per Right, subject to adjustments as provided in
subsection (c) below (the "Redemption Price"); provided, however, that from and
after the time that any Person shall become an Acquiring Person (other than
pursuant to a Qualifying Tender Offer), the Company may redeem the Rights only
if at the time of the action of the Board of Directors there are then in office
not less than two Continuing Directors and such redemption is approved by a
majority of the Continuing Directors then in office. Notwithstanding anything
contained in this Rights Agreement to the contrary, the Rights shall not be
exercisable pursuant to Section
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11(a)(ii) prior to the expiration of the Company's right of redemption
hereunder.
(b) Without any further action and without any notice, the right
to exercise the Rights will terminate effective at the time of the action of the
Board of Directors ordering the redemption of the Rights and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
Within 10 days after the effective time of the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the holders of the then outstanding Rights by mailing such notice
to all such holders at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each notice of redemption will state the method by which
the payment of the Redemption Price will be made. At the option of the Board of
Directors, the Redemption Price may be paid in cash to each Rights holder or by
the issuance of shares (and, at the Company's election pursuant to Section 14(b)
hereof, cash or depositary receipts in lieu of fractions of shares other
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than fractions which are integral multiples of one one-hundredth (1/100) of a
share) of Preferred Stock having a Fair Market Value equal to such cash payment.
(c) In the event the Company shall at any time after the date of
this Rights Agreement (A) pay any dividend on Common Stock in shares of Common
Stock, (B) subdivide or split the outstanding shares of Common Stock into a
greater number of shares, (C) combine or consolidate the outstanding shares of
Common Stock into a smaller number of shares or effect a reverse split of the
outstanding shares of Common Stock or (D) issue any shares of its capital stock
in a reclassification of the Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, and in each such event, the
Redemption Price shall be adjusted so that the Redemption Price after such event
shall equal the Redemption Price immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to such event;
provided, however, that in each case such adjustment to the Redemption Price
shall be made only
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if the amount of the Redemption Price shall be reduced or increased by $.01 per
Right.
Section 24. Notice of Proposed Actions.
(a) In case the Company, after the Distribution Date, shall
propose (i) to effect any of the transactions referred to in Section 11(a)(i) or
11(g), or (ii) to offer to the holders of record of its Common Stock options,
warrants, or other rights to subscribe for or to purchase shares of Common Stock
(including any security convertible into or exchangeable for Common Stock) or
shares of stock of any class or any other securities, options, warrants,
convertible or exchangeable securities or other rights, or (iii) to effect any
reclassification of its Preferred Stock or Common Stock or any recapitalization
or reorganization of the Company, or (iv) to effect any consolidation or merger
with or into, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person or Persons, or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of record of a Right
Certificate, in accordance with Section 25, notice of such
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proposed action, which shall specify the record date for the purposes of such
transaction referred to in Section 11(a)(i) or such dividend or distribution, or
the date on which such reclassification, recapitalization, reorganization,
consolidation, merger, sale or transfer of assets, liquidation, dissolution, or
winding up is to take place and the record date for determining participation
therein by the holders of record of Common Stock or Preferred Stock, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of record of the Preferred Stock for purposes of such
action, and in the case of any such other action, at least 10 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of record of Common Stock or Preferred Stock, whichever shall be
the earlier. The failure to give notice required by this Section 24 or any
defect therein shall not affect the legality or validity of the action taken by
the Company or the vote upon any such action.
(b) In case any of the transactions referred to in Section
11(a)(i), 11(g) or 13 of this Rights Agreement are proposed, then, in any such
case, the Company shall give to each holder of Rights, in accordance with
Section 25
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hereof, notice of the proposal of such transaction at least 10 days prior to
consummating such transaction, which notice shall specify the proposed event and
the consequences of the event to holders of Rights under Section 11(a)(i), 11(g)
or 13 hereof, as the case may be, and, upon consummating such transaction, shall
similarly give notice thereof to each holder of Rights.
Section 25. Notices. Notices or demands authorized by this Rights
Agreement to be given or made by the Rights Agent or by the holder of record of
any Right Certificate or Right to or on the Company shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Rights Agent) as follows:
Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
and
Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire, DN40 2PR, England
Attention: General Counsel
Subject to the provisions of Section 21, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of record
of any Right Certificate or Right to or on the Rights Agent shall be
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sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
First Chicago Trust Company of New York
525 Washington Boulevard
Suite 4660
Jersey City, NJ 07310
Att: Tenders and Exchanges Administration
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of record of any Right Certificate
or Right shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 26. Supplements and Amendments. For as long as the Rights
are then redeemable and except as provided in the last sentence of this Section
26, the Company may in its sole and absolute discretion, and the Rights Agent
shall if the Company so directs, supplement or amend any provision of this
Rights Agreement without the approval of any holders of the Rights. At any time
when the Rights are not then redeemable and except as provided in the last
sentence of this Section 26, the Company may, and the Rights Agent shall if the
Company so directs, supplement or amend this Rights Agreement without the
approval of any holders of Right Certificates (i) to cure any ambiguity,
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(ii) to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein or (iii) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable, provided that no such supplement or amendment pursuant
to this clause (iii) shall materially adversely affect the interest of the
holders of Right Certificates. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment. This Rights Agreement may be amended
or supplemented at any time with the approval of a majority of the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Stock). Notwithstanding anything contained in this Rights Agreement to
the contrary, no supplement or amendment shall be made which changes the
Redemption Price or shortens the Final Expiration Date and supplements or
amendments may be made after the time that any Person becomes an Acquiring
Person (other than pursuant to a Qualifying Tender Offer) only if at the time of
the action of the Board of Directors approving such supplement or amendment
there are then in office not less than two Continuing Directors and such
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supplement or amendment is approved by a majority of the Continuing Directors
then in office.
Section 27. Determination and Actions by the Board of Directors
of the Company, etc. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Rights Agreement and to
exercise all rights and powers specifically granted to the Board, or the
Company, or as may be necessary or advisable in the administration of this
Rights Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Rights Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Rights Agreement (including, without limitation, a determination to redeem or
not redeem the Rights or to amend the Rights Agreement and whether any proposed
amendment materially adversely affects the interests of the holders of Rights
Certificates). For all purposes of this Rights Agreement, any calculation of the
number of shares of Common Stock or other securities outstanding at any
particular time, including for purposes of determining the particular percentage
of such outstanding shares of Common Stock or any other securities of which any
Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General
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Rules and Regulations under the Exchange Act as in effect on the date of this
Rights Agreement. All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board to
any liability to the holders of the Rights.
Section 28. Successors. All of the covenants and provisions of
this Rights Agreement by or for the benefit of the Company or the Rights Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Rights Agreement. Nothing in this
Rights Agreement shall be construed to give to any person or corporation other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the holders of Common Stock
in their capacity as holders of the Rights) any legal or equitable right, remedy
or claim under this Rights Agreement; but this Rights Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the holders of
record of the Right
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Certificates (and, prior to the Distribution Date, the holders of Common Stock
in their capacity as holders of the Rights).
Section 30. Delaware Contract. This Rights Agreement and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed and enforced in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state.
Section 31. Counterparts. This Rights Agreement may be executed
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 32. Descriptive Headings. Descriptive headings of the
several Sections of this Rights Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
Section 33. Severability. If any term, provision, covenant or
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
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remainder of the terms, provisions, covenants and restrictions of this Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed, all as of the day and year first above written.
MILLENNIUM CHEMICALS INC.
By
-----------------------------------
Name:
Title:
Attest:
---------------------------
(SEAL)
FIRST CHICAGO TRUST COMPANY OF
NEW YORK
By
-----------------------------------
Name:
Title:
Attest:
---------------------------
(SEAL)
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EXHIBIT A
UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE
RIGHTS AGREEMENT (AS REFERRED TO BELOW), RIGHTS
ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING
PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND VOID
AND MAY NOT BE TRANSFERRED TO ANY PERSON.
MILLENNIUM CHEMICALS INC.
SUMMARY OF RIGHTS TO PURCHASE
SERIES A JUNIOR PREFERRED STOCK
On , 1996, the Board of Directors of Millennium Chemicals
Inc. (the "Company") declared a dividend distribution of one Preferred Stock
Purchase Right for each outstanding share of Common Stock, par value 5.01 per
share (the "Common Stock"), of the Company. The distribution is payable as of
, 1996 to stockholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one one-hundredth (1/100) of a
share of preferred stock of the Company, designated as Series A Junior Preferred
Stock (the "Preferred Stock") at a price of $33.63 per one one-hundredth (1/100)
of a share ("Exercise Price"). The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and
Chemical Bank, as Rights Agent (the "Rights Agent").
As discussed below, initially the Rights will not be exercisable,
certificates will not be sent to stockholders and the Rights will automatically
trade with the Common Stock.
Unless earlier redeemed, the Rights will expire (the "Final Expiration
Date") at the close of business on the date of the second annual meeting of the
Company's stockholders following the date on which Hanson PLC pays a stock
dividend consisting of all of the then issued and outstanding shares of Common
Stock (the "Dividend Payment Date").
The Rights, unless earlier redeemed by the Company's Board of Directors
or modified as described below, become exercisable by each record holder
thereof, other than the Acquiring Person (as defined below), upon the close of
business on the day (the "Rights Distribution Date") which is the earlier of (i)
the tenth day following a public announcement that a person or group of
affiliated or associated persons, with certain exceptions set forth below, has
acquired beneficial ownership of 15% or more of the outstanding voting stock of
the Company (an "Acquiring Person") and (ii) the tenth business day (or such
later date as may be determined by the Company's Board of Directors prior to
such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) after the date of the commencement or announcement of a
person's or group's intention to commence a tender or
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exchange offer the commencement of which would result in the ownership of 15% or
more of the Company's outstanding voting stock (even if no shares are actually
purchased pursuant to such offer); prior thereto, the Rights will not be
exercisable, will not be represented by a separate certificate, and will not be
transferable apart from the Common Stock. An Acquiring Person does not include
(A) prior to the Dividend Payment Date, Hanson, (B) the Company, (C) any
subsidiary of the Company, (D) any employee benefit plan or employee stock plan
of the Company or of any subsidiary of the Company, or any trust or other entity
organized, appointed, established or holding Common Stock for or pursuant to the
terms of any such plan or (E) any person, together with all affiliates and
associates of such person, who would be an Acquiring Person solely by (i) any
action or transaction or series of related actions or transactions approved by
the Company's Board of Directors before such person or group became an Acquiring
Person or (ii) a reduction in the number of issued and outstanding shares of
voting stock of the Company pursuant to a transaction or transactions approved
by the Company's Board of Directors (provided that any person or group that does
not become an Acquiring Person by reason of clause (i) or (ii) above shall
become an Acquiring Person upon acquisition of an additional 1% of the Company's
voting stock unless such acquisition of additional voting stock will not result
in such person or group becoming an Acquiring Person by reason of such clause
(i) or (ii)). For purposes of the foregoing, outstanding voting stock of the
Company includes voting stock that trades on a "when issued" basis on a national
securities exchange (such as the NYSE), on the National Association of
Securities Dealers' Automated Quotation System or otherwise.
The Rights Agreement provides that when a person or group of affiliated
or associated persons becomes an Acquiring Person (other than pursuant to a
Qualifying Tender Offer (as defined below)), such Acquiring Person's Rights and
the rights of any transferee of such Acquiring Person will thereupon become null
and void.
The Rights Agreement provides that until the Rights Distribution Date,
the Rights will be transferred with and only with the Common Stock. Until the
Rights Distribution Date (or earlier redemption or expiration of the Rights),
Common Stock certificates will contain a legend incorporating the Rights
Agreement by reference. Until the Rights Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any of
the Common Stock certificates will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. As soon as
practicable following the Rights Distribution Date, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to holders of
record of the Common Stock as of the close of business on the Rights
Distribution Date and such separate certificates alone will evidence the Rights
from and after the Rights Distribution Date.
The Series A Preferred Stock is nonredeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, subordinate to any other series of the Company's preferred stock. The
Series A Preferred Stock may not be issued except upon exercise of Rights. Each
share of Series A Preferred Stock will be entitled to receive when, as and if
declared, a quarterly dividend in an amount equal to the greater of $.10 per
share or 100 times the cash dividends declared on the Common Stock, in addition,
Series A Preferred Stock is entitled to 100 times any non-cash dividends (other
than dividends payable in equity securities) declared on the Common Stock, in
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like kind. In the event of the liquidation of the Company, the holders of Series
A Preferred Stock will be entitled to receive a payment in an amount equal to
the greater of $33.63 per one one-hundredth share or 100 times the payment made
per share of Common Stock. Each share of Series A Preferred Stock will have 100
votes, voting together with the Common Stock. In the event of any merger,
consolidation or other transaction in which Common Stock is changed, exchanged
or converted, each share of Series A Preferred Stock will be entitled to receive
100 times the amount received per share of Common Stock. The rights of Series A
Preferred Stock as to dividends, liquidation and voting are protected by
anti-dilution provisions.
The number of shares of Series A Preferred Stock issuable upon exercise
of the Rights is subject to certain adjustments from time to time in the event
of a stock dividend on, or a subdivision, combination or issuance of capital
stock in a reclassification of, the Common Stock. The Exercise Price for the
Rights is subject to adjustment in certain circumstances, including certain
distributions of cash or other property to holders of Common Stock.
Unless the Rights are earlier redeemed, the Rights Agreement provides
that in the event that a person, alone or together with its affiliates, becomes
an Acquiring Person (other than pursuant to a tender or exchange offer (a
"Qualifying Tender Offer") for all outstanding shares of Common Stock that is
approved by the Board of Directors after taking into account the long-term value
of the Company and all other factors they consider relevant), proper provision
will be made so that each holder of record of a Right, other than the Acquiring
Person, will thereafter have the right to receive, upon payment of the Exercise
Price, the greater of (i) that number of shares of Preferred Stock for which
such Right was exercisable immediately prior to such event or (ii) that number
of shares of Preferred Stock having a market value at the time of the
transaction equal to two times the Exercise Price. In addition, unless the
Rights are earlier redeemed, the Rights Agreement provides that in the event
that, at any time on or after the Rights Distribution Date (except for any
transaction approved by a majority of the Continuing Directors (as defined in
the Rights Agreement)), the Company were to be acquired in a merger or other
business combination (in which any shares of Common Stock are changed or
converted into or exchanged for other securities or assets) or more than 50% of
the assets or voting power of the Company and its subsidiaries (taken as a
whole) were to be sold or transferred in one or a series of related
transactions, proper provision will be made so that each holder of record of a
Right, other than the Acquiring Person, will from and after such date have the
right to receive, upon payment of the Exercise Price, that number of shares of
common stock of the acquiring company having a market value at the time of such
transaction equal to two times the Exercise Price.
Fractions of shares of Series A Preferred Stock (other than fractions
which are integral multiples of one one-hundredth of a share) may, at the
election of the Company, be evidenced by depositary receipts. The Company may
also issue cash in lieu of fractional shares which are not integral multiples of
one one-hundredth of a share.
At any time on or prior to the close of business on the earlier of (i)
the tenth day after the time that a person has become an Acquiring Person (or
such later date as a majority of the Board of Directors and a majority of the
Continuing Directors may determine) and (ii) the Final Expiration Date,
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the Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right, subject to adjustment (the "Redemption Price"). The Rights may be
redeemed after the time that any Person has become an Acquiring Person (other
than pursuant to a Qualifying Tender Offer) only if approved by a majority of
the Continuing Directors. Immediately upon the effective time of the action of
the Board of Directors of the Company authorizing redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
For as long as the Rights are then redeemable, the Company may, except
with respect to the Redemption Price or shortening or extending the Final
Expiration Date, amend the Rights in any manner. At any time when the Rights are
not then redeemable, the Company may amend the Rights in any manner that does
not materially adversely affect the interests of holders of the Rights as such.
Amendments to the Rights Agreement from and after the time that any Person
becomes an Acquiring Person (other than pursuant to a Qualifying Tender Offer)
require the approval of a majority of the Continuing Directors (as provided in
the Rights Agreement).
Until a Right is exercised, the holder, as such, will have no rights as
a stockholder of the Company, including, without limitation, the right to vote
or to receive dividends. Holders of Common Stock may, depending upon the
circumstances, recognize taxable income should the Rights become exercisable or
upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Registration Statement on Form 10 dated
, 1996. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement which is incorporated in this summary description herein by reference.
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EXHIBIT B
Form of Right Certificate
Certificate No. W- ______ Rights
NOT EXERCISABLE AFTER THE DATE OF THE SECOND ANNUAL MEETING OF
STOCKHOLDERS OF MILLENNIUM CHEMICALS INC. AFTER THE DATE ON WHICH
HANSON PLC PAYS A STOCK DIVIDEND TO THE HOLDERS OF ITS ORDINARY SHARES
OF 25P EACH CONSISTING OF, IN THE AGGREGATE, ALL OF THE ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK, OR EARLIER IF REDEEMED. THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY AND UNDER
CERTAIN OTHER CIRCUMSTANCES, AT $.01 PER RIGHT (SUBJECT TO
ADJUSTMENT), ON THE TERMS SET FORTH OR REFERRED TO IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE RIGHTS
AGREEMENT (AS REFERRED TO BELOW), RIGHTS ISSUED TO OR BENEFICIALLY
OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS SHALL BE NULL AND VOID AND MAY NOT BE TRANSFERRED TO ANY
PERSON.
Right Certificate
MILLENNIUM CHEMICALS INC.
This certifies that , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of , 1996 (the "Rights Agreement") between
Millennium Chemicals Inc., a Delaware corporation (the "Company"), and First
Chicago Trust Company of New York, as Rights Agent (the "Rights
<PAGE>
<PAGE>
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M. (New
York City time) on the date of the second annual meeting of the Company's
stockholders after the date on which Hanson PLC pays a stock dividend to the
holders of its Ordinary Shares of 25p each consisting of in the aggregate all of
the issued and outstanding shares of Common Stock, at the office of the Rights
Agent designated in the Rights Agreement for such purpose, or its successor as
Rights Agent, in New York City, one one-hundredth (1/100) of a fully paid
nonassessable share of Series A Junior Preferred Stock (the "Preferred Stock")
of the Company at a purchase price of $33.63, as the same may from time to time
be adjusted in accordance with the Rights Agreement (the "Exercise Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase attached hereto duly executed.
As provided in the Rights Agreement, the Exercise Price and the
number of shares of Preferred Stock which may be purchased upon the exercise of
the Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events and, upon the happening of
certain events, securities other than
2
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shares of Preferred Stock, or other property, may be acquired upon exercise of
the Rights evidenced by this Right Certificate, as provided in the Rights
Agreement.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent,
the Company and the holders of record of Right Certificates. Copies of the
Rights Agreement are on file at the principal executive office of the Company.
This Right Certificate, with or without other Right Certificates,
upon surrender at the office of the Rights Agent designated in the Rights
Agreement for such purpose, may be exchanged for another Right Certificate or
Right Certificates of like tenor and date evidencing Rights entitling the holder
of record to purchase a like aggregate number of shares of Preferred Stock as
the Rights evidenced by the Right Certificate or Right Certificates surrendered
shall have entitled such holder to purchase. If this Right Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender
hereof, another Right
3
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Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option or
under certain other circumstances at a redemption price of $.01 per Right.
No fractional shares of Preferred Stock (other than fractions
which are integral multiples of one one-hundredth (1/100) of a share) are
required to be issued upon the exercise of any Right or Rights evidenced hereby,
and in lieu thereof the Company may cause depositary receipts to be issued
and/or a cash payment may be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at meeting
thereof, or to give or withhold consent to any corporate action or to receive
notice of
4
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meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _____________, 199_.
ATTEST: MILLENNIUM CHEMICALS INC.
By
- --------------------------------- --------------------------
Secretary Title:
Countersigned:
FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By
------------------------------
Authorized Signature
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Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificates.)
FOR VALUE RECEIVED ______________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
Rights evidenced by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint First
Chicago Trust Company of New York Attorney to transfer the within Right
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: ________________, 199__
_____________________________
Signature
Signature Guaranteed:
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Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned
or transferred by or on behalf of a Person who is or was an Acquiring Person or
an Associate or an Affiliate thereof (as such terms are defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
Dated: ____________, 199__ _______________________________
Signature
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO PURCHASE
(To be executed if registered holder
desires to exercise the Right Certificate.)
TO MILLENNIUM CHEMICALS INC.:
The undersigned hereby irrevocably elects to exercise
_________________ Rights represented by this Right Certificate to purchase the
shares of Preferred Stock issuable upon the exercise of such Rights and requests
that certificates for such share(s) be issued in the following name:
Please insert social security
or other identifying number: ___________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
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Please insert social security
or other identifying number: ___________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _____________, 199__
Signature___________________________
(Signature must conform in all
respects to name of holder as
specified on the face of this
Right Certificate)
Signature Guaranteed:
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EXHIBIT C
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PREFERRED STOCK
OF
MILLENNIUM CHEMICALS INC.
Pursuant to Section 151 of the Delaware
General Corporation Law
I, [name] , [office] of Millennium Chemicals Inc., a
corporation organized and existing under the Delaware General Corporation Law
(the "Company"), in accordance with the provisions of Section 151 of such law,
DO HEREBY CERTIFY that pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Company, the Board of
Directors on , 1996 adopted the following resolution which creates a
series of 2,000,000 shares of Preferred Stock designated as Series A Junior
Preferred Stock, as follows:
RESOLVED, that pursuant to Section 151(g) of the Delaware General
Corporation Law and the authority vested in the Board of Directors of the
Company in accordance with the provisions of ARTICLE IV of the Amended and
Restated Certificate of Incorporation of the Company, a series of Preferred
Stock of the Company be, and hereby is, created, and the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof, be, and hereby are, as follows:
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Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
2,000,000.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set
forth, the holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, (i) cash dividends in an amount per share (rounded to
the nearest cent) equal to 100 times the aggregate per share amount of all cash
dividends declared or paid on the Common Stock, $0.01 par value per share, of
the Company (the "Common Stock") and (ii) a preferential cash dividend (the
"Preferential Dividends"), if any, in preference to the holders of Common Stock,
on the first day of February, May, August and November of each year (each a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, payable in an amount (except in the case of the first
Quarterly Dividend Payment if the date of the first issuance of Series A
Preferred Stock is a date other than a Quarterly Dividend Payment Date, in which
case such payment shall be a prorated amount of such amount) equal to $.10 per
share of Series
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A Preferred Stock less the per share amount of all cash dividends declared on
the Series A Preferred Stock pursuant to clause (i) of this sentence since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Company shall,
at any time after the issuance of any share or fraction of a share of Series A
Preferred Stock, make any distribution on the shares of Common Stock of the
Company, whether by way of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial liquidation of the Company or
otherwise, which is payable in cash or any debt security, debt instrument, real
or personal property or any other property (other than cash dividends subject to
the immediately preceding sentence, a distribution of shares of Common Stock or
other capital stock of the Company or a distribution of rights or warrants to
acquire any such share, including any debt security convertible into or
exchangeable for any such share, at a price less than the Fair Market Value (as
hereinafter defined) of such share), then, and in each such event, the Company
shall simultaneously pay on each then outstanding share of Series A Preferred
Stock of the Company a distribution, in like kind, of 100 times such
distribution paid on a share of Common Stock (subject to the provisions for
adjustment hereinafter set forth).
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The dividends and distributions on the Series A Preferred Stock to which holders
thereof are entitled pursuant to clause (i) of the first sentence of this
paragraph and pursuant to the second sentence of this paragraph are hereinafter
referred to as "Dividends" and the multiple of such cash and non-cash dividends
on the Common Stock applicable to the determination of the Dividends, which
shall be 100 initially but shall be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Dividend Multiple". In the event
the Company shall at any time after , 1996 (i) declare or pay any
dividend or make any distribution on Common Stock payable in shares of Common
Stock, (ii) effect a subdivision or split or a combination, consolidation or
reverse split of the outstanding shares of Common Stock into a greater or lesser
number of shares of Common Stock, or (iii) issue any shares of its capital stock
in a reclassification of the Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then in each such case the Dividend
Multiple thereafter applicable to the determination of the amount of Dividends
which holders of shares of Series A Preferred Stock shall be entitled to receive
shall be the Dividend Multiple applicable immediately prior to such event
multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immedi-
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ately after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) The Company shall declare each Dividend at the same time it
declares any cash or non-cash dividend or distribution on the Common Stock in
respect of which a Dividend is required to be paid. No cash or non-cash dividend
or distribution on the Common Stock in respect of which a Dividend is required
to be paid shall be paid or set aside for payment on the Common Stock unless a
Dividend in respect of such dividend or distribution on the Common Stock shall
be simultaneously paid, or set aside for payment, on the Series A Preferred
Stock.
(C) Preferential Dividends shall begin to accrue on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of any shares of Series A Preferred Stock.
Accrued but unpaid Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
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(A) Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the holders of the Common
Stock. The number of votes which a holder of Series A Preferred Stock is
entitled to cast, as the same may be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Vote Multiple". In the event the
Company shall at any time after , 1996, (i) declare or pay any dividend
on Common Stock payable in shares of Common Stock, (ii) effect a subdivision or
split or a combination, consolidation or reverse split of the outstanding shares
of Common Stock into a greater or lesser number of shares of Common Stock, or
(iii) issue any shares of its capital stock in a reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), then in
each such case the Vote Multiple thereafter applicable to the determination of
the number of votes per share to which holders of shares of Series A Preferred
Stock shall be entitled after such event shall be the Vote Multiple immediately
prior to such event multiplied by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of
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which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or By-laws, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the
Series A Preferred Stock for four or more quarterly dividend periods, whether
consecutive or not, shall not have been declared and paid or irrevocably set
aside for payment, the holders of record of Preferred Stock of the Company of
all series (including the Series A Preferred Stock), other than any series in
respect of which such right is expressly withheld by the Certificate of
Incorporation or the authorizing resolutions included in any Certificate of
Designations therefor, shall have the right, at the next meeting of stockholders
called for the election of directors, to elect two members to the Board of
Directors, which directors shall be in addition to the number required by the
By-laws prior to such event, to serve until the next Annual Meeting and until
their successors are elected and qualified or their earlier resignation, removal
or incapacity or until such earlier time as all accrued and unpaid Preferential
Dividends upon the outstanding shares of Series A Preferred Stock
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shall have been paid (or irrevocably set aside for payment) in full. The holders
of shares of Series A Preferred Stock shall continue to have the right to elect
directors as provided by the immediately preceding sentence until all accrued
and unpaid Preferential Dividends upon the outstanding shares of Series A
Preferred Stock shall have been paid (or set aside for payment) in full. Such
directors may be removed and replaced by such stockholders, and vacancies in
such directorships may be filled only by such stockholders (or by the remaining
director elected by such stockholders, if there be one) in the manner permitted
by law; provided, however, that any such action by stockholders shall be taken
at a meeting of stockholders and shall not be taken by written consent thereto.
(D) Except as otherwise required by the Certificate of
Incorporation or By-laws or set forth herein, holders of Series A Preferred
Stock shall have no other special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for the taking of any corporate action.
Section 4. Certain Restrictions.
(A) Whenever Preferential Dividends or Dividends are in arrears
or the Company shall be in default of payment thereof, thereafter and until all
accrued and unpaid Preferential Dividends and Dividends, whether or not
declared, on shares of
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Series A Preferred Stock outstanding shall have been paid or set irrevocably
aside for payment in full, and in addition to any and all other rights which any
holder of shares of Series A Preferred Stock may have in such circumstances, the
Company shall not
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration, any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity as to dividends with the Series
A Preferred Stock, unless dividends are paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable
or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled if the full dividends accrued thereon
were to be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph
4(A), redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for
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shares of any stock of the Company ranking junior (both as to dividends
and upon liquidation, dissolution or winding up) to the Series A
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up), except in accordance with a
purchase offer made to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series or classes.
(B) The Company shall not permit any Subsidiary (as hereinafter
defined) of the Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner. A "Subsidiary" of the Company shall mean any corporation or other
entity of which securities or other ownership interests having ordinary voting
power sufficient to elect a majority of the board of directors of such
corporation or other entity or other persons performing similar functions are
benefi-
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cially owned, directly or indirectly, by the Company or by any corporation or
other entity that is otherwise controlled by the Company.
(C) The Company shall not issue any shares of Series A Preferred Stock
except upon exercise of Rights issued pursuant to that certain Rights Agreement
dated as of , 1996 between the Company and First Chicago Trust Company
of New York, as Rights Agent, a copy of which is on file with the Secretary of
the Company at its principal executive office and shall be made available to
stockholders of record without charge upon written request therefor addressed to
said Secretary. Notwithstanding the foregoing sentence, nothing contained in the
provisions hereof shall prohibit or restrict the Company from issuing for any
purpose any series of Preferred Stock with rights and privileges similar to,
different from, or greater than, those of the Series A Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares upon their retirement and cancellation shall become authorized but
unissued shares of Preferred Stock, without designation as to series, and such
shares may be reissued as part of a new series of Preferred
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Stock to be created by resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
no distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless the holders of shares of Series A
Preferred Stock shall have received, subject to adjustment as hereinafter
provided, (A) $33.63 per one one-hundredth (1/100) share plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, or (B) if greater than the amount specified in
clause (i)(A) of this sentence, an amount equal to 100 times the aggregate
amount to be distributed per share to holders of Common Stock, as the same may
be adjusted as hereinafter provided, and (ii) to the holders of stock ranking on
a parity upon liquidation, dissolution or winding up with the Series A Preferred
Stock, unless simultaneously therewith distributions are made ratably on the
Series A Preferred Stock and all other shares of such parity stock in proportion
to the total amounts to which the holders of shares of Series A Preferred Stock
are entitled under clause (i)(A) of this sentence and to which the holders of
such parity shares are entitled, in each case upon such liquidation,
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dissolution or winding up. The amount to which holders of Series A Preferred
Stock may be entitled upon liquidation, dissolution or winding up of the Company
pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to
as the "Participating Liquidation Amount" and the multiple of the amount to be
distributed to holders of shares of Common Stock upon the liquidation,
dissolution or winding up of the Company applicable pursuant to said clause to
the determination of the Participating Liquidation Amount, as said multiple may
be adjusted from time to time as hereinafter provided, is hereinafter referred
to as the "Liquidation Multiple". In the event the Company shall at any time
after , 1996 (i) declare or pay any dividend on Common Stock
payable in shares of Common Stock, (ii) effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, or (iii) issue
any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is continuing or surviving corporation), then, in
each such case, the Liquidation Multiple thereafter applicable to the
determination of the Participating Liquidation Amount to which holders of Series
A Preferred Stock shall be entitled after such event shall be the Liquidation
Multiple applicable immediately prior to such event
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multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Certain Reclassification and Other Events.
(A) In the event that holders of shares of Common Stock of the
Company receive after , 1996 in respect of their shares of Common
Stock any share of capital stock of the Company (other than any share of Common
Stock of the Company), whether by way of reclassification, recapitalization,
reorganization, dividend or other distribution or otherwise (a "Transaction"),
then, and in each such event, the dividend rights, voting rights and rights upon
the liquidation, dissolution or winding up of the Company of the shares of
Series A Preferred Stock shall be adjusted so that after such event the holders
of Series A Preferred Stock shall be entitled, in respect of each share of
Series A Preferred Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect immediately prior
to such Transaction multiplied by the additional dividends which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock, (ii) such additional voting rights as
equal the
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Vote Multiple in effect immediately prior to such Transaction multiplied by the
additional voting rights which the holder of a share of Common Stock shall be
entitled to receive by virtue of the receipt in the Transaction of such capital
stock and (iii) such additional distributions upon liquidation, dissolution or
winding up of the Company as equal the Liquidation Multiple in effect
immediately prior to such Transaction multiplied by the additional amount which
the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company by virtue of the receipt
in the Transaction of such capital stock, as the case may be, all as provided by
the terms of such capital stock.
(B) In the event that holders of shares of Common Stock of the
Company receive after , 1996 in respect of their shares of Common
Stock any right or warrant to purchase Common Stock (including as such a right,
for all purposes of this paragraph, any security convertible into or
exchangeable for Common Stock) at a purchase price per share less than the Fair
Market Value of a share of Common Stock on the date of issuance of such right or
warrant, then and in each such event the dividend rights, voting rights and
rights upon the liquidation, dissolution or winding up of the Company of the
shares of Series A Preferred Stock shall each be adjusted so that after such
event the Dividend Multiple, the Vote Multiple and the Liquidation
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Multiple shall each be the product of the Dividend Multiple, the Vote Multiple
and the Liquidation Multiple, as the case may be, in effect immediately prior to
such event multiplied by a fraction the numerator of which shall be the number
of shares of Common Stock outstanding immediately before such issuance of rights
or warrants plus the maximum number of shares of Common Stock which could be
acquired upon exercise in full of all such rights or warrants and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the number of shares
of Common Stock which could be purchased, at the Fair Market Value of the Common
Stock at the time of such issuance, by the maximum aggregate consideration
payable upon exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock of the
Company receive after , 1996 in respect of their shares of Common
Stock any right or warrant to purchase capital stock of the Company (other than
shares of Common Stock), including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for capital stock of
the Company (other than Common Stock), at a purchase price per share less than
the Fair Market Value of such shares of capital stock on the date of issuance of
such right or warrant, then and in each such event the dividend rights, voting
rights and rights
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upon liquidation, dissolution or winding up of the Company of the shares of
Series A Preferred Stock shall each be adjusted so that after such event each
holder of a share of Series A Preferred Stock shall be entitled, in respect of
each share of Series A Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately prior to such
event, to receive (i) such additional dividends as equal the Dividend Multiple
in effect immediately prior to such event multiplied, first, by the additional
dividends to which the holder of a share of Common Stock shall be entitled upon
exercise of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount Fraction (as
hereinafter defined) and (ii) such additional voting rights as equal the Vote
Multiple in effect immediately prior to such event multiplied, first, by the
additional voting rights to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the Discount
Fraction and (iii) such additional distributions upon liquidation, dissolution
or winding up of the Company as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the additional amount
which the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or
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winding up of the Company upon exercise of such right or warrant by virtue of
the capital stock which could be acquired upon such exercise and multiplied
again by the Discount Fraction. For purposes of this paragraph, the "Discount
Fraction" shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a right
or warrant distributed to holders of shares of Common Stock of the Company as
contemplated by this paragraph immediately after the distribution thereof and
the purchase price per share for such share of capital stock pursuant to such
right or warrant and the denominator of which shall be the Fair Market Value of
a share of such capital stock immediately after the distribution of such right
or warrant.
(D) For purposes of this Certificate of Designations, the "Fair
Market Value" of a share of capital stock of the Company (including a share of
Common Stock) on any date shall be deemed to be the average of the daily closing
price per share thereof over the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that, in
the event that such Fair Market Value of any such share of capital stock is
determined during a period which includes any date that is within 30 Trading
Days after (i) the ex-dividend date for a dividend or distribution on stock
payable in shares of such stock or securities convertible into shares of
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such stock, or (ii) the effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such stock, then, and
in each such case, the Fair Market Value shall be appropriately adjusted by the
Board of Directors of the Company to take into account ex-dividend or
post-effective date trading. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way (in either case, as
reported in the applicable transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange), or, if
the shares are not listed or admitted to trading on the New York Stock Exchange,
as reported in the applicable transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares are listed or admitted to trading or, if the shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in
use, or if on any such date the shares are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the
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shares selected by the Board of Directors of the Company. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the shares are listed or admitted to trading is open for the transaction of
business or, if the shares are not listed or admitted to trading on any national
securities exchange, on which the New York Stock Exchange or such other national
securities exchange as may be selected by the Board of Directors of the Company
is open. If the shares are not publicly held or not so listed or traded on any
day within the period of 30 Trading Days applicable to the determination of Fair
Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair
market value thereof per share as determined in good faith by the Board of
Directors of the Company. In either case referred to in the foregoing sentence,
the determination of Fair Market Value shall be described in a statement filed
with the Secretary of the Company.
Section 8. Consolidation, Merger, etc. In case the Company shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each
outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like
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kind), as the case may be, for which or into which each share of Common Stock is
changed or exchanged multiplied by the highest of the Vote Multiple, the
Dividend Multiple or the Liquidation Multiple in effect immediately prior to
such event.
Section 9. Effective Time of Adjustments.
(A) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(B) The Company shall give prompt written notice to each holder
of a share of Series A Preferred Stock of the effect of any adjustment to the
voting rights, dividend rights or rights upon liquidation, dissolution or
winding up of the Company of such shares required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
Section 10. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Series A Preferred Stock in any other manner permitted by law, the
provisions hereof and the Certificate of Incorporation of the Company.
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Section 11. Ranking. Unless otherwise provided in the Certificate
of Incorporation of the Company or a Certificate of Designations relating to a
subsequent series of preferred stock of the Company, the Series A Preferred
Stock shall rank junior to all other series of the Company's preferred stock as
to the payment of dividends and the distribution of assets on liquidation,
dissolution or winding up and senior to the Common Stock.
Section 12. Amendment. The provisions hereof and the Certificate
of Incorporation of the Company shall not be amended in any manner which would
adversely affect the rights, privileges or powers of the Series A Preferred
Stock without, in addition to any other vote of stockholders required by law,
the affirmative vote of the holders of two-thirds or more of the outstanding
shares of Series A Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, I have executed and subscribed this
Certificate of Designations and do affirm the foregoing as true under the
penalties of perjury this ____ day of July, 1996.
_________________________
Name:
Title:
ATTEST:
__________________________
Name:
Title:
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Exhibit 4.1
PATTY 7-11-96 7-18-96 CM/JC ETHER 28 LOT 1 H-45083 A
NUMBER SHARES
COMMON STOCK COMMON STOCK
Millennium
[LOGO] Chemicals Inc. CUSIP 599903 10 1
SEE REVERSE FOR
CERTAIN DEFINITIONS
This Certifies that
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.01, OF
Millennium Chemicals Inc. transferable on the books of the Company by the
holder hereof in person or by duly authorized Attorney upon surrender of
this Certificate properly endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
Witness the seal of the Company and the signatures of its duly
authorized officers.
Dated:
[MILLENNIUM CHEMICALS INC. INCORPORATED SEAL 1996 DELAWARE]
AMERICAN BANKNOTE COMPANY.
[SIGNATURE] [SIGNATURE]
SENIOR VICE PRESIDENT AND SECRETARY CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
Millennium Chemicals Inc. will furnish without charge to each stockholder who
so requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof of
the corporation, and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the corporation or the
transfer agent.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- __________ Custodian _________
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
Act __________________________
JT TEN -- as joint tenants with right of (State)
survivorship and not as tenants
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
----------------------------------------
| |
| |
| |
----------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _______________________
_______________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: _______________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
<PAGE>
EXHIBIT 4.2
RESOLUTIONS OF BOARD OF DIRECTORS OF
HANSON AMERICA INC.
ADOPTED AS OF FEBRUARY 1, 1994
BY UNANIMOUS WRITTEN CONSENT
Hanson Antilles N.V. Loan
RESOLVED, that the Company, effective on the date hereof, shall amend the
terms of its outstanding loan from Hanson Antilles N.V., a Netherlands
Antilles corporation ("Lender") under which the aggregate principal amount of
Two Billion, Two Hundred Fifty Million Dollars ($2,250,000,000) has been
borrowed by the Company as contemplated by the resolutions adopted by this Board
on October 15, 1993 (the "Loan");
RESOLVED, that the Loan, which originally was to mature on March 25, 1999,
shall be amended to become due and payable on October 15, 2003; and
RESOLVED, that the interest rate shall be increased from six and one-half
percent (6 1/2%) to seven percent (7%) per annum; and
RESOLVED, that interest shall continue to be payable annually in arrears on
each September 25, commencing on September 25, 1994, and at payment in full of
the Loan; and
RESOLVED, that, from and after the date hereof, the Loan shall be
subordinate in right of payment to the prior payment in full of all of the
Company's senior indebtedness for borrowed money, including without limitation
any indebtedness under the Company's proposed new Credit Agreement with Chemical
Bank, as agent, and the Company's proposed Senior Exchangeable Discount Notes
due 2001, and the Loan shall continue to be subordinate in right of payment to
the prior payment in full of the obligations of the Company under its existing
Credit Agreement with Chemical Bank, as agent, and to the presently outstanding
Beazer Bond Obligations referred to in such existing Credit Agreement
(collectively, the "Senior Obligations"); provided, however, that Lender may
receive and the Company may make payments of interest on the Loan on the agreed
dates of payment thereof if, at the time of making such payments and immediately
after giving effect thereto, no default under any of the terms, covenants or
conditions of any of the instruments
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evidencing the Senior Obligations shall have occurred and be continuing; and
RESOLVED, that, subject to the foregoing, if any default should occur on
the part of the Company under any Senior Obligations, and the maturity of the
existing Credit Agreement, the proposed new Credit Agreement, the proposed
Senior Exchangeable Discount Notes due 2001 or a total amount of other Senior
Obligations in excess of One Hundred Million United States Dollars
(US$100,000,000) is accelerted by action of any agent, lender or trustee
thereunder; or if the Company shall fail to pay interest on the Loan when due;
or if the Company shall voluntarily commence a proceeding or if an involuntary
proceeding shall be commenced against the Company under Title 11 of the United
States Code or any other similar federal or state law; then Lender shall have
the right to declare the Loan and all amounts due in connection therewith to be
forthwith due and payable; and
RESOLVED, that any transfer or assignment of Lender's rights to principal
and interest on the Loan shall continue to be effective only when reflected on
the books of the Company; and
RESOLVED, that the terms of the Loan, as amended hereby, are to be governed
by the laws of the State of New York; and
RESOLVED, that all actions heretofore taken by the proper officers and
representatives of the Company in connection with the above actions are hereby
confirmed, approved and ratified in all respects; and
RESOLVED, that the President, any Vice President, the Secretary, the
Treasurer or any Assistant Secretary or Assistant Treasurer of the Company,
acting individually be, and each hereby is, authorized and directed to take all
actions and do all things including, without limiting the generality of the
foregoing, execute and deliver all agreements, instruments and other documents,
in the name and on behalf of the Company, which in their judgment are necessary
or desirable to perform the obligations of the Company, described above and to
otherwise implement and effectuate the actions contemplated by the foregoing
resolutions.
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EXTRACT FROM THE MINUTES OF THE MEETING OF THE BOARD OF MANAGING DIRECTORS
OF HANSON ANTILLES N.V., THE COMPANY, A NETHERLANDS ANTILLES CORPORATION
RESIDENT IN CURACAO, HELD AT THE REGISTERED OFFICE OF THE COMPANY AT
SCHOTTEGATWEGOOST 130, SALINJA, CURACAO, NETHERLANDS ANTILLES, ON OCTOBER 15,
1993 AT 4.15 P.M.
After due consideration IT WAS RESOLVED the Company shall lend to Hanson
America Inc., a Delaware Corporation ("Borrower") two billion two hundred and
fifty million United States Dollars (US$2,250,000,000) on October 31, 1993, or
any such other date thereabout as may be agreed between the two parties, the
maturity date of the loan being March 25, 1999, and that the loan shall bear
interest at the rate of six and one-half percent (6 1/2%) per annum, payable in
arrears on the 25th day of each September, commencing on September 25, 1994, and
at payment in full of the loan.
It was noted that the loan will be subordinate in right of payment to the
prior payment in full of the obligations of the Borrower under the Credit
Agreement with Chemical Bank, as Agent and to the Beazer Bond Obligations
referred to in such Credit Agreement; provided, however, that the Company may
receive and Borrower may make payments of interest on the loan on the agreed
dates of payment thereof if, at the time of making such payment and immediately
after giving effect thereto no default under any of the terms, covenants or
conditions of any of the instruments evidencing the Credit Agreement and the
Beazer Bond Obligations shall have occurred and be continuing.
It was also noted that, subject to the foregoing, if any default should
occur on the part of the Borrower under its Credit Agreement with Chemical Bank,
as Agent, and the effect of such default shall be to accelerate the obligations
of the Borrower under such Credit Agreement, or if the maturity is accelerated
by action of the Agent or Lenders thereunder, or if the Borrower shall fail to
pay interest on the loan when due, or if the Borrower shall voluntarily commence
a proceeding or if an involuntary proceeding shall be commenced against the
borrower under Title 11 of the United States Code or any other similar federal
or state law, then the Company shall have the right to declare the loan and all
amounts due in connection therewith to be forthwith due and payable.
It was also noted that any transfer or assignment of the Company's rights
to principal and interest on the loan shall be effective only when reflected on
the books of the Borrower.
It was further noted that the terms of the loan are to be governed by the
laws of the State of New York.
In furtherance of the foregoing, it was then RESOLVED that the Company's
directors be, and each of them hereby is, authorized and directed to take such
actions on behalf of the Company as may be necessary or appropriate to carry out
the intent and accomplish the purposes of the foregoing.
1
<PAGE>
<PAGE>
EXTRACT FROM THE MINUTES OF THE MEETING OF THE BOARD OF MANAGING DIRECTORS
OF HANSON ANTILLES N.V., THE COMPANY, A NETHERLANDS ANTILLES CORPORATION
RESIDENT IN CURACAO, HELD AT THE REGISTERED OFFICE OF THE COMPANY AT
SCHOTTEGATWEGOOST 130, SALINJA, CURACAO, NETHERLANDS ANTILLES, ON FEBRUARY 1,
1994.
After due consideration IT WAS RESOLVED the Company shall amend the terms
of its outstanding loan (the "Loan") to Hanson America Inc., a Delaware
corporation ("Borrower"), under which the aggregate principal amount of Two
Billion Hundred Fifty Million United States Dollars (US$2,250,000,000) has been
advanced to Borrower as contemplated by the resolutions adopted by this board on
October 15, 1993, so that effective on the date hereof the maturity of the Loan
shall be extended from March 25, 1999 to October 15, 2003, and the interest rate
shall be increased from six and one-half percent (6 1/2%) to seven percent (7%)
per annum, payable in arrears on the 25th day of each September, commencing on
September 25, 1994, and at payment in full of the Loan.
It was noted that, from and after the date hereof, the Loan will be
subordinate in right payment to the prior payment in full of all of the
Borrower's senior indebtedness for borrowed money, including without limitation
any indebtedness under the Borrower's proposed new Credit Agreement with
Chemical Bank, as agent, and the Borrower's proposed Senior Exchangeable
Discount Notes due 2001, and the Loan will continue to be subordinate in right
of payment to the prior payment in full of the obligations of the Borrower under
its existing Credit Agreement with Chemical Bank, as agent, and to the presently
outstanding Beazer Bond Obligations referred to in such existing Credit
Agreement (collectively, the "Senior Obligations"); provided, however, that the
Company may receive and Borrower may make payments of interest on the Loan on
the agreed dates of payment thereof if, at the time of making such payments and
immediately after giving effect thereto, no default under any of the terms,
covenants or conditions of any of the instruments evidencing the Senior
Obligations shall have occurred and be continuing.
It was also noted that if any default should occur on the part of the
Borrower under any Senior Obligations, and the maturity of existing Credit
Agreement, the proposed new Credit Agreement, the proposed Senior Exchangeable
Discount Notes due 2001 or a total amount of other Senior Obligations in excess
of One Hundred Million United States Dollars (US$100,000,000) is accelerated by
action of any agent, lender or trustee thereunder; or if the Borrower shall fail
to pay interest on the Loan when due; or if the Borrower shall voluntarily
commence a proceeding or if an involuntary proceeding shall be commenced against
the Borrower under Title 11 of the United States Code or any other similar
federal or state law; then the Company shall have the right to declare the Loan
and all amounts due in connection therewith to be forthwith due and payable.
It was also noted that any transfer or assignment of the Company's rights
to principal and interest on the Loan shall continue to be effective only when
reflected on the books of the Borrower.
It was further noted that the terms of the Loan, as amended hereby, are to
be governed by the laws of the State of New York.
After due consideration, it was also RESOLVED that the Company's
US$2,250,000,000 loan from Hanson Holdings Netherlands B.V. be amended so that
effective on the date hereof the maturity of such loan shall be extended from
March 25, 1999 to October 15, 2003, and the interest rate shall be increased
from six and one half percent less one basis point to seven percent per annum
less one basis point, payable in arrears on the 25th day of each September,
commencing on September 25, 1994, and at payment in full of such loan.
In furtherance of the foregoing, it was then RESOLVED that the Company's
directors be, and each of them hereby is, authorized and directed to take such
actions on behalf fo the Company as may be necessary or appropriate to carry out
the intent and accomplish the purposes of the foregoing.
2
<PAGE>
<PAGE>
ANNEX 1
Exhibit 4.2
RESOLUTIONS OF BOARD OF DIRECTORS OF
HANSON AMERICA INC.
ADOPTED AS OF OCTOBER 15, 1993
BY UNANIMOUS WRITTEN CONSENT
Hanson Antilles N.V. Loan
RESOLVED, that the Company shall borrow from Hanson Antilles N.V., a
Netherlands Antilles corporation ('Lender') Two Billion, Two Hundred Fifty
Million Dollars ($2,250,000,000) on October 30, 1993, or any such other date
thereabout as may be agreed upon by the Company and Lender, subject to the terms
and conditions set forth below (the 'Loan'); and
RESOLVED, that the loan shall become due and payable on March 25, 1999; and
RESOLVED, that the Loan shall bear interest at the interest rate per annum
equal to six and one-half percent (6 1/2%); and
RESOLVED, that interest shall be payable annually in arrears on each
September 25, commencing on September 25, 1994, and at payment in full of the
Loan; and
RESOLVED, that the Loan shall be subordinate in right of payment to the
prior payment in full of the obligations of the Company under the Credit
Agreement and to the Beazer Bond Obligations referred to in the Credit
Agreement; provided, however, that Lender may receive and the Company may make
payments of interest on the Loan on the agreed dates of payment thereof if, at
the time of making such payment and immediately after giving effect thereto no
default under any of the terms, covenants or conditions of any of the
instruments evidencing the Credit Agreement and the Beazer Bond Obligations
shall have occurred and be continuing; and
RESOLVED, that, subject to the foregoing, if any default should occur on
the part of the Company under the Credit Agreement, and the effect of such
default shall be to accelerate the obligations of the Company under the Credit
Agreement, or if the maturity is accelerated by action of the Agent or Lenders
thereunder, or if the Company shall fail to pay interest on the Loan when due,
or if the Company shall voluntarily commence a proceeding or if an involuntary
proceeding shall be commenced against the Company under Title 11 of the United
States Code or any other similar federal or state law, then Lender shall have
the right to declare the Loan and all amounts due in connection therewith to be
forthwith due and payable; and
<PAGE>
<PAGE>
RESOLVED, that the terms of the Loan are to be governed by the laws of the
State of New York; and
RESOLVED, that any transfer or assignment of Lender's rights to principal
and interest on the Loan shall be effective only when reflected on the books of
the Company; and
Ratification, Implementation
RESOLVED, that all actions heretofore taken by the proper officers and
representatives of the Company in connection with the above actions are hereby
confirmed, approved and ratified in all respects; and
RESOLVED, that the President, any Vice President, the Secretary, the
Treasurer or any Assistant Secretary or Assistant Treasurer of the Company,
acting individually be, and each hereby is, authorized and directed to take all
actions and do all things including, without limiting the generality of the
foregoing, execute and deliver all agreements, instruments, financing statements
and other documents, in the name and on behalf of the Company which in their
judgment are necessary or desirable to perform the obligations of the Company,
to consummate the borrowings described above and to otherwise implement and
effectuate the actions contemplated by the foregoing resolutions.
2
<PAGE>
<PAGE>
Resolutions of Board of Directors of
Hanson America Inc. (the 'Company')
Adopted as of November 1, 1994
by Unanimous Written Consent
WHEREAS, during October and November 1993, the Company borrowed a total of
two billion two hundred and fitfy million dollars ($2,250,000,000) from Hanson
Antilles N.V. (the 'Lender'), a Netherlands Antilles corporation resident in
Curacao, Netherlands Antilles (the 'Loan'), which is due and payable on October
15, 2003;
WHEREAS, the Loan bears interest at a rate of seventy percent (7%), payable
in arrears on the 25th day of each September, commencing September 25, 1994, and
at payment in full of the Loan;
WHEREAS, it has been requested that, prior to December 31, 1994, the
Company prepay to the Lender the interest that will accrue on the Loan from
September 26, 1994 to a mutually agreed upon date in 1996 (but in no event later
than December 31, 1996), discounted to its present value using a discount rate
equal to the interest rate on the Loan (the 'Interest Prepayment');
WHEREAS, to enable the Company to make the Interest Prepayment, Hanson PLC
('HPLC'), a public limited company incorporated in England and Wales and the
ultimate parent of the Lender and the Company, has agreed to loan (or to cause
one of its affiliates to loan) to the Company the amount of the Interest
Prepayment (the 'Interest Loan') on terms and conditions identical to the Loan
(including the interest rate) except that the Interest Loan shall be repaid on
the regular payment dates of the prepaid interest (i.e., on September 25, 1995,
1996, and 1997);
WHEREAS, the Company has determined that the foregoing transactions will
have no substantive impact on the Company in that the Company will be in the
same financial position after incurring the Interest Loan and making the
Interest Prepayment as if it had not incurred the Interest Loan and made the
Interest Prepayment; and accordingly has decided to make the Interest
Prepayment;
NOW, THEREFORE, the directors of the Company hereby unanimously approve the
following resolutions:
RESOLVED, that, prior to December 31, 1994, the Company shall prepay to the
Lender, in one or more nonrefundable installments, the interest that will accrue
on the Loan from September 26, 1994 to a mutually agreed upon date in 1996 (but
in no event later than December 31, 1996), discounted to its present value using
a discount rate equal to the interest rate on the Loan;
<PAGE>
<PAGE>
RESOLVED, that, simultaneous with each prepayment of such interest, the
Company shall borrow from HPLC (and/or one of HPLC's affiliates), on the terms
and conditions set forth in the Note attached hereto as Exhibit A (the 'Note'),
the amount of each such prepayment, and that the President, any Vice President,
the Secretary, the Treasurer, or any Assistant Secretary or Assistant Treasurer
of the Company, acting individually be, and each hereby is, authorized to
execute and deliver the Note on behalf of the Company, in substantially the form
set forth in Exhibit A, together with such changes as such officer deems
appropriate, his execution of the Note constituting conclusive evidence that he
deemed such changes appropriate;
RESOLVED, that the President, any Vice President, the Secretary, the
Treasurer, or any Assistant Secretary or Assistant Treasurer of the Company,
acting individually be, and each hereby is, authorized, empowered, and directed
to take all actions and do all things, including, without limiting the
generality of the foregoing, execute and deliver all agreements, instruments,
financing statements, and other documents, in the name and on behalf of the
Company, that in such officer's judgment are necessary or desirable to
consummate the Interest Prepayment and the Interest Loan and to otherwise
implement and effectuate the actions contemplated by the foregoing resolutions.
<PAGE>
<PAGE>
RESOLUTIONS OF BOARD OF DIRECTORS OF
HANSON ANTILLES N.V.
ADOPTED AS OF NOVEMBER 2, 1994
BY UNANIMOUS WRITTEN CONSENT
With respect to the outstanding loan (the 'Loan') by the Company to Hanson
America Inc., a Delaware Corporation (the 'Borrower'), in the amount of two
billion two hundred and fifty million United States Dollars (US$2,250,000,000),
as described in the resolutions adopted by the board on October 15, 1993 and
February 1, 1994, IT WAS NOTED that, on November 7, 1994, the Borrower had
offered to prepay to the Company by nonrefundable instalment, the interest of
US$17,292,309.30 that will accrue on the Loan from September 26, 1994 until
November 7, 1994, discounted to its present value using a discount rate equal to
the interest rate on the Loan (the 'Interest Prepayment'); and IT WAS RESOLVED
the Company shall accept the Interest Prepayment.
It was noted that, to enable the Borrower to make the Interest Prepayment,
Hanson PLC ('HPLC'), a public limited company incorporated in England and Wales
and the ultimate parent of the Company and the Borrower, has agreed to loan (or
to cause one of its affiliates to loan) to the Borrower the amount of the
Interest Prepayment (the 'Interest Loan') on terms and conditions identical to
the Loan (including the interest rate) except that the Interest Loan shall be
repaid on the regular payment date of the prepaid interest on September 25,
1995.
It was also noted that the Interest Prepayment and the Interest Loan shall
be structured such that the Company shall remain in full compliance with the
agreements it made under the Letter Agreement dated March 11, 1994 from the
Company to Chemical Bank, as Agent, and the Letter Agreement dated March 11,
1994 from the Company to The Bank of New York, as Trustee. It was further noted
that the lenders under the Borrower's Credit Agreement with Chemical Bank, as
agent, have consented to the Interest Prepayment and the Interest Loan, and that
HPLC (and any affiliate making the Interest Loan or any part thereof) shall
agree to subordinate the Interest Loan on the terms and conditions set forth in
the form of letter attached hereto as Attachment A.
In furtherance of the foregoing, it was then RESOLVED that the Company's
Managing Directors be, and each of them hereby is, authorised and directed to
take such actions on behalf of the Company as may be necessary or appropriate to
carry out the intent and accomplish the purpose of the foregoing.
The Chairman advised the Meeting that Hanson America Inc. may wish to
consider making more substantial prepayments of interest, it being noted that
such prepayments would be on the same discounted nonrefundable basis as the
prepayment to be received on November 7, 1994 and after due consideration it was
agreed the Company would be prepared to accept such prepayments. The Meeting
noted that if the Company received such interest prepayments consideration might
be given to the Company declaring a dividend in favour of its parent company,
Hanson Holdings Netherlands B.V.
The Meeting was advised that a Form VS-4 had now been issued by the Curacao
Tax Authorities and that a Power of Attorney was executed in connection with
this by Messrs. H. P. F. von Aesch and E. F. Promes by which Patricia uit de Bos
of Loyens & Volkmaars was authorised to deal with this matter on behalf of the
Company.
There being no further business the Meeting was adjourned.
<PAGE>
<PAGE>
RESOLUTIONS OF BOARD OF DIRECTORS OF
HANSON ANTILLES N.V.
ADOPTED AS OF DECEMBER 6, 1994
BY UNANIMOUS WRITTEN CONSENT
With respect to the outstanding loan (the 'Loan') by the Company to Hanson
America Inc., a Delaware Corporation (the 'Borrower'), in the amount of two
billion two hundred and fifty million United States Dollars (US$2,250,000,000),
as described in the resolutions adopted by the board on October 15, 1993 and
February 1, 1994, IT WAS NOTED that on December 12, 1994 the Borrower had
offered to prepay to the Company, in three nonrefundable instalments, the
interest that will accrue on the Loan for the period November 8, 1994 until
December 31, 1996, discounted to its present value using a discount rate equal
to the interest rate on the Loan, (the 'Interest Prepayments') and IT WAS
RESOLVED that the Company shall accept the Interest Prepayments.
It was noted that, to enable the Borrower to make the Interest Prepayments,
Hanson PLC ('HPLC'), a public limited company incorporated in England and Wales
and the ultimate parent of the Company and the Borrower, has agreed to loan (or
to cause one of its affiliates to loan) to the Borrower the amounts of the
Interest Prepayments (the 'Interest Loans') on terms and conditions identical to
the Loan (including the interest rate) except that the Interest Loans shall be
repaid on the regular payment dates of the prepaid interest on September 25,
1995, 1996 and 1997.
It was also noted that the Interest Prepayments and the Interest Loans shall be
structured such that the Company shall remain in full compliance with the
agreements it made under the Letter Agreement dated March 11, 1994 from the
Company to Chemical Bank as Agent, and the Letter Agreement dated March 11, 1994
from the Company to The Bank of New York, as Trustee. It was further noted that
the lenders under the Borrower's Credit Agreement with Chemical Bank, as agent,
have consented to the Interest Prepayments and the Interest Loans, and that HPLC
(and any affiliate making the Interest Loans or any part thereof) shall agree
to subordinate the Interest Loans on the terms and conditions set forth in the
form of letter attached hereto as Attachment A.
In furtherance of the foregoing, it was then RESOLVED that the Company's
Managing Directors be, and each of them hereby is, authorised and directed to
take such actions on behalf of the Company as may be necessary or appropriate to
carry out the intent and accomplish the purpose of the foregoing.
<PAGE>
<PAGE>
[LOGO]
Kaya W F G (Jombi) Mensing 36,
Curacao,
Netherlands Antilles.
Tel: (599) 9 616773
Fax: (599) 9 616837
March 11, 1994
JFW/STR/3HANV11
Chemical Bank, As Agent,
270 Park Avenue,
New York, NY 10017,
United States of America.
Dear Ladies and Gentlemen,
We refer to the $2,250,000,000 loan (the "Loan") which we agreed on October
15, 1993 to make to our affiliate, Hanson America Inc. ("HAI") as amended to
date.
As you know, the obligations of HAI under the Loan are to be subordinate,
in certain respects, to the prior payment in full of (i) the obligations of HAI
under that certain Credit Agreement dated as of March 11, 1994, and as
thereafter amended (the "Credit Agreement"), among HAI, the lenders thereunder,
Chemical Bank, as administrative agent ("Agent") and Citibank N.A., and
National Westminster Bank PLC and Toronto-Dominion Bank, as Syndication
Co-Agents.
In this regard, we hereby confirm the following:-
1. Attached hereto as Exhibit A and Exhibit B are extracts from minutes of the
meetings of our Board of Managing Directors held on October 15, 1993 and
February 1, 1994, which minutes duly reflect the action taken by such Board
with respect to the Loan. No action has been taken by such Board on or
prior to the date hereof which would have the effect of withdrawing such
minutes or amending the subject matter thereof.
2. We agree, for the ratable benefit of the Senior Creditors (as hereinafter
defined), that all indebtedness now or hereafter existing under the Loan,
including interest thereon and other amounts payable in respect thereof
(such amounts being herein referred to as the "Subordinated Debt") shall
be subordinate, to the extent and in the manner hereinafter set forth, in
right of payment to the prior payment in full of the Senior Debt. For
purposes hereof, the term "Senior Debt" means the principal of, interest
on (including, without limitation, interest, if any, accruing after the
filing of a petition initiating any proceeding referred to in Section 4(a)
hereof), or fees or expenses payable in connection with all obligations of
HAI under the Credit Agreement, whether outstanding on, or incurred,
created or assumed after the date hereof. Capitalised terms hereinafter
used but not defined herein shall have the meanings assigned to such terms
in the Credit Agreement.
Page 1 of 6
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<PAGE>
Chemical Bank -2- March 11, 1994
3. We agree not to ask, demand, sue for, take or received from HAI, directly
or indirectly, in cash or other property or by set-off or in any other
manner (including, without limitation, from or by way of collateral),
payment of all or any of the Subordinated Debt unless and until the Senior
Debt shall have been paid in full; provided, however, that we may receive
and HAI may make payments of interest and fees on the Subordinated Debt on
the stated dates of payment thereof if, at the time of making such payment
and immediately after giving effect thereto no default under, or breach or
violation of, any of the terms, covenants or conditions of any of the
instruments evidencing any of the Senior Debt shall have occurred and be
continuing. For the purposes hereof, the Senior Debt shall not be deemed to
have been paid in full until and unless the holders or owners of the Senior
Debt shall have received payment of the Senior Debt in cash.
4. We agree as follows:
(a) Upon any distribution of all or any of the assets of HAI to creditors
of HAI upon the dissolution, winding up, liquidation, arrangement,
reorganisation, adjustment, protection or relief of HAI or its debts,
whether in any bankruptcy, insolvency, arrangement, reorganisation,
receivership, relief or similar proceedings or upon an assignment for
the benefit of creditors or any other marshalling of the assets and
liabilities of HAI or otherwise, any payment or distribution of any
kind (whether in cash, property or securities) which otherwise would
be payable or deliverable upon or with respect to the Subordinated
Debt shall be paid or delivered directly to the Agent for the holders
of the Senior Debt (the "Senior Creditors"), as their respective
interests may appear, for application (in the case of cash) to or as
collateral (in the case of non-cash property or securities) for the
payment or prepayment of the Senior Debt until the Senior Debt shall
have been paid in full.
(b) If any proceeding referred to in subsection (a) above is commenced by
or against HAI,
(i) the Agent, for the benefit of the Senior Creditors, is hereby
irrevocably authorised and empowered (in its own name or our name
or otherwise), but shall have no obligation, to demand, sue for,
collect and receive every payment or distribution referred to in
subsection (a) above and give acquittance therefor and to file
claims and proofs of claim and take such other action as it may
deem necessary or advisable for the exercise or enforcement of
its rights or interests hereunder; provided, however, that any
payment or distribution of any kind obtained by the Agent for the
benefit of the Senior Creditors as a result of actions taken
pursuant to this letter shall be held by the Agent for the
benefit of the Senior Creditors, as their respective interests
may appear; and
Page 2 of 6
<PAGE>
<PAGE>
Chemical Bank -3- March 11, 1994
(ii) we shall duly and promptly take such action as the Agent, for the
benefit of the Senior Creditors, may request (A) to collect the
Subordinated Debt for the account of the Senior Creditors and to
file appropriate claims or proofs of claim in respect of the
Subordinated Debt, (B) to execute and deliver to the Senior
Creditors such powers of attorney, assignments, or other
instruments as it may request in order to enable it to enforce
any and all claims with respect to, and any security interests
and other liens securing payment of, the Subordinated Debt, and
(C) to collect and receive any and all payments or distributions
which may be payable or delivered upon or with respect to the
Subordinated Debt.
(c) All payments or distributions upon or with respect to the Subordinated
Debt which are received by us contrary to the provisions of this
Letter shall be received in trust for the benefit of the Agent, for
the benefit the Senior Creditors, as their respective interests may
appear, shall be segregated from other funds and property held by us
and shall be forthwith paid over to the Agent, in the same form as so
received (with any necessary endorsement) to be applied by the Agent
for the payment or prepayment of the Senior Debt in accordance with
the terms of the instruments evidencing the Senior Debt.
(d) The Agent, for the benefit of the Senior Creditors, is hereby
authorised to demand specific performance by us of the provisions
hereof at any time when we shall have failed to comply with any of
such provisions. We hereby irrevocably waive any defence based on the
adequacy of a remedy at law, which might be asserted as a bar to such
remedy of specific performance.
5. We agree that, so long as any of the Senior Debt shall remain unpaid, we
will not commence, or join with any creditor other than the Senior
Creditors in commencing, any proceeding referred to in Section 4(a) hereof.
6. We agree that no payment or distribution to the Senior Creditors or the
Agent pursuant to the provisions of this Letter shall entitle us to
exercise any rights of subrogation in respect thereof until the Senior Debt
shall have been paid in full.
7. We will, at our expense and at any time and from time to time, promptly
execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that the Agent, on
behalf of the Senior Creditors, may reasonably request, in order to protect
any right or interest granted or purported to be granted pursuant to this
Letter or to enable the Agent to exercise and enforce its rights and
remedies hereunder.
8. We will not sell, assign, pledge, encumber or otherwise dispose of any of
the Subordinated Debt unless such sale, assignment, pledge, encumbrance or
disposition is made expressly subject to the provisions of this Letter.
9. All rights and interests of the Senior Creditors hereunder, and all of our
obligations hereunder, shall remain in full force and effect irrespective
of:
Page 3 of 6
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<PAGE>
Chemical Bank -4- March 11, 1994
(i) any lack of validity or enforceability of any instrument evidencing
all or any part of the Senior Debt, or any other agreement or
instrument relating to all or any part of the Senior Debt;
(ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Senior Debt, or any other amendment or
waiver of or any consent to departure from any of the instruments
evidencing any of the Senior Debt;
(iii) any exchange, release or non-perfection of any security interest in
any collateral, or any release or amendment or waiver of, or consent
to departure from, any guaranty, for all or any of the Senior Debt; or
(iv) any other circumstance which might otherwise constitute a defence
available to, or a discharge of, HAI in respect of the Senior Debt or
the Subordinated Debt or us in respect of our obligations under this
Letter.
The provisions of this Letter shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Senior Debt is
rescinded or must otherwise be returned by any Senior Creditor upon the
insolvency, bankruptcy or reorganisation of HAI or otherwise, all as though such
payment had not been made.
10. We agree that no amendment or waiver of any of the provisions of this
Letter shall in any event be effective unless the same shall be consented
to in writing by Required Lenders under the Credit Agreement.
11. Our obligations set forth in this Letter are continuing obligations and
shall (i) remain in full force and effect until the Senior Debt shall have
been paid in full, (ii) be binding upon us and our successors and assigns,
and (iii) inure to the benefit of and be enforceable by the Senior
Creditors and their respective successors, transferees and assigns. Without
limiting the generality of foregoing clause (iii), any Senior Creditor may
assign or otherwise transfer any instrument evidencing indebtedness of HAI
to it which constitutes Senior Debt to any other person or entity, and such
other person or entity shall thereupon become vested with all the rights in
respect thereof granted to such Senior Creditor herein or otherwise.
12. This Letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
Very truly yours,
HANSON ANTILLES N.V.
[SIGNATURE]
J.F. WHITEHEAD
MANAGING DIRECTOR
Page 4 of 6
<PAGE>
<PAGE>
EXHIBIT A
EXTRACT FROM THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF HANSON
ANTILLES N.V., THE COMPANY, A NETHERLANDS ANTILLES CORPORATION RESIDENT IN
CURACAO, HELD AT THE REGISTERED OFFICE OF THE COMPANY AT SCHOTTEGATWEGOOST 130,
SALINJA, CURACAO, NETHERLANDS ANTILLES, ON OCTOBER 15, 1993 AT 4.15 P.M.
After due consideration IT WAS RESOLVED the Company shall lend to Hanson America
Inc., a Delaware Corporation ("Borrower") two billion two hundred and fifty
million United States Dollars (US$2,250,000,000) on October 31, 1993, or any
such other date thereabout as may be agreed between the two parties, the
maturity date of the loan being March 25, 1999, and that the loan shall bear
interest at the rate of six and one-half percent (6 1/2%) per annum, payable in
arrears on the 25th day of each September, commencing on September 25, 1994, and
at payment in full of the loan.
It was noted that the loan will be subordinate in right of payment to the prior
payment in full of the obligations of the Borrower under the Credit Agreement
with Chemical Bank, as Agent and to the Beazer Bond Obligations referred to in
such Credit Agreement; provided, however, that the Company may receive and
Borrower may make payments of interest on the loan on the agreed dates of
payment thereof if, at the time of making such payment and immediately after
giving effect thereto no default under any of the terms, covenants or conditions
of any of the instruments evidencing the Credit Agreement and the Beazer Bond
Obligations shall have occurred and be continuing.
It was also noted that, subject to the foregoing, if any default should occur on
the part of the Borrower under its Credit Agreement with Chemical Bank, as
Agent, and the effect of such default shall be to accelerate the obligations of
the Borrower under such Credit Agreement, or if the maturity is accelerated by
action of the Agent or Lenders thereunder, or if the Borrower shall fail to pay
interest on the loan when due, or if the Borrower shall voluntarily commence a
proceeding or if an involuntary proceeding shall be commenced against the
Borrower under Title 11 of the United States Code or any other similar federal
or state law, then the Company shall have the right to declare the loan and all
amounts due in connection therewith to be forthwith due and payable.
It was also noted that any transfer or assignment of the Company's rights to
principal and interest on the loan shall be effective only when reflected on the
books of the Borrower.
It was further noted that the terms of the loan are to be governed by the laws
of the State of New York.
In furtherance of the foregoing, it was then RESOLVED that the Company's
directors be, and each of them hereby is, authorised and directed to take such
actions on behalf of the Company as may be necessary or appropriate to carry out
the intent and accomplish the purpose of the foregoing.
Page 5 of 6
<PAGE>
<PAGE>
EXHIBIT B
EXTRACT FROM THE MINUTES OF THE MEETING OF THE BOARD OF MANAGING DIRECTORS OF
HANSON ANTILLES N.V., THE COMPANY, A NETHERLANDS ANTILLES CORPORATION RESIDENT
IN CURACAO, HELD AT THE REGISTERED OFFICE OF THE COMPANY AT SCHOTTEGATWEGOOST
130, SALINJA, CURACAO, NETHERLANDS ANTILLES, ON FEBRUARY 1, 1994 AT 10.30 A.M.
After due consideration IT WAS RESOLVED the Company shall amend the terms of its
outstanding loan (the "Loan") to Hanson America Inc., a Delaware corporation
("Borrower"), under which the aggregate principal amount of Two Billion Two
Hundred Fifty Million United States Dollars (US$2,250,000,000) has been advanced
to Borrower as contemplated by the resolution adopted by the board on October
15, 1993, so that effective on the date hereof the maturity of the Loan shall be
extended from March 25, 1999 to October 15, 2003, and the interest rate shall be
increased from six and one-half percent (6 1/2%) to seven percent (7%) per
annum, payable in arrears on the 25th day of each September, commencing on
September 25, 1994, and at payment in full of the Loan.
It was noted that, from and after the date hereof, the Loan will be subordinate
in right payment to the prior payment in full of all of the Borrower's senior
indebtedness for borrowed money, including without limitation any indebtedness
under the Borrower's proposed new Credit Agreement with Chemical Bank, as agent,
and the Borrower's proposed Senior Exchangeable Discount Notes due 2001, and the
Loan will continue to be subordinate in right of payment to the prior payment in
full of the obligations of the Borrower under its existing Credit Agreement with
Chemical Bank, as agent, and to the presently outstanding Beazer Bond
Obligations referred to in such existing Credit Agreement (collectively, the
"Senior Obligations"); provided, however, that the Company may receive and
Borrower may make payments of interest on the Loan on the agreed dates of
payment thereof if, at the time of making such payments and immediately after
giving effect thereto, no default under any of the terms, covenants or
conditions of any of the instruments evidencing the Senior Obligations shall
have occurred and be continuing.
It was also noted that if any defaults should occur on the part of the Borrower
under any Senior Obligations, and the maturity of existing Credit Agreement, the
proposed new Credit Agreement, the proposed Senior Exchangeable Discount Notes
due 2001 or a total amount of other Senior Obligations in excess of One Hundred
Million United States Dollars (US$100,000,000) is accelerated by action of any
agent, lender or trustee thereunder, or if the Borrower shall fail to pay
interest on the Loan when due; or if the Borrower shall voluntarily commence a
proceeding or if an involuntary proceeding shall be commenced against the
Borrower under Title 11 of the United States Code or any other similar federal
or state law; then the Company shall have the right to declare the Loan and all
amounts due in connection therewith to be forthwith due and payable.
It was also noted that any transfer or assignment of the Company's rights to
principal and interest on the Loan shall continue to be effective only when
reflected on the books of the Borrower.
It was further noted that the terms of the Loan, as amended hereby, are to be
governed by the laws of the State of New York.
After due consideration, it was also RESOLVED that the Company's
US$2,250,000,000 loan from Hanson Holdings Netherlands B.V. be amended so that
effective on the date hereof the maturity of such loan shall be extended from
March 25, 1999 to October 15, 2003, and the interest rate shall be increased
from six and one half percent less one basis point to seven percent per annum
less one basis point, payable in arrears on the 25th day of each September,
commencing on September 25, 1994, and at payment in full of such loan.
In furtherance of the foregoing, it was then RESOLVED that the Company's
directors be, and each of them hereby is, authorised and directed to take such
actions on behalf of the Company as may be necessary or appropriate to carry out
the intent and accomplish the purpose of the foregoing.
Page 6 of 6
<PAGE>
<PAGE>
EXHIBIT 4.3
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
H.M. ANGLO AMERICAN LIMITED (THE "COMPANY")
ADOPTED AS OF MARCH 29, 1996
BY UNANIMOUS WRITTEN CONSENT
UNDER SECTION 141(f) OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
WHEREAS, there is currently outstanding a loan to the Company from Hanson
Aruba N.V. (the "Lender") (formerly known as Milmar N.V.) in the principal
amount of US$1,900,000,000 (the "Loan"), maturing October 15, 2003;
WHEREAS, the Loan requires the Company to make interest payments to the
Lender on the 25th day of each December, March, June, and September (or the
business day immediately preceding such date if such date is not a business
day), and at payment in full of the Loan;
WHEREAS, on December 15, 1995, the Lender and the Company agreed, among
other things, that the Company would defer making the December 25, 1995 and
March 25, 1996 interest payments on the Loan until April 2, 1996; and
WHEREAS, the Lender and the Company have decided to make additional changes
to the timing of certain upcoming interest payments, as described in detail
below.
NOW THEREFORE, the directors of the Company hereby unanimously approve the
following resolutions:
RESOLVED, that the Lender and the Company have agreed to the following
changes to the interest payment schedule provided for under the Loan:
i. The interest that is due and payable with respect to the Loan on
June 25, 1996 (the "Interest Payment") shall be paid by the Company to the
Lender, not on that date, but instead on July 2, 1996. To compensate the Lender
for the deferral in payment of the Interest Payment, the Company shall pay the
Lender interest on the Interest Payment at the same rate of interest payable on
the principal amount of the loan between April 2, 1996 and the altered interest
payment date of July 2, 1996, which rate, as established by reference to Reuters
Screen Rates on March 29, 1996, will equal 6.99219% (the "Rate").
ii. On July 2, 1996, the Company shall pay the Lender the interest
that accrues on the Loan from June 26, 1996 through July 2, 1996. The rate for
purposes of computing such interest shall be the Rate. The amount of such
interest shall be discounted, using the Rate as the discount rate, to reflect
the fact that the Company is paying such interest 85 days early.
RESOLVED, that the President, any Vice President, the Secretary, the
Treasurer, or any Assistant Secretary or Assistant Treasurer of the Company be,
and each of them hereby is, authorized and directed to take such actions on
behalf of the Company as may be necessary or appropriate to carry out the intent
and accomplish the purposes of the foregoing resolutions.
<PAGE>
<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned, being all the directors of the
Company, hereby consent to the adoption of the foregoing resolutions and direct
the Secretary of the Company to file this Consent in the minute book of the
Company.
/s/ William M. Landuyt
____________________________________
Name:
/s/ Robert E. Lee
____________________________________
Name:
/s/ George H. Hempstead, III
____________________________________
Name:
<PAGE>
<PAGE>
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
H.M. ANGLO AMERICAN LIMITED (THE "COMPANY")
Adopted as of December 15, 1995
by Unanimous Written Consent
Under Section 141(f) of the General Corporation Law
of the State of Delaware
WHEREAS, there is currently outstanding a loan to the Company from Hanson
Aruba N.V. (the "Lender") (formerly known as Milmar N.V.) in the principal
amount of US$1,900,000,000 (the "Loan"), maturing October 15, 2003;
WHEREAS, the Loan requires the Company to make interest payments to the
Lender on the 25th day of each December, March, June, and September (or the
business day immediately preceding such date if such date is not a business
day), and at payment in full of the Loan; and
WHEREAS, the Lender and the Company have agreed to changes to the timing of
certain of the interest payments on the Loan, as described in detail below.
NOW THEREFORE, the directors of the Company hereby unanimously approve the
following resolutions:
RESOLVED, that the Lender and the Company have agreed to the following
changes to the interest payment schedule provided for under the Loan:
i. The interest that is due and payable with respect to the Loan on
December 25, 1995 and March 25, 1996 (the "Interest Payments") shall be paid by
the Company to the Lender, not on those two dates, but instead on April 2, 1996.
To compensate the Lender for the deferral in payment of the Interest Payments,
the Company shall pay the Lender interest on the Interest Payments at the same
rate of interest payable on the principal amount of the loan between December
25, 1995 and the altered interest payment date of April 2, 1996, which rate will
be established by reference to Reuters Screen Rates on December 20, 1995 (the
"Rate").
ii. On April 2, 1996, the Company shall pay the Lender the interest
that accrues on the Loan from March 26, 1996 through April 2, 1996. The rate for
purposes of computing such interest shall be the Rate. The amount of such
interest shall be discounted, using the Rate as the discount rate, to reflect
the fact that the Company is paying such interest 84 days early.
RESOLVED, that the President, any Vice President, the Secretary, the
Treasurer, or any Assistant Secretary or Assistant Treasurer of the Company be,
and each of them hereby is, authorized and directed to take such actions on
behalf of the Company as may be necessary or appropriate to carry out the intent
and accomplish the purposes of the foregoing resolutions.
<PAGE>
<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned, being all the directors of the
Company, hereby consent to the adoption of the foregoing resolutions and direct
the Secretary of the Company to file this Consent in the minute book of the
Company.
/s/ William M. Landuyt
----------------------------
Name
/s/ Robert E. Lee
----------------------------
Name
/s/ George H. Hempstead, III
----------------------------
Name
<PAGE>
<PAGE>
Written Consent of the Board of Directors of
HM Anglo American Ltd.
Adopted pursuant to Section 141(f) of
the General Corporation Law of the State of Delaware
The undersigned, being all the directors of HM Anglo American Ltd., a
Delaware corporation (the "Corporation"), hereby consent, pursuant to Section
141(f) of the General Corporation Law of the State of Delaware (the "DGCL"), to
the adoption of the following:
WHEREAS, the Board of Directors of the Corporation deems it advisable and
in the best interests of the Corporation to borrow $1,900,000,000 from its
affiliate, Milmar N.V., an Aruba corporation (the "Lender") (in the process of
changing name to Hanson Aruba N.V.), on the terms and conditions set forth
below;
NOW, THEREFORE, the directors of the Corporation hereby unanimously approve
the following resolutions:
RESOLVED, that (i) the Corporation shall borrow from the Lender One Billion
Nine Hundred Million United States Dollars (US $1,900,000,000) on September 29,
1995 (the "Loan"); (ii) the maturity date of the Loan shall be October 15, 2003;
(iii) the Loan shall bear interest at the rate equal to the three month LIBOR
rate as quoted by Reuters Page LIBO (a) on the date hereof, with respect to the
period ending December 25, 1995, and (b) two business days prior to each
successive interest payment date, plus 150 basis points; and (iv) interest on
the Loan shall be payable in arrears on the 25th day of each December, March,
June, and September (or the business day immediately preceding such date if such
date is not a business day), commencing on December 25, 1995, and at payment in
full of the Loan.
RESOLVED, that (i) if the Corporation fails to pay interest on the Loan
when due, or (ii) if the Corporation voluntarily commences a proceeding, or if
an involuntary proceeding is commenced against the Corporation, under Title 11
of the United States Code or any other similar federal or state law, or (iii) if
a default occurs with respect to any indebtedness for borrowed money of the
Corporation or the Corporation's subsidiary, Hanson America Inc., in an
aggregate principal amount in excess of US $15,000,000 and the effect of such
default is to accelerate or permit the holder or obligee of such indebtedness
(or any trustee on behalf of such holder or obligee) to accelerate (with or
without the giving of notice or the lapse of time or both) the maturity date of
such indebtedness; then the Lender shall have the right to declare the Loan and
all amounts due in connection therewith to be immediately due and payable.
<PAGE>
<PAGE>
RESOLVED, that any transfer or assignment of the Lender's rights to
principal and interest on the Loan shall be effective only when reflected on the
books of the Corporation.
RESOLVED, that the terms of the Loan are to be governed by the laws of the
State of New York.
RESOLVED, that the appropriate officers of the Corporation be, and each of
them hereby is, authorized and directed to take such actions on behalf of the
Corporation as may be necessary or appropriate to carry out the intent and
accomplish the purposes of the foregoing resolutions.
RESOLVED, that a copy of this written consent be filed with the minutes of
the proceedings of the Board of Directors of the Corporation, and that a
certified copy of this written consent be promptly sent by registered mail to
the Lender.
This written consent may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
Dated: September 27, 1995 /s/ William M. Landuyt
----------------------------
William M. Landuyt
Dated: September 27, 1995 /s/ George H. Hempstead, III
----------------------------
George H. Hempstead, III
Dated: September 27, 1995 /s/ Robert E. Lee
----------------------------
Robert E. Lee
<PAGE>
<PAGE>
EXHIBIT 4.4(a)
- --------------------------------------------------------------------------------
HANSON AMERICA INC.
Issuer
HM HOLDINGS, INC.
Guarantor
and
THE BANK OF NEW YORK
Trustee
-----------------------------------------------------------------
Indenture
Dated as of March 1, 1994
-----------------------------------------------------------------
$1,255,115,000*
2.39% Senior Exchangeable Discount Notes Due 2001
- --------------------------------------------------------------------------------
* Subject to increase to up to $1,380,626,500
<PAGE>
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TABLE OF CONTENTS
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RECITALS OF THE COMPANY.......................................................1
ARTICLE ONE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
SECTION 101. Provisions of General Application; Definitions...........1
SECTION 102. Compliance Certificates and Opinions....................13
SECTION 103. Form of Documents Delivered to Trustee..................14
SECTION 104. Acts of Holders of Notes................................14
SECTION 105. Notices, etc., to Trustee, Company and HMH..............16
SECTION 106. Notice to Holders; Waiver...............................16
SECTION 107. Effect of Headings and Table of Contents................18
SECTION 108. Successors and Assigns..................................18
SECTION 109. Separability Clause.....................................18
SECTION 110. Benefits of Indenture...................................18
SECTION 111. GOVERNING LAW...........................................18
SECTION 112. Legal Holidays..........................................18
SECTION 113. Non-separability........................................18
SECTION 114. Submission to Jurisdiction..............................18
SECTION 115. Cooperation With ADS Rights Agent.......................19
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ARTICLE TWO 20
THE NOTES
SECTION 201. Forms Generally.........................................20
SECTION 202. Forms of Notes..........................................20
SECTION 203. Form of Temporary Global Note...........................20
SECTION 204. Form of Coupon..........................................25
SECTION 205. Form of Trustee's Certificate of Authentication.........26
SECTION 206. Legends on Restricted Notes.............................26
SECTION 207. Title and Terms.........................................27
SECTION 208. Denominations...........................................27
SECTION 209. Execution, Authentication, Delivery and Dating..........28
SECTION 210. Temporary Global Note; Exchange of Temporary
Global Note for Definitive Notes........................28
SECTION 211. Registration, Registration of Transfer and
Exchange; Restrictions on Transfer......................31
SECTION 212. Mutilated, Destroyed, Lost or Stolen Notes and
Coupons.................................................34
SECTION 213. Payment of Interest; Interest Rights Preserved..........35
SECTION 214. Persons Deemed Owners...................................36
SECTION 215. Cancellation............................................38
SECTION 216. Computation of Interest.................................38
SECTION 217. Forms of Certification..................................38
SECTION 218. Temporary Notes.........................................41
SECTION 219. Form of HMH Note Guaranty...............................41
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SECTION 220. CUSIP Numbers...........................................42
SECTION 221. Rule 144A Global Notes..................................42
SECTION 222. Exchange of Rule 144A Global Notes for Registered
Notes...................................................42
ARTICLE THREE 43
REDEMPTION AND REPURCHASES OF NOTES
SECTION 301. Right of Redemption at Company's Election...............43
SECTION 302. Redemption of Notes Upon Exercise of ADS Rights.........45
SECTION 303. Change-in-Control Right of Holders......................45
SECTION 304. Tax Repurchase..........................................46
SECTION 305. Deposit of Redemption Price, Repurchase Price or
Tax Repurchase Price....................................48
SECTION 306. Notes Payable on Redemption Date, Repurchase Date
or Tax Repurchase Date..................................48
SECTION 307. Notes Redeemed or Repurchased in Part...................49
ARTICLE FOUR 50
SATISFACTION AND DISCHARGE; COVENANT DEFEASANCE
SECTION 401. Satisfaction and Discharge of Indenture.................50
SECTION 402. Application of Trust Money..............................51
SECTION 403. Covenant Defeasance Upon Deposit of Moneys or
Government Obligations..................................52
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ARTICLE FIVE 53
REMEDIES
SECTION 501. Events of Default.......................................53
SECTION 502. Acceleration of Maturity, Rescission and Annulment......54
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee..................................56
SECTION 504. Trustee May File Proofs of Claim........................56
SECTION 505. Trustee May Enforce Claims Without Possession of
Notes or Coupons........................................57
SECTION 506. Application of Money Collected..........................57
SECTION 507. Limitation on Suits.....................................57
SECTION 508. Unconditional Right of Holders to Receive
Payments, to Require Purchase and to Exercise ADS
Rights..................................................58
SECTION 509. Restoration of Rights and Remedies......................58
SECTION 510. Rights and Remedies Cumulative..........................59
SECTION 511. Delay or Omission Not Waiver............................59
SECTION 512. Control by Holders of Notes.............................59
SECTION 513. Waiver of Past Defaults.................................59
ARTICLE SIX 60
THE TRUSTEE
SECTION 601. Notice of Defaults......................................60
SECTION 602. Certain Rights and Duties of Trustee....................60
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SECTION 603. Not Responsible for Recitals or Issuance of Notes.......62
SECTION 604. May Hold Notes..........................................62
SECTION 605. Money Held in Trust.....................................62
SECTION 606. Compensation and Reimbursement..........................62
SECTION 607. Corporate Trustee Required; Eligibility;
Conflicting Interests...................................63
SECTION 608. Resignation and Removal; Appointment of Successor.......64
SECTION 609. Acceptance of Appointment by Successor..................65
SECTION 610. Merger, Exchange, Consolidation or Succession to
Business................................................65
SECTION 611. Disclosure of Names and Addresses of Holders............65
SECTION 612. Reports by Trustee......................................66
SECTION 613. Delegation of Duties by ADS Rights Agent................66
SECTION 614. Same Treatment of Holders...............................66
SECTION 615. HBL and Hanson Amounts..................................67
ARTICLE SEVEN 67
CONSOLIDATION, MERGER OR TRANSFER
SECTION 701. When the Company May Merge or Transfer Assets...........67
SECTION 702. Successor Substituted...................................68
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ARTICLE EIGHT 68
SUPPLEMENTAL INDENTURES
SECTION 801. Supplemental Indentures Without Consent of Holders......68
SECTION 802. Supplemental Indentures with Consent of Holders.........69
SECTION 803. Execution of Supplemental Indentures....................70
SECTION 804. Effect of Supplemental Indentures.......................70
SECTION 805. Reference in Notes to Supplemental
Indentures, etc.........................................70
SECTION 806. Notice of Supplemental Indentures.......................70
ARTICLE NINE 71
COVENANTS
SECTION 901. Payment of Notes........................................71
SECTION 902. Maintenance of Offices or Agencies......................71
SECTION 903. Amounts for Note Payments to Be Held in Trust...........72
SECTION 904. Negative Pledge.........................................73
SECTION 905. Additional Amounts......................................75
SECTION 906. Statements as to Compliance.............................75
SECTION 907. Corporate Existence.....................................76
SECTION 908. Maintenance of Properties...............................76
SECTION 909. Payment of Taxes and Other Claims.......................76
SECTION 910. Delivery of Certain Information.........................76
SECTION 911. Resale of Certain Notes.................................77
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SECTION 912. Waiver of Stay, Extension or Usury Laws.................77
SECTION 913. Calculation of Original Issue Discount For Tax
Purposes and Certain Information Concerning Tax
Reporting...............................................78
SECTION 914. Limitation on Subsidiary Indebtedness...................78
SECTION 915. Judgment Currency.......................................79
ARTICLE TEN 80
MEETINGS OF HOLDERS OF NOTES
SECTION 1001. Purposes for Which Meetings May Be Called...............80
SECTION 1002. Call, Notice and Place of Meetings......................80
SECTION 1003. Persons Entitled to Vote at Meetings....................80
SECTION 1004. Quorum; Action..........................................80
SECTION 1005. Determination of Voting Rights; Conduct and
Adjournment of Meetings.................................81
SECTION 1006. Counting Votes and Recording Action of Meetings.........82
ARTICLE ELEVEN 83
THE HMH NOTE GUARANTY
SECTION 1101. The HMH Note Guaranty...................................83
SECTION 1102. Payment of Obligations..................................83
SECTION 1103. Subordination and Subrogation...........................83
SECTION 1104. Waivers and Agreements..................................83
SECTION 1105. Reinstatement upon Bankruptcy...........................84
SECTION 1106. Successors and Assigns..................................85
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SECTION 1107. Execution and Delivery of HMH Note Guaranty.............85
SECTION 1108. Termination and Amendment of HMH Note Guaranty..........85
ANNEX A Form of Bearer Note
ANNEX B Form of Registered Note
ANNEX C Form of Rule 144A Global Note
ANNEX D Form of ADS Right
</TABLE>
viii
<PAGE>
<PAGE>
INDENTURE dated as of March 1, 1994, among HANSON AMERICA INC., a
corporation duly organized and existing under the laws of the State of Delaware
(the "Company"), HM HOLDINGS, INC., a corporation duly organized and existing
under the laws of the State of Delaware ("HMH"), and THE BANK OF NEW YORK, a New
York banking corporation, as Trustee hereunder (the "Trustee").
RECITALS OF THE COMPANY:
The Company has duly authorized the creation of an issue of its
2.39% Senior Exchangeable Discount Notes Due 2001 (each, a "Note"; collectively,
the "Notes") and the coupons, if any, thereto appertaining, of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
HMH has duly authorized the issuance of the HMH Note Guaranty (as
hereinafter defined), of substantially the tenor hereinafter set forth, and to
provide therefor, HMH has duly authorized the execution and delivery of this
Indenture and the HMH Note Guaranty;
All actions necessary to constitute (i) the Notes and the
coupons, when executed by the Company and authenticated and delivered hereunder,
the valid obligations of the Company, (ii) the HMH Note Guaranty, when executed
and delivered by HMH and delivered hereunder, the valid obligation of HMH, and
(iii) this Indenture a valid agreement of the Company and HMH in accordance with
its terms, have been accomplished.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders (as hereinafter defined) thereof, the Company, HMH and the
Trustee covenant and agree, for the equal and proportionate benefit of all
Holders of the Notes and coupons, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Provisions of General Application; Definitions. (a)
For all purposes of this Indenture, except as otherwise expressly provided
herein or unless the context otherwise requires:
<PAGE>
<PAGE>
(l) the terms defined in this Article One have the meanings
assigned to them in such Article and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with U.S. GAAP as from time to time in
effect;
(3) references to Articles and Sections herein shall be deemed to
be references to the Articles and Sections of this Indenture unless the context
indicates otherwise; and
(4) 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.
(b) Definitions.
"Accreted Value" of a Note, as of any date, will be the sum of
(i) the Issue Price of such Note and (ii) the portion of the accrued OID through
the date of determination, such portion to be determined on a semi-annual bond
equivalent basis.
For example, the table below shows the Accreted Value (expressed
in percentages of the Principal Amount at Maturity) of a Note at March 1, 1995
and at each March 1 through March 1, 2001.
Date Accreted Value
------------- --------------
March 1, 1995 82.032%
March 1, 1996 84.602%
March 1, 1997 87.329%
March 1, 1998 90.221%
March 1, 1999 93.290%
March 1, 2000 96.546%
March 1, 2001 100.000%
For purposes of determining the Accreted Value of a Note at any
other date, the accrued OID shall be such that, when added to the interest
payable on the Note, it will represent at such date a constant yield of 6.00%
per annum (computed on a semi-annual bond equivalent basis) calculated from
March 11, 1994.
"Adjusted Accreted Value" of a Note, as of any date, will be the
sum of (i) the Adjusted Issue Price of such Note, and (ii) the portion of the
accrued Adjusted OID through the date of determination, such portion to be
determined on a semi-annual bond equivalent basis.
2
<PAGE>
<PAGE>
"Adjusted Issue Price" means $744.62 per $1,000 Principal Amount
at Maturity of the Notes (representing the Issue Price thereof, minus $52.12
(the amount paid to HBL on the Issue Date of the Notes for the ADS Right sold
therewith)).
"Adjusted OID" of any Note means the excess of the "stated
redemption price at maturity" of such Note as defined in Section 1273 of the
Internal Revenue Code of 1986, as amended, or any successor provisions, and the
applicable Treasury Regulations thereunder, whether denominated as principal or
interest, over the Adjusted Issue Price thereof.
"ADRs" means American Depositary Receipts evidencing ADSs issued
from time to time by the Depositary; "ADR" means each such receipt.
"ADSs" means American Depositary Shares, evidenced by ADRs, of
Hanson, issued from time to time by the Depositary, each such share
representing, as of the date hereof, five Ordinary Shares, including evidence of
rights to receive such Ordinary Shares; "ADS" means each such American
Depositary Share.
"ADS Issuance Agreement" means the ADS Issuance Agreement dated
as of March 1, 1994, between HBL and Hanson, as originally executed or as it may
from time to time be supplemented or amended.
"ADS Right" means the ADS Right associated with each Note,
pursuant to which the Holder of such Note may elect to have such Holder's Note
redeemed pursuant to this Indenture and the proceeds used to purchase ADSs
pursuant to the ADS Rights Agreement. The form of ADS Right is set forth in
Annex D.
"ADS Rights Agent" means Citibank, N.A., acting under the ADS
Rights Agreement as ADS Rights Agent, and any successor ADS Rights Agent
thereunder.
"ADS Rights Agreement" means the ADS Rights Agreement dated as of
March 1, 1994, among HBL, Hanson and the ADS Rights Agent, as originally
executed or as it may from time to time be supplemented or amended.
"ADS Rights Amount" per $1,000 Principal Amount at Maturity of
Notes shall be equal to the Sale Price of an ADS on the Trading Day immediately
preceding the ADS Exercise Date, multiplied by the ADS Ratio in effect on such
Trading Day.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Authorized Newspaper" means a newspaper, in an official language
of the country of publication or in the English language, customarily published
on each Business Day, whether or not published on Saturdays, Sundays or
holidays, and of general circulation in the place in connection with which the
term is used or in the financial community of such place. Where successive
publications are required to be made in Authorized Newspapers, the successive
publications may be made in the same or in different newspapers in the same city
meeting the foregoing requirements and in each case on any Business Day.
"Authorized Officers" means any Officers duly authorized to take
the actions specified.
"Bearer Note" means any Note in the form for Bearer Notes set
forth in Annex A.
"Board of Directors", when used with reference to the Company,
means the board of directors of the Company, or a duly authorized committee of
the board of directors of the Company, as the case may be.
"Board Resolution", when used with reference to the Company,
means a resolution or resolutions, certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by its Board of Directors and
to be in full force and effect on the date of such certification.
"Business Day" means, with respect to any act to be performed
pursuant to this Indenture, each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the place where such act is
to occur are authorized or obligated by applicable law, regulation or executive
order to close.
"Capitalized Lease Obligations" means obligations to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real and/or personal property, which obligations are accounted for as a
capital lease on a balance sheet under U.S. GAAP; for the purpose hereof the
amount of such obligations shall be the capitalized amount reflected on such
balance sheet.
"Change-in-Control" means the occurrence of any event the effect
of which is that Hanson ceases to own, directly or indirectly, securities
representing 100% of the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors of the Company.
"Closing Date" means March 11, 1994, or such later date on which
the Notes shall first be delivered pursuant to the U.S. Purchase Agreement and
the Subscription Agreement.
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"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" and "Company Order" mean, respectively, a
written request or order signed in the name of the Company by an Officer of the
Company and delivered to the Trustee.
"Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with U.S. GAAP), after deducting therefrom (i)
all current liabilities of the Company and its Subsidiaries (excluding current
maturities of long-term indebtedness and intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt issuance fees and
expenses and other like intangibles, all as determined in accordance with U.S.
GAAP.
"Corporate Trust Office" means the principal office of the
Trustee in the Borough of Manhattan, The City of New York, at which at any
particular time its corporate trust business shall be administered.
"coupon" means any interest coupon appertaining to a Bearer Note.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Deposit and Custody Agreement" means the Deposit and Custody
Agreement of even date herewith, among the Note Depositary, the Note Custodian,
the Company, HMH, Hanson, HBL and the holder and beneficial owners from time to
time of Rule 144A Global Receipts.
"Depositary" means the depositary (presently Citibank, N.A.)
under the Deposit Agreement dated as of September 29, 1986 as amended and
restated as of November 3, 1986, as it may subsequently be amended, among
Hanson, Citibank, N.A., as depositary, and the holders from time to time of
ADRs, or any successor to such Deposit Agreement.
"Dollar", "U.S. Dollar" or "$" means a United States dollar or
other equivalent unit in such coin or currency of the United States as at the
time shall be legal tender for the payment of public and private debts.
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"DTC" or "The Depository Trust Company" means The Depository
Trust Company, a limited-purpose trust company organized under the New York
Banking Law, or any successor thereto.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended from time to time.
"Funded Indebtedness" means Indebtedness 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 any obligor to a date more than one year from such date.
"Global Exchange Date" means the date that is 40 days after the
latest of (i) the commencement of the Offerings (as defined in the U.S. Purchase
Agreement), (ii) the Closing Date, and (iii) the Second Time of Delivery (as
defined in the U.S. Purchase Agreement).
"Global Note" means a temporary Note in the form set forth in
Section 203.
"Hanson" means Hanson PLC, a public limited company incorporated
in England and Wales and, subject to Section 5.1(b) of the ADS Rights Agreement,
its successors and assigns.
"HBL" means Hanson (Bermuda) Limited, a corporation with limited
liability under the laws of Bermuda and, subject to Section 5.1(a) of the ADS
Rights Agreement, its successors and assigns.
"HMH" means the Person named as HMH in the first paragraph of
this Indenture until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "HMH" shall mean such
successor Person.
"HMH Bank Guaranty" means the Guarantee Agreement dated as of
March 11, 1994, made by HMH to and for the benefit of the Beneficiaries (as
defined therein).
"HMH Note Guaranty" means the guaranty of the Notes by HMH under
the provisions contained herein.
"Holder" (i) when used with respect to any Note, means (A) in the
case of a Registered Note, the Person in whose name the Note is registered in
the Note Register, (B) in the case of a Bearer Note or the Global Note, the
bearer thereof, and (C) in the case of a Rule 144A Global Note, the bearer
thereof, the Note Custodian, and (ii) when used with respect to any coupon,
means the bearer thereof.
"Indebtedness" means, as applied to any Person, without
duplication, any indebtedness, exclusive of deferred taxes, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a
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portion thereof); (ii) evidenced by bonds, notes, debentures or similar
instruments or letters of credit in support of bonds, notes, debentures or
similar instruments; (iii) representing the balance deferred and unpaid of the
purchase price of any property, if and to the extent such indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with U.S. GAAP (but excluding trade accounts payable arising in the ordinary
course of business that are not overdue by more than 90 days or are being
contested by such Person in good faith); (iv) any Capitalized Lease Obligations
of such Person; and (v) Indebtedness of others guaranteed by such Person,
including, without limitation, every obligation of such Person (A) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, or (B) 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
Indebtedness.
"Indenture" means this instrument as originally executed or 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.
"Intercompany Funded Indebtedness" means Funded Indebtedness
incurred by a Subsidiary of the Company and owing to another Subsidiary of the
Company or to the Company.
"Issue Date" means, with respect to any Note and ADS Right, the
date on which such Note and ADS Right were originally issued as set forth on the
face of such Note.
"Issue Price" means $796.74 per $1,000 Principal Amount at
Maturity of the Notes (representing the initial issue price at which such Note
(and the ADS Right sold simultaneously with such Note) is sold as set forth on
the face of such Note).
"Keepwell Agreement" means the Keepwell Agreement dated as of
March 1, 1994, between HBL and Hanson, as originally executed or as it may from
time to time be supplemented or amended.
"Maturity" means, when used with respect to any Note, the date
specified in such Note as the date on which an amount equal to the Principal
Amount at Maturity, the Accreted Value, the ADS Rights Amount, the Repurchase
Price, the Tax Repurchase Price or the Redemption Price with respect to such
Note is due and payable, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"New Credit Facility" means the Credit Agreement dated as of
March 11, 1994, among the Company, HMH, Chemical Bank, as administrative agent,
and the banks named therein, as in effect from time to time and as amended,
renewed, extended or supplemented, and any replacements and refinancings
thereof.
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"Non-Recourse Funded Indebtedness" means Funded Indebtedness
incurred in connection with the acquisition, purchase, improvement or
development of property or assets used or held by any Subsidiary of the Company
and which is secured only by such assets and without recourse to any Subsidiary
of the Company for such Funded Indebtedness.
"Note" and "Notes" have the meanings set forth in the Recitals to
this Indenture and, unless the context otherwise requries, includes the
associated HMH Note Guaranty.
"Note Custodian" means The Bank of New York, Cayman Islands
Branch, or such other Person which is appointed custodian of a Rule 144A Global
Note with the approval of the Company.
"Note Depositary" means The Bank of New York or such other Person
that is the depositary in connection with the Rule 144A Global Notes and which
has delivered or will deliver one or more Rule 144A Global Receipts representing
the Rule 144A Global Notes held by the Note Custodian.
"Offering Memorandum" has the meaning set forth in the U.S.
Purchase Agreement and the Subscription Agreement.
"Officer", with respect to any Person, means its Chairman, any of
its Vice Chairmen, its President, any of its Vice Presidents, its Treasurer, any
of its Assistant Treasurers, its Secretary, any of its Assistant Secretaries or
any individual routinely performing corresponding functions with respect to the
Company.
"Officers' Certificate", when used with reference to any Person,
means a written certificate containing the information specified in Section 102,
executed by two different Officers of such Person and delivered to the Trustee.
"OID" or "Original Issue Discount" of any Note means the excess
of the "stated redemption price at maturity" of such Note, as defined in Section
1273 of the Internal Revenue Code of 1986, as amended, or any successor
provisions, and the applicable Treasury Regulations thereunder, whether
denominated as principal or interest, over the Issue Price thereof.
"Opinion of Counsel" means a written opinion containing the
information specified in Section 102, furnished by legal counsel, who may be the
general counsel of the Company, or other counsel reasonably acceptable to the
Trustee.
"Ordinary Shares" means ordinary shares of 25p each in the
capital of Hanson as authorized from time to time and all other (if any) stock
or shares from time to time and for the time being ranking pari passu therewith
and all other (if any) shares or stock resulting from any subdivision,
consolidation or reclassification of Ordinary Shares,
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having as between themselves no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary winding-up of Hanson.
"Outstanding", when used with respect to Notes, means, as of the
date of determination, all Notes theretofore authenticated and delivered under
this Indenture, except:
(i) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Notes for the payment or redemption of which money
in the necessary amount has been theretofore deposited with the Trustee
or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Notes and any coupons thereto
appertaining, provided that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture; and
(iii) Notes which have been paid pursuant to Section 212
or in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than any
such Notes in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Notes are held by a bona fide
purchaser in whose hands such Notes are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
Principal Amount at Maturity of Outstanding Notes are present at a meeting of
Holders of Notes for quorum purposes or have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of 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 determination as to the presence of a quorum or upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
which the Trustee knows to be so owned shall be so disregarded. Notes so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Notes and that the pledgee is not the Company or any
other obligor upon the Notes or any Affiliate of the Company or such other
obligor.
"Paying Agent" means any Person (which may be the Company or an
Affiliate of the Company) appointed by the Company as provided in Section 902 to
pay for, purchase or redeem the Notes on behalf of the Company.
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"Person" or "person" means any individual, corporation,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 212 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
"Principal Amount at Maturity" of any Note means the principal
amount of such Note due at Maturity as set forth on the face of such Note.
"Principal Subsidiary" means, with respect to the Company, any
Subsidiary the gross assets of which represent 10% or more of the consolidated
gross assets of the Company and its consolidated subsidiaries as of the end of a
fiscal year of the Company. For the purposes of this definition, in determining
whether a Subsidiary shall represent 10% or more of such consolidated gross
assets, such Subsidiary shall be deemed to own the consolidated gross assets of
its Subsidiaries.
"QIB" means "qualified institutional buyer", as defined in Rule
144A.
"Quantum" means Quantum Chemical Corporation, a Virginia
corporation.
"Redemption Date" means the date specified for redemption of any
of the Notes in accordance with the terms of the Notes and of Section 301.
"Redemption Price" means the price to be paid upon any redemption
of any of the Notes at the option of the Company pursuant to this Indenture.
"Registered Note" means any Note in the form for Registered Notes
set forth in Annex B.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the February 15 (whether or not a Business Day) next
preceding a March 1 Interest Payment Date and the August 15 (whether or not a
Business Day) next preceding a September 1 Interest Payment Date.
"Responsible Officer" means any officer of the Trustee assigned
by it to administer corporate trust matters.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means any Note in the form for Rule 144A
Global Notes set forth in Annex C, authenticated and delivered to the Note
Custodian, which shall cause the issuance by the Note Depositary of a Rule 144A
Global Receipt in
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respect thereof to the Rule 144A Global Receipt Holder or its nominee, and
registered in the name of the Rule 144A Global Receipt Holder or its nominee.
"Rule 144A Global Receipt" means an American Depositary Note
Receipt issued under the Deposit and Custody Agreement.
"Rule 144A Global Receipt Holder" means the registered holder
from time to time of the Rule 144A Global Receipts, which initially shall be DTC
or its nominee.
"Sale Price" of a single ADS on any Trading Day means the closing
sale price per ADS (or, if no closing sale price is reported, the closing bid
price per ADS) on such Trading Day as reported in the composite transactions for
the New York Stock Exchange (or, if ADSs are not then traded on the New York
Stock Exchange, the principal securities exchange or market in the United States
on which such ADSs are then traded). In the absence of one or more such
quotations, HBL shall be entitled to determine the Sale Price on the basis of
such quotations as it in good faith considers appropriate, as evidenced by a
resolution of its Board of Directors.
"Securities Act" means the United States Securities Act of l933,
as amended from time to time.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 213.
"Stated Maturity", when used with respect to any Note, or any
installment of interest thereon, means the date specified in such Note, or a
coupon representing such installment of interest, as the fixed date on which the
payment with respect to such Note or such installment of interest is due and
payable.
"Subscription Agreement" means the Subscription Agreement dated
March 3, 1994, among the Company, Hanson, HBL and Lehman Brothers International
(Europe), CS First Boston Limited and Goldman Sachs International, as
representatives of the International Managers named therein.
"Subsidiary" means any entity in which the Company owns, directly
or indirectly, at least 51% of the combined voting power of such entity's then
outstanding securities entitled to vote generally in the election of directors.
"Tax Amounts" has the meaning specified in the ADS Rights
Agreement.
"Trading Day" means each day on which the New York Stock Exchange
(or, if ADSs are not then traded on the New York Stock Exchange, the principal
securities exchange or market in the United States on which such ADSs are then
traded) is open for trading, other than a day on which such exchange is
scheduled to close prior to its regular weekday closing time.
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"Transfer Agent" means any Person, which may be the Company or
any of its Affiliates, appointed by the Company as provided in Section 902 to
register the transfer of Notes.
"Trustee" means 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.
"United States" means the United States of America (including the
States and the District of Columbia) and its "possessions" include Puerto Rico,
the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern
Mariana Islands.
"U.S. GAAP" means United States generally accepted accounting
principles consistently applied.
"U.S. Government Obligations" means direct non-callable
obligations of, or non-callable obligations guaranteed as to timely payment by,
the United States of America for the payment of which obligation or guarantee
the full faith and credit of the United States of America is pledged.
"U.S. Purchase Agreement" means the Purchase Agreement dated
March 3, 1994, among the Company, HBL, Hanson and Lehman Brothers Inc., CS First
Boston Corporation and Goldman, Sachs & Co., as representatives of the U.S.
Purchasers named therein.
(c) Other Terms Defined Elsewhere in this Indenture.
<TABLE>
<CAPTION>
Defined in Section
Term or Annex
---- --------
<S> <C>
Act 104(a)
Additional Amounts Annexes A,B & C
ADS Exercise Date Annex D
ADS Ratio Annex D
CEDEL 210
Change-in-Control Right Annexes A,B & C
Common Depositary 210
Debt Basket 914
Defaulted Interest 213
Determination Notice Annex A
EUROCLEAR 210
Event of Default 50l
Interest Payment Date Annexes A,B & C
Judgment Currency 915
Lien Basket 904
</TABLE>
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<TABLE>
<S> <C>
National Accountants 910(b)
New York Banking Day 916
Note Register 211(a)
Note Registrar 211(a)
Obligations 1101
Original Issuance Date Annexes A,B & C
Repurchase Date Annexes A,B & C
Repurchase Exercise Date 303(b)
Repurchase Notice Annexes A,B & C
Repurchase Price Annexes A,B & C
Required Currency 915
Restricted Notes 206
Rule 144A Information Annexes A,B & C
Tax Repurchase Annexes A,B & C
Tax Repurchase Date 304(3)
Tax Repurchase Price Annexes A,B & C
Tax Repurchase Right Annexes A,B & C
United States Alien Annexes A,B & C
Withholding Tax Notice 304
</TABLE>
SECTION 102. Compliance Certificates and Opinions. Upon any
application or request by the Company or HMH to the Trustee to take any action
under any provision of this Indenture, the Company or HMH shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel 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 an Officers' Certificate and an Opinion of Counsel 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 with respect to compliance with a
covenant or condition provided for in or pursuant to this Indenture (other than
pursuant to Section 906) shall include:
(a) a statement that each individual executing such certificate
or 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;
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(c) a statement that, in the opinion of each such individual, he
or she has made such examination or investigation as is necessary to
enable him or her 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, such covenant or condition has been complied with.
SECTION 103. 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 Company may be
based, insofar as such certificate or opinion 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 such
certificate or opinion is based are erroneous. Any such certificates or Opinion
of Counsel 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
Company, on behalf of the Company, stating that the information with respect to
such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which such
certificate or opinion are based are erroneous.
In any instance in which any Person is required to make, provide
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 104. Acts of Holders of Notes. (a) Any request, demand,
authorization, direction, notice, consent, election, waiver or other action
provided by this Indenture to be provided or taken by Holders may be embodied
in, and evidenced by, (i) one or more instruments of substantially similar tenor
signed by such Holders in person or by their agent duly appointed in writing,
(ii) the record of Holders of Notes voting in favor thereof, either in person or
by proxies duly appointed in writing, at any meeting of Holders of Notes duly
called and held in accordance with Article Ten, or (iii) a combination of such
instruments and such record. Except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments or record or
both are delivered to the Trustee and, where it is hereby expressly required,
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to the Company. Such instrument or instruments and record (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders executing such instrument or instruments or so voting at
any such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Note, shall be
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section 104. The
record of any meeting of Holders shall be proven in the manner provided in
Section 1006.
(b) 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, or in any
other reasonable manner the Trustee deems sufficient. Where such execution is by
a Person acting in a capacity other than such signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof of such signer's
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 and in accordance with such
reasonable rules as the Trustee may determine.
(c) The Issue Price, Principal Amount at Maturity and serial
numbers of Bearer Notes held by any Person, and the date of his holding the
same, may be proved by the production of such Bearer Notes or by a certificate
executed by any trust company, bank, banker or other depositary, wherever
situated, if such certificate shall be deemed by the Trustee to be satisfactory,
showing that at the date therein mentioned such Person had on deposit with such
depositary, or exhibited to it, the Bearer Notes therein described; or such
facts may be proved by the certificate or affidavit of the Person holding such
Bearer Notes, if such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Company may assume that such ownership of any
Bearer Note continues until (l) another certificate or affidavit bearing a later
date issued in respect of the same Bearer Note is produced, (2) such Bearer Note
is produced to the Trustee by some other Person, (3) such Bearer Note is
surrendered in exchange for a Registered Note, or (4) such Bearer Note is no
longer Outstanding.
(d) The Issue Price, Principal Amount at Maturity and serial
numbers of Registered Notes held by any Person, and the date of such Person's
holding the same, shall be conclusively proven by reference to the Note
Register, except in cases of manifest error. The Principal Amount at Maturity
and serial numbers of Rule 144A Global Notes held by the Note Custodian, and the
date of the Note Custodian's holding the same, shall be conclusively proven by
the production of such Rule 144A Global Notes or by a certificate executed by
the Note Custodian.
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(e) Any request, demand, authorization, direction, notice,
consent, election, waiver, agreement or other Act of the Holder of any Note
shall bind every future Holder of the same Note, and the Holder of every Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 105. Notices, etc., to Trustee, Company and HMH. Any
request, demand, authorization, direction, notice, consent, election, waiver,
Act or other document provided or permitted by this Indenture to be made upon,
provided or furnished to, or filed with:
(1) the Trustee, by any Holder, the Company or HMH, shall be
sufficient for every purpose hereunder if in writing, mailed,
first-class postage prepaid, or delivered, to it at its Corporate Trust
Office, 101 Barclay Street (Floor 21 West), New York, New York 10286,
Attention: Corporate Trust Trustee Administration, or at such other
notice address as shall have been most recently furnished in writing to
the Holders, the Company and HMH;
(2) the Company, by the Trustee, any Holder or HMH, shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing, mailed, first-class postage prepaid,
or delivered, to it at 99 Wood Avenue, South Iselin, New Jersey 08830;
Attention: General Counsel, or at such other notice address as shall
have been most recently furnished in writing to the Trustee by the
Company; or
(3) HMH, by the Trustee, any Holder or the Company shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing, mailed, first-class postage prepaid,
or delivered, to it at 99 Wood Avenue South, Iselin, New Jersey 08830;
Attention: General Counsel, or at such other notice address as shall
have been most recently furnished in writing to the Trustee by the
Company.
Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this Indenture shall be in the
English language, except that any published notice may be in an official
language of the country of publication; provided, however, that a notice
published in Luxembourg shall be in English.
SECTION 106. Notice to Holders; Waiver. Except as otherwise
expressly provided herein, where this Indenture provides for notice to Holders
of Notes of any event,
(l) such notice shall be sufficiently given to Holders of Bearer
Notes if published at least twice in an Authorized Newspaper in The City
of New York and in London and, so long as the Notes are listed on the
Luxembourg Stock Exchange
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and such stock exchange shall so require, in Luxembourg or, if not
practicable in either London or Luxembourg, elsewhere in any country in
Western Europe, on a Business Day, the first such publication to be not
earlier than the earliest date and the second not later than the latest
date prescribed for the giving of such notice;
(2) such notice shall be sufficiently given to Holders of
Registered Notes if published in an Authorized Newspaper pursuant to
paragraph (l) above and given in writing and mailed, first-class postage
prepaid, to each Holder of a Registered Note affected by such event, at
the address of such Holder as it appears in the Note Register, not
earlier than the earliest date and not later than the latest date
prescribed for the giving of such notice; and
(3) such notice shall be sufficiently given to the Holder of a
Rule 144A Global Note if given in writing and mailed, first-class
postage prepaid, to the Note Custodian at the address notified to the
Trustee, not earlier than the earliest date and not later than the
latest date prescribed for the giving of such notice (or by such other
method as the Note Custodian may from time to time communicate to the
Trustee).
In case by reason of the suspension of publication of any
Authorized Newspaper or Authorized Newspapers or by reason of any other cause it
shall be impracticable to publish any notice to Holders of Notes as provided
above, then such notification to Holders of Notes as shall be given with the
approval of the Trustee shall constitute sufficient notice to such Holders for
every purpose hereunder.
In any case where notice to Holders of Registered Notes is given
by mail, neither the failure to mail such notice, nor any defect in any notice
so mailed, to any particular Holder of a Registered Note shall affect the
sufficiency of such notice with respect to other Holders of Registered Notes or
the sufficiency of any notice by publication to Holders of Bearer Notes given as
provided above or the sufficiency of any notice to the Holder of a Rule 144A
Global Note as provided above. In case by reason of the suspension of regular
mail service or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification to Holders of Registered Notes and
Rule 144A Global Notes as shall be made with the approval of the Trustee shall
constitute a sufficient notification to such Holders for every purpose
hereunder.
Such notices shall be deemed been to have given on the date of
such publication or mailing or, if published in Authorized Newspapers on
different dates, on the date of the first such publication.
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
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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.
SECTION 107. 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 l08. Successors and Assigns. All covenants and agreements
in this Indenture by the Company and HMH shall bind their respective successors
and assigns, whether so expressed or not.
SECTION l09. Separability Clause. In the event that any provision
in this Indenture or in the Notes or coupons shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions thereof shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture. Nothing in this Indenture or
in the Notes or coupons, express or implied, shall provide to any Person, other
than the parties hereto and their successors hereunder and the Holders, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW. THIS INDENTURE, THE NOTES AND ANY
COUPONS APPERTAINING THERETO, AND THE HMH NOTE GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 112. Legal Holidays. If any date specified in this
Indenture or the Notes for the occurrence of any event (including, without
limitation, the providing of notice and the making of a payment) shall not be a
Business Day at the place of the occurrence of the event, then such event shall
occur on the next succeeding date that is a Business Day at such place with the
same force and effect as if such event had occurred on the date originally
specified; it being understood that if such event is a payment in respect of the
Notes and coupons and such payment is so made on such succeeding Business Day,
no additional Original Issue Discount or interest, if any, as applicable, shall
accrue in respect of the period from and after the date on which such payment
was due.
SECTION 113. Non-separability. Except as provided in the form of
ADS Right and the ADS Rights Agreement, neither a Note nor the ADS Right
associated therewith may be transferred separately from the other.
SECTION 114. Submission to Jurisdiction. Each of the Company and
HMH agrees that any legal suit, action or proceeding arising out of or relating
to this
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Indenture, the Notes or coupons or the HMH Note Guaranty may be instituted in
any state or federal court in the State and County of New York, United States of
America and to the extent it may effectively do so, each of the Company and HMH
hereby waives, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding any claim which it may now or
hereafter have that it is not personally subject to the jurisdiction of the
above-named courts, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper, or that this Indenture, the Notes or coupons or the HMH Note Guaranty
or the subject matter hereof or thereof may not be enforced by such courts, and
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding. Each of the Company and HMH hereby designates HM
Anglo-American, Ltd. as its authorized agent to accept and acknowledge on its
behalf service of any and all process which may be served in any such suit,
action or proceeding in any such court and agrees that service of process upon
said agent at its office at 410 Park Avenue, New York, New York 10022 (or at
such other address in the Borough of Manhattan, The City of New York, as such
agent may designate by written notice to the Company, HMH and the Trustee), and
written notice of said service to the Company or HMH, as the case may be, in
accordance with Section 105 shall be deemed in every respect effective service
of process upon the Company or HMH, as the case may be, in any such suit, action
or proceeding and shall be taken and held to be valid personal service upon the
Company or HMH, as the case may be, whether or not the Company or HMH, as the
case may be, shall then be doing, or at any time shall have done, business
within the State of New York, and that any such service of process shall be of
the same force and validity as if service were made upon it according to the
laws governing the validity and requirements of such service in such State, and
waives all claim of error by reason of any such service. Said designation and
appointment shall be irrevocable until this Indenture shall have been satisfied
and discharged and, if at any time, HM Anglo-American, Ltd. does not have a
business address in the Borough of Manhattan, The City of New York, each of the
Company and HMH agrees to appoint CT Corporation System, 1633 Broadway, New
York, New York 10019, as its successor authorized agent. Notwithstanding the
foregoing, any suit, action or proceeding arising out of or in connection with
this Indenture, the Notes or coupons or the HMH Note Guaranty may be instituted
by the Trustee or any Holder in any competent court in Bermuda or England and
Wales.
SECTION 115. Cooperation With ADS Rights Agent. Each of the
Company, HMH and the Trustee shall cooperate with the ADS Rights Agent in
connection with the performance by the ADS Rights Agent of its duties, and the
exercise of its rights, under the ADS Rights Agreement. Without limiting the
generality of the foregoing, the Company, HMH or the Trustee shall, at the
request of the ADS Rights Agent, (a) give any notices which the ADS Rights Agent
is required, or desires, to give to the Holders under the ADS Rights Agreement,
and (b) provide the ADS Rights Agent notice of the amount of any interest
payable on any Notes on any Interest Payment Date.
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ARTICLE TWO
THE NOTES
SECTION 201. Forms Generally. The Notes and coupons shall be in
substantially the forms referred to in this Article Two, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, 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, the Internal
Revenue Code of 1986, as amended, and regulations and rulings promulgated
thereunder, any securities clearance or settlement organization, or as may be
approved, consistently herewith, by the officers executing such Notes and
coupons, as evidenced by their execution thereof.
The Trustee's certificate of authentication shall be in
substantially the form set forth in Section 205.
Exercise notices in respect of the exercise of the ADS Rights
shall be in substantially the form set forth in the form of ADS Right.
Registered Notes and Rule 144A Global Notes which are Restricted
Notes shall bear a legend as set forth in Annexes B and C, respectively, and as
required by Section 206.
The definitive Notes and coupons shall be printed, lithographed
or engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Notes may be listed, all as determined by the
officers executing such Notes and coupons, as evidenced by such execution.
SECTION 202. Forms of Notes. The forms of Bearer Note, Registered
Note and Rule 144A Global Note shall be as set forth in Annexes A, B and C,
respectively.
SECTION 203. Form of Temporary Global Note.
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAW, INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES
INTERNAL REVENUE CODE.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
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SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTES DUE 2001
TEMPORARY GLOBAL NOTE
HANSON AMERICA INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to bearer upon presentation and surrender of
this Global Note the Principal Amount at Maturity of United States Dollars
($ ) on March 1, 2001, and to pay interest thereon, from the date hereof,
semiannually in arrears on March 1 and September 1, in each year, commencing
March 11, 1994, at the rate of 2.39% per annum, until the principal hereof is
paid or made available for payment; provided, however, that interest on this
Global Note shall be payable only after the issuance of the definitive Notes for
which this Global Note is exchangeable and, in the case of definitive Notes in
bearer form, only upon presentation and surrender (at an office or agency
outside the United States and its possessions, except as otherwise provided in
the Indenture referred to below) of the interest coupons thereto attached as
they severally mature.
This Global Note is one of a duly authorized issue of Notes of
the Company designated as specified in the title hereof, issued and to be issued
under the Indenture dated as of March 1, 1994 (the "Indenture"), among the
Company, HMH and The Bank of New York, as Trustee (the "Trustee", which term
includes any successor trustee under the Indenture). This Global Note is a
temporary Note and is exchangeable in whole or from time to time in part without
charge upon request of the Holder hereof for definitive Notes in bearer form,
with interest coupons attached, or in registered form, without coupons, of
authorized denominations, (a) not earlier than 40 days after the latest of the
commencement of the Offerings (as defined in the Offering Memorandum), the date
of original issuance of the Notes, and the issue date with respect to the
additional Notes referred to in the second paragraph of Section 207 of the
Indenture, and (b) as promptly as practicable following presentation of
certification, in one of the forms set forth in the Indenture for such purpose,
that the beneficial owner or owners of this Global Note (or if such exchange is
only for a part of this Global Note, of such part) are not United States persons
or other Persons who have purchased such Note for resale to United States
persons. Definitive Notes in bearer form to be delivered in exchange for any
part of this
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Global Note shall be delivered only outside the United States and its
possessions. Upon any exchange of a part of this Global Note for definitive
Notes, the portion of the Principal Amount at Maturity hereof so exchanged
shall be endorsed by the Trustee or its agent on the schedule hereto, and the
Principal Amount at Maturity hereof shall be reduced for all purposes by the
amount so exchanged.
Until exchanged in full for definitive Notes, this Global Note
shall in all respects be entitled to the same benefits under, and subject to the
same terms and conditions of, the Indenture as definitive Notes authenticated
and delivered thereunder, except that neither the Holder hereof nor the
beneficial owners of this Global Note shall be entitled to receive payment of
interest hereon or to exchange this Global Note for ADSs or any other security,
cash or other property.
THIS GLOBAL NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
All terms used in this Global Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Unless the certificate of authentication hereon has been executed
by the Trustee by the manual signature of one of its authorized officers, this
Global Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this Global Note to be
duly executed under its corporate seal.
Dated: ________, 1994
HANSON AMERICA INC.,
[Corporate Seal]
By _____________________________
Attest:
- ------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By ________________________
Authorized Signatory
Dated: ________, _____
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SCHEDULE OF EXCHANGES
<TABLE>
<CAPTION>
Remaining
Principal Principal
Amount at Maturity Amount at Maturity Notation made
Date made exchanged for following such on behalf of
definitive Notes exchange the Trustee
--------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C>
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
--------------------- -------------------- --------------------- --------------------
</TABLE>
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SECTION 204. Form of Coupon.
[FORM OF FACE]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE
LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES
INTERNAL REVENUE CODE.
No.-____________
$________________
Due________________,_____
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTE DUE 2001
Unless the Bearer Note to which this coupon appertains shall have
been called for previous redemption or exchanged, Hanson America Inc. (the
"Company") shall, subject to and in accordance with the terms and conditions of
the Bearer Note and the Indenture dated as of March 1, 1994, among the Company,
HMH and The Bank of New York, as Trustee, pay to the bearer, on the date set
forth hereon upon surrender hereof, the amount shown hereon (together with any
Additional Amounts in respect thereof which the Company may be required to pay
according to the terms of said Bearer Note) at the paying agencies set out on
the reverse hereof or at such other places outside the United States or its
possessions and other areas subject to its jurisdiction as the Company may
determine from time to time.
HANSON AMERICA INC.,
By ___________________________
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[FORM OF REVERSE]
PAYING AGENT AND TRANSFER AGENT
The Bank of New York, London Branch
46 Berkeley Street
London WIX 6AA
England
PAYING AGENT AND TRANSFER AGENT
Commerzbank International S.A.
11, rue Notre Dame
L-2240
Luxembourg
SECTION 205. Form of Trustee's Certificate of Authentication. The
Trustee's certificate of authentication shall be in substantially the following
form:
This is one of the Notes referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee
By ____________________________
Authorized Signatory
Dated ____________, _____
SECTION 206. Legends on Restricted Notes. During the period
beginning on the Closing Date and ending on the date three years from the
Closing Date or, if later, the Second Time of Delivery (as defined in the U.S.
Purchase Agreement), all Registered Notes and Rule 144A Global Notes issued at
any Time of Delivery (as defined in the U.S. Purchase Agreement) pursuant to the
U.S. Purchase Agreement, and all Registered Notes and Rule 144A Global Notes
issued upon registration of transfer of, or in exchange for, such Registered
Notes and Rule 144A Global Notes, shall be "Restricted Notes" and shall be
subject to the restrictions on transfer provided in the legend set forth on the
face of the form of Registered Note in Annex B and the form of Rule 144A Global
Note in Annex C; provided, however, that the term "Restricted Notes" shall not
include (a) Registered Notes which are issued upon transfer of, or in exchange
for, either Bearer Notes or Registered Notes which are not Restricted Notes, or
(b) Registered Notes as to which such restrictions on transfer have been
terminated in accordance with Section 211(e). All Restricted Notes shall bear
the legend set forth on the face of the form of Registered Note
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<PAGE>
in Annex B or the form of Rule 144A Global Note in Annex C. Notes which are not
Restricted Notes shall not bear such legend.
SECTION 207. Title and Terms. The aggregate Principal Amount at
Maturity of Notes which may be authenticated and delivered under this Indenture
is limited to $1,255,115,000 (and such additional Principal Amount at Maturity
of Notes, if any, as shall be determined pursuant to the next succeeding
paragraph), except for Notes authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section
210, 211, 212, 307 or 805.
Upon receipt by the Trustee of an Officers' Certificate stating
that the U.S. Purchasers and the International Managers (as such terms are
defined in the U.S. Purchase Agreement and the Subscription Agreement) have
elected to purchase from the Company a specified aggregate Principal Amount at
Maturity of additional Notes not to exceed a total of $125,511,500 for all such
elections in accordance with the U.S. Purchase Agreement and the Subscription
Agreement, the Trustee shall authenticate and make available for delivery such
specified aggregate Principal Amount at Maturity of such additional Notes to or
upon a Company Order, and such specified aggregate Principal Amount at Maturity
of such additional Notes shall be considered part of the original aggregate
Principal Amount at Maturity of the Notes.
The Notes shall be known and designated as the "2.39% Senior
Exchangeable Discount Notes Due 2001" of the Company. Their Stated Maturity
shall be March 1, 2001 and they shall bear interest from March 11, 1994 payable
semiannually in arrears on March 1 and September 1 in each year, commencing
September 1, 1994, at the rate of 2.39% per annum until the principal thereof is
paid or made available for payment.
As of any date, the interest rate and the accrued OID of each
Note represent a constant yield of 6.00% per annum (computed on a semi-annual
bond equivalent basis) calculated from March 11, 1994.
Payments with respect to the Notes shall be made as provided in
the forms of Notes set forth in Annexes A, B and C.
The Notes shall be redeemable and shall be repurchased, as
provided in the forms of Notes set forth in Annexes A, B and C and in Article
Three.
The ADS Rights associated with the Notes shall be exercised
pursuant to the ADS Rights Agreement. Subject to Sections 115 and 613, it is
understood by all the parties hereto and the Holders that the Trustee shall not
be responsible for monitoring the manner in which the ADS Rights are exercised.
SECTION 208. Denominations. The Notes shall be issuable (a) as
Bearer Notes, with interest coupons attached, in denominations of $10,000 or any
amount in
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excess thereof that is an integral multiple of $1,000, (b) as Registered Notes,
without coupons, in denominations of $10,000 or any amount in excess thereof
that is an integral multiple of $1,000, and (c) as Rule 144A Global Notes,
without coupons, in denominations of $10,000 or any amount in excess thereof
that is an integral multiple of $1,000.
SECTION 209. Execution, Authentication, Delivery and Dating. The
Notes shall be executed on behalf of the Company by its Chairman of the Board,
its Chief Executive Officer, its President or one of its Vice Presidents, under
a facsimile of its corporate seal reproduced thereon attested by its Secretary
or one of its Assistant Secretaries. Any such signature may be manual or
facsimile. Coupons shall bear the facsimile signature of the Treasurer or any
Assistant Treasurer of the Company.
Notes and coupons bearing the manual or facsimile signature of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Notes, and the Trustee in accordance with
such Company Order shall authenticate and deliver such Notes as in this
Indenture provided and not otherwise.
Each Bearer Note, each Rule 144A Global Note and the Global Note
shall be dated as of March 11, 1994. Each Registered Note shall be dated the
date of its authentication.
No Note or coupon shall be entitled to any benefit under this
Indenture, or be valid or obligatory for any purpose, unless there appears on
such Note a certificate of authentication substantially in the form provided for
herein executed by or on behalf of the Trustee by manual signature, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered thereunder. Except as
permitted by Section 210, 212 or 213, the Trustee shall not authenticate and
deliver any Bearer Note unless all appurtenant coupons for interest then matured
have been detached and canceled.
Bearer Notes and coupons may not be delivered in the United
States or its possessions.
SECTION 210. Temporary Global Note; Exchange of Temporary Global
Note for Definitive Notes. The Bearer Notes shall be issued initially in the
form of one temporary Global Note; which temporary Global Note shall be
deposited on behalf of the subscribers for the Notes represented thereby with
Barclays Bank PLC, as common
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depositary (the "Common Depositary"), for credit to their respective accounts
(or to such other accounts as they may direct) at Morgan Guaranty Trust Company
of New York, Brussels Office, as operator of the Euroclear Clearance System
("EUROCLEAR") or Cedel S.A. ("CEDEL").
On or before the Global Exchange Date, the Company shall deliver
to the Trustee or its designated agent outside the United States and its
possessions definitive Bearer Notes and Registered Notes and to the Trustee at
its Corporate Trust Office definitive Registered Notes, in each case executed by
the Company. Such definitive Notes shall be in the form of Bearer Notes or
Registered Notes, or any combination thereof, as may be specified by the
Trustee. On or after the Global Exchange Date, the Global Note shall be
surrendered by the Depositary to the Trustee or its agent, as the Company's
agent for such purpose, to be exchanged, in whole or from time to time in part,
for definitive Notes without charge to Holders, and the Trustee shall
authenticate and deliver (at an office or agency outside the United States and
its possessions in the case of Bearer Notes) in exchange for the Global Note or
the portions thereof to be exchanged, an equal aggregate Principal Amount at
Maturity of definitive Notes in the form of Bearer Notes or Registered Notes, or
any combination thereof, as shall be specified by the beneficial owners thereof;
provided, however, that upon such presentation by the Depositary, the Global
Note is accompanied by a certificate dated the Global Exchange Date or a
subsequent date and signed by EUROCLEAR as to the portion of the Global Note
held for its account then to be exchanged and a certificate dated the Global
Exchange Date or a subsequent date and signed by CEDEL as to the portion of the
Global security held for its account then to be exchanged, each to the effect
hereinafter provided. The Company hereby appoints the agents set forth in
Section 902 located outside the United States where Bearer Notes may be
delivered in exchange for the Global Note or portions thereof. Notwithstanding
any other provision hereof or of the Notes, no Bearer Note will be mailed to or
otherwise delivered to any location within the United States and its
possessions.
Each certificate to be provided by EUROCLEAR and CEDEL shall be
substantially to the following effect or with such changes therein as shall be
approved by the Company and Lehman Brothers International (Europe) and shall be
reasonably acceptable to the Trustee:
[Form of certificate to be given by EUROCLEAR and CEDEL]
CERTIFICATE
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTES DUE 2001
This is to certify that, based solely on certificates we have
received in writing, by tested telex or electronic transmissions from our member
organizations
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appearing in our records as persons being entitled to a portion of the Principal
Amount at Maturity set forth below (our "Member Organizations") substantially in
the form set out in Section 217(a) of the Indenture relating to the
above-captioned Notes, as of the date hereof, $_______ Principal Amount at
Maturity of the above-captioned Notes: (i) is owned by persons that are not
citizens or residents of the United States, domestic partnerships, domestic
corporations or any estate or trust the income of which is subject to United
States federal income taxation regardless of its source ("United States
persons"); (ii) is owned by United States persons that (a) are foreign branches
of United States financial institutions (as defined in U.S. Treasury Regulations
Section 1.165-12(c) (l) (v)) ("financial institutions") purchasing for their own
account or for resale, or (b) acquired the Notes through the foreign branches of
United States financial institutions and who hold the Notes through such United
States financial institution on the date hereof (and in the case of either
clause (a) or (b), each such United States financial institution has agreed, on
its own behalf or through its agent, that we may advise the Company or the
Company's agent that it will comply with the requirements of Section 165(j) (3)
(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder); or (iii) is owned by United States or foreign financial
institutions for purposes of resale during the restricted period (as defined in
U.S. Treasury Regulations Section 1.163-5(c) (2) (i) (D) (7)) and to the further
effect that United States or foreign financial institutions described in clause
(iii) above (whether or not also described in clause (i) or (ii)) have certified
that they have not acquired the Notes for purposes of resale directly or
indirectly to a United States person or to a person within the United States or
its possessions.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia) and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island and the Northern Mariana Islands.
We further certify (A) that we are not making available herewith
for exchange (or, if relevant, exercise of any rights or collection of any
interest) any portion of the Temporary Global Note excepted in such
certifications, and (B) that, as of the date hereof, we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of the
part submitted herewith for exchange (or, if relevant, exercise of any rights or
collection of any interest) are no longer true and cannot be relied upon as of
the date hereof.
We understand that this certificate is required in connection
with certain tax laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
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Dated: _______, 19___*
* To be dated no earlier than the
Global Exchange Date
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
BRUSSELS OFFICE, AS OPERATOR OF THE EUROCLEAR
CLEARANCE SYSTEM]
[CEDEL S.A.]
By__________________________________________
Each certificate received by EUROCLEAR and CEDEL from Persons
appearing in their records as Persons entitled to a portion of the Global Note
shall be substantially to the effect set forth in Section 217(a).
Upon any such exchange of a portion of the Global Note for
definitive Notes, the Global Note shall be endorsed to reflect the reduction of
the Principal Amount at Maturity evidenced thereby. Until so exchanged in full,
the Global Note shall in all respects be entitled to the same benefits under,
and subject to the same terms and conditions of, this Indenture as definitive
Notes authenticated and delivered hereunder, except that none of EUROCLEAR,
CEDEL or the beneficial owners of the Global Note shall be entitled to receive
payment of interest thereon or to exchange the Global Note for ADSs or any other
security, cash or other property.
SECTION 211. Registration, Registration of Transfer and Exchange;
Restrictions on Transfer. (a) The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Registered Notes and of transfers of Registered
Notes. The Trustee is hereby appointed "Note Registrar" for the purpose of
registering Registered Notes and transfers of Registered Notes as herein
provided.
Upon surrender for registration of transfer of any Registered
Note at an office or agency of the Company designated pursuant to Section 902
for such purpose, the Company shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Registered Notes of any authorized denominations and of a like
aggregate Principal Amount at Maturity and bearing such restrictive legends as
may be required by this Indenture (including Section 206). At the option of the
Holder upon request in writing, Registered Notes will be exchangeable at an
office or agency of the Company designated pursuant to Section 902 for such
purpose, into an equal aggregate Principal Amount at Maturity of beneficial
interests in the Rule 144A Global Receipts representing the Rule 144A Global
Notes.
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Registered Notes may not be exchanged for Bearer Notes. Every Registered Note
presented or surrendered for registration of transfer or for exchange shall (if
so required by the Company or the Trustee) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing.
(b) At the option of the Holder, upon request confirmed in
writing, Bearer Notes may be exchanged for Bearer Notes or for Registered Notes,
of any authorized denominations and of a like aggregate Principal Amount at
Maturity, upon surrender of the Bearer Notes to be exchanged at any office or
agency designated pursuant to Section 902, with all unmatured coupons. If the
Holder of a Bearer Note is unable to produce any such unmatured coupon or
coupons, such exchange may be effected if the Bearer Notes are accompanied by
payment in funds acceptable to the Company in an amount equal to the face amount
of such missing coupon or coupons or the surrender of such missing coupon or
coupons may be waived by the Company and the Trustee, if there is furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such security shall surrender
to any Paying Agent any such missing coupon in respect of which such a payment
shall have been made, such Holder shall be entitled to receive the amount of
such payment; provided, however, that, except as otherwise provided in the form
of Bearer Note set forth in Annex A, interest represented by coupons shall be
payable only upon presentation and surrender of those coupons at the office of a
Paying Agent outside the United States and its possessions. Notwithstanding the
foregoing, in case a Bearer Note is surrendered in exchange for a Registered
Note at an office or agency designated pursuant to Section 902 after the close
of business at such office or agency on (i) any Regular Record Date and before
the opening of business at such office or agency on the next succeeding Interest
Payment Date, or (ii) any Special Record Date and before the opening of business
at such office or agency on the related date for payment of Defaulted Interest,
such Bearer Note shall be surrendered without the coupon relating to such
Interest Payment Date or Defaulted Interest, as the case may be.
Bearer Notes and coupons are transferable upon delivery.
(c) Rule 144A Global Notes may be exchanged for one or more Rule
144A Global Notes in the total aggregate Principal Amount at Maturity of the
Rule 144A Global Notes so exchanged. Rule 144A Global Notes to be so exchanged
shall be surrendered by the Note Custodian to the Trustee, and the Company shall
execute, and the Trustee shall authenticate and make available for delivery,
such one or more Rule 144A Global Notes. Rule 144A Global Notes may not be
exchanged for Bearer Notes.
(d) All Notes issued upon any registration of transfer or
exchange of Notes or coupons shall be valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Notes or coupons surrendered upon such registration of
transfer or exchange.
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No service charge shall be made to any Holder for any
registration of transfer or exchange of Notes, but the Company 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
Notes, other than exchanges pursuant to Sections 210, 307, or 805 not involving
any transfer.
In the event of a redemption in part, the Company will not be
required: (i) to register the transfer of or exchange Registered Notes or Rule
144A Global Notes, or to exchange Bearer Notes for Registered Notes, for a
period of 15 days immediately preceding the date notice is given identifying the
serial numbers of the Notes called for such redemption; (ii) to register the
transfer of or exchange any such Registered Note or Rule 144A Global Note, or
portion thereof, called for redemption; or (iii) to exchange any Bearer Note
called for redemption; provided, however, that a Bearer Note called for
redemption may be exchanged for a Registered Note which is simultaneously
surrendered for redemption.
(e) Every Restricted Note shall be subject to the restrictions on
transfer provided in the legend required to be set forth on the face of each
Restricted Note pursuant to Section 206, unless such restrictions on transfer
shall be waived by the written consent of the Company, and the Holder of each
Restricted Note, by such Holder's acceptance thereof, agrees to be bound by such
restrictions on transfer. Whenever any Restricted Note is presented or
surrendered for registration of transfer or for exchange for a Registered Note
registered in a name other than that of the Holder, such Restricted Note must be
accompanied by a certificate in substantially the form set forth in Section
217(b), dated the date of such surrender and signed by the Holder of such
Restricted Note, as to compliance with such restrictions on transfer. Neither
the Trustee nor any Transfer Agent shall be required to accept for such
registration of transfer or exchange any Restricted Note not so accompanied by a
properly completed certificate. Notwithstanding the preceding two sentences, a
properly completed certificate shall not be required in connection with any
transfer of any Restricted Note through the facilities of The Depository Trust
Company or any other United States securities clearance and settlement
organization, provided that such transfer does not require a change in the name
(other than to another nominee of The Depository Trust Company or such other
securities clearance and settlement organization) in which such Restricted Note
is then registered.
The restrictions imposed by this Section 211 and Section 206 upon
the transferability of any particular Restricted Note shall cease and terminate
when such Restricted Note has been sold pursuant to an effective registration
statement under the Securities Act or transferred pursuant to Rule 144 under the
Securities Act (or any successor provision thereto), unless the Holder thereof
is an affiliate of the Company within the meaning of Rule 144 (or such successor
provision). Any Restricted Note as to which such restrictions on transfer shall
have expired in accordance with their terms or shall have terminated may, upon
surrender of such Restricted Note for exchange to the Trustee or any Transfer
Agent in accordance with the provisions of this Section 211
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(accompanied, in the event that such restrictions on transfer have terminated by
reason of a transfer pursuant to Rule 144 or any successor provision, by an
Opinion of Counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the Company, addressed to
the Company and the Trustee and in form acceptable to the Company, to the effect
that the transfer of such Restricted Note has been made in compliance with Rule
144 or such successor provision), be exchanged for a new Registered Note, of
like tenor and aggregate Principal Amount at Maturity, which shall not bear the
restrictive legend required by Section 206. The Company shall promptly inform
the Trustee in writing of the effective date of any registration statement
registering the Notes under the Securities Act. The Trustee shall not be liable
for any action taken or omitted to be taken by it in good faith in accordance
with the aforementioned Opinion of Counsel or registration statement.
As used in the preceding two paragraphs of this Section 211(e),
the term "transfer" encompasses any sale, transfer or other disposition of any
Notes referred to herein.
SECTION 212. Mutilated, Destroyed, Lost or Stolen Notes and
Coupons. If any mutilated Note or a Note with a mutilated coupon appertaining to
it is surrendered to the Trustee or any agent of the Company maintained for such
purpose pursuant to Section 902, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Note of like tenor and
Principal Amount at Maturity and bearing a number not contemporaneously
Outstanding, with coupons corresponding to the coupons, if any, appertaining to
the surrendered Note. Bearer Notes and coupons may not be delivered in the
United States or its possessions.
If there be delivered to the Company and the Trustee:
(l) evidence to their satisfaction of the destruction, loss or
theft of any Note or coupon, and
(2) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless,
then, in the absence of notice to the Company or the Trustee that such Note or
coupon has been acquired by a bona fide purchaser, the Company shall execute and
upon request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Note or in exchange for the Note to which such coupon
appertains (with all appurtenant coupons not destroyed, lost or stolen), a new
Note of like tenor and Principal Amount at Maturity and bearing a number not
contemporaneously Outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Note to which such
destroyed, lost or stolen coupon appertains. Bearer Notes and coupons may not be
delivered in the United States or its possessions.
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In case any such mutilated, destroyed, lost or stolen Note or
coupon has become or is about to become due and payable, the Company in its
discretion, but subject to any ADS Rights, may, instead of issuing a new Note,
pay such Note or coupon, upon satisfaction of the condition set forth in the
preceding paragraph; provided, however, that, except as otherwise provided in
the forms of Notes set forth in Annexes A, B and C, payments with respect to
Bearer Notes shall be payable only at the office of a Paying Agent outside the
United States and its possessions and, in the case of interest, only upon
presentation and surrender of the coupons appertaining thereto.
Upon the issuance of any new Note under this Section 212, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of' the Trustee) connected therewith.
Every new Note with its coupons, if any, issued pursuant to this
Section in lieu of any destroyed, lost or stolen Note or in exchange for a Note
to which a destroyed, lost or stolen coupon appertains, shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Note and its coupons, if any, or the destroyed, lost
or stolen coupon shall be at any time enforceable by anyone, and such new Note
and coupons, if any, shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Notes and coupons duly issued
hereunder.
The provisions of this Section 212 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 Notes or
coupons.
SECTION 213. Payment of Interest; Interest Rights Preserved.
Interest on any Registered Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest. In case a Bearer Note is
surrendered in exchange for a Registered Note at an office or agency of the
Company designated pursuant to Section 902 for the purpose after the close of
business (at such office or agency) on any Regular Record Date and before the
opening of business (at such office or agency) on the next succeeding Interest
Payment Date, such Bearer Note shall be surrendered without the coupon relating
to such Interest Payment Date and interest will not be payable on such Interest
Payment Date in respect of the Registered Note issued in exchange for such
Bearer Note, but will be payable only to the Holder of such coupon when due.
Any interest on any Registered Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date ("Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue
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of having been such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Notes (or their
respective Predecessor Notes) 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 Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Registered Note and the date of the proposed payment, and
at the same time the Company 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 date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a 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 proposed payment 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 Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid (by airmail in the case of any notice sent to an address outside
the United States), to each Holder of Registered Notes at the address of
such Holder as it appears in the Note 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 therefor having been
so mailed such Defaulted Interest shall be paid to the Persons in whose
names the Registered Notes (or their respective Predecessor Notes) are
registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2). In case
a Bearer Note is surrendered in exchange for a Registered Note at an
office or agency of the Company designated pursuant to Section 902 for
the purpose after the close of business (at such office or agency) on
any Special Record Date and before the opening of business (at such
office or agency) on the related proposed date for payment of Defaulted
Interest, such Bearer Note shall be surrendered without the coupon
relating to such Defaulted Interest and such Defaulted Interest will not
be payable on such proposed date of payment in respect of the Registered
Note issued in exchange for such Bearer Note, but will be payable only
to the Holder of such coupon.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any Notes
exchange on which the Notes may be listed, and upon such notice as may
be required by such exchange, if, after notice given by the Company to
the Trustee of the
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proposed payment pursuant to this clause, such manner of payment shall
be deemed reasonable and practicable by the Trustee.
Subject to the foregoing provisions of this Section 213, each
Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
A Note will bear interest at a rate of 0% per annum during the
period commencing on an Interest Payment Date and ending on the day before the
next succeeding Interest Payment Date, if the ADS Right associated with such
Note is exercised during such period. A Registered Note surrendered upon
exercise of the ADS Right associated therewith during the period from the close
of business on the February 15 or August 15 next preceding any Interest Payment
Date to the opening of business on such Interest Payment Date must be
accompanied by payment of an amount equal to the amount of interest payable
thereon which the Holder is to receive, and such interest will be paid on such
Interest Payment Date to the Holder of record on the next preceding Regular
Record Date. A Registered Note surrendered upon exercise of the ADS Right
associated therewith on an Interest Payment Date need not be accompanied by such
payment and interest on the Principal Amount at Maturity of such Note shall be
paid on such Interest Payment Date to the registered Holder of such Note on the
immediately preceding Regular Record Date. In the case of any Registered Note
called for redemption at the option of the Company between a Regular Record Date
and the opening of business on the next succeeding Interest Payment Date, no
interest shall be payable on any such Registered Notes surrendered for
redemption upon exercise of the ADS Right during such period.
SECTION 214. Persons Deemed Owners. The Company, the Trustee and
any agent of the Company or the Trustee may treat the bearer of any Bearer Note,
the Global Note or any Rule 144A Global Note and the bearer of any coupon as the
absolute owner of such Note or coupon for the purpose of receiving payment
thereof or on account thereof and for all other purposes whatsoever, whether or
not such Note or coupon be overdue, and notwithstanding any notice of ownership
or writing thereon, or any notice of previous loss or theft or other interest
therein. Absent manifest error, the Company, the Trustee, any agent of the
Company or the Trustee, the Note Registrar, HBL, Hanson and the ADS Rights Agent
may treat the Person in whose name any Registered Note is registered as the
owner of such Registered Note for the purpose of receiving payment of Principal
Amount at Maturity, Accreted Value, Redemption Price, Repurchase Price and Tax
Repurchase Price with respect to, and (subject to Section 213) interest on, such
Note and for all other purposes whatsoever, whether or not such Note or coupon
be overdue, and notwithstanding any notice of ownership or writing thereon, or
any notice of previous loss or theft or other interest therein. HBL, Hanson, the
ADS Rights Agent and any agent of HBL, Hanson or the ADS Rights Agent may treat
the Note Custodian as the sole owner or Holder of the Rule 144A Global Notes, so
long as the Note Custodian holds the
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Rule 144A Notes, for all purposes whatsoever , and notwithstanding any notice of
ownership or writing thereon, or any notice of previous loss or theft or other
interest therein.
SECTION 215. Cancellation. All Notes and coupons surrendered for
payment, redemption, repurchase, registration of transfer or exchange shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee.
All Notes and matured coupons so delivered shall be canceled promptly by the
Trustee. Unless the Trustee is instructed otherwise, all canceled Notes, coupons
and any certificates in connection therewith held by the Trustee shall be
delivered to the Company.
SECTION 216. Computation of Interest. Interest shall be
calculated on the basis of a 360-day year. Whenever it is necessary to compute
an amount of interest in respect of any Note for a period of less than a full
year, such interest shall be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of an incomplete month,
the number of days elapsed.
SECTION 217. Forms of Certification. (a) Whenever any provision
of this Indenture or the form of Global Note contemplates that certification be
given by a beneficial owner of a portion of the Global Note, such certification
shall be provided substantially in the form of the following certificate, with
only such changes as shall be reasonably approved by the Company and Lehman
Brothers International (Europe) and reasonably acceptable to the Trustee.
CERTIFICATE
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTES DUE 2001
This is to certify that as of the date hereof and except as set
forth below, the above-captioned Notes held by you for our account: (i) are
owned by persons that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States federal income taxation regardless of its
source ("United States persons"); (ii) are owned by United States persons that
(A) are foreign branches of a United States financial institution (as defined in
U.S. Treasury Regulations Section 1.165-12 (c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or (B) acquired the Notes
through foreign branches of United States financial institutions and who hold
the Notes through such United States financial institutions on the date hereof
(and in either case (A) or (B), each such United States financial institution
hereby agrees on its own behalf or through its agent, that you may advise the
Company or the Company's agent that it will comply with the requirements of
Section 165(j) (3) (A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder); or (iii) are owned by United States or
foreign financial institutions for purposes of resale during the restricted
period (as defined
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in U.S. Treasury Regulations Section 1.163-5(c) (2) (i) (D) (7)), and in
addition, if the owner of the Notes is a United States or foreign financial
institution described in clause (iii) above (whether or not also described in
clause (i) or (ii)) this is to further certify that such financial institution
has not acquired the Notes for purposes of resale directly or indirectly to a
United States person or to a person within the United States or its possessions.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia) and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American
Samoa, Wake Island and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior
to the date on which you intend to submit your certification relating to the
Notes held by you for our account in accordance with your operating procedures
if any applicable statement herein is not correct on such date, and in the
absence of any such notification it may be assumed that this certification
applies as of such date.
This certificate excepts and does not relate to $_________
Principal Amount at Maturity of the above-captioned Notes in respect of which we
are to certify and as to which we understand that exchange and delivery of
definitive Notes (or, if relevant, exercise of any rights or collection of any
interest) cannot be made until we do so certify.
We understand that this certificate is required in connection
with certain tax laws in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy hereof to any interested party in such proceedings.
Dated: __________, 19__*
[To be dated on or after , 19 ]
[the 15th day before the certification date].
[Name of Account Holder]
(Authorized Signatory)
Name:_________________
Title:________________
(b) In connection with any certification contemplated by Section
211 relating to compliance with certain restrictions relating to transfers of
Restricted Notes, such certification shall be provided to the Trustee
substantially in the form of the following certificate, with only such changes
as shall be reasonably approved by the
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Company and Lehman Brothers International (Europe) and reasonably acceptable to
the Trustee.
CERTIFICATE
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTES DUE 2001
This is to certify that as of the date hereof with respect to $
Principal Amount at Maturity of the above-captioned Notes presented or
surrendered on the date hereof (the "Surrendered Notes") for registration of
transfer, or for exchange where the Notes issuable upon such exchange are to be
registered in a name other than that of the undersigned Holder (each such
transaction being a "transfer"), the undersigned Holder (as defined in the
Indenture) certifies that the transfer of Surrendered Notes associated with such
transfer complies with the restrictive legend set forth on the face of the
Surrendered Notes for the reason checked below:
<TABLE>
<S> <C> <C> <C>
|_| Transfer to Hanson America Inc. |_| Transfer outside the United States
in compliance with Rule 904 under
the Securities Act.
|_| Transfer inside the United States to |_| Transfer other than those above in
a Qualified Institutional Buyer in connection with which the Company
compliance with Rule 144A under the has received an Opinion of Counsel
Securities Act. (satisfactory to it in form and
substance) to the effect that the
|_| Transfer in compliance with Rule 144 transfer is being made pursuant to
under the Securities Act. an exemption from, or in a
transaction not subject to, the
registration requirements of the
Securities Act.
</TABLE>
[NAME OF HOLDER]
-------------------------------
Dated: ___________, ___*
__________________________
*To be dated the date of presentation or surrender
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SECTION 218. Temporary Notes. Pending the preparation of
definitive Notes, the Company may execute, and upon Company Order the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at any office or agency of the Company
designated pursuant to Section 902, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
Principal Amount at Maturity of definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as definitive Notes.
SECTION 219. Form of HMH Note Guaranty. The form of HMH Note
Guaranty shall be set forth on the Notes substantially as follows:
GUARANTY
For value received, the undersigned hereby unconditionally and
irrevocably guarantees to the Holder of this Note, as a primary obligor and not
merely as a surety, any and all payments with respect to this Note to be made by
the Company, in the amounts and at the times when due and payable, whether by
declaration thereof or otherwise, and interest on the overdue payments with
respect to this Note, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Notes, to the Holder of
this Note and the Trustee, all in accordance with and subject to the terms and
limitations of this Note and Article Eleven of the Indenture, including without
limitation the provisions of said Article Eleven providing for the release of
this Guaranty under the conditions provided for therein. This Guaranty will not
become effective until the Trustee duly executes the certificate of
authentication on this Note.
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Dated: _____________, 199_
[Corporate Seal] HM HOLDINGS, INC.,
Attest: By: __________________________
___________________________
SECTION 220. CUSIP Numbers. The Company in issuing the Notes may
use CUSIP numbers, if then generally in use, and thereafter the Trustee may use
such numbers in any notice of redemption with respect to the Notes.
SECTION 221. Rule 144A Global Notes. Rule 144A Global Notes shall
be issued in bearer form and only to the Note Custodian.
SECTION 222. Exchange of Rule 144A Global Notes for Registered
Notes. (a) Holders of Rule 144A Global Notes shall be issued definitive
Registered Notes if: (i) DTC notifies the Company and the Note Depositary that
it is unwilling or unable to continue as the Rule 144A Global Receipt Holder
with respect to such Notes or if at any time it ceases to be a clearing agency
registered under the Exchange Act and, in either case, a successor Rule 144A
Global Receipt Holder is not appointed by the Company within 90 days; (ii) at
any time the Note Depositary or the Note Custodian notifies the Trustee and the
Company that it is unwilling or unable to continue as Note Depositary or Note
Custodian, as the case may be, with respect to the Rule 144A Global Notes and no
successor Note Depositary or Note Custodian, as the case may be, is appointed
within 90 days; (iii) upon the occurrence of an Event of Default; or (iv) at any
time the Company in its sole discretion determines that the Rule 144A Global
Notes shall be exchanged for definitive Registered Notes.
(b) Any Rule 144A Global Note (or a portion thereof) also may be
exchanged for definitive Registered Notes if the Note Depositary on behalf of
the Note Custodian notifies the Trustee that the Rule 144A Global Receipt Holder
has requested in writing that definitive Registered Notes in respect of a
portion of the Rule 144A Global Notes be issued to such Rule 144A Global Receipt
Holder and the Note Custodian surrenders such Rule 144A Global Note for
exchange.
(c) In the case of Registered Notes issued in respect of Rule
144A Global Notes, such definitive Registered Notes shall be registered in the
name of such person or persons as the Note Depositary on behalf of the Note
Custodian shall instruct the Trustee.
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ARTICLE THREE
REDEMPTION AND REPURCHASES OF NOTES
SECTION 301. Right of Redemption at Company's Election. (a) The
Notes may be redeemed, subject to the conditions, at the times and at the
Redemption Prices specified in the forms of Notes set forth in Annexes A, B and
C, together with accrued interest to but excluding the Redemption Date;
provided, however, that prior to the Global Exchange Date, the Company may not
redeem the Notes other than under the circumstances described in the third
paragraph on the reverse side of such forms (involving United States taxes) or
in the fourth paragraph on the reverse side of such forms (involving
identification requirements).
(b) The election of the Company to redeem any Notes shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of the Notes, in whole or in part, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the Principal Amount at Maturity of Notes to be redeemed. If the
Notes are to be redeemed pursuant to an election of the Company which is subject
to a condition specified in the forms of Notes set forth in Annexes A, B and C,
the Company shall furnish the Trustee with an Officers' Certificate stating that
the Company is entitled to effect such redemption and setting forth a statement
of facts demonstrating the same.
(c) If less than all the Notes are to be redeemed, the particular
Notes to be redeemed in Principal Amounts at Maturity of $1,000 or integral
multiples thereof (provided that the remaining Principal Amount at Maturity, if
any, of any Holder's Notes must be $10,000 or any amount in excess thereof that
is an integral multiple of $1,000) shall be selected not more than 60 days nor
less than 30 days prior to the Redemption Date by the Trustee, from the
Outstanding Notes not previously called for redemption, individually by lot in
the case of Bearer Notes, and by such method as the Trustee may deem fair and
appropriate in the case of Registered Notes and Rule 144A Global Notes, and
under circumstances intended not to discriminate between Registered Notes,
Bearer Notes and Rule 144A Global Notes in the selection of Notes (or portions
thereof) selected for redemption.
If any Registered Note selected for partial redemption is
redeemed upon exercise of the ADS Right in part pursuant to Section 302 before
termination of the ADS Right with respect to the portion of the Note so
selected, the redeemed portion of such Note shall be deemed to be the portion
selected for redemption for purposes of this Section 301. Notes which have been
redeemed upon exercise of the ADS Right pursuant to Section 302 during a
selection of Notes to be redeemed at the election of the Company may be treated
by the Trustee as Outstanding for the purpose of such selection.
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The Trustee shall promptly notify the Company and each Note
Registrar (other than the Trustee) in writing of the Notes selected for
redemption and, in the case of any Registered Notes selected for partial
redemption, the Principal Amount at Maturity thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Notes redeemed or to be redeemed only in part, to the portion of
the Principal Amount at Maturity of such Notes which has been or is to be
redeemed.
(d) Notice of redemption in whole or in part shall be given in
the manner provided in Section 106 to the Holders of Notes to be redeemed.
Notice shall be given not less than 30 nor more than 60 days prior to the
Redemption Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, and accrued interest, if any,
(3) if less than all the Outstanding Notes are to be redeemed,
the aggregate Principal Amount at Maturity of Notes to be redeemed and
the aggregate Principal Amount at Maturity of Notes which will be
Outstanding after such partial redemption,
(4) that on the Redemption Date the Redemption Price, and accrued
interest, if any, will become due and payable upon each such Note to be
redeemed, and that interest thereon shall cease to accrue on and after
said date,
(5) the ADS Ratio, the date on which the right to exercise the
ADS Rights with respect to the Notes to be redeemed will terminate and
the places where such Notes may be surrendered upon exercise of the ADS
Rights,
(6) the place or places where such Notes, together in the case of
Bearer Notes with all coupons appertaining thereto, if any, maturing
after the Redemption Date, are to be surrendered for payment of the
Redemption Price and accrued interest, if any; and
(7) the CUSIP Number(s), if any.
In case of a partial redemption, the notice given shall specify
(A) the last date on which exchanges or transfers of Notes may be made pursuant
to Section 211, (B) the serial numbers of the Bearer Notes (either individually
or in group, from one number to another, or by last digit or digits) called for
redemption, (C) in the case of Registered Notes, the serial numbers and the
portions thereof called for redemption, and (D) in the case of Rule 144A Global
Notes, the portions thereof called for redemption.
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Notice of redemption of Notes to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name of and at the expense of the Company.
SECTION 302. Redemption of Notes Upon Exercise of ADS Rights.
Upon surrender of a Note (or portion thereof) for redemption by the Company in
connection with the exercise of an ADS Right in accordance with the ADS Rights
Agreement, the Company shall pay to the ADS Rights Agent, acting on behalf of
the Holder, an amount in U.S. Dollars equal to the Adjusted Accreted Value
thereof to but excluding the ADS Exercise Date.
SECTION 303. Change-in-Control Right of Holders. (a) The Notes of
each Holder who exercises its Change-in-Control Right shall be repurchased by
the Company, subject to the conditions, at the times and at the Repurchase Price
specified in the forms of Notes set forth in Annexes A, B and C, together with
interest to but excluding the Repurchase Date.
(b) In case a Change-in-Control shall have occurred, the Company
shall give the Repurchase Notice in the manner provided in Section 106 to the
Holders and the Trustee within 30 days after the Company becomes aware of such
occurrence; provided, however, that the Trustee shall not be deemed to have
notice of such Change-in-Control until the date notice of such Change-in-Control
is actually received by the Trustee. The Repurchase Notice will specify (i) the
date by which a Holder must irrevocably exercise the Change-in-Control Right
(which must be a date no later than 60 days and no earlier than 30 days after
the date of the Repurchase Notice) (the "Repurchase Exercise Date"), (ii) the
Repurchase Date (which must be a date not later than 75 days and no earlier than
60 days after the date of the Repurchase Notice), (iii) the applicable
Repurchase Price, and (iv) the name and address of the Paying Agents. To
exercise the Change-in-Control Right, a Holder must timely deliver irrevocable
written notice to the Company (and the Trustee) of the Holder's exercise of such
right, together with the Notes with respect to which the right is being
exercised, duly endorsed for transfer. Each Bearer Note delivered for repurchase
must be delivered with all unmatured coupons appertaining thereto. The
submission of a Note pursuant to the exercise of a Change-in-Control Right will
be irrevocable on the part of the Holder and the right to exchange such Note
will expire upon submission (unless the Company shall fail to purchase the Note
on the Repurchase Date). Repurchase by the Company will be effected in
compliance with all applicable laws and the procedures set forth in this
Indenture will be modified to the extent necessary to comply therewith. The
notice of exercise of a Change-in-Control Right shall specify the name of such
Holder and shall identify the Notes, or the portion of the Principal Amount at
Maturity thereof (which portion must be $1,000 Principal Amount at Maturity or a
Principal Amount at Maturity in excess thereof that is an integral multiple of
$1,000; provided that the remaining Principal Amount at Maturity of any Holder's
Notes must be $10,000 or an amount in excess thereof that is an integral
multiple of $1,000), that are to be so purchased and their aggregate Principal
Amount at
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Maturity. No such notice shall be deemed to have been delivered, and no such
Notes shall be deemed to have been presented and surrendered, until such notice
and Notes are actually received by the Company or its designated agent.
SECTION 304. Tax Repurchase. The Notes shall be purchased
pursuant to the Tax Repurchase, at the Tax Repurchase Price, at the option of
the Holder thereof, if HBL or Hanson shall have sent to the Holders a notice (a
"Withholding Tax Notice") in the manner provided in the ADS Rights Agreement
that states:
(1) that HBL or Hanson has or will become obligated to pay Tax
Amounts as a result of any change in, or amendment to, the laws (or any
regulations, rulings or similar pronouncements promulgated thereunder)
of Bermuda or the United Kingdom or of any political subdivision or
taxing authority thereof or therein, or any change in the official
position regarding the application or interpretation of such laws,
regulations, rulings or similar pronouncements, which change or
amendment is announced or becomes effective on or after March 4, 1994;
(2) that with effect from the date on which such Withholding Tax
Notice is given, HBL and Hanson will no longer be obligated to pay such
Tax Amounts;
(3) that the Notes will be purchased on the repurchase date
specified in the notice (which shall be 20 Business Days after the date
such notice is given) (the "Tax Repurchase Date");
(4) that any Note not tendered will continue to accrue Original
Issue Discount and interest and that the ADS Right with respect to such
Note will continue to be exercisable by the Holder thereof;
(5) the ADS Ratio then in effect;
(6) the name and address of each Paying Agent and the Exchange
Agent;
(7) in summary form, the ADS Rights of the Holders;
(8) that any Note accepted for payment pursuant to the Tax
Repurchase shall cease to accrue Original Issue Discount or interest
after the Tax Repurchase Date;
(9) that Holders electing to have a Note purchased pursuant to
the Tax Repurchase will be required to surrender the Note to a Paying
Agent at the address specified in the notice prior to the close of
business on the Tax Repurchase Date;
(10) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
third Business Day (or such shorter periods as may be required by
applicable law) preceding the Tax
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Repurchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the Principal Amount at Maturity
of Notes the Holder delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Note purchased; and
(11) that Holders which elect to have their Notes purchased only
in part will be issued new Notes in a Principal Amount at Maturity equal
to the unpurchased portion of the Notes surrendered (provided that the
remaining Principal Amount at Maturity of any Note must be at least
$10,000 or any amount in excess thereof that is an integral multiple of
$1,000).
Before providing any Withholding Tax Notice, HBL or Hanson, as
the case may be, shall deliver to the Company, and the Company shall deliver to
the Trustee, an Officers' Certificate (as defined in the ADS Rights Agreement)
setting forth a statement of facts showing that HBL or Hanson has or will become
obligated to pay Tax Amounts as a result of a change in, or amendment to, the
laws (or any regulations, rulings or similar pronouncements promulgated
thereunder) of Bermuda or the United Kingdom or of any political subdivision or
taxing authority thereof or therein, or any change in the official position
regarding the application or interpretation of such laws, regulations, rulings
or similar pronouncements, which change or amendment is announced or becomes
effective on or after March 4, 1994, and such obligation cannot be avoided by
HBL or Hanson taking reasonable measures available to it, and an opinion
addressed to the Company and to the Trustee of independent counsel of recognized
standing to the effect that HBL or Hanson has or will become obligated to pay
such Tax Amounts as a result of such change or amendment.
At the request of HBL or Hanson, the Trustee shall provide such
Withholding Tax Notice in such party's name and at such party's expense;
provided, however, that, in all cases, the text of such Withholding Tax Notice
shall be prepared by HBL or Hanson.
Any Tax Repurchase shall be consummated by the delivery to the
Holder of the aggregate Tax Repurchase Price of the Notes surrendered to the
Paying Agent in cash in Dollars no later than the Tax Repurchase Date.
Notwithstanding anything herein to the contrary, any Holder
surrendering Notes to a Paying Agent in accordance with a Withholding Tax Notice
shall have the right to withdraw its election to have Notes repurchased by
delivering to the Paying Agent, not later than the close of business on the
third Business Day (or such shorter period as may be required by applicable law)
preceding the Tax Repurchase Date, a notice, specifying, as applicable:
(1) the name of the Holder and the Principal Amount at Maturity
of Notes that the Holder delivered for purchase;
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(2) the certificate number, if any, of the Note in respect of
which such notice of withdrawal is being submitted;
(3) the Principal Amount at Maturity of the Note with respect to
which such notice of withdrawal is being submitted (which shall be
$10,000 Principal Amount at Maturity or an amount in excess thereof
which is an integral multiple of $1,000 if the notice of withdrawal
relates to less than the entire amount of such Holder's Notes); and
(4) the Principal Amount at Maturity, if any, of such Note that
remains subject to the Tax Repurchase.
The Paying Agent shall promptly (not more frequently that once
per day, but, in any event, prior to 10:00 a.m., New York City time, on the
Business Day immediately preceding the Tax Repurchase Date) notify the Company
and HBL or Hanson, as applicable, of the receipt by it of any Notes for purchase
or written notice of withdrawal.
SECTION 305. Deposit of Redemption Price, Repurchase Price or Tax
Repurchase Price. (a) On or prior to any Redemption Date, Repurchase Date or Tax
Repurchase Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 903) an amount of money sufficient to pay the
portion of the Redemption Price, or the Repurchase Price or the Tax Repurchase
Price, as applicable, payable by the Company (as provided herein) and accrued
interest on, all the Notes which are to be redeemed or repurchased on that date.
(b) If the ADS Right is exercised with respect to any Note that
is to be redeemed or repurchased, any money deposited with the Trustee or with a
Paying Agent or so segregated and held in trust for the redemption of such Note
shall (subject to any right of the Holder of such Note or any Predecessor Note
to receive interest as provided in Section 306) be paid to the Company, on
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 306. Notes Payable on Redemption Date, Repurchase Date or
Tax Repurchase Date. The Notes to be redeemed at the election of the Company or
to be repurchased at the option of Holders shall, on the Redemption Date,
Repurchase Date, Tax Repurchase Date or ADS Exercise Date, as applicable, become
due and payable at the Redemption Price, the Repurchase Price, the Tax
Repurchase Price or the Adjusted Accreted Value, as applicable, and from and
after such date (unless there is a default in the payment of the Redemption
Price, the Repurchase Price, the Tax Repurchase Price or the Adjusted Accreted
Value, as applicable, and accrued interest where applicable) such Notes shall
cease to bear interest and the coupons for such interest appertaining to Bearer
Notes shall, except to the extent provided below, be void. Upon surrender of any
such Note for redemption or repurchase in accordance herewith, together with all
coupons, if
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any, appertaining thereto maturing after the Redemption Date, Repurchase Date,
Tax Repurchase Date or the ADS Exercise Date, as applicable, such Note shall be
paid as described in this Article; provided, however, that installments of
interest on Bearer Notes whose Stated Maturity is on or prior to the Redemption
Date, Repurchase Date, Tax Repurchase Date or the ADS Exercise Date, as
applicable, shall be payable only upon presentation and surrender of coupons for
such interest (at the office of a Paying Agent outside the United States except
as otherwise provided in the form of Bearer Note set forth in Annex A); provided
further, however, that installments of interest on Registered Notes whose Stated
Maturity is on or prior to the Redemption Date, Repurchase Date or Tax
Repurchase Date, as applicable, shall be payable to the Holders of such Notes,
or one or more Predecessor Notes, registered as such on the relevant Record Date
according to their terms and the provisions of Section 213.
If any Bearer Note surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date,
Repurchase Date, Tax Repurchase Date or the ADS Exercise Date, as applicable,
such Note may be paid after deducting from the Redemption Price, Repurchase
Price, Tax Repurchase Price or the Adjusted Accreted Value, as applicable, an
amount equal to the face amount of all such missing coupons, or the surrender of
such missing coupons or coupon may be waived by the Company and the Trustee if
there be furnished to them such security or indemnity as they may require to
save each of them and any Paying Agent harmless. If thereafter the Holder of
such Note shall surrender to any Paying Agent any such missing coupon in respect
of which a deduction shall have been made from the Redemption Price, Repurchase
Price, Tax Repurchase Price or the Adjusted Accreted Value, as applicable, such
Holder shall be entitled to receive the amount so deducted; provided, however,
that interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at the office of a Paying Agent located outside of
the United States (except as otherwise provided in the form of Bearer Note set
forth in Annex A).
SECTION 307. Notes Redeemed or Repurchased in Part. Any Note
which is to be redeemed or purchased only in part shall be surrendered at an
office or agency of the Company designated for that purpose pursuant to Section
902 (with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or Notes
of any authorized denomination as requested by such Holder in aggregate
Principal Amount at Maturity equal to and in exchange for the unredeemed portion
of the Principal Amount at Maturity of the Note so surrendered (provided that
the remaining Principal Amount at Maturity of any Holder's Registered Notes or
Bearer Notes must be $10,000 or any amount in excess thereof that is an integral
multiple of $1,000).
Upon partial exercise of an ADS Right annexed to a Note, the ADS
Rights Agent shall instruct the Company to execute, and the Company shall
instruct the Trustee
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to authenticate and deliver to the Holder, without service charge, a new Note in
an authorized denomination equal in Principal Amount at Maturity to the portion
of the Note as to which the ADS Right was not exercised. Upon surrender (by
book-entry delivery) of a beneficial interest in a Rule 144A Global Receipt
representing the Rule 144A Global Notes for exercise of an ADS Right, the
Trustee shall cause the Note Depositary to instruct DTC to reduce the Principal
Amount at Maturity of such Rule 144A Global Receipt representing the Rule 144A
Global Notes by the aggregate Principal Amount at Maturity of the beneficial
interest in such Rule 144A Global Receipts representing the Rule 144A Global
Notes surrendered.
HMH shall execute the HMH Note Guaranty endorsed on any Notes
delivered to Holders pursuant to this Section 307.
ARTICLE FOUR
SATISFACTION AND DISCHARGE; COVENANT DEFEASANCE
SECTION 401. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to (a) the rights of
Holders to have their Notes purchased upon a Change-in-Control or a Tax
Repurchase or to exercise an ADS Right, (b) the surviving rights of exchange,
registration of transfer or replacement of Notes herein expressly provided for,
and (c) the right to receive Additional Amounts), and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered and
all coupons appertaining thereto (other than (i) coupons appertaining to
Bearer Notes surrendered for exchange for Registered Notes and maturing
after such exchange whose surrender is not required or has been waived
as provided in Section 211, (ii) Notes and coupons which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 212, (iii) coupons appertaining to Notes called for
redemption and maturing after the relevant Redemption Date whose
surrender has been waived as provided in Section 306, and (iv) Notes and
coupons for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section 903),
have been delivered to the Trustee for cancellation; or
(B) all such Notes and all coupons appertaining thereto
not theretofore delivered to the Trustee for cancellation (other than
Notes or coupons referred to in clauses (i) through (iv) of clause
(1)(A) above)
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(i) have become due and payable, or
(ii) will have become due and payable at their
Stated Maturity within one year, or
(iii) are to be 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 Company;
and the Company, in the case of clause (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds
(immediately available to the Holders in the case of clause (i)) in
trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness to be paid by the Company with respect to such Notes
and coupons not theretofore delivered to the Trustee for cancellation,
for all sums payable by the Company to the date of such deposit (in the
case of Notes which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 606 shall survive
and, if money or U.S. Government Obligations shall have been deposited with the
Trustee pursuant to clause (1)(B) of this Section 401 or pursuant to Section
403, the obligations of the Trustee under Section 402 and the last paragraph of
Section 903 shall survive.
SECTION 402. Application of Trust Money. Subject to the
provisions of the last paragraph of Section 903, all money or U.S. Government
Obligations deposited with the Trustee pursuant to Section 401 or Section 403
shall be held in trust and applied by it, in accordance with the provisions of
the Notes, the coupons and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying Agent)
as the Trustee may determine, to the Persons entitled thereto, of all sums for
whose payment such money has been deposited with the Trustee.
All money or U.S. Government Obligations deposited with the
Trustee pursuant to Section 401 or Section 403 (and held by it or any Paying
Agent) for the payment of Notes with respect to which the ADS Right has
subsequently been exercised shall be returned to the Company upon Company
Request.
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SECTION 403. Covenant Defeasance Upon Deposit of Moneys or
Government Obligations. (a) The Company shall cease to be under any obligation
to comply with any term, provision or condition set forth in Sections 904 and
914 (and any other restrictive covenant added for the benefit of Holders of
Notes pursuant to Section 801(4)), and non-compliance with such Sections shall
not give rise to any Event of Default under Section 501(3), at any time after
the applicable conditions set forth below have been satisfied:
(1) The Company shall have deposited or caused to be
deposited irrevocably with the Trustee or its agent as trust funds in
trust, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of the Notes (i) money in an amount, or (ii)
U.S. Government Obligations which through the payment of interest
thereon and principal thereof in accordance with their terms will
provide, not later than the due date of any payment, money in an amount,
or (iii) a combination of (i) and (ii), sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge each and every payment to be made by the Company with respect
to the Notes on the dates such payments are due (or to and including the
Redemption Date irrevocably designated by the Company pursuant to clause
(3) below);
(2) No Event of Default or Default shall have occurred and
be continuing on the date of such deposit;
(3) If the Company has deposited or caused to be deposited
money or U.S. Government Obligations pursuant to clause (1) above to pay
or discharge each and every payment with respect to the Notes to be made
by the Company to and including a Redemption Date, such Redemption Date
shall be irrevocably designated by a Board Resolution delivered to the
Trustee on or prior to the date of deposit of such money or U.S.
Government Obligations and such Board Resolution shall be accompanied by
an irrevocable Company Order that the Trustee give notice of such
redemption in the name and at the expense of the Company not less than
30 nor more than 60 days prior to such Redemption Date in accordance
with Section 301; and
(4) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by
this Section 403(a) have been complied with.
(b) Money or U.S. Government Obligations deposited with the
Trustee pursuant to Section 403(a) shall be applied by the Trustee in accordance
with Section 402.
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(c) The Trustee and the Paying Agent shall promptly pay to the
Company upon request any excess money or securities held by them at any time in
accordance with the provisions of Section 402.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. An "Event of Default" occurs if
any one of the following events (irrespective of 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) shall
have occurred and be continuing:
(1) failure to pay when due all or any part of the Principal
Amount at Maturity, Accreted Value, Redemption Price, Additional Amounts
or Tax Amounts; or
(2) failure to pay when due all or any installment of interest on
the Notes and continuance of such failure for 30 days; or
(3) failure by the Company or HMH, as the case may be, duly to
observe or perform any other of the terms, covenants or agreements of
the Company or HMH, respectively, contained in the Notes or the
Indenture for a period of 60 days after the date on which written notice
specifying such failure, demanding that the Company or HMH, as the case
may be, remedy the same, shall have been given to the Company, HMH and
the Trustee by the Holders of at least 25% in aggregate Principal Amount
at Maturity of the Notes at the time Outstanding; or
(4) failure (i) to deliver ADSs (and cash in lieu of fractional
ADSs) upon exercise of the ADS Rights as required under the ADS Rights
Agreement, and continuance of such failure for 10 days, or (ii) to pay
when due all or any part of the Repurchase Price or the Tax Repurchase
Price; or
(5) failure by HBL or Hanson, as the case may be, duly to observe
or perform any other of the terms, covenants or agreements of HBL or
Hanson, respectively, contained in the ADS Rights Agreement for a period
of 60 days after the date on which written notice specifying such
failure, demanding that HBL or Hanson, as the case may be, remedy the
same, shall have been given to the Company, HBL, Hanson and the Trustee
by the holders of at least 25% in aggregate Principal Amount at Maturity
of the Notes at the time Outstanding; or
(6) the occurrence of a default under any note or other evidence
of indebtedness for money borrowed by the Company or any Principal
Subsidiary (or
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under any indenture or instrument under which there may be issued or
secured or evidenced any indebtedness for money borrowed by the Company
or any Principal Subsidiary), whether such indebtedness now exists or
shall hereafter be created, which default individually, or in the
aggregate with other such defaults, shall constitute a failure to pay
principal of such indebtedness in excess of $15,000,000 when due and
payable (after applicable notice and grace periods, if any) or shall
have resulted in the principal of such indebtedness in excess of
$15,000,000 being declared due and payable prior to the date on which it
would otherwise be due and payable and such acceleration shall not have
been rescinded or annulled, or such accelerated indebtedness shall not
have been discharged, within five Business Days of such acceleration; or
(7) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company, HBL or a
Principal Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Company, HBL or a
Principal Subsidiary or for any substantial part of the property of the
Company, HBL or Principal Subsidiary, or ordering the winding up or
liquidation of the affairs of the Company, HBL or Principal Subsidiary,
and the continuance of any such decree or order unstayed and in effect
for a period of 90 consecutive days; or
(8) the Company, HBL or a Principal Subsidiary shall commence a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect or consent to the entry of an
order for relief in an involuntary case under any such law or consent to
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official)
of the Company, HBL or a Principal Subsidiary or any substantial part of
the property of the Company, HBL or a Principal Subsidiary, or the
making by the Company, HBL or a Principal Subsidiary of a general
assignment for the benefit of creditors, or if the Company, HBL or a
Principal Subsidiary shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of the
foregoing; or
(9) the ADS Issuance Agreement or the Keepwell Agreement is not
(or is claimed by Hanson not to be) in full force and effect, or the ADS
Issuance Agreement or the Keepwell Agreement is purported to be
modified, amended or terminated, other than strictly in accordance with
its terms, without the consent of all the Holders, or HBL fails to
enforce its rights under the ADS Issuance Agreement or the Keepwell
Agreement.
SECTION 502. Acceleration of Maturity, Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
501(7) or 501(8)) occurs and is continuing, the Holders of not less than 25% in
aggregate Principal Amount
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at Maturity of the Notes then Outstanding, by notice in writing to the Company
and to the Trustee, shall have the right to declare
(1) the Accreted Value plus interest accrued to but excluding the
date of the Event of Default (in the case of an Event of Default
specified in Section 501(1) or 501(2)),
(2) the Accreted Value plus interest accrued to but excluding the
date of declaration (in the case of an Event of Default specified in
Section 501(3), 501(5), 501(6) or 501(9)) ,
(3) the greater of (x) the Accreted Value plus interest accrued
to but excluding the date of the Event of Default and (y) the ADS Rights
Amount on the ADS Exercise Date to which such Event of Default relates
(in the case of an Event of Default specified in Section 501(4)(i)), or
(4) the Repurchase Price or the Tax Repurchase Price, as
applicable (in the case of an Event of Default specified in Section
501(4)(ii)),
of all Notes to be immediately due and payable.
In the case of an Event of Default specified in Section 501(7) or
501(8), the Accreted Value plus interest to but excluding the date of occurrence
of such Event of Default shall automatically become and be immediately due and
payable, without any declaration or other act on the part of the Trustee or the
Holders.
The Holders of a majority in aggregate Principal Amount at
Maturity of the Notes then Outstanding (or such lesser amount as shall have
acted at a meeting pursuant to the provisions of this Indenture), by notice to
the Trustee (and without notice to any other Holder), may rescind any
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of the amounts that have become due solely as a result
of acceleration. No such rescission shall affect any subsequent Default or Event
of Default or impair any right consequent thereon.
If any payment is not made when due, then interest shall accrue
thereon at the rate of 6.00% per annum, compounded semiannually, and shall be
payable by the Company (or by HBL, with respect to amounts, if any, payable by
HBL under the ADS Rights and the ADS Rights Agreement) upon the demand of the
Holders, in each case to the extent payment of such interest shall be legally
enforceable under applicable law. Such interest shall accrue from and including
the date such payment was due to, but excluding, the date such payment,
including interest thereon, has been duly made or provided for.
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Upon the occurrence of an Event of Default and the declaration by
the Holders of amounts to be due and payable, the Company will be required to
pay to the Holders any accrued interest, plus the Adjusted Accreted Value of the
Notes (plus, in the case of certain Events of Default specified in Section
501(4)(ii) above relating to the Repurchase Price, 1% of the Adjusted Accreted
Value of the Notes). (Simultaneously therewith, HBL (in respect of the ADS
Rights) will be required to pay, pursuant to the ADS Rights Agreement, the
excess of the total amount due to the Holders over the amount payable by the
Company pursuant to the immediately preceding sentence.)
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee. If an Event of Default occurs and is continuing, the Trustee, in its
own name and as trustee of an express trust, shall have the right to institute a
judicial proceeding for the collection of the amounts so due and unpaid, and the
amounts provided for in Section 606, and may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company, HMH or
any other obligor upon the Notes and coupons and collect the amounts adjudged or
decreed to be payable in the manner provided by law out of the property of the
Company, HMH or any other obligor upon the Notes and any coupons, wherever
situated.
SECTION 504. Trustee May File Proofs of Claim. In the event of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relating to the Company or HMH or the property of the Company or HMH
or the creditors of the Company or HMH, the Trustee (irrespective of whether the
Principal Amount at Maturity, Accreted Value, Adjusted Accreted Value,
Redemption Price, Repurchase Price, Tax Repurchase Price, Additional Amounts or
interest, if any, in respect of the Notes shall then be due and payable as
therein expressed or by declaration of acceleration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company or
HMH for the payment of any such amount) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(1) to file and prove a claim for the amount (in whole or in
part) of the Principal Amount at Maturity, Accreted Value, Adjusted
Accreted Value, Redemption Price, Repurchase Price, Tax Repurchase
Price, Additional Amounts and interest, if any, in respect of the Notes
and to file such other papers or documents 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 of
Notes and coupons allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Notes and coupons 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 of Notes and coupons, to pay to the Trustee any amount due to 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 606.
Nothing contained herein 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 Notes or
coupons or the rights of any Holder thereunder 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
Notes or Coupons. All rights of action and claims under this Indenture or the
Notes or coupons may be prosecuted and enforced by the Trustee without
possession of any of the Notes or coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name 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 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 Five shall be applied in the following
order, at the date or dates fixed by the Trustee and, in the event of the
distribution of such money on account of the Notes or coupons or both, upon
presentation of the Notes or coupons or both and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee under
Section 606;
SECOND: to Holders, for amounts then due and unpaid for the
Principal Amount at Maturity, Accreted Value, Adjusted Accreted Value,
ADS Rights Amount, Redemption Price, Repurchase Price, Tax Repurchase
Price, Additional Amounts and interest, if any, in respect of the Notes,
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind; and
THIRD: the balance, if any, to or as directed by the Company.
SECTION 507. Limitation on Suits. No Holder shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
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(1) such Holder has previously provided written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate Principal Amount at
Maturity of the Notes then Outstanding shall have made a written request
to the Trustee to institute proceedings or for any other remedy in
respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against any loss, liability or expense
satisfactory to it;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of security or indemnity has failed to institute any
such proceeding; and
(5) no direction inconsistent with such written request has been
provided to the Trustee during such 60-day period by the Holders of a
majority in aggregate Principal Amount at Maturity of the Notes then
Outstanding (or such lesser amount as shall have acted at a meeting
pursuant to the provisions of this Indenture);
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Payments,
to Require Purchase and to Exercise ADS Rights. Notwithstanding any other
provision of this Indenture that may be to the contrary, each Holder shall have
the right, which is absolute and unconditional, (a) to receive each and every
payment with respect to such Holder's Notes and coupons on or after the
respective due dates expressed in such Notes and coupons (or as of any
Redemption Date, Repurchase Date or Tax Repurchase Date, as applicable), (b)
upon exercise of ADS Rights, to require the Company to redeem such Holder's
Notes in accordance with this Indenture, and (c) to institute suit for the
enforcement of any such payment or such redemption, and such rights shall not be
impaired or adversely affected 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 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, subject to any determination in such proceeding, the
Company, HMH, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder,
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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 or payment of mutilated, destroyed,
lost or stolen Notes or coupons in the last paragraph of Section 212, 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 by the
Trustee or any Holder in the exercise of, nor any omission of the Trustee or of
any Holder 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 Five or by law to the Trustee or to the 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 of Notes. The Holders of a
majority in Principal Amount at Maturity of the Notes then Outstanding (or such
lesser amount as shall have acted at a meeting pursuant to the provisions of
this Indenture) 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; provided, however, that:
(1) such direction shall not be in conflict with any law or with
this Indenture, be unduly prejudicial to Holders not joining therein or
expose the Trustee to personal liability, and
(2) the Trustee may take any other action deemed necessary or
appropriate by the Trustee which is not inconsistent with such
direction.
SECTION 513. Waiver of Past Defaults. Subject to Section 502, the
Holders either (a) through the written consent of not less than a majority of
the Principal Amount at Maturity of the Notes then Outstanding, or (b) by the
adoption of a resolution, at a meeting of Holders of the Notes then Outstanding
at which a quorum is present, by the Holders of at least 66-2/3% of the
Principal Amount at Maturity of the Notes then Outstanding represented at such
meeting, may, by Act of such Holders, on behalf of the Holders of all the Notes
then Outstanding, waive any past Default or Event of Default hereunder and its
consequences, except:
(1) an Event of Default described in Section 501(l), 501(2) or
501(4), or
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(2) a Default in respect of a covenant or provision hereof which
under Article Eight cannot be modified or amended without the consent of
the Holder of each Note affected.
Upon any such waiver, such Default or Event of Default shall
cease to exist, and any Event of Default arising from such Default 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 Event of Default or
impair any right consequent thereon.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults. Within 90 days after the
occurrence of any Default hereunder, the Trustee shall transmit to Holders, in
the manner and to the extent provided in Section 106, notice of such Default
hereunder actually known to the Trustee, unless such Default shall have been
cured or waived; provided, however, that, except in the case of a Default of the
character specified in Section 501(1), 501(2) or 501(4), the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
SECTION 602. Certain Rights and Duties of Trustee. Subject to the
provisions hereof:
(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, coupon, other evidence of indebtedness 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 Company referred to herein
shall be sufficiently evidenced by a Company Request or Company Order,
as the case may be, and any resolution of the Board of Directors of the
Company may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it necessary or appropriate 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)
shall have the right, in the absence of bad faith on its part, to rely
upon an Officers' Certificate;
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(d) before the Trustee acts or refrains from acting, the Trustee
shall have the right to consult with legal counsel of its selection and
the 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 it hereunder in good faith and in reliance
thereon;
(e) 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 reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(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,
bond, debenture, note, coupon, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine during normal business
hours the books and records of the Company or HMH, personally or by
agent or attorney;
(g) 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 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;
(h) if an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs;
(i) 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;
(j) except as provided in Section 602(h), the Trustee undertakes
to perform such duties and only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall
be read into this Indenture against the Trustee;
(k) in the absence of bad faith 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
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the requirements of this Indenture; but 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 be under a
duty to examine the same to determine whether or not they conform to the
requirements of this Indenture; and
(l) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in Principal Amount at Maturity
of Notes then Outstanding (or such lesser amount as shall have acted at
a meeting pursuant to the provisions of this Indenture), relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture with respect to such Notes.
The Trustee shall not be required 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 has
reasonable grounds for believing that repayment of such funds or adequate
indemnity against risk or liability is not reasonably assured to it.
SECTION 603. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes (except the Trustee's
certificates of authentication) and in the coupons shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness, except that the Trustee represents that it is duly authorized to
execute and deliver this Indenture, authenticate the Notes and perform its
obligations hereunder. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Notes or coupons. The Trustee shall
not be accountable for the use or application by the Company of Notes or the
proceeds thereof.
SECTION 604. May Hold Notes. The Trustee, any Paying Agent, any
Transfer Agent, any Note Registrar or any other agent of the Company, in its
individual or any other capacity, shall have the right to become the owner or
pledgee of Notes and coupons may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Transfer Agent, Note
Registrar or such other agent.
SECTION 605. Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 606. Compensation and Reimbursement. The Company
covenants and agrees:
(l) to pay to the Trustee from time to time such compensation as
the Company and the Trustee shall from time to time agree in writing for
all services
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rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision hereof (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except to the extent that any
such expense, disbursement or advance may be attributable to its
negligence, willful misconduct or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability, damage, claims or expense, including taxes
(other than taxes based upon or measured by or determined by the income
of the Trustee), including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder incurred, arising
out of or in connection with the acceptance or administration of this
trust or performance of its duties hereunder, except to the extent that
any such loss, liability, damage, claims or expense may be attributable
to its negligence, willful misconduct or bad faith.
The term "Trustee" shall include any predecessor Trustee but the
negligence of any Trustee shall not affect the rights of any other Trustee
hereunder.
As security for the performance of the obligations of the Company
under this Section 606, the Trustee shall have a lien prior to the Notes and
coupons upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of Holders of particular Notes or
coupons.
The payment obligations of the Company pursuant to this Section
606 shall survive discharge of this Indenture. When the Trustee incurs expenses
or renders services in connection with an Event of Default specified in Section
501(7) or 501(8), the expenses (including the charges and expenses of its
counsel) are intended to constitute expenses of administration under any
applicable bankruptcy, insolvency or other similar law.
SECTION 607. Corporate Trustee Required; Eligibility; Conflicting
Interests. There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee and shall have a combined capital and surplus of at
least $50,000,000. If such 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 607, the combined capital and surplus of such 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 607, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article Six.
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SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment by the successor
Trustee pursuant to this Article Six shall become effective until the acceptance
of appointment of a successor Trustee in accordance with the applicable
requirements of Section 609.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 609 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in Principal Amount at Maturity of the Notes then Outstanding (or
such lesser amount as shall have acted at a meeting pursuant to the provisions
of this Indenture), delivered to the Trustee and the Company.
(d) If at any time:
(l) the Trustee shall cease to be eligible under Section
607 and shall fail to resign after written request therefor by the
Company or by any Holder which has been a bona fide Holder for at least
six months, or
(2) 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 such event, (i) the Company by a Board Resolution shall have the
right to remove the Trustee, or (ii) any Holder which has been a bona fide
Holder for at least six months may, on behalf of itself and all other Holders
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of 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 Company, by a Board Resolution, shall promptly appoint a successor Trustee
and the Company and such successor Trustee shall comply with the applicable
requirements of Section 609. If, within one year after such resignation, removal
or incapacity, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in Principal Amount at Maturity of
the Notes then Outstanding (or such lesser amount as shall have acted at a
meeting pursuant to the provisions of this Indenture) delivered to the Company
and the retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment in accordance with the applicable
requirements of Section 609, become the successor Trustee and supersede the
successor Trustee
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appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner required by
Section 609, any Holder which has been a bona fide Holder for at least six
months may, on behalf of itself and all other Holders similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall provide notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company, HMH and 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; but, on request of the Company, HMH or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company and HMH shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be eligible under this
Article Six.
SECTION 610. Merger, Exchange, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or exchanged or
with which it may be consolidated, or any corporation resulting from any merger,
exchange or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto; provided, however, that such corporation shall be otherwise
eligible under this Article Six. If any Notes shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger, exchange
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Notes so authenticated with the same effect as if such successor
Trustee had itself authenticated such Notes.
SECTION 611. Disclosure of Names and Addresses of Holders. Every
Holder, by receiving and holding any Notes, agrees with the Company and the
Trustee that neither the Company nor HBL nor the Trustee nor any agent of any of
them shall be
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held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders, irrespective 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 of any Holder, HBL or the
Company.
SECTION 612. Reports by Trustee. Within 60 days after May 15 of
each year commencing with the first May 15 after the date of this Indenture, the
Trustee shall transmit to the Note Custodian, the Note Depositary and to any
Holder requesting such, in the manner and to the extent provided in Section 106,
a brief report, dated as of such May 15, with respect to:
(1) any change to its eligibility under Section 607;
(2) the character and amount of any advances made by the Trustee,
as Trustee, which remain unpaid on the date of such report, and for the
reimbursement of which it claims or may claim a lien or charge, prior to
that of the Holders, on the trust estate or on property or funds held or
collected by it, if such advances so remaining unpaid aggregate more
than one-half of one percent of the aggregate Principal Amount at
Maturity of Notes Outstanding on such date;
(3) any change to the property and funds physically in the
Trustee's possession as Trustee on the date of such report; and
(4) any action taken by it in the performance of its duties under
this Indenture which it has not previously reported and which in its
option materially affects the Notes or coupons or the trust estate,
except action in respect of a Default, notice of which has been or is to
be withheld by it in accordance with Section 601.
SECTION 613. Delegation of Duties by ADS Rights Agent. The
Trustee hereby accepts the delegation of duties from the ADS Rights Agent as set
forth in the ADS Rights Agreement and agrees to enforce any and all rights of
the Holders in respect of the covenants and agreements contained in the ADS
Rights and the ADS Rights Agreement; provided, however, the ADS Rights Agent's
delegation of such duties to the Trustee shall cease and revert to the ADS
Rights Agent if the Trustee fails to duly perform such duties.
SECTION 614. Same Treatment of Holders. In connection with the
performance of its duties and obligations hereunder, the Trustee shall not take
any action as a result of which Holders of Notes that have ADS Rights associated
therewith or Holders of Notes that no longer have ADS Rights associated
therewith (as a result of cash exercises of such ADS Rights in accordance with
Section 3.2 of the ADS Rights Agreement) receive preferential treatment, one as
against the other.
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SECTION 615. HBL and Hanson Amounts. At the request of the ADS
Rights Agent and upon receipt by the Trustee of the HBL Amounts or Hanson
Amounts (as such terms are defined in the ADS Rights Agreement), as the case may
be, the Trustee shall pay the Holders the HBL Amounts and Hanson Amounts,
pursuant to and in accordance with the ADS Rights Agreement.
ARTICLE SEVEN
CONSOLIDATION, MERGER OR TRANSFER
SECTION 701. When the Company May Merge or Transfer Assets. The
Company will not consolidate with or merge into any other Person or convey,
sell, transfer or lease its properties and assets substantially as an entirety
to any Person (in one transaction or in a series of related transactions),
unless:
(1) if the Company is not the surviving corporation, the Person
formed by such consolidation or into which the Company is merged or the
Person which acquires by conveyance, sale or transfer, or which leases,
the properties and assets of the Company substantially as an entirety is
a corporation, partnership or trust organized and validly existing under
the laws of the United States and any state thereof or the District of
Columbia and expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Trustee, the due and punctual payment of
all amounts payable by the Company with respect to the Notes and the
performance or observance of each covenant of the Company under the
Indenture;
(2) after consummating such consolidation, merger, acquisition or
lease, no Default or Event of Default will have occurred and be
continuing;
(3) such successor corporation or Person acquiring or leasing the
properties and assets of the Company substantially as an entirety
expressly agrees (A) to indemnify each Holder of a Note against any tax,
assessment or other governmental charge payable by withholding or
deduction thereafter imposed on such Holder solely as a consequence of
such consolidation, merger, acquisition or lease with respect to any
amounts payable by the Company with respect to the Notes, and (B) to
deliver a substitute undertaking to the Trustee in form and substance
satisfactory to the Trustee to pay any Additional Amounts required to be
paid on the Notes solely as a result of such consolidation, merger,
acquisition or lease; and
(4) such consolidation, merger, acquisition or lease complies
with the Indenture and all conditions precedent provided for in the
Indenture relating to such transaction have been complied with.
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SECTION 702. Successor Substituted. Upon any consolidation of the
Company with, or merger of the Company into, any other Person or any conveyance,
sale, transfer or lease of the properties of the Company substantially as an
entirety in accordance with Section 701, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
sale, transfer or lease is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the Notes and
coupons.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 801. Supplemental Indentures Without Consent of Holders.
Without the consent of the Holders, the Company and HMH, when authorized by or
pursuant to a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Company, HMH and the Trustee, for any of the following
purposes:
(1) to cure any ambiguity, defect or inconsistency or make any
other provision which the Company and the Trustee may deem necessary or
desirable and which will not adversely affect the interests of the
Holders of the Notes or the coupons;
(2) to provide for the assumption by a successor to the Company
(or HMH) of its obligations under the Indenture;
(3) to permit the Registered Notes to be exchanged for Bearer
Notes or relax or eliminate the restrictions on the payment of the
Principal Amount at Maturity, Accreted Value, Adjusted Accreted Value,
interest, Redemption Price, Repurchase Price, Tax Repurchase Price, the
ADS Rights Amount or Additional Amounts with respect to Bearer Notes in
the United States to the extent then permitted under applicable
regulations of the United States Treasury Department, and provided that
no adverse consequences would result to the Holders of the Notes;
(4) to add to the covenants or obligations of the Company under
the Indenture or surrender any right, power or option conferred by the
Indenture on the Company; or
(5) to secure the Notes pursuant to Section 904 or otherwise.
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SECTION 802. Supplemental Indentures with Consent of Holders.
With either (a) the consent of the Holders of at least a majority in aggregate
Principal Amount at Maturity of the Notes then Outstanding, by Act of such
Holders delivered to the Company and the Trustee, or (b) by the adoption of a
resolution, at a meeting of Holders of the Outstanding Notes at which a quorum
is present, by the Holders of 66-2/3% in Principal Amount at Maturity
represented at such meeting, the Company and HMH, when authorized by or pursuant
to a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Note or coupon affected thereby:
(1) reduce the percentage of the Principal Amount at Maturity of
Notes the Holders of which must consent to any amendment or waiver under
this Indenture or reduce the requirements of Section 1004 for quorum or
voting;
(2) make any change in the manner or rate of accrual in
connection with Original Issue Discount, reduce the rate of interest on
the Notes, or extend the time for payment of Original Issue Discount or
interest on any Note;
(3) reduce the Principal Amount at Maturity or the Issue Price
of, or change the obligation of the Company to pay (or reduce the amount
of) any Additional Amounts with respect to, or extend the Stated
Maturity of, any Note;
(4) reduce the Redemption Price, Repurchase Price or Tax
Repurchase Price of any Note;
(5) reduce the amount that would be due and payable upon a
declaration of acceleration of the Maturity of any Note pursuant to
Section 502 or the amount thereof provable in bankruptcy pursuant to
Section 504;
(6) make any Note payable in money or securities other than as
stated in the Note;
(7) make any change in Section 508, this Section 802 or Section
905, or make any change in Section 513 except to increase any percentage
set forth therein;
(8) make any change that adversely affects the right to exercise
an ADS Right with respect to any Note or the right to require the
Company to redeem any Note in connection with the exercise of the ADS
Rights;
(9) make any change that adversely affects the right to require
the Company to redeem or purchase the Notes in accordance with the terms
thereof
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and of this Indenture on the Redemption Date, the Repurchase Date or the
Tax Repurchase Date, as the case may be;
(10) impair the right to institute suit for the enforcement of
any payment with respect to, or exchange of, the Notes; or
(11) change the obligation of the Company to maintain an office
or agency in the Borough of Manhattan, The City of New York, and in a
Western European city pursuant to Section 902.
It shall not be necessary for any Act of Holders under this
Section 802 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 803. Execution of Supplemental Indentures. In executing,
or accepting the additional trusts created by, any supplemental indenture
permitted by this Article Eight or the modification thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 804. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article Eight, 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 a Note
theretofore or thereafter authenticated and delivered hereunder and coupons
shall be bound thereby.
SECTION 805. Reference in Notes to Supplemental Indentures, etc.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article Eight 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 Company shall so determine,
new Notes so modified as to conform, in the opinion of the Company and the
Trustee, to any such supplemental indenture may be prepared and executed by the
Company (and, in the case of the HMH Note Guaranty, by HMH) and such Notes may
be authenticated and delivered by the Trustee in exchange for Outstanding Notes.
SECTION 806. Notice of Supplemental Indentures. Promptly after
the execution by the Company, HMH and the Trustee of any supplemental indenture
pursuant to the provisions of this Article Eight, the Company shall provide
notice to the Holders, setting forth in general terms the substance of such
supplemental indenture, in the manner provided in Section 106. Any failure of
the Company to give such notice, or
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any defect therein, shall not in any way impair or affect the validity of any
such supplemental indenture.
ARTICLE NINE
COVENANTS
SECTION 901. Payment of Notes. The Company will duly and
punctually pay all amounts payable by it with respect to the Notes and coupons
in accordance with the terms of the Notes and this Indenture. The Company will
deposit or cause to be deposited with the Trustee (as directed by the Trustee),
on or prior to the Stated Maturity of any Note or installment of interest, all
payments so due.
SECTION 902. Maintenance of Offices or Agencies. The Company
hereby appoints (a) the Corporate Trust Office of the Trustee as its agent in
the Borough of Manhattan, The City of New York, where Registered Notes and Rule
144A Global Notes may be presented or surrendered for payment, where Bearer
Notes and coupons may be presented or surrendered for payment in the
circumstances described below (and not otherwise), where Notes may be
surrendered for registration of transfer or exchange, where Bearer Notes may be
surrendered for exchange in circumstances described below (and not otherwise)
and where notices and demands to or upon the Company or HMH in respect of the
Notes and coupons and this Indenture may be served, and (b) the office of The
Bank of New York, London Branch, as its agent outside of the United States
where, subject to any applicable laws or regulations, Bearer Notes and coupons
may be presented and surrendered for payment and where Notes may be surrendered
for exchange. As provided in the form of Bearer Note set forth in Annex A,
payments with respect to Bearer Notes may be made, and Bearer Notes may be
surrendered for exchange, at the office of the Paying Agent in the Borough of
Manhattan, The City of New York, if (but only if) payment of the full amount of
such payments or surrender of Bearer Notes for exchange, as the case may be, at
all offices outside the United States maintained for such purpose by the Company
in accordance with this Indenture is illegal or effectively precluded by
exchange controls or other similar restrictions, as determined by the Company.
In addition, the Company hereby appoints (i) the main office of
Commerzbank International S.A. in Luxembourg as additional Paying Agent for
payments with respect to the Notes, and (ii) the main office of Commerzbank
International S.A. in Luxembourg as additional Transfer Agent, where Notes may
be surrendered for registration of transfer or exchange.
The Company may at any time and from time to time vary or
terminate the appointment of any such agent or appoint any additional agents for
any or all of such purposes; provided, however, that until all of the Notes have
been delivered to the Trustee for cancellation, or moneys sufficient to pay all
amounts with respect to the
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Notes have been made available for payment and either paid or returned to the
Company pursuant to the provisions of Section 903, the Company will maintain (l)
in the Borough of Manhattan, The City of New York, an office or agency where
Registered Notes and Rule 144A Global Notes may be presented or surrendered for
payment, where Bearer Notes and coupons may be presented or surrendered for
payment in the circumstances described in the last sentence of the first
paragraph of this Section (and not otherwise), where Notes may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company or HMH in respect of the Notes and coupons and this Indenture
may be served, and (2) subject to any laws or regulations applicable thereto, in
any city in a Western European country, an office or agency where Bearer Notes
and coupons may be presented and surrendered for payment and where Notes may be
presented for registration of transfer or exchange; provided further, however,
that so long as the Notes are listed on the Luxembourg Stock Exchange and such
stock exchange shall so require, the Company will maintain a Paying Agent and
Transfer Agent in Luxembourg. The Company will give prompt written notice to the
Trustee, and notice to the Holders in accordance with Section 106, of the
appointment or termination of any such agents and of the location and any change
in the location of any such office or agency.
If at any time the Company shall fail to maintain any such
required office or agency in the Borough of Manhattan, The City of New York, or
in any city in a Western European country, or shall fail to furnish the Trustee
with the address thereof, presentations and surrenders may be made and notices
and demands may be served on the Corporate Trust Office of the Trustee, except
that Bearer Notes and coupons may be presented and surrendered to The Bank of
New York, London Branch, and the Company and HMH hereby appoints the same as its
agent to receive such respective presentations, surrenders, notices and demands.
SECTION 903. Amounts for Note Payments to Be Held in Trust. If
the Company shall act as a Paying Agent, the Company will, on or before each due
date of payments in respect of any Note, segregate and hold in trust for the
benefit of the Persons entitled thereto an amount of money in Dollars,
sufficient to make such payments so becoming due until such amounts shall be
paid to such Persons or otherwise disposed of as herein provided and the Company
will promptly notify the Trustee of its or their action or failure so to act.
Whenever the Company shall have one or more Paying Agents, the
Company will, prior to each due date of payments in respect of any Note, deposit
with a Paying Agent an amount sufficient to make such payments so becoming due,
such amount to be held in trust for the benefit of the Persons entitled thereto,
and (unless such Paying Agent is the Trustee) will promptly notify the Trustee
of its action or failure so to act.
The Company 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
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with the Trustee, subject to the provisions of this Section 903, to the effect
that such Paying Agent will:
(1) hold all amounts held by it for the making of payments in
respect of the Notes in trust for the benefit of the Persons entitled
thereto until such amounts shall be paid to such Persons or otherwise
disposed of as herein provided;
(2) provide the Trustee notice of any Default by the Company in
the making of payments in respect of the Notes; and
(3) at any time during the continuance of any such Default, upon
the written request of the Trustee, forthwith pay to the Trustee all
amounts so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay or
deliver, or by Company Order direct any Paying Agent to pay or deliver, to the
Trustee all amounts held in trust by the Company or such Paying Agent, such
amounts to be held by the Trustee upon the same trusts as those upon which such
amounts were held by the Company 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 sums.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the making of any payment in respect of any
Note and remaining unclaimed for two years after such payment has become due and
payable (if then held by the Trustee or any Paying Agent) shall be paid or
returned to the Company, on Company Request or (if then held by the Company)
shall be discharged from such trust; and Holders shall thereafter, as unsecured
general creditors, seek recourse only to the Company as applicable, for payment
thereof (unless an applicable abandoned property law designates another Person),
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company, 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 Company provide
notice to Holders in the manner set forth in Section 106 that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the latest date of publication or mailing, any unclaimed balance of
such money then remaining will be repaid or redelivered to the Company.
SECTION 904. Negative Pledge. For so long as any of the Notes
remain Outstanding, the Company shall not and shall not permit any Subsidiary to
create or assume any lien or other encumbrance of or upon any of its present or
future properties, assets or revenues to secure any indebtedness for money
borrowed or guaranteed by the Company without making effective provision whereby
the Notes are secured by such lien or encumbrance equally and ratably with the
indebtedness or other obligation being secured (and the Company covenants that
in such case it will make or cause to be made
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effective provision to such effect); provided, however, that the foregoing
restriction shall not apply to (i) any lien created on property at the time of
purchase, acquisition, construction or improvement thereof by the Company or a
Subsidiary solely as security for the payment of the purchase price thereof,
(ii) any lien existing on any asset of any entity at the time such entity
becomes a Subsidiary, provided that such lien is not created or assumed in
contemplation of such event, (iii) any lien on any asset securing indebtedness
incurred or assumed for the purpose of financing all or part of the cost of
acquiring such asset (including construction cost and carrying charges), and, in
the case of a Subsidiary all or substantially all of whose assets consist of
such asset, any lien on ownership interests or investments in such Subsidiary
incurred or assumed in connection with the acquisition or construction of such
asset; provided that in each case such lien attaches to such asset, interest or
investment concurrently with or within 185 days after the acquisition thereof or
completion of construction thereof, or commencement of commercial operation
thereof, (iv) any lien existing on any asset prior to the acquisition thereof by
the Company or a Subsidiary, provided that such lien is not created or assumed
in contemplation of such event, (v) any lien securing indebtedness to the
Company or any Subsidiary, (vi) any lien for taxes, assessments or government
charges or claims not yet due or which are being contested in good faith by
appropriate proceedings or if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with U.S. GAAP, (vii)
deposits or pledges to secure obligations under workmen's compensation,
temporary disability, social security, retiree health or similar laws, or under
unemployment insurance, (viii) deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the repayment of borrowed
money), leases, statutory obligations, surety and appeal bonds, progress
payments, government contracts, custom duties and other obligations of like
nature arising in the ordinary course of business, (ix) minor imperfections of
title, provided that such imperfections do not materially interfere with the use
or operation of the property or assets of the Company, (x) mechanics', workers',
materialmen's, landlords', suppliers', warehousemen's, or other like liens
arising in the ordinary course of business with respect to obligations which are
not due or which are being contested in good faith, (xi) any lien arising out of
conditional sale, title retention, consignment or similar arrangements for the
sale of goods in the ordinary course of business, (xii) any lien to secure
indebtedness for borrowed money if, immediately after the incurrence thereof,
the aggregate of all amounts of indebtedness for borrowed money then outstanding
secured by liens incurred solely under this clause (xii) does not exceed 5% of
Consolidated Net Tangible Assets as derived from the most recent audited
consolidated balance sheet of the Company (the "Lien Basket"); provided,
however, that the Lien Basket shall be reduced, without duplication, by the
amount of outstanding Funded Indebtedness incurred from time to time pursuant to
the Debt Basket, or (xiii) any lien arising out of the refinancing, extension,
renewal or refunding (or successive refinancings, extensions, renewals or
refundings) of any indebtedness secured by any lien permitted by any of the
foregoing clauses of this paragraph; provided that the amount of such
indebtedness is not increased and is not secured by any additional assets (other
than improvements, alterations and repairs to such property).
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SECTION 905. Additional Amounts. The Company will pay to the
Holder of any Note or any coupon appertaining thereto Additional Amounts as
provided in the form of Bearer Note, in the form of Registered Note and in the
form of Rule 144A Global Note, as set forth in Annexes A, B and C, respectively.
Whenever in this Indenture there is mentioned, in any context, the payment with
respect to any Note or any coupon, such mention shall be deemed to include
mention of the payment of Additional Amounts provided for in this Section 905 to
the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof pursuant to the provisions of this Section and
express mention of the payment of Additional Amounts (if applicable) in any
provisions hereof shall not be construed as excluding Additional Amounts in
those provisions hereof where such express mention is not made.
At least 10 days prior to September 1, 1994 (and at least 10 days
prior to each date of payment with respect to any Notes or coupons after
September 1, 1994, if there has been any change with respect to the matters set
forth in the below-mentioned Officers' Certificate), the Company will furnish
the Trustee and the Company's Paying Agent in the Borough of Manhattan, The City
of New York, if other than the Trustee, with an Officers' Certificate
instructing the Trustee and such Paying Agent whether such payment with respect
to any Notes or coupons shall be made to Holders of Notes or coupons who are
United States Aliens without withholding for or on account of any tax,
assessment or other governmental charge described in the second paragraph of the
face of the forms of Bearer Note, Registered Note and Rule 144A Global Note set
forth in Annexes A, B and C, respectively. If any such withholding shall be
required, then such Officers' Certificate shall specify by Holder or class of
Holder the amount, if any, required to be withheld on such payments to such
Holders of Notes or coupons and the Company will pay to the Trustee or such
Paying Agent the Additional Amounts required by this Section to be paid in the
event of any such withholding. The Company covenants to indemnify the Trustee
and any Paying Agent for, and to hold them harmless against, any loss, liability
or expense reasonably arising out of or in connection with actions taken or
omitted by any of them in reliance on any Officers' Certificate furnished
pursuant to this Section, except to the extent such loss, liability or expense
is attributable to the Trustee's or Paying Agent's negligence or bad faith.
SECTION 906. Statements as to Compliance. (a) Each of the Company
and HMH will deliver to the Trustee, the Note Depositary, the Note Custodian and
the ADS Rights Agent, within 120 days after the end of each fiscal year ending
after the date hereof, a certificate (which need not comply with Section 102) of
its principal executive officer, principal financial officer or principal
accounting officer stating whether, to such officer's knowledge, the Company or
HMH, as the case may be, is in compliance with all covenants and conditions to
be complied with by it under this Indenture. For purposes of this Section 906,
such compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture. The Company will deliver to the
Trustee, within 10 days after the occurrence thereof, notice of any acceleration
or default in payment at maturity of any indebtedness referred to in Section
501(6).
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(b) Each of the Company and HMH shall deliver to the Trustee, the
Note Depositary, the Note Custodian and the ADS Rights Agent, promptly upon
becoming aware of any Default or Event of Default (but in no event later than
five business days thereafter) in the performance of any covenant or agreement
of the Company or HMH contained in this Indenture or any of the Notes or
coupons, an Officers' Certificate specifying with particularity such event, its
status and what action the Company or HHM is taking or proposes to take with
respect thereto.
SECTION 907. Corporate Existence. Subject to Article Seven, the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights (charter and
statutory) and franchises, except for those that the failure of which to
preserve and keep in full force and effect will not have a material adverse
effect on the Holders.
SECTION 908. Maintenance of Properties. The Company will, and
will cause each Subsidiary to, maintain and keep its properties in such repair,
working order and condition, and make or cause to be made all such needful and
proper repairs, renewals and replacements thereto, as in the judgment of the
Company are necessary in the interests of the Company; provided, however, that
nothing in this Section 908 shall prevent the Company or any Subsidiary from
selling, abandoning or otherwise disposing of any of their respective properties
or discontinuing a part of their respective businesses from time to time, or
from failing to make such repairs, renewals and replacements, if such sale,
abandonment, disposition, discontinuance or failure to make such repairs,
renewals and replacements will not have a material adverse effect on the
Holders.
SECTION 909. Payment of Taxes and Other Claims. The Company will,
and will cause each Subsidiary to, promptly pay and discharge or cause to be
paid and discharged all taxes, assessments and governmental charges or levies
lawfully imposed upon it or upon its income or profits or upon any of its
property, real or personal, or upon any part thereof, as well as all claims for
labor, materials and supplies which, if unpaid, might by law become a lien or
charge upon its property; provided, however, that neither the Company nor any
Subsidiary shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge, levy, or claim if the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company or such Subsidiary, as the case may
be, shall have set aside on its books reserves deemed by it adequate with
respect thereto.
SECTION 910. Delivery of Certain Information. (a) At any time
when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon
the request of a Holder or a beneficial owner of a Note, the Company will
promptly furnish or cause to be furnished Rule 144A Information to such Holder,
to a prospective purchaser of such Note designated by such Holder, to such
beneficial owner or to a prospective purchaser designated by such beneficial
owner, as the case may be, in order to permit compliance by such Holder or
beneficial owner with Rule 144A under the Securities Act in
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connection with the resale of such Note by such Holder or beneficial owner;
provided, however, that the Company shall not be required to furnish such
information in connection with any request made on or after the date which is
three years from the later of (i) the date such Note (or any Predecessor Note)
was originally acquired from the Company and (ii) the date such Note (or any
Predecessor Note) was last acquired from the Company, Hanson, HBL or an
"affiliate" of any of them within the meaning of Rule 144 under the Securities
Act.
(b) The Company shall furnish or cause to be furnished to the
Trustee, the Note Custodian, the Note Depositary and the Holders, within 105
days after each fiscal year of the Company, a copy of annual audited financial
statements of the Company prepared in conformity with U.S. GAAP, accompanied by
a report of Ernst & Young or of another firm of independent certified public
accountants of recognized national standing selected by the Company (the
"National Accountants"), together with a certificate from such National
Accountants stating that their audit examination has included a review of the
terms of this Indenture and that the National Accountants have not become aware
of any Event of Default or that a Default has occurred and is continuing, and if
they have become aware of any such Event of Default or Default, describing it;
provided, however, that the National Accountants shall not be liable to any
Person for any failure to discover any Event of Default or Default in connection
with such review.
(c) At any time after the Company becomes subject to Section 13
or 15(d) of the Exchange Act, the Company shall furnish or cause to be furnished
to the Trustee, the Note Custodian, the Note Depositary and the Holders, copies
of each filing and report made by the Company with the Commission pursuant to
the reporting and filing requirements of Section 13 or 15(d) of the Exchange
Act, within 15 days after the Company is required to file the same.
SECTION 911. Resale of Certain Notes. During the period of three
years after the Closing Date (or, if later, the Second Time of Delivery (as
defined in the U.S. Purchase Agreement)), the Company shall not, and shall not
permit any of its "affiliates" within the meaning of Rule 144 under the
Securities Act to, resell any Notes, or ADSs issuable upon exercise of the ADS
Rights, which constitute "restricted securities" under Rule 144, that are
acquired by any of them within the United States or to U.S. persons (as defined
in Regulation S under the Securities Act) except pursuant to an effective
registration statement under the Securities Act or an applicable exemption
therefrom. The Trustee shall have no responsibility or liability in respect of
the Company's performance of its agreement in the preceding sentence.
SECTION 912. Waiver of Stay, Extension or Usury Laws. 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 to take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the
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Company from paying all or any portion of any payment due with respect to any
Note (including interest thereon) as contemplated herein, wherever enacted, now
or at any time hereafter in force, or that may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company 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 913. Calculation of Original Issue Discount For Tax
Purposes and Certain Information Concerning Tax Reporting. The Company will
deliver to the Trustee, within 40 days of the date of original issuance of the
Notes, an Officers' Certificate, setting forth (a) the amount of the original
issue discount on the Notes (as calculated for United States federal income tax
purposes), expressed as a U.S. Dollar amount per $1,000 of Principal Amount at
Maturity, (b) the yield to maturity for the Notes (as calculated for United
States federal income tax purposes), and (c) a table of the amount of the
original issue discount on the Notes (as calculated for United States federal
income tax purposes), expressed as a U.S. Dollar amount per $1,000 of Principal
Amount at Maturity, accrued for each day from the date of original issuance of
the Notes to their Maturity.
On or before December 15 of each year during which any notes are
Outstanding, the Company shall furnish to the Trustee such information as may be
reasonably requested by the Trustee in order that the Trustee may prepare the
information which it is required to report for such year on Internal Revenue
Service Forms 1096, 1099, 1042 and 1042S (or any successor forms) pursuant to
Section 6049 of the United States Internal Revenue Code of 1986, as amended.
Such information shall include the amount of original issue discount (as
calculated for United States federal income tax purposes) includible in income
for each $1,000 of Principal Amount at Maturity of Outstanding Notes during such
year.
SECTION 914. Limitation on Subsidiary Indebtedness. So long as
any of the Notes remain outstanding, the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur, issue, assume, guarantee, or
otherwise become directly or indirectly liable with respect to (collectively,
"incur"), any Funded Indebtedness; provided, however, the foregoing restriction
shall not apply to the following: (i) Intercompany Funded Indebtedness; (ii)
Non-Recourse Funded Indebtedness; (iii) Funded Indebtedness of any Subsidiary
acquired by the Company from a non-Affiliate (whether through a stock
acquisition, merger, consolidation or otherwise) after the date of the Indenture
(provided such Funded Indebtedness was not incurred in connection with such
acquisition), and any Funded Indebtedness arising out of the refinancing,
extension, renewal or refunding thereof (provided that such refinancing,
extension, renewal or refunding does not increase the principal amount thereof);
(iv) the HMH Note Guaranty and the HMH Bank Guaranty; (v) Funded Indebtedness of
Quantum as to which notices
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of redemption have been delivered by Quantum on or before February 15, 1994; and
(vi) Funded Indebtedness incurred by any Subsidiary if, immediately after the
incurrence thereof, the aggregate principal amount of such Funded Indebtedness
plus all other Funded Indebtedness of all Subsidiaries of the Company then
outstanding (other than Funded Indebtedness permitted by (i) through (v) above)
does not exceed 5% of Consolidated Net Tangible Assets as derived from the most
recent audited consolidated balance sheet of the Company (the "Debt Basket");
provided further, however, that the Debt Basket shall be reduced, without
duplication, by the amount of indebtedness secured pursuant to the Lien Basket
referred to above, to the extent such indebtedness may from time to time be
outstanding.
SECTION 915. Judgment Currency. Each of the Company and HMH
agrees, to the fullest extent that it may effectively do so under applicable
law, that: (a) if for the purpose of obtaining judgment in any court it is
necessary to convert the sum due in respect of any payments to be made hereunder
(the "Required Currency") into a currency in which a judgment will be rendered
(the "Judgment Currency"), the rate of exchange used shall be the rate at which
The Bank of New York in New York City could purchase the Required Currency with
the Judgment Currency on the day on which final unappealable judgment is
entered, unless such day is not a New York Banking Day, then, to the extent
permitted by applicable law, the rate of exchange used shall be the rate at
which The Bank of New York in New York City could purchase the Required Currency
with the Judgment Currency on the New York Banking Day preceding the day on
which a final unappealable judgment is entered; and (b) its obligations under
this Indenture, the Notes and the HMH Note Guaranty, as applicable, to make
payments in the Required Currency (i) shall not be discharged or satisfied by
any tender, or any recovery pursuant to any judgment (whether or not entered in
accordance with clause (a) above) in any currency other than the Required
Currency, except to the extent that such tender or recovery shall result in the
actual receipt, by the payee, of the full amount of the Required Currency
expressed to be payable in respect of such payments; (ii) shall be enforceable
as an alternative or additional cause of action for the purpose of recovering in
the Required Currency the amount, if any, by which such actual receipt shall
fall short of the full amount of the Required Currency so expressed to be
payable; and (iii) shall not be affected by judgment being obtained for any
other sum due under this ADS Rights Agreement. For purposes of the foregoing,
"New York Banking Day" means any day except a Saturday, Sunday or a legal
holiday in The City of New York or a day on which banking institutions in The
City of New York are authorized or required by law or executive order to close.
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ARTICLE TEN
MEETINGS OF HOLDERS OF NOTES
SECTION 1001. Purposes for Which Meetings May Be Called. A
meeting of Holders of Notes may be called at any time and from time to time
pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other Act provided by this
Indenture to be made, given or taken by Holders of Notes.
SECTION 1002. Call, Notice and Place of Meetings. (a) The Trustee
may at any time call a meeting of Holders of Notes for any purpose specified in
Section 1001, to be held at such time and at such place in the Borough of
Manhattan, The City of New York, or in London as the Trustee shall determine.
Notice of every meeting of Holders of Notes, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given, in the manner provided in Section 106, not less
than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 10% in Principal Amount at Maturity of
the Outstanding Notes, shall have requested the Trustee to call a meeting of the
Holders of Notes for any purpose specified in Section 1001, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have made the first publication of the notice
of such meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided herein, then the
Company or the Holders of Notes in the amount specified, as the case may be, may
determine the time and the place in the Borough of Manhattan, The City of New
York, or in London for such meeting and may call such meeting for such purposes
by giving notice thereof as provided in Section 1002(a).
SECTION 1003. Persons Entitled to Vote at Meetings. To be
entitled to vote at any meeting of Holders of Notes, a Person shall be (a) a
Holder of one or more Outstanding Notes, or (b) a Person appointed by an
instrument in writing as proxy for a Holder or Holders of one or more
Outstanding Notes by such Holder or Holders. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders shall be the
Persons entitled to vote at such meeting and their counsel, any representatives
of the Trustee and its counsel and any representatives of the Company and its
counsel. The Trustee, in consultation with the Company, will have the discretion
to establish a record date for the purpose of determining Holders of Registered
Notes entitled to vote at such meetings.
SECTION 1004. Quorum; Action. The Persons entitled to vote a
majority in Principal Amount at Maturity of the Outstanding Notes shall
constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of
Holders of Notes, be dissolved. In any
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other case the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 1002(a), except that such notice need be given only
once and not less than five days prior to the date on which the meeting is
scheduled to be reconvened. Notice of the reconvening of an adjourned meeting
shall state expressly the percentage of the Principal Amount at Maturity of the
Outstanding Notes which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the Persons entitled to vote 25% in Principal
Amount at Maturity of the Outstanding Notes at the time shall constitute a
quorum for the taking of any action set forth in the notice of the original
meeting.
At a meeting or an adjourned meeting duly reconvened and at which
a quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 802) shall be effectively passed and decided
if passed or decided by the Persons entitled to vote not less than 66-2/3% in
Principal Amount at Maturity of Outstanding Notes represented and voting at such
meeting.
Any resolution passed or decisions taken at any meeting of
Holders of Notes duly held in accordance with this Section shall be binding on
all the Holders of Notes and coupons, whether or not present or represented at
the meeting.
SECTION 1005. Determination of Voting Rights; Conduct and
Adjournment of Meetings. (a) Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of Notes in regard to proof of the holding
of Notes and of the appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of Notes
shall be proved in the manner specified in Section 104 and the appointment of
any proxy shall be proved in the manner specified in Section 104 or by having
the signature of the Person executing the proxy witnessed or guaranteed by any
trust company, bank, banker or depositary authorized by Section 104 to certify
to the holding of Bearer Notes. Such regulations may provide that written
instruments appointing proxies, regular on their face, may be presumed valid and
genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman (which may be the Trustee) of the meeting, unless the meeting
shall have been
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called by the Company or by Holders of Notes as provided in Section 1002(b), in
which case the Company or the Holders of Notes calling the meeting, as the case
may be, shall in like manner appoint a temporary chairman. A permanent chairman
and a permanent secretary of the meeting shall be elected by vote of the Persons
entitled to vote a majority in Principal Amount at Maturity of the Outstanding
Notes represented at the meeting.
(c) At any meeting each Holder of a Note or proxy shall be
entitled to one vote for each $1,000 Principal Amount at Maturity of Notes held
or represented by him; provided, however, that no vote shall be cast or counted
at any meeting in respect of any Note challenged as not Outstanding and ruled by
the chairman of the meeting to be not Outstanding. The chairman of the meeting
shall have no right to vote, except as a Holder of a Note or proxy.
(d) Any meeting of Holders of Notes duly called pursuant to
Section 1002 at which a quorum is present may be adjourned from time to time by
Persons entitled to vote a majority in Principal Amount at Maturity of the
Outstanding Notes represented at the meeting, and the meeting may be held as so
adjourned without further notice.
SECTION 1006. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of Notes shall
be by written ballots on which shall be subscribed the signatures of the Holders
of Notes or of their representatives by proxy and the Principal Amounts at
Maturity and serial numbers of the Outstanding Notes held or represented by
them. The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A
record, at least in duplicate, of the proceedings of each meeting of Holders of
Notes shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more Persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1002 and, if
applicable, Section 1004. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
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ARTICLE ELEVEN
THE HMH NOTE GUARANTY
SECTION 1101. The HMH Note Guaranty. Subject to the provisions of
this Article Eleven, HMH hereby unconditionally and irrevocably guarantees to
each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, as primary obligor and not merely as a
surety, that any and all payments with respect to the Notes and coupons to be
made by the Company, in the amounts and at the times when due and payable,
whether by declaration thereof or otherwise, and interest on the overdue
payments with respect to the Notes and coupons, if lawful, and the payment or
performance of all other obligations of the Company hereunder and under the
Notes (all such payments, interest and obligations being herein collectively
called the "Obligations") will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof.
All payments by HMH shall be in immediately available Dollars and
shall be made to the Trustee for the account of the Holders entitled thereto.
This is a continuing guaranty and each and every default in payment with respect
to any Obligations shall give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of action arises.
SECTION 1102. Payment of Obligations. In furtherance of the
foregoing and not in limitation of any other right which the Holders may have at
law or in equity against HMH by virtue hereof, upon failure of the Company to
pay any Obligation when and as the same shall become due, whether at maturity,
by prepayment, acceleration or otherwise, HMH hereby promises to, and will, upon
receipt of written demand by any of the Holders, forthwith pay, or cause to be
paid, to the Trustee for the account of the Holders entitled thereto, in cash,
Obligations of the Company to the Holders then due.
SECTION 1103. Subordination and Subrogation. Upon payment by HMH
of any sums to the Holders hereunder, all rights of HMH against the Company
arising as a result thereof shall in all respects be subordinate and junior in
right of payment to the prior indefeasible payment in full of all the
Obligations and, if any payment shall be made to HMH on account of such rights
prior to the indefeasible payment in full of all the Obligations, such payment
shall forthwith be paid to the Holders to be credited and applied against the
Obligations to the extent necessary to discharge such Obligations. Upon payment
by HMH of sums to the Holders hereunder, subject to the indefeasible payment in
full of all the Obligations, HMH shall be subrogated to the rights of the
Holders to receive payments of the Obligations.
SECTION 1104. Waivers and Agreements. (a) HMH waives notice of
acceptance of the HMH Note Guaranty and also waives presentation to, demand of
payment from and protest to the Company of any of the Obligations, as well as
notice of protest for nonpayment and all other formalities. The obligations of
HMH hereunder
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shall not be affected by (i) the failure of any of the Holders to assert any
claim or demand or to enforce any right or remedy against the Company, HMH or
any other person under this Indenture or otherwise; (ii) any extension or
renewal of any of the Obligations; (iii) any rescission, waiver, amendment or
modification of any of the terms or provisions of the HMH Note Guaranty, this
Indenture or any other agreement or instrument; (iv) the release of any security
held by or for the benefit of the Trustee or the Holders for the performance of
any of the Obligations; (v) the release of any other person that may become
liable in respect of the Obligations; (vi) any default, failure or delay,
willful or otherwise, in the performance of the Obligations; or (vii) any other
act or omission or delay to do any other act which might in any manner or to any
extent vary the risk of HMH or which would otherwise operate as a discharge of
HMH or any other Person as a matter of law.
(b) HMH agrees that the HMH Note Guaranty constitutes a guarantee
of payment when due and not of collection and waives any right to require that
any resort be had by any of the Holders to any security held for payment of the
Obligations. The Holders, in their sole discretion, shall have the right to
proceed first and directly against HMH.
(c) The obligations of HMH hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense, set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise.
(d) HMH waives notice of and hereby consents to any agreements or
arrangements whatsoever by the Holders with any other person pertaining to the
Obligations, including, without limitation, agreements and arrangements for
payment, extension, subordination, composition, arrangement, discharge or
release of the whole or any part of the Obligations, or for the discharge or
surrender of any or all security, or for compromise, whether by way of
acceptance of part payment or otherwise, and the same shall in no way impair
HMH's liability hereunder. Nothing shall discharge or satisfy the liability of
HMH hereunder except the full performance and payment of the Obligations.
(e) HMH shall not consolidate with or merge into any other person
(other than the Company) or sell, lease, transfer or assign to any person (other
than the Company) or otherwise dispose of (whether in one transaction or a
series of transactions) assets representing all or substantially all the assets
of HMH and its subsidiaries (whether now owned or hereafter acquired).
SECTION 1105. Reinstatement upon Bankruptcy. HMH further agrees
that the HMH Note Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment on any Obligation is rescinded or
must otherwise be
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restored by any of the Holders upon the bankruptcy or reorganization of the
Company or otherwise.
SECTION 1106. Successors and Assigns. Each reference herein to
the Holders shall be deemed to include each of their successors or assigns, in
whose favor the provisions of the HMH Note Guaranty shall also inure. HMH shall
not assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Holders.
SECTION 1107. Execution and Delivery of HMH Note Guaranty. To
further evidence the HMH Note Guaranty set forth in Section 1101, HMH hereby
agrees that a notation of such HMH Note Guaranty, substantially in the form set
forth in Section 219, shall be endorsed on each Note authenticated and delivered
by the Trustee after such HMH Note Guaranty is executed by either manual or
facsimile signature of an authorized officer of HMH. The validity and
enforceability of any HMH Note Guaranty shall not be affected by the fact that
it is not affixed to any particular Note.
HMH hereby agrees that the HMH Note Guaranty set forth in Section
1101 shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such HMH Note Guaranty.
If an officer of a HMH whose signature is on this Indenture or an
HMH Note Guaranty no longer holds that office at the time the Trustee
authenticates the Note on which such HMH Note Guaranty is endorsed or at any
time thereafter, such HMH Note Guaranty shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any HMH Note Guaranty set
forth in this Indenture on behalf of HMH.
SECTION 1108. Termination and Amendment of HMH Note Guaranty.
(a) If the lenders under the New Credit Facility terminate the HMH Bank
Guaranty, or if HMH ceases to be a Subsidiary of the Company, then the HMH
Note Guaranty will be automatically terminated without any action or consent
required by Holders or the Trustee. If pursuant to this Section 1108, the HMH
Note Guaranty is terminated, then all references to HMH herein and in the Notes
are nugatory.
(b) If at any time and from time to time the lenders under the
New Credit Facility amend, modify or waive a provision in the HMH Bank Guaranty
and there is a comparable provision in this Article Eleven, then the comparable
provision in this Article Eleven shall automatically be similarly amended,
modified or waived without any action or consent required by the Holders or the
Trustee.
(c) The Company shall promptly notify the Trustee of any
termination, amendment, modification or waiver of the HMH Bank Guaranty.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the day and year first above written.
HANSON AMERICA INC.,
By: /s/ Robert E. Lee
--------------------------------------
Name: Robert E. Lee
Title: V.P. & Chief Financial Officer
THE BANK OF NEW YORK,
By: /s/ Lawrence Olsen
--------------------------------------
Name: Lawrence Olsen
Title: Assistant Vice President
HM HOLDINGS, INC.,
By: /s/ Robert M. Brier
--------------------------------------
Name: Robert M. Brier
Title: V.P. & Treasurer
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Annex A
FORM OF BEARER NOTE
[FORM OF FACE]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE.
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTE DUE 2001
No. B -_______________
Original Issue Discount: $203.26 (for each $1,000 Principal Amount at Maturity)
Issue Price: $796.74 (for each $1,000 Principal Amount at Maturity)
Principal Amount at Maturity: $[ ]
HANSON AMERICA INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company", which term includes any
successor corporation under the Indenture referred to on the reverse hereof),
for value received, hereby promises to pay to bearer upon presentation and
surrender of this Note the Principal Amount at Maturity of [ ] United States
Dollars on March 1, 2001 and to pay interest thereon, from March 11, 1994,
semiannually in arrears on March 1, and September 1 in each year (each an
"Interest Payment Date"), commencing September 1, 1994, at the rate of 2.39% per
annum, until the principal hereof is paid or made available for payment. All
payments with respect to this Note, including Principal Amount at Maturity,
interest, Accreted Value, Adjusted Accreted Value, Redemption Price, Repurchase
Price, Tax Repurchase Price and Additional Amounts (as defined below), shall be
made, subject to any laws or regulations applicable thereto and to the right of
the Company (limited as provided in the Indenture) to terminate the appointment
of any Paying Agent, at the main offices of The Bank of New York, London Branch,
in London, Commerzbank International, S.A. in Luxembourg, or at such other
offices or agencies outside the United States (as defined below) as the Company
may designate, at the option of the Holder by United States Dollar check drawn
on a bank in The City of New York or by transfer of United States Dollars to an
account maintained by the payee with a bank located in a Western European city.
Interest on this Note due on or before maturity shall be payable only upon
presentation and surrender at such an office or agency of the interest coupons
hereto attached as they severally mature. No payment with respect to this Note,
shall be made at the Corporate Trust Office of the Trustee under the Indenture
or at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by wire transfer to an account
maintained with a bank
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located in the United States; provided, however, that payment with respect to
this Note may be made at the office of the Paying Agent in the Borough of
Manhattan, The City of New York, if (but only if) payment of the full amount of
such payment at all offices outside the United States maintained for such
purpose by the Company in accordance with the Indenture is illegal or
effectively precluded by exchange controls or other similar restrictions, as
determined by the Company.
All payments made by the Company in respect of the Principal
Amount at Maturity, Accreted Value, Adjusted Accreted Value, ADS Rights Amount,
interest, Redemption Price, Repurchase Price, Tax Repurchase Price and other
amounts with respect to the Notes will be without deduction or withholding for
or on account of any present or future tax, assessment or governmental charge
imposed or levied by the United States (or any political subdivision or tax or
administrative authority of the United States), unless the withholding or
deduction of such tax, assessment or governmental charge is required by law. In
the event such withholding or deduction is so required, the Company will pay to
the Holder of this Note or any coupon appertaining hereto who is a United States
Alien (as defined below) such additional amounts ("Additional Amounts") as may
be necessary in order that every net payment in respect of Principal Amount at
Maturity, Accreted Value, Adjusted Accreted Value, ADS Rights Amount, interest,
Redemption Price, Repurchase Price, Tax Repurchase Price and other amounts with
respect to the Notes, after deduction or withholding for or on account of any
present or future tax, assessment or governmental charge imposed upon or as a
result of such payment by the United States (or any political subdivision or tax
or administrative authority of the United States), will not be less than the
amount provided for in this Note or in such coupon to be then due and payable by
the Company; provided, however, that the foregoing obligation to pay Additional
Amounts will not apply to:
(a) any tax, assessment or other governmental charge that would
not have been so imposed but for the existence of any present or former
connection between such Holder or beneficial owner (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor
of a power over, such Holder or beneficial owner, if such Holder or
beneficial owner is an estate, a trust, a partnership or a corporation)
and the United States, including, without limitation, such Holder or
beneficial owner (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) being or having been a citizen or resident of
the United States or treated as a resident thereof, or being or having
been engaged in a trade or business or present therein, or having or
having had an office, fixed place of business or permanent establishment
therein, or making or having made an election the effect of which is to
subject such Holder or beneficial owner (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) to such tax, assessment
or other governmental charge;
(b) any tax, assessment or other governmental charge that would
not have been so imposed but for the presentation by the Holder of this
Note or any coupon appertaining thereto for payment on a date more than
15 days after the
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date on which such payment became due and payable or the date on which
payment thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, excise,
personal property, or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure by the Holder or the
beneficial owner of this Note or any coupon appertaining thereto to
comply with any requirement under a statute, treaty, regulation, or
administrative practice of the United States to establish entitlement to
exemption from all or part of such tax, assessment or other governmental
charge;
(e) any tax, assessment or other governmental charge that is
payable otherwise than by deduction or withholding from a payment with
respect to this Note or any coupon appertaining hereto;
(f) any tax, assessment, or other governmental charge imposed as
a result of a Holder's or beneficial owner's past or present status as
(i) a personal holding company or a foreign personal holding company
with respect to the United States; (ii) a corporation which accumulates
earnings to avoid United States Federal income tax; (iii) a controlled
foreign corporation with respect to the United States that is related to
the Company through stock ownership; (iv) a private foundation or other
tax exempt organization with respect to the United States; (v) a
"10-percent shareholder" with respect to the Company within the meaning
of Section 871(h)(3) or 881(c)(3)(B) of the United States Internal
Revenue Code of 1986, as amended (the "Code"); or (vi) a bank receiving
interest described in Section 881(c)(3)(A) of the Code;
(g) any tax, assessment or other governmental charge required to
be withheld by any Paying Agent from any payment with respect to this
Note or any coupon appertaining thereto, if such payment could be made
without such withholding by any other Paying Agent;
(h) any tax, assessment or other governmental charge imposed on
any payment with respect to this Note or any coupon appertaining thereto
to a Holder that is a fiduciary or partnership or other than the sole
beneficial owner of such payment to the extent a beneficiary or settlor
with respect to such fiduciary or a member of such partnership or a
beneficial owner would not have been entitled to the payment of
Additional Amounts had such beneficiary, settlor, member or beneficial
owner directly received its beneficial or distributive share of such
payment; or
(i) any combination of items (a), (b), (c), (d), (e), (f), (g)
and (h).
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For purposes of this Note, "United States" means the United
States of America (including the States and the District of Columbia) and its
possessions, and "United States Alien" means any person who, for United States
federal income tax purposes, is (i) a foreign corporation, (ii) a nonresident
alien individual, (iii) an estate or trust that is not an estate or trust that
is subject to United States federal income taxation regardless of the source of
its income, or (iv) a foreign partnership one or more of the members of which
is, for United States federal income tax purposes, a foreign corporation, a
nonresident alien individual or an estate or trust that is not an estate or
trust that is subject to United States federal income taxation regardless of the
source of its income.
Notwithstanding the foregoing, if and so long as a certification,
identification or other information reporting requirement referred to in the
fourth paragraph of the reverse hereof would be fully satisfied by payment of a
backup withholding tax or similar charge, the Company may elect, as provided in
such fourth paragraph, by so stating in the Determination Notice (as defined on
the reverse hereof), to pay, as Additional Amounts, such amounts as may be
necessary so that every net payment made, following the effective date of such
requirements, outside the United States by the Company or any Paying Agent in
respect of the Principal Amount at Maturity, Accreted Value, Adjusted Accreted
Value, ADS Rights Amount, interest, Redemption Price, Repurchase Price, Tax
Repurchase Price and other amounts due with respect to this Note, or interest
represented by any coupon, the beneficial owner of which is a United States
Alien (but without any requirement that the nationality, residence or identity
of such beneficial owner be disclosed to the Company, any Paying Agent or any
governmental authority), after deduction or withholding for or on account of
such backup withholding tax or similar charge, other than a backup withholding
tax or similar charge that is (a) the result of a certification, identification
or information reporting requirement described in the first parenthetical clause
of such paragraph, (b) imposed as a result of the fact that the Company or any
Paying Agent has actual knowledge that the beneficial owner of this Note or
coupon is within the category of Persons described in clause (a) of the second
preceding paragraph, or (c) imposed as a result of presentation of this Note or
coupon for payment more than 15 days after the date on which such payment
becomes due and payable or on which payment thereof is duly provided for,
whichever occurs later, will not be less than the amount provided for in this
Note or coupon to be then due and payable by the Company.
Except as specifically provided herein and in the Indenture or
otherwise provided by law, the Company shall not be required to make any payment
with respect to any tax, assessment or other governmental charge imposed by any
government or any political subdivision or tax or administrative authority
thereof or therein.
Any payments made by the Company in respect of this Note, other
than payments of stated interest, shall be applied in the following order: (i)
first, to the payment of any original issue discount (as determined for United
States federal income
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tax purposes) that is accrued and unpaid on the date of such payment; and (ii)
thereafter, to any remaining amounts due and payable under this Note.
Reference is hereby made to the further provisions of this Note
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 Note is entitled to the benefits of the HMH Note Guaranty of
HMH on a senior unsecured basis, which HMH Note Guaranty is 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 of HMH
under the HMH Note Guaranty.
This Note and the ADS Right annexed hereto have been issued as a
unit. Except as provided in such ADS Right and in the ADS Rights Agreement,
neither this Note nor such ADS Right may be transferred separately from the
other.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee by the manual signature of an authorized
signatory, neither this Note, nor any coupon appertaining hereto, shall be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal and coupons bearing the facsimile signature of
its Treasurer to be annexed hereto.
Dated: ________, 1994
HANSON AMERICA INC.,
[Corporate Seal]
By _____________________________
Attest:
___________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By ________________________
Authorized Signatory
Dated: _______, ____
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[FORM OF REVERSE]
This Note is one of a duly authorized issue of Notes of the
Company designated as its "2.39% Senior Exchangeable Discount Notes Due 2001"
(the "Notes"), limited in aggregate Principal Amount at Maturity to
$1,255,115,000 (subject to increase to $1,380,626,500), issued and to be issued
under an Indenture dated as of March 1, 1994 (the "Indenture"), among the
Company, HM Holdings, Inc. 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 and immunities
thereunder of the Company, HMH, the Trustee and the Holders of the Notes and any
coupons appertaining thereto and of the terms upon which the Notes are, and are
to be, authenticated and delivered. The Notes are issuable (1) as Bearer Notes,
with interest coupons attached, in the denominations of $10,000 Principal Amount
at Maturity or any amount in excess thereof that is an integral multiple of
$1,000, (2) as Registered Notes, without coupons, in denominations of $10,000
Principal Amount at Maturity or any amount in excess thereof that is an integral
multiple of $1,000, and (3) as Rule 144A Global Notes. As provided in the
Indenture and subject to certain limitations therein set forth, Bearer Notes are
exchangeable for a like aggregate Principal Amount at Maturity of Registered
Notes of any authorized denominations as requested by the Holder surrendering
the same upon surrender of the Bearer Note or Notes to be exchanged, with all
unmatured coupons and all matured coupons in default thereto appertaining to
such Bearer Notes, except as provided below, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, or, subject to any
laws or regulations applicable thereto and to the right of the Company to
terminate the appointment of any such Transfer Agent, at the main offices of The
Bank of New York, London Branch, in London and at the main offices of
Commerzbank International S.A. in Luxembourg, or at such other offices or
agencies outside the United States and its possessions as the Company may
designate. Bearer Notes surrendered in exchange for Registered Notes between a
Regular Record Date and the relevant Interest Payment Date will not be required
to be surrendered with the coupon relating to such Interest Payment Date. Bearer
Notes will not be issued in exchange for Registered Notes or Rule 144A Global
Notes.
The Notes are subject to redemption: (a) any time on or after
March 1, 1999, in whole or in part, at the election of the Company, at the
Redemption Price (as defined below); and (b) in whole under the circumstances
described in the next two succeeding paragraphs at the Redemption Price;
together in the case of any such redemption (whether pursuant to clause (a)
above or this clause (b)) with accrued interest to but excluding the Redemption
Date; provided, however, that interest installments on Bearer Notes whose Stated
Maturity is on or prior to such Redemption Date will be payable only upon
presentation and surrender of coupons for such interest (at an office or agency
outside the United States except as herein provided otherwise). The "Redemption
Price" of the Notes means the Accreted Value thereof to but excluding the
Redemption
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Date. In the case of any partial redemption of Notes, the Notes to be redeemed
shall be selected by the Trustee not more than 60 days prior to the Redemption
Date from the Outstanding Notes not previously called for redemption, in the
case of Bearer Notes, individually by lot and, in the case of Registered Notes,
by such method as the Trustee shall deem fair and appropriate, and under
circumstances intended not to discriminate between Registered and Bearer Notes
in the selection of Notes (or portions thereof) selected for redemption. The
Notes will be redeemable in multiples of $1,000 Principal Amount at Maturity
(provided that the remaining Principal Amount at Maturity, if any, of any
Holder's Notes must be $10,000 or any amount in excess thereof that is an
integral multiple of $1,000). The Company will be required to pay accrued
interest, plus such portion of the Redemption Price as is equal to the Adjusted
Accreted Value of the Notes being redeemed. (Simultaneously therewith, HBL (in
respect of the ADS Rights) will be required to pay, pursuant to the ADS Rights,
an amount equal to the excess of the Redemption Price over the Adjusted Accreted
Value of the Notes being redeemed.) The Notes also are subject to redemption
upon exercise of the ADS Rights, as provided in the ADS Rights and the ADS
Rights Agreement.
If (A) as a result of any change in, or amendment to, the laws
(including any regulations, rulings or similar pronouncements promulgated
thereunder) of the United States or any political subdivision or tax or
administrative authority thereof or therein, or any change in the official
position regarding the application or interpretation of such laws (or
regulations, rulings or similar pronouncements), which change or amendment is
announced or becomes effective on or after March 4, l994, the Company has or
will become obligated to pay to the Holder of any Note or coupon Additional
Amounts, as described in the second paragraph of the face of this Note, and such
obligation cannot be avoided by the Company taking reasonable measures available
to it, or (B) an act has been taken by a legislature, tax authority or court of
competent jurisdiction in or of the United States, including any of those acts
or occurrences specified in clause (A) above, whether or not such act was taken
with respect to the Company, that results in a substantial probability that the
Company will be required to pay Additional Amounts in respect of the Notes or
coupons, then the Company may, at its option, redeem the Notes as a whole but
not in part, at any time, upon prior notice as described below, at a Redemption
Price equal to the Accreted Value of the Notes to but excluding the Redemption
Date, plus accrued interest to but excluding the Redemption Date (and Additional
Amounts, if any); provided, however, that no such notice of redemption shall be
given earlier than 90 days prior to the earliest date on which the Company would
be obligated to pay any such Additional Amounts were a payment in respect of the
Notes or coupons then due. Prior to the giving of any notice of redemption
pursuant to this paragraph, the Company shall deliver to the Trustee (i) a
certificate stating that the Company is entitled to effect such redemption and
setting forth a statement of facts showing that the conditions in (A) or (B)
above to the right of the Company so to redeem have occurred, and (ii) a written
opinion of independent counsel of recognized standing selected by the Company to
the effect that such conditions have occurred. The Company's right to redeem the
Notes shall continue, as long as the Company is obligated
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to pay such Additional Amounts, notwithstanding that the Company shall have made
payments of Additional Amounts specified in such second paragraph.
Notwithstanding the foregoing, the Company will not so redeem the Notes if the
Company, based upon a written opinion of independent counsel of recognized
standing selected by the Company, subsequently determines, not less than 30 days
prior to the Redemption Date, that neither clause (A) nor clause (B) above
pertains; in which case the Company will notify the Trustee in writing, and the
Trustee will promptly give notice of that determination in the manner provided
below and any earlier redemption notice will thereupon be revoked and of no
further effect. The Company will be required to pay the Holder only such portion
of the Redemption Price as is equal to the Adjusted Accreted Value of the Notes
being redeemed (together with accrued interest). (Simultaneously therewith, HBL
(in respect of the ADS Rights) will be required to pay, pursuant to the ADS
Rights, an amount equal to the excess of the Redemption Price over the Adjusted
Accreted Value of the Notes being redeemed.)
In addition, if the Company determines, based upon a written
opinion of independent counsel of recognized standing selected by the Company,
that any payment made outside the United States by the Company or any of its
Paying Agents in respect of any Bearer Note or coupon would, under any present
or future laws, regulations or rulings of the United States, be subject to any
certification, identification or other information reporting requirement of any
kind, the effect of which is the disclosure to the Company, any Paying Agent or
any governmental authority of the nationality, residence or identity of a
beneficial owner of such Bearer Note or coupon who is a United States Alien
(other than such a requirement (a) that would not be applicable to a payment
made by the Company or any of its Paying Agents (i) directly to the beneficial
owner or (ii) to any custodian, nominee or other agent to the beneficial owner,
or (b) that can be satisfied by the custodian, nominee or other agent certifying
that such beneficial owner is a United States Alien; provided that in each case
referred to in clauses (a) (ii) and (b), payment by such custodian, nominee or
other agent to such beneficial owner is not otherwise subject to any such
requirement), the Company at its election will either (x) redeem the Notes, as a
whole but not in part, upon not less than 30 nor more than 60 days prior notice
given in the manner provided below, at the Redemption Price, or (y) if and so
long as the conditions of the fourth paragraph on the face hereof are satisfied,
pay the Additional Amounts specified in such paragraph. The Company will make
such determination and election and notify the Trustee thereof in writing as
soon as practicable, and the Trustee will promptly give notice of such
determination in the manner provided below (the "Determination Notice"), in each
case stating the effective date of such certification, identification or
information reporting requirement, whether the Company will redeem the Notes or
will pay the Additional Amounts specified in such fourth paragraph and (if
applicable) the last date by which the redemption of the Notes must take place.
If the Company elects to redeem the Notes, such redemption will take place on
such date, not later than one year after the publication of the Determination
Notice, as the Company elects by notice in writing to the Trustee at least 75
days before the Redemption Date, unless shorter notice is acceptable to the
Trustee. Notwithstanding the foregoing, the
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Company will not so redeem the Notes if the Company, based upon a written
opinion of independent counsel of recognized standing selected by the Company,
subsequently determines, not less than 30 days prior to the Redemption Date,
that (i) neither clause (A) nor clause (B) in the first sentence of the
preceding paragraph pertains, or (ii) subsequent payments described in this
paragraph would not be subject to any such certification, identification or
information reporting requirement; in either of which case the Company will
notify the Trustee in writing, and the Trustee will promptly give notice of that
determination in the manner provided below and any earlier redemption notice
will thereupon be revoked and of no further effect. If the Company elects as
provided in clause (y) above to pay Additional Amounts, (i) the Company may, as
long as the Company is obligated to pay such Additional Amounts, redeem the
Notes, at any time, as a whole but not in part, at the Redemption Price, but
without reduction for applicable United States withholding taxes, and (ii) if
the conditions of the fourth paragraph on the face hereof should no longer be
satisfied, the Company will promptly redeem the Notes as a whole, but not in
part, at the Redemption Price. The Company will be required to pay accrued
interest, plus such portion of the Redemption Price as is equal to the Adjusted
Accreted Value of the Notes being redeemed. (Simultaneously therewith, HBL (in
respect of the ADS Rights) will be required to pay, pursuant to the ADS Rights,
an amount equal to the excess of the Redemption Price over the Adjusted Accreted
Value of the Note being redeemed.)
Notice of redemption will be given by publication in Authorized
Newspapers in The City of New York, in London and, so long as the Notes are
listed on the Luxembourg Stock Exchange and such stock exchange shall so
require, in Luxembourg, or, if not practicable in either London or Luxembourg,
elsewhere in any country in Western Europe, and by mail to Holders of Registered
Notes. In the case of a redemption, notice will be given once, not more than 60
days nor less than 30 days prior to the Redemption Date, all as provided in the
Indenture.
In the event of a redemption of the Notes in part, the Company
will not be required (a) to register the transfer of, or exchange, Registered
Notes or Rule 144A Global Notes or to exchange Bearer Notes for Registered Notes
for a period of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Notes called for such redemption, (b) to
register the transfer of, or exchange, any such Registered Notes or Rule 144A
Global Notes, or portion thereof, called for redemption, or (c) to exchange any
Bearer Notes called for redemption; provided, however, that a Bearer Note called
for redemption may be exchanged for a Registered Note which is simultaneously
surrendered to the Note Registrar or Transfer Agent making such exchange with
written instruction for payment consistent with the provisions of the Indenture.
Upon the occurrence of a Change-in-Control (as defined in the
Indenture) with respect to the Company, each Holder of Notes shall have the
right (the "Change-in-Control Right"), at such Holder's option, and subject to
the conditions hereof, to require the repurchase of all its Notes, or a portion
thereof which is $1,000 or any integral
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multiple thereof, at the Repurchase Price. For the period from (i) the issue
date of the Notes until February 28, 1999, the "Repurchase Price" will be 101%
of the Accreted Value of the Notes to but excluding the date of repurchase (the
"Repurchase Date"), plus accrued interest to but excluding the Repurchase Date,
and (ii) March 1, 1999 until maturity, the "Repurchase Price" will be 100% of
the Accreted Value of the Notes to but excluding the Repurchase Date, plus
accrued interest to but excluding the Repurchase Date.
In case a Change-in-Control shall have occurred, notice (the
"Repurchase Notice") thereof shall be given by publication in an Authorized
Newspaper in The City of New York, in London and, so long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg, or, if not practicable
in either London or Luxembourg, elsewhere in any country in Western Europe, and
by mail to the Trustee and to each Holder of Registered Notes within 30 days
after the Company becomes aware of such occurrence. The Repurchase Notice will
specify (i) the date by which a Holder must irrevocably exercise the
Change-in-Control Right (which must be a date no later than 60 days and no
earlier than 30 days after the date of the Repurchase Notice) (the "Repurchase
Exercise Date"), (ii) the Repurchase Date (which must be a date not later than
75 days and no earlier than 60 days after the date of the Repurchase Notice),
(iii) the applicable Repurchase Price, and (iv) the name and address of the
Paying Agents. To exercise the Change-in-Control Right, a Holder of Notes must
timely deliver irrevocable written notice to the Company (and the Trustee) of
the Holder's exercise of such right, together with the Notes with respect to
which the right is being exercised, duly endorsed for transfer. Each Bearer Note
delivered for repurchase must be delivered with all unmatured coupons
appertaining thereto. The submission of a Note pursuant to the exercise of a
Change-in-Control Right will be irrevocable on the part of the Holder and the
right to exercise the ADS Right will expire upon submission (unless the Company
shall fail to repurchase the Note on the Repurchase Date). Repurchase will be
effected in compliance with all applicable laws and the procedures set forth in
the Indenture will be modified to the extent necessary to comply therewith. The
notice of exercise of a Change-in-Control Right (A) shall, in the case of
Registered Notes, identify the name of such Holder, and (B) shall identify the
Notes (or the portion of the Principal Amount at Maturity thereof (which portion
must be $1,000 Principal Amount at Maturity or an amount in excess thereof that
is an integral multiple of $1,000; provided that the remaining Principal Amount
at Maturity of any Holder's Notes must be $10,000 or an amount in excess thereof
that is an integral multiple of $1,000)), that are to be so purchased and their
aggregate Principal Amount at Maturity. No such notice shall be deemed to have
been delivered, and no such Notes shall be deemed to have been presented and
surrendered, until such notice and Notes are actually received by the Company or
its designated agent.
With respect to each Note which has been presented and
surrendered and as to which notice has been given to the Company of the Holder's
intention to exercise its Change-in-Control Right in accordance herewith, such
Note shall become due and
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payable on the Repurchase Date. Upon presentation and surrender of each Note in
accordance herewith, such Note shall be purchased at the applicable Repurchase
Price therefor, together with interest accrued thereon to but excluding the
Repurchase Date. OID and interest on any Note so elected to be put to the
Company for purchase shall cease to accrue from and after the Repurchase Date
(unless there is a default in the payment of any such Note at the applicable
Repurchase Price, together with interest accrued thereon to but excluding the
Repurchase Date). The Company will be required to pay such accrued interest,
plus such portion of the Repurchase Price as is equal to (i) 101% of the
Adjusted Accreted Value of the Notes being repurchased, if the Repurchase Date
is on or prior to February 28, 1999, or (ii) the Adjusted Accreted Value of such
Notes, if the Repurchase Date is on or after March 1, 1999. (Simultaneously
therewith, HBL (in respect of the ADS Rights) will be required to pay, pursuant
to the ADS Rights, an amount equal to (1) the excess of the Repurchase Price
over 101% of the Adjusted Accreted Value of the Notes being repurchased, if the
Repurchase Date is on or prior to February 28, 1999, or (2) the excess of the
Repurchase Price over the Adjusted Accreted Value of the Notes being
repurchased, if the Repurchase Date is on or after March 1, 1999.)
There also will be an obligation to purchase (the "Tax
Repurchase") any outstanding Note, at the option of the Holder thereof (the "Tax
Repurchase Right"), at the Tax Repurchase Price (as defined below) if HBL or
Hanson has delivered a Withholding Tax Notice in the manner set forth in the
Indenture that states, among other things, that (1) HBL or Hanson has or will
become obligated to pay Tax Amounts as a result of any change in, or amendment
to, the laws (or any regulations, rulings or similar pronouncements promulgated
thereunder) of Bermuda or the United Kingdom or of any political subdivision or
taxing authority thereof or therein, or any change in the official position
regarding the application or interpretation of such laws, regulations, rulings
or similar pronouncements which change or amendment is announced or becomes
effective on or after March 4, 1994, and (2) HBL or Hanson has exercised its
right, pursuant to the ADS Rights Agreement such that, with effect from the date
on which such notice is given, HBL or Hanson will no longer be obligated to pay
such Tax Amounts. Before providing any Withholding Tax Notice, HBL or Hanson
shall deliver to the Company and the Company shall deliver to the Trustee an
Officer's Certificate (as defined in the ADS Rights Agreement) setting forth a
statement of facts showing that HBL or Hanson has or will become obligated to
pay Tax Amounts as a result of a change in, or amendment to, the laws (or any
regulations, rulings or similar pronouncements promulgated thereunder) of
Bermuda or the United Kingdom or of any political subdivision or taxing
authority thereof or therein, or any change in the official position regarding
the application or interpretation of such laws, regulations, rulings or similar
pronouncements, which change or amendment is announced or becomes effective on
or after March 4, 1994, and such obligation cannot be avoided by HBL or Hanson
taking reasonable measures available to it, and an opinion addressed to the
Company and the Trustee, of independent counsel of recognized standing to the
effect that HBL or Hanson has or will become obligated to pay such Tax Amounts
as a result of such change or amendment.
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On the Tax Repurchase Date (i) there shall be accepted for
repayment Notes or portions thereof tendered pursuant to the Tax Repurchase, and
(ii) the Company and HBL, as applicable, shall deposit with the Trustee money
sufficient to pay the Tax Repurchase Price of all Notes or portions thereof so
tendered. "Tax Repurchase Price" means the greater of (x) the Accreted Value to
but excluding the Tax Repurchase Date plus accrued interest to but excluding the
Tax Repurchase Date and (y) the ADS Rights Amount. The Company will be required
to pay such accrued interest, plus such portion of the Tax Repurchase Price as
is equal to the Adjusted Accreted Value of the Notes being repurchased.
(Simultaneously therewith, HBL (in respect of the ADS Rights) will be required
to pay, pursuant to the ADS Rights, an amount equal to the excess of the Tax
Repurchase Price over the Adjusted Accreted Value (plus such accrued interest)
of the Notes being repurchased.) Each Bearer Note delivered for repurchase or
redemption must be delivered with all unmatured coupons appertaining thereto.
Holders have the right to withdraw any election for Tax
Repurchase by delivering to the Paying Agent a written notice of withdrawal in
accordance with the provisions of the Indenture.
Upon presentation and surrender of any Note which is to be
redeemed or repurchased in part only, upon its redemption or purchase, the
Company shall execute and the Trustee shall authenticate and deliver to the
holder thereof, at the expense of the Company, a new Note or Notes in authorized
denominations in an aggregate Principal Amount at Maturity equal to the portion
of the Note not redeemed or purchased.
In any case where the due date for the payment with respect to
any Note or the date fixed for redemption or repurchase of any Note shall be at
any place of payment a day which is not a Business Day, then payment need not be
made on such date at such place but may be made on the next succeeding day at
such place which is a Business Day, with the same force and effect as if made on
the date for such payment or the date fixed for redemption or repurchase, and no
additional OID or interest shall accrue for the period after such date.
Subject to certain limitations in the Indenture, at any time when
the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder of a Note or of a beneficial owner of a Bearer Note, the
Company will promptly furnish or cause to be furnished Rule 144A Information (as
defined below) to such Holder, to such beneficial owner or to a prospective
purchaser of such Note designated by such Holder or such beneficial owner, as
the case may be, in order to permit compliance by such Holder or beneficial
owner with Rule 144A under the Securities Act. "Rule 144A Information" shall be
such information as is specified pursuant to Rule l44A(d)(4) under the
Securities Act (or any successor provision thereto).
If an Event of Default shall occur and be continuing, the
Accreted Value, the ADS Rights Amount, the Repurchase Price or the Tax
Repurchase Price, as the case
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may be, of all the Notes may be declared due and payable in the manner and with
the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and HMH and the rights of the Holders of the Notes
and coupons under the Indenture at any time by the Company, HMH and the Trustee
with the consent of the Holders of a majority in Principal Amount at Maturity of
the Notes at the time Outstanding (or such lesser amount as shall have acted at
a meeting pursuant to the provisions of the Indenture). The Indenture also
contains provisions permitting the Holders of specified percentages in Principal
Amount at Maturity of the Notes at the time Outstanding, on behalf of the
Holders of all the Notes and coupons, to waive compliance by the Company or HMH
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and any coupon appertaining hereto and of any Note issued
in exchange herefore or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Note or such other Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the respective obligations of the
Company and HMH, which are absolute and unconditional, to make all payments
(including Additional Amounts, as described on the face hereof) on this Note at
the times, places and rate, and in the coin or currency, herein prescribed, or
the obligations of the Company to effect the redemption of this Note upon the
exercise of the ADS Rights, in each case as provided in the Indenture.
A Note will bear interest at a rate of 0% per annum during the
period commencing on an Interest Payment Date and ending on the day before the
next succeeding Interest Payment Date, if the ADS Right associated with such
Note is exercised during such period. Bearer Notes surrendered upon exercise of
the ADS Right must be delivered with all unmatured coupons and any matured
coupons in default appurtenant thereto.
Title to Bearer Notes and coupons shall pass by delivery.
No service charge shall be made for any exchange of the Bearer
Notes, but the Company may require payment of a sum sufficient to recover any
tax or other governmental charge payable in connection therewith.
The Company, the Trustee, any agent of the Company or the
Trustee, HBL, Hanson and the ADS Rights Agent may treat the bearer of this Note
and any coupon appertaining hereto as the owner hereof for all purposes, whether
or not this Note or coupon be overdue, and neither the Company, the Trustee, any
such agent, HBL, Hanson nor the ADS Rights Agent shall be affected by notice to
the contrary.
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<PAGE>
THE INDENTURE, THE NOTES AND ANY COUPONS APPERTAINING THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
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<PAGE>
Annex B
FORM OF REGISTERED NOTE
[FORM OF FACE]
Legend if Registered Note is a Restricted Note:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT); (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE DATE
OF ORIGINAL ISSUANCE OF THE NOTES EVIDENCED HEREBY (THE "ORIGINAL ISSUANCE
DATE") RESELL OR OTHERWISE TRANSFER THE NOTES EVIDENCED HEREBY, EXCEPT (A) TO
HANSON AMERICA INC., (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER, IF AVAILABLE, (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT OR (E) IN A TRANSACTION OF A TYPE OTHER THAN THOSE
DESCRIBED IN CLAUSE (A), (B), (C) OR (D) ABOVE IN CONNECTION WITH WHICH THE
COMPANY SHALL HAVE RECEIVED A LEGAL OPINION, IN FORM AND SUBSTANCE SATISFACTORY
TO IT, TO THE EFFECT THAT THE PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTES EVIDENCED HEREBY ARE TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTES
EVIDENCED HEREBY WHILE THIS NOTE IS REQUIRED TO BEAR THIS LEGEND, THE HOLDER
HEREOF MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. THIS
LEGEND WILL BE REMOVED (A) AFTER THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL
ISSUANCE DATE OR (B) UPON THE EARLIER SATISFACTION OF THE TRUSTEE THAT THE NOTES
EVIDENCED HEREBY HAVE BEEN
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<PAGE>
OR ARE BEING OFFERED AND SOLD IN COMPLIANCE WITH RULE 144 OR RULE 904 UNDER THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE
THE RESPECTIVE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.]
[Legend if Registered Note is to be deposited for securities
clearance and settlement through the facilities of The Depository Trust Company:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY 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 SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
INFORMATION REGARDING ORIGINAL ISSUE DISCOUNT ON THIS NOTE MAY BE OBTAINED BY
CONTACTING TAX DIRECTOR, HANSON INDUSTRIES, 99 WOOD AVENUE SOUTH, ISELIN, NEW
JERSEY 08830.
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTE DUE 2001
No. R -_____________
Original Issue Discount: $203.26 (for each $1,000 Principal Amount at Maturity)
Issue Price: $796.74 (for each $1,000 Principal Amount at Maturity)
Principal Amount at Maturity: $[ ]
HANSON AMERICA INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company", which term includes any
successor corporation under the Indenture referred to on the reverse hereof),
for value received, hereby promises to pay to [ ], or registered assigns,
the Principal Amount at Maturity of [ ] United States Dollars on March 1,
2001 and to pay interest thereon, from March 11, 1994 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semiannually in arrears on March 1 and September 1 in each year (each an
"Interest Payment Date"), commencing September 1, 1994, at the rate of 2.39% per
annum, until the principal hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in whose
name this Note (or one or more Predecessor Notes) is registered at the close of
business
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<PAGE>
on the Regular Record Date for such interest, which shall be the February 15
(whether or not a Business Day) next preceding a March 1 Interest Payment Date
and the August 15 (whether or not a Business Day) next preceding a September 1
Interest Payment Date. Except as otherwise provided in the Indenture, any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Note (or one or more Predecessor Notes) 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 Notes 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 Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in the Indenture. All payments with respect to this Note, including Principal
Amount at Maturity, Accreted Value, Adjusted Accreted Value, Redemption Price,
Repurchase Price, Tax Repurchase Price and Additional Amounts (as defined
below), shall be made upon the surrender of this Note at the option of the
Holder (a) at the Corporate Trust Office of the Trustee, or at such other office
or agency of the Company as may be designated by it for such purpose in the
Borough of Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, or (b) subject to any laws or regulations
applicable thereto and to the right of the Company (limited as provided in the
Indenture) to terminate the appointment of any Paying Agent, at the main offices
of The Bank of New York, London Branch in London, Commerzbank International S.A.
in Luxembourg, or at such other offices or agencies as the Company may
designate, by United States Dollar check drawn on, or wire transfer to a United
States Dollar account (such wire transfers to be made only to Holders of an
aggregate Principal Amount at Maturity of Registered Notes in excess of
$1,000,000 upon application of such Holder to the Note Registrar not later than
the third Business Day before the applicable payment date) maintained by the
payee with, a bank in The City of New York. Payment of interest on this Note may
be made by United States Dollar check drawn on a bank in The City of New York
mailed to the address of the Person entitled thereto as such address shall
appear in the Note Register, or upon application by the Holder to the Note
Registrar not later than the relevant Record Date, by wire transfer to a United
States Dollar account (such wire transfers to be made only to Holders of an
aggregate Principal Amount at Maturity of Registered Notes in excess of
$1,000,000) maintained by the payee with a bank in The City of New York.
All payments made by the Company in respect of the Principal
Amount at Maturity, Accreted Value, Adjusted Accreted Value, ADS Rights Amount,
interest, Redemption Price, Repurchase Price, Tax Repurchase Price and other
amounts with respect to the Notes will be without deduction or withholding for
or on account of any present or future tax, assessment or governmental charge
imposed or levied by the United States (or any political subdivision or tax or
administrative authority of the United States), unless the withholding or
deduction of such tax, assessment or governmental charge is required by law. In
the event such withholding or deduction is so required, the
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<PAGE>
Company will pay to the Holder of this Note who is a United States Alien (as
defined below) such additional amounts ("Additional Amounts") as may be
necessary in order that every net payment in respect of Principal Amount at
Maturity, Accreted Value, Adjusted Accreted Value, ADS Rights Amount, interest,
Redemption Price, Repurchase Price, Tax Repurchase Price and other amounts with
respect to the Notes, after deduction or withholding for or on account of any
present or future tax, assessment or governmental charge imposed upon or as a
result of such payment by the United States (or any political subdivision or tax
or administrative authority of the United States), will not be less than the
amount provided for in this Note to be then due and payable by the Company;
provided, however, that the foregoing obligation to pay Additional Amounts will
not apply to:
(a) any tax, assessment or other governmental charge that would
not have been so imposed but for the existence of any present or former
connection between such Holder or beneficial owner (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor
of a power over, such Holder or beneficial owner, if such Holder or
beneficial owner is an estate, a trust, a partnership or a corporation)
and the United States, including, without limitation, such Holder or
beneficial owner (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) being or having been a citizen or resident of
the United States or treated as a resident thereof, or being or having
been engaged in a trade or business or present therein, or having or
having had an office, fixed place of business or permanent establishment
therein, or making or having made an election the effect of which is to
subject such Holder or beneficial owner (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) to such tax, assessment
or other governmental charge;
(b) any tax, assessment or other governmental charge that would
not have been so imposed but for the presentation by the Holder of this
Note for payment on a date more than 15 days after the date on which
such payment became due and payable or the date on which payment thereof
is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, excise,
personal property, or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure by the Holder or the
beneficial owner of this Note or any coupon appertaining thereto to
comply with any requirement under a statute, treaty, regulation, or
administrative practice of the United States to establish entitlement to
exemption from all or part of such tax, assessment or other governmental
charge;
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<PAGE>
(e) any tax, assessment or other governmental charge that is
payable otherwise than by deduction or withholding from a payment with
respect to this Note or any coupon appertaining hereto;
(f) any tax, assessment or other governmental charge imposed as a
result of a Holder's or beneficial owner's past or present status as (i)
a personal holding company or a foreign personal holding company with
respect to the United States; (ii) a corporation which accumulates
earnings to avoid United States Federal income tax; (iii) a controlled
foreign corporation with respect to the United States that is related to
the Company through stock ownership; (iv) a private foundation or other
tax exempt organization with respect to the United States; (v) a
"10-percent shareholder" with respect to the Company within the meaning
of Section 871(h)(3) or 881(c)(3)(B) of the United States Internal
Revenue Code of 1986, as amended (the "Code"); or (vi) a bank receiving
interest described in Section 881(c)(3)(A) of the Code;
(g) any tax, assessment or other governmental charge required to
be withheld by any Paying Agent from any payment with respect to this
Note, if such payment could be made without such withholding by any
other Paying Agent;
(h) any tax, assessment or other governmental charge imposed on
any payment with respect to this Note to a Holder that is a fiduciary or
partnership or other than the sole beneficial owner of such payment to
the extent a beneficiary or settlor with respect to such fiduciary or a
member of such partnership or a beneficial owner would not have been
entitled to the payment of Additional Amounts had such beneficiary,
settlor, member or beneficial owner directly received its beneficial or
distributive share of such payment; or
(i) any combination of items (a), (b), (c), (d), (e), (f), (g)
and (h).
For purposes of this Note, "United States" means the United
States of America (including the States and the District of Columbia) and its
possessions, and "United States Alien" means any person who, for United States
federal income tax purposes, is (i) a foreign corporation, (ii) a nonresident
alien individual, (iii) an estate or trust that is not an estate or trust that
is subject to United States federal income taxation regardless of the source of
its income, or (iv) a foreign partnership one or more of the members of which
is, for United States federal income tax purposes, a foreign corporation, a
nonresident alien individual or an estate or trust that is not an estate or
trust that is subject to United States federal income taxation regardless of the
source of its income.
Except as specifically provided herein and in the Indenture or
otherwise provided by law, the Company shall not be required to make any payment
with respect to any tax, assessment or other governmental charge imposed by any
government or any political subdivision or tax or administrative authority
thereof or therein.
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<PAGE>
Any payments made by the Company in respect of this Note, other
than payments of stated interest, shall be applied in the following order: (i)
first, to the payment of any original issue discount (as determined for United
States federal income tax purposes) that is accrued and unpaid on the date of
such payment; and (ii) thereafter, to any remaining amounts due and payable
under this Note.
Reference is hereby made to the further provisions of this Note
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 Note is entitled to the benefits of the HMH Note Guaranty of
HMH on a senior unsecured basis, which HMH Note Guaranty is 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 of HMH
under the HMH Note Guaranty.
This Note and the ADS Right annexed hereto have been issued as a
unit. Except as provided in such ADS Right and in the ADS Rights Agreement,
neither this Note nor such ADS Right may be transferred separately from the
other.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee by the manual signature of an authorized
signatory, this Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
Dated: ________, 1994
HANSON AMERICA INC.,
[Corporate Seal]
By ________________________________
Attest:
- ------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By ________________________
Authorized Signatory
Dated: ________, ____
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<PAGE>
[FORM OF REVERSE]
This Note is one of a duly authorized issue of Notes of the
Company designated as its "2.39% Senior Exchangeable Discount Notes Due 2001"
(the "Notes"), limited in aggregate Principal Amount at Maturity to
$1,255,115,000 (subject to increase to $1,380,626,500), issued and to be issued
under an Indenture dated as of March 1, 1994 (the "Indenture"), among the
Company, HM Holdings, Inc. 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 and immunities
thereunder of the Company, HMH, the Trustee and the Holders of the Notes and any
coupons appertaining thereto and of the terms upon which the Notes are, and are
to be, authenticated and delivered. The Notes are issuable (1) as Bearer Notes,
with interest coupons attached, in the denominations of $10,000 Principal Amount
at Maturity or any amount in excess thereof that is an integral multiple of
$1,000, (2) as Registered Notes, without coupons, in denominations of $10,000
Principal Amount at Maturity or any amount in excess thereof that is an integral
multiple of $1,000, and (3) as Rule 144A Global Notes. As provided in the
Indenture and subject to certain limitations therein set forth, Registered Notes
are exchangeable for a like aggregate Principal Amount at Maturity of Registered
Notes of any authorized denominations as requested by the Holder surrendering
the same upon surrender of the Registered Note or Notes to be exchanged, except
as provided below, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, or, subject to any laws or regulations
applicable thereto and to the right of the Company to terminate the appointment
of any such Transfer Agent, at the main offices of The Bank of New York, London
Branch, in London and at the main offices of Commerzbank International S.A. in
Luxembourg, or at such other offices or agencies as the Company may designate.
Bearer Notes will not be issued in exchange for Registered Notes or Rule 144A
Global Notes.
The Notes are subject to redemption: (a) any time on or after
March 1, 1999, in whole or in part, at the election of the Company, at the
Redemption Price (as defined below); and (b) in whole under the circumstances
described in the next succeeding paragraph at the Redemption Price; together in
the case of any such redemption (whether pursuant to clause (a) above or this
clause (b)) with accrued interest to but excluding the Redemption Date;
provided, however, that interest installments on Registered Notes whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Notes, or one or more Predecessor Notes, of record at the close of
business on the relevant Record Dates referred to on the face of such Registered
Notes, all as provided in the Indenture. The "Redemption Price" of the Notes
means the Accreted Value thereof to but excluding the Redemption Date. In the
case of any partial redemption of Notes, the Notes to be redeemed shall be
selected by the Trustee not more than 60 days prior to the Redemption Date from
the Outstanding Notes not previously called for redemption, in the case of
Bearer Notes, individually by lot and, in the case of Registered Notes, by such
method as the Trustee shall deem fair and appropriate, and
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<PAGE>
under circumstances intended not to discriminate between Registered and Bearer
Notes in the selection of Notes (or portions thereof) selected for redemption.
The Notes will be redeemable in multiples of $1,000 Principal Amount at Maturity
(provided that the remaining Principal Amount at Maturity, if any, of any
Holder's Notes must be $10,000 or any amount in excess thereof that is an
integral multiple of $1,000). The Company will be required to pay accrued
interest, plus such portion of the Redemption Price as is equal to the Adjusted
Accreted Value of the Notes being redeemed. (Simultaneously therewith, HBL (in
respect of the ADS Rights) will be required to pay, pursuant to the ADS Rights,
an amount equal to the excess of the Redemption Price over the Adjusted Accreted
Value of the Notes being redeemed.) The Notes also are subject to redemption
upon exercise of the ADS Rights, as provided in the ADS Rights and the ADS
Rights Agreement.
If (A) as a result of any change in, or amendment to, the laws
(including any regulations, rulings or similar pronouncements promulgated
thereunder) of the United States or any political subdivision or tax or
administrative authority thereof or therein, or any change in the official
position regarding the application or interpretation of such laws (or
regulations, rulings or similar pronouncements), which change or amendment is
announced or becomes effective on or after March 4, 1994, the Company has or
will become obligated to pay to the Holder of any Note Additional Amounts, as
described in the second paragraph of the face of this Note, and such obligations
cannot be avoided by the Company taking reasonable measures available to it, or
(B) an act has been taken by a legislature, tax authority or court of competent
jurisdiction in or of the United States, including any of those acts or
occurrences specified in clause (A) above, whether or not such act was taken
with respect to the Company, that results in a substantial probability that the
Company will be required to pay Additional Amounts in respect of the Notes, then
the Company may, at its option, redeem the Notes as a whole but not in part, at
any time, upon prior notice as described below, at a Redemption Price equal to
the Accreted Value of the Notes to but excluding the Redemption Date, plus
accrued interest to but excluding the Redemption Date (and Additional Amounts,
if any); provided, however, that no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to pay any such Additional Amounts were a payment in respect of the
Notes then due. Prior to the giving of any notice of redemption pursuant to this
paragraph, the Company shall deliver to the Trustee (i) a certificate stating
that the Company is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions in (A) or (B) above to the right
of the Company so to redeem have occurred, and (ii) a written opinion of
independent counsel of recognized standing selected by the Company to the effect
that such conditions have occurred. The Company's right to redeem the Notes
shall continue, as long as the Company is obligated to pay such Additional
Amounts, notwithstanding that the Company shall have made payments of Additional
Amounts specified in such second paragraph. Notwithstanding the foregoing, the
Company will not so redeem the Notes if the Company, based upon a written
opinion of independent counsel of recognized standing selected by the Company,
subsequently determines, not less than 30 days prior
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<PAGE>
to the Redemption Date, that neither clause (A) nor clause (B) above pertains;
in which case the Company will notify the Trustee in writing, and the Trustee
will promptly give notice of that determination in the manner provided below and
any earlier redemption notice will thereupon be revoked and of no further
effect. The Company will be required to pay the Holder only such portion of the
Redemption Price as is equal to the Adjusted Accreted Value of the Notes being
redeemed (together with accrued interest). (Simultaneously therewith, HBL (in
respect of the ADS Rights) will be required to pay, pursuant to the ADS Rights,
an amount equal to the excess of the Redemption Price over the Adjusted Accreted
Value of the Notes being redeemed.)
Notice of redemption will be given by publication in Authorized
Newspapers in The City of New York, in London and, so long as the Notes are
listed on the Luxembourg Stock Exchange and such stock exchange shall so
require, in Luxembourg, or, if not practicable in either London or Luxembourg,
elsewhere in any country in Western Europe, and by mail to Holders of Registered
Notes. In the case of a redemption, notice will be given once, not more than 60
days nor less than 30 days prior to the Redemption Date, all as provided in the
Indenture.
In the event of a redemption of the Notes in part, the Company
will not be required (a) to register the transfer of, or exchange, Registered
Notes or Rule 144A Global Notes or to exchange Bearer Notes for Registered Notes
for a period of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Notes called for such redemption, (b) to
register the transfer of, or exchange, any such Registered Notes or Rule 144A
Global Notes, or portion thereof, called for redemption, or (c) to exchange any
Bearer Notes called for redemption; provided, however, that a Bearer Note called
for redemption may be exchanged for a Registered Note which is simultaneously
surrendered to the Note Registrar or Transfer Agent making such exchange with
written instruction for payment consistent with the provisions of the Indenture.
Upon the occurrence of a Change-in-Control (as defined in the
Indenture) with respect to the Company, each Holder of Notes shall have the
right (the "Change-in-Control Right"), at such Holder's option, and subject to
the conditions hereof, to require the repurchase of all its Notes, or a portion
thereof which is $1,000 or any integral multiple thereof, at the Repurchase
Price. For the period from (i) the issue date of the Notes until February 28,
1999, the "Repurchase Price" will be 101% of the Accreted Value of the Notes to
but excluding the date of repurchase (the "Repurchase Date"), plus accrued
interest to but excluding the Repurchase Date, and (ii) March 1, 1999 until
maturity, the "Repurchase Price" will be 100% of the Accreted Value of the Notes
to but excluding the Repurchase Date, plus accrued interest to but excluding the
Repurchase Date (provided that if the date fixed for such purchase is on or
subsequent to the date on which interest is otherwise payable to holders of
Notes under the Indenture, such interest shall be payable to the Holder of
Registered Notes as of the applicable record date for such interest payment).
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<PAGE>
In case a Change-in-Control shall have occurred, notice (the
"Repurchase Notice") thereof shall be given by publication in an Authorized
Newspaper in The City of New York, in London and, so long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg, or, if not practicable
in either London or Luxembourg, elsewhere in any country in Western Europe, and
by mail to the Trustee and to each Holder of Registered Notes within 30 days
after the Company becomes aware of such occurrence. The Repurchase Notice will
specify (i) the date by which a Holder must irrevocably exercise the
Change-in-Control Right (which must be a date no later than 60 days and no
earlier than 30 days after the date of the Repurchase Notice) (the "Repurchase
Exercise Date"), (ii) the Repurchase Date (which must be a date not later than
75 days and no earlier than 60 days after the date of the Repurchase Notice),
(iii) the applicable Repurchase Price, and (iv) the name and address of the
Paying Agents. To exercise the Change-in-Control Right, a Holder of Notes must
timely deliver irrevocable written notice to the Company (and the Trustee) of
the Holder's exercise of such right, together with the Notes with respect to
which the right is being exercised, duly endorsed for transfer. The submission
of a Note pursuant to the exercise of a Change-in-Control Right will be
irrevocable on the part of the Holder and the right to exercise the ADS Right
will expire upon submission (unless the Company shall fail to repurchase the
Note on the Repurchase Date). Repurchase will be effected in compliance with all
applicable laws and the procedures set forth in the Indenture will be modified
to the extent necessary to comply therewith. The notice of exercise of a
Change-in-Control Right (A) shall, in the case of Registered Notes, identify the
name of such Holder, and (B) shall identify the Notes (or the portion of the
Principal Amount at Maturity thereof (which portion must be $1,000 Principal
Amount at Maturity or an amount in excess thereof that is an integral multiple
of $1,000; provided that the remaining Principal Amount at Maturity of any
Holder's Notes must be $10,000 or an amount in excess thereof that is an
integral multiple of $1,000)), that are to be so purchased and their aggregate
Principal Amount at Maturity. No such notice shall be deemed to have been
delivered, and no such Notes shall be deemed to have been presented and
surrendered, until such notice and Notes are actually received by the Company or
its designated agent.
With respect to each Note which has been presented and
surrendered and as to which notice has been given to the Company of the Holder's
intention to exercise its Change-in-Control Right in accordance herewith, such
Note shall become due and payable on the Repurchase Date. Upon presentation and
surrender of each Note in accordance herewith, such Note shall be purchased at
the applicable Repurchase Price therefor, together with interest accrued thereon
to but excluding the Repurchase Date. OID and interest on any Note so elected to
be put to the Company for purchase shall cease to accrue from and after the
Repurchase Date (unless there is a default in the payment of any such Note at
the applicable Repurchase Price, together with interest accrued thereon to but
excluding the Repurchase Date). The Company will be required to pay such accrued
interest, plus such portion of the Repurchase Price as is equal to (i) 101% of
the Adjusted Accreted Value of the Notes being repurchased, if the Repurchase
Date is on or prior to February 28, 1999, or (ii) the Adjusted Accreted Value of
such
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Notes, if the Repurchase Date is on or after March 1, 1999. (Simultaneously
therewith, HBL (in respect of the ADS Rights) will be required to pay, pursuant
to the ADS Rights, an amount equal to (1) the excess of the Repurchase Price
over 101% of the Adjusted Accreted Value of the Notes being repurchased, if the
Repurchase Date is on or prior to February 28, 1999, or (2) the excess of the
Repurchase Price over the Adjusted Accreted Value of the Notes being
repurchased, if the Repurchase Date is on or after March 1, 1999.)
There also will be an obligation to purchase (the "Tax
Repurchase") any outstanding Note, at the option of the Holder thereof (the "Tax
Repurchase Right"), at the Tax Repurchase Price (as defined below) if HBL or
Hanson has delivered a Withholding Tax Notice in the manner set forth in the
Indenture that states, among other things, that (1) HBL or Hanson has or will
become obligated to pay Tax Amounts as a result of any change in, or amendment
to, the laws (or any regulations, rulings or similar pronouncements promulgated
thereunder) of Bermuda or the United Kingdom or of any political subdivision or
taxing authority thereof or therein, or any change in the official position
regarding the application or interpretation of such laws, regulations, rulings
or similar pronouncements which change or amendment is announced or becomes
effective on or after March 4, 1994, and (2) HBL or Hanson has exercised its
right, pursuant to the ADS Rights Agreement such that, with effect from the date
on which such notice is given, HBL or Hanson will no longer be obligated to pay
such Tax Amounts. Before providing any Withholding Tax Notice, HBL or Hanson
shall deliver to the Company and the Company shall deliver to the Trustee an
Officer's Certificate (as defined in the ADS Rights Agreement) setting forth a
statement of facts showing that HBL or Hanson has or will become obligated to
pay Tax Amounts as a result of a change in, or amendment to, the laws (or any
regulations, rulings or similar pronouncements promulgated thereunder) of
Bermuda or the United Kingdom or of any political subdivision or taxing
authority thereof or therein, or any change in the official position regarding
the application or interpretation of such laws, regulations, rulings or similar
pronouncements, which change or amendment is announced or becomes effective on
or after March 4, 1994, and such obligation cannot be avoided by HBL or Hanson
taking reasonable measures available to it, and an opinion addressed to the
Company and the Trustee, of independent counsel of recognized standing to the
effect that HBL or Hanson has or will become obligated to pay such Tax Amounts
as a result of such change or amendment.
On the Tax Repurchase Date (i) there shall be accepted for
repayment Notes or portions thereof tendered pursuant to the Tax Repurchase, and
(ii) the Company and HBL, as applicable, shall deposit with the Trustee money
sufficient to pay the Tax Repurchase Price of all Notes or portions thereof so
tendered. "Tax Repurchase Price" means the greater of (x) the Accreted Value to
but excluding the Tax Repurchase Date plus accrued interest to but excluding the
Tax Repurchase Date and (y) the ADS Rights Amount. The Company will be required
to pay such accrued interest, plus such portion of the Tax Repurchase Price as
is equal to the Adjusted Accreted Value of the Notes being repurchased.
(Simultaneously therewith, HBL (in respect of the ADS Rights) will
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be required to pay, pursuant to the ADS Rights, an amount equal to the excess of
the Tax Repurchase Price over the Adjusted Accreted Value (plus such accrued
interest) of the Notes being repurchased.)
Holders have the right to withdraw any election for Tax
Repurchase by delivering to the Paying Agent a written notice of withdrawal in
accordance with the provisions of the Indenture.
Upon presentation and surrender of any Note which is to be
redeemed or repurchased in part only, upon its redemption or purchase, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder thereof, at the expense of the Company, a new Note or Notes in authorized
denominations in an aggregate Principal Amount at Maturity equal to the portion
of the Note not redeemed or purchased.
In any case where the due date for the payment with respect to
any Note or the date fixed for redemption or repurchase of any Note shall be at
any place of payment a day which is not a Business Day, then payment need not be
made on such date at such place but may be made on the next succeeding day at
such place which is a Business Day, with the same force and effect as if made on
the date for such payment or the date fixed for redemption or repurchase, and no
additional OID or interest shall accrue for the period after such date.
Subject to certain limitations in the Indenture, at any time when
the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder of a Note or of a beneficial owner of a Bearer Note, the
Company will promptly furnish or cause to be furnished Rule 144A Information (as
defined below) to such Holder, to such beneficial owner or to a prospective
purchaser of such Note designated by such Holder or such beneficial owner, as
the case may be, in order to permit compliance by such Holder or beneficial
owner with Rule 144A under the Securities Act. "Rule 144A Information" shall be
such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto).
If an Event of Default shall occur and be continuing, the
Accreted Value, the ADS Rights Amount, the Repurchase Price or the Tax
Repurchase Price, as the case may be, of all the Notes may be declared due and
payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and HMH and the rights of the Holders of the Notes
and coupons under the Indenture at any time by the Company, HMH and the Trustee
with the consent of the Holders of a majority in Principal Amount at Maturity of
the Notes at the time Outstanding (or such lesser amount as shall have acted at
a meeting pursuant to the provisions of the Indenture). The Indenture also
contains provisions permitting the Holders of specified percentages in Principal
Amount at Maturity of the Notes at the time Outstanding, on
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behalf of the Holders of all the Notes and coupons, to waive compliance by the
Company or HMH with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon registration of
transfer hereof or in exchange herefore or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note or such other Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the respective obligations of the
Company and HMH, which are absolute and unconditional, to make all payments
(including Additional Amounts, as described on the face hereof) on this Note at
the times, places and rate, and in the coin or currency, herein prescribed, or
the obligations of the Company to effect the redemption of this Note upon the
exercise of the ADS Rights, in each case as provided in the Indenture.
A Note will bear interest at a rate of 0% per annum during the
period commencing on an Interest Payment Date and ending on the day before the
next succeeding Interest Payment Date, if the ADS Right associated with such
Note is exercised during such period. A Registered Note surrendered upon
exercise of the ADS Right associated therewith during the period from the close
of business on the February 15 or August 15 next preceding any Interest Payment
Date to the opening of business on such Interest Payment Date must be
accompanied by payment of an amount equal to the interest payable thereon which
the Holder is to receive, and such interest will be paid on such Interest
Payment Date to the Holder of record on the next preceding Regular Record Date.
A Registered Note surrendered upon exercise of the ADS Right associated
therewith on an Interest Payment Date need not be accompanied by such payment
and interest on the Principal Amount at Maturity of such Note shall be paid on
such Interest Payment Date to the registered Holder of such Note on the
immediately preceding Regular Record Date.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of Registered Notes is registrable on the Note
Register upon surrender of a Registered Note for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or, subject to any laws or regulations applicable thereto and to the right
of the Company to terminate the appointment of any such Transfer Agent, at the
Corporate Trust Office of the Trustee in New York, New York or at the offices of
the Transfer Agents described herein or at such other offices or agencies as the
Company may designate, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Note Registrar duly
executed by, the Holder thereof or his attorney duly authorized in writing, and
thereupon one or more new Registered Notes, of authorized denominations and for
the same aggregate Principal Amount at Maturity, will be issued to the
designated transferee or transferees.
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No service charge shall be made for any such registration of
transfer or exchange of the Registered Notes, but the Company may require
payment of a sum sufficient to recover any tax or other governmental charge
payable in connection therewith.
The Company, the Trustee, any agent of the Company or the
Trustee, HBL, Hanson and the ADS Rights Agent may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Company, the Trustee, any such agent, HBL,
Hanson nor the ADS Rights Agent shall be affected by notice to the contrary.
THE INDENTURE, THE NOTES AND ANY COUPONS APPERTAINING THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
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Annex C
FORM OF RULE 144A GLOBAL NOTE
[FORM OF FACE]
[LEGEND IF RULE 144A GLOBAL NOTE IS A RESTRICTED NOTE:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT); (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE DATE
OF ORIGINAL ISSUANCE OF THE NOTES EVIDENCED HEREBY (THE "ORIGINAL ISSUANCE
DATE") RESELL OR OTHERWISE TRANSFER THE NOTES EVIDENCED HEREBY, EXCEPT (A) TO
HANSON AMERICA INC., (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER, IF AVAILABLE, (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT OR (E) IN A TRANSACTION OF A TYPE OTHER THAN THOSE
DESCRIBED IN CLAUSE (A), (B), (C) OR (D) ABOVE IN CONNECTION WITH WHICH THE
COMPANY SHALL HAVE RECEIVED A LEGAL OPINION, IN FORM AND SUBSTANCE SATISFACTORY
TO IT, TO THE EFFECT THAT THE PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTES EVIDENCED HEREBY ARE TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTES
EVIDENCED HEREBY WHILE THIS NOTE IS REQUIRED TO BEAR THIS LEGEND, THE HOLDER
HEREOF MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. THIS
LEGEND WILL BE REMOVED (A) AFTER THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL
ISSUANCE DATE OR (B) UPON THE EARLIER SATISFACTION
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OF THE TRUSTEE THAT THE NOTES EVIDENCED HEREBY HAVE BEEN OR ARE BEING OFFERED
AND SOLD IN COMPLIANCE WITH RULE 144 OR RULE 904 UNDER THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.]
INFORMATION REGARDING ORIGINAL ISSUE DISCOUNT ON THIS NOTE MAY BE OBTAINED BY
CONTACTING TAX DIRECTOR, HANSON INDUSTRIES, 99 WOOD AVENUE SOUTH, ISELIN, NEW
JERSEY, 08830.
HANSON AMERICA INC.
2.39% SENIOR EXCHANGEABLE DISCOUNT NOTE DUE 2001
No. G -____________
Original Issue Discount: $203.26 (for each $1,000 Principal Amount at Maturity)
Issue Price: $796.74 (for each $1,000 Principal Amount at Maturity)
Principal Amount at Maturity: $[ ]
HANSON AMERICA INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company", which term includes any
successor corporation under the Indenture referred to on the reverse hereof),
for value received, hereby promises to pay to bearer upon presentation and
surrender of this Rule 144A Global Note, the Principal Amount at Maturity of
[ ] United States Dollars on March 1, 2001 and to pay interest thereon,
from March 11, 1994 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semiannually in arrears on March 1
and September 1 in each year (each an "Interest Payment Date"), commencing
September 1, 1994, at the rate of 2.39% per annum, until the principal hereof is
paid or made available for payment. All payments with respect to this Note,
including Principal Amount at Maturity, Accreted Value, Adjusted Accreted Value,
interest, Redemption Price, Repurchase Price, Tax Repurchase Price and
Additional Amounts (as defined below), shall be made upon the surrender of this
Note at the option of the Holder (a) at the Corporate Trust Office of the
Trustee, or at such other office or agency of the Company as may be designated
by it for such purpose in the Borough of Manhattan, The City of New York, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, or (b)
subject to any laws or regulations applicable thereto and to the right of the
Company (limited as provided in the Indenture) to terminate the appointment of
any Paying Agent, at the main offices of The Bank of New York, London Branch in
London, Commerzbank International S.A. in Luxemburg, or at such other offices or
agencies as the Company may designate, by United States Dollar check drawn on,
or wire transfer to a United States Dollar account maintained by the payee with,
a bank in The City of New York.
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All payments made by the Company in respect of the Principal
Amount at Maturity, Accreted Value, Adjusted Accreted Value, ADS Rights Amount,
interest, Redemption Price, Repurchase Price, Tax Repurchase Price and other
amounts with respect to the Notes will be without deduction or withholding for
or on account of any present or future tax, assessment or governmental charge
imposed or levied by the United States (or any political subdivision or tax or
administrative authority of the United States), unless the withholding or
deduction of such tax, assessment or governmental charge is required by law. In
the event such withholding or deduction is so required, the Company will pay to
the Holder of this Note who is a United States Alien (as defined below) such
additional amounts ("Additional Amounts") as may be necessary in order that
every net payment in respect of Principal Amount at Maturity, Accreted Value,
Adjusted Accreted Value, ADS Rights Amount, interest, Redemption Price,
Repurchase Price, Tax Repurchase Price and other amounts with respect to the
Notes, after deduction or withholding for or on account of any present or future
tax, assessment or governmental charge imposed upon or as a result of such
payment by the United States (or any political subdivision or tax or
administrative authority of the United States), will not be less than the amount
provided for in this Note to be then due and payable by the Company; provided,
however, that the foregoing obligation to pay Additional Amounts will not apply
to:
(a) any tax, assessment or other governmental charge that would
not have been so imposed but for the existence of any present or former
connection between such Holder or beneficial owner (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor
of a power over, such Holder or beneficial owner, if such Holder or
beneficial owner is an estate, a trust, a partnership or a corporation)
and the United States, including, without limitation, such Holder or
beneficial owner (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) being or having been a citizen or resident of
the United States or treated as a resident thereof, or being or having
been engaged in a trade or business or present therein, or having or
having had an office, fixed place of business or permanent establishment
therein, or making or having made an election the effect of which is to
subject such Holder or beneficial owner (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) to such tax, assessment
or other governmental charge;
(b) any tax, assessment or other governmental charge that would
not have been so imposed but for the presentation by the Holder of this
Note for payment on a date more than 15 days after the date on which
such payment became due and payable or the date on which payment thereof
is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, excise,
personal property, or similar tax, assessment or governmental charge;
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(d) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure by the Holder or the
beneficial owner of this Note or any coupon appertaining thereto to
comply with any requirement under a statute, treaty, regulation, or
administrative practice of the United States to establish entitlement to
exemption from all or part of such tax, assessment or other governmental
charge;
(e) any tax, assessment or other governmental charge that is
payable otherwise than by deduction or withholding from a payment with
respect to this Note or any coupon appertaining hereto;
(f) any tax, assessment or other governmental charge imposed as a
result of a Holder's or beneficial owner's past or present status as (i)
a personal holding company or a foreign personal holding company with
respect to the United States; (ii) a corporation which accumulates
earnings to avoid United States Federal income tax; (iii) a controlled
foreign corporation with respect to the United States that is related to
the Company through stock ownership; (iv) a private foundation or other
tax exempt organization with respect to the United States; (v) a
"10-percent shareholder" with respect to the Company within the meaning
of Section 871(h)(3) or 881(c)(3)(B) of the United States Internal
Revenue Code of 1986, as amended (the "Code"); or (vi) a bank receiving
interest described in Section 881(c)(3)(A) of the Code;
(g) any tax, assessment or other governmental charge required to
be withheld by any Paying Agent from any payment with respect to this
Note, if such payment could be made without such withholding by any
other Paying Agent;
(h) any tax, assessment or other governmental charge imposed on
any payment with respect to this Note to a Holder that is a fiduciary or
partnership or other than the sole beneficial owner of such payment to
the extent a beneficiary or settlor with respect to such fiduciary or a
member of such partnership or a beneficial owner would not have been
entitled to the payment of Additional Amounts had such beneficiary,
settlor, member or beneficial owner directly received its beneficial or
distributive share of such payment; or
(i) any combination of items (a), (b), (c), (d), (e), (f), (g)
and (h).
For purposes of this Note, "United States" means the United
States of America (including the States and the District of Columbia) and its
possessions, and "United States Alien" means any person who, for United States
federal income tax purposes, is (i) a foreign corporation, (ii) a nonresident
alien individual, (iii) an estate or trust that is not an estate or trust that
is subject to United States federal income taxation regardless of the source of
its income, or (iv) a foreign partnership one or more of the members of which
is, for United States federal income tax purposes, a foreign corporation, a
nonresident alien individual or an estate or trust
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that is not an estate or trust that is subject to United States federal income
taxation regardless of the source of its income.
Except as specifically provided herein and in the Indenture or
otherwise provided by law, the Company shall not be required to make any payment
with respect to any tax, assessment or other governmental charge imposed by any
government or any political subdivision or tax or administrative authority
thereof or therein.
Any payments made by the Company in respect of this Note, other
than payments of stated interest, shall be applied in the following order: (i)
first, to the payment of any original issue discount (as determined for United
States federal income tax purposes) that is accrued and unpaid on the date of
such payment; and (ii) thereafter, to any remaining amounts due and payable
under this Note.
Reference is hereby made to the further provisions of this Note
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 Note is entitled to the benefits of the HMH Note Guaranty of
HMH on a senior unsecured basis, which HMH Note Guaranty is 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 of HMH
under the HMH Note Guaranty.
This Note and the ADS Right annexed hereto have been issued as a
unit. Except as provided in such ADS Right and in the ADS Rights Agreement,
neither this Note nor such ADS Right may be transferred separately from the
other.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee by the manual signature of an authorized
signatory, this Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
Dated: ________, 1994
HANSON AMERICA INC.,
[Corporate Seal]
By ________________________________
Attest:
- ------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By ________________________
Authorized Signatory
Dated: ________, ____
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[FORM OF REVERSE]
This Note is one of a duly authorized issue of Notes of the
Company designated as its "2.39% Senior Exchangeable Discount Notes Due 2001"
(the "Notes"), limited in aggregate Principal Amount at Maturity to
$1,255,115,000 (subject to increase to $1,380,626,500), issued and to be issued
under an Indenture dated as of March 1, 1994 (the "Indenture"), among the
Company, HM Holdings, Inc. 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 and immunities
thereunder of the Company, HMH, the Trustee and the Holders of the Notes and any
coupons appertaining thereto and of the terms upon which the Notes are, and are
to be, authenticated and delivered. The Notes are issuable (1) as Bearer Notes,
with interest coupons attached, in the denominations of $10,000 Principal Amount
at Maturity or any amount in excess thereof that is an integral multiple of
$1,000, (2) as Registered Notes, without coupons, in denominations of $10,000
Principal Amount at Maturity or any amount in excess thereof that is an integral
multiple of $1,000, and (3) as Rule 144A Global Notes. As provided in the
Indenture and subject to certain limitations therein set forth, Rule 144A Global
Notes are exchangeable for a like aggregate Principal Amount at Maturity of
Registered Notes of any authorized denominations as requested by the Holder
surrendering the same upon surrender of the Rule 144A Global Note or Notes to be
exchanged at the office or agency of the Company in the Borough of Manhattan,
The City of New York, or, subject to any laws or regulations applicable thereto
and to the right of the Company to terminate the appointment of any such
Transfer Agent, at the main offices of The Bank of New York, London Branch, in
London and at the main offices of Commerzbank International S.A. in Luxembourg,
or at such other offices or agencies as the Company may designate. Bearer Notes
will not be issued in exchange for Registered Notes or Rule 144A Global Notes.
The Notes are subject to redemption: (a) any time on or after
March 1, 1999, in whole or in part, at the election of the Company, at the
Redemption Price (as defined below); and (b) in whole under the circumstances
described in the next succeeding paragraph at the Redemption Price; together in
the case of any such redemption (whether pursuant to clause (a) above or this
clause (b)) with accrued interest to but excluding the Redemption Date. The
"Redemption Price" of the Notes means the Accreted Value thereof to but
excluding the Redemption Date. In the case of any partial redemption of Notes,
the Notes to be redeemed shall be selected by the Trustee not more than 60 days
prior to the Redemption Date from the Outstanding Notes not previously called
for redemption, in the case of Bearer Notes, individually by lot and, in the
case of Registered Notes, by such method as the Trustee shall deem fair and
appropriate, and under circumstances intended not to discriminate between
Registered and Bearer Notes in the selection of Notes (or portions thereof)
selected for redemption. The Notes will be redeemable in multiples of $1,000
Principal Amount at Maturity (provided that the remaining Principal Amount at
Maturity, if any, of any Holder's Notes must be $10,000
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or any amount in excess thereof that is an integral multiple of $1,000). The
Company will be required to pay accrued interest, plus such portion of the
Redemption Price as is equal to the Adjusted Accreted Value of the Notes being
redeemed. (Simultaneously therewith, HBL (in respect of the ADS Rights) will be
required to pay, pursuant to the ADS Rights, an amount equal to the excess of
the Redemption Price over the Adjusted Accreted Value of the Notes being
redeemed.) The Notes also are subject to redemption upon exercise of the ADS
Rights, as provided in the ADS Rights and the ADS Rights Agreement.
If (A) as a result of any change in, or amendment to, the laws
(including any regulations, rulings or similar pronouncements promulgated
thereunder) of the United States or any political subdivision or tax or
administrative authority thereof or therein, or any change in the official
position regarding the application or interpretation of such laws (or
regulations, rulings or similar pronouncements), which change or amendment is
announced or becomes effective on or after March 4, 1994, the Company has or
will become obligated to pay to the Holder of any Note Additional Amounts, as
described in the second paragraph of the face of this Note, and such obligations
cannot be avoided by the Company taking reasonable measures available to it, or
(B) an act has been taken by a legislature, tax authority or court of competent
jurisdiction in or of the United States, including any of those acts or
occurrences specified in clause (A) above, whether or not such act was taken
with respect to the Company, that results in a substantial probability that the
Company will be required to pay Additional Amounts in respect of the Notes, then
the Company may, at its option, redeem the Notes as a whole but not in part, at
any time, upon prior notice as described below, at a Redemption Price equal to
the Accreted Value of the Notes to but excluding the Redemption Date, plus
accrued interest to but excluding the Redemption Date (and Additional Amounts,
if any); provided, however, that no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to pay any such Additional Amounts were a payment in respect of the
Notes then due. Prior to the giving of any notice of redemption pursuant to this
paragraph, the Company shall deliver to the Trustee (i) a certificate stating
that the Company is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions in (A) or (B) above to the right
of the Company so to redeem have occurred, and (ii) a written opinion of
independent counsel of recognized standing selected by the Company to the effect
that such conditions have occurred. The Company's right to redeem the Notes
shall continue, as long as the Company is obligated to pay such Additional
Amounts, notwithstanding that the Company shall have made payments of Additional
Amounts specified in such second paragraph. Notwithstanding the foregoing, the
Company will not so redeem the Notes if the Company, based upon a written
opinion of independent counsel of recognized standing selected by the Company,
subsequently determines, not less than 30 days prior to the Redemption Date,
that (i) neither clause (A) nor clause (B) above pertains, or (ii) subsequent
payments described in this paragraph would not be subject to any such
certification, identification or information reporting requirement; in either of
which case the Company will notify the Trustee in writing, and the Trustee will
promptly give notice
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of that determination in the manner provided below and any earlier redemption
notice will thereupon be revoked and of no further effect. The Company will be
required to pay the Holder only such portion of the Redemption Price as is equal
to the Adjusted Accreted Value of the Notes being redeemed (together with
accrued interest). (Simultaneously therewith, HBL (in respect of the ADS Rights)
will be required to pay, pursuant to the ADS Rights, an amount equal to the
excess of the Redemption Price over the Adjusted Accreted Value of the Notes
being redeemed.)
Notice of redemption will be given by publication in Authorized
Newspapers in The City of New York, in London and, so long as the Notes are
listed on the Luxembourg Stock Exchange and such stock exchange shall so
require, in Luxembourg, or, if not practicable in either London or Luxembourg,
elsewhere in any country in Western Europe, and by mail to Holders of Registered
Notes. In the case of a redemption, notice will be given once, not more than 60
days nor less than 30 days prior to the Redemption Date, all as provided in the
Indenture.
In the event of a redemption of the Notes in part, the Company
will not be required (a) to register the transfer of, or exchange, Registered
Notes or Rule 144A Global Notes or to exchange Bearer Notes for Registered Notes
for a period of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Notes called for such redemption, (b) to
register the transfer of, or exchange, any such Registered Notes or Rule 144A
Global Notes, or portion thereof, called for redemption, or (c) to exchange any
Bearer Notes called for redemption; provided, however, that a Bearer Note called
for redemption may be exchanged for a Registered Note which is simultaneously
surrendered to the Note Registrar or Transfer Agent making such exchange with
written instruction for payment consistent with the provisions of the Indenture.
Upon the occurrence of a Change-in-Control (as defined in the
Indenture) with respect to the Company, each Holder of Notes shall have the
right (the "Change-in-Control Right"), at such Holder's option, and subject to
the conditions hereof, to require the repurchase all of its Notes, or a portion
thereof which is $1,000 or any integral multiple thereof, at the Repurchase
Price. For the period from (i) the issue date of the Notes until February 28,
1999, the "Repurchase Price" will be 101% of the Accreted Value of the Notes to
but excluding the date of repurchase (the "Repurchase Date"), plus accrued
interest to but excluding the Repurchase Date, and (ii) March 1, 1999 until
maturity, the "Repurchase Price" will be 100% of the Accreted Value of the Notes
to but excluding the Repurchase Date, plus accrued interest to but excluding the
Repurchase Date.
In case a Change-in-Control shall have occurred, notice (the
"Repurchase Notice") thereof shall be given by publication in an Authorized
Newspaper in The City of New York, in London and, so long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg, or, if not practicable
in either London or Luxembourg, elsewhere in any country in Western Europe, and
by mail to the Trustee and to each
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Holder of Registered Notes within 30 days after the Company becomes aware of
such occurrence. The Repurchase Notice will specify (i) the date by which a
Holder must irrevocably exercise the Change-in-Control Right (which must be a
date no later than 60 days and no earlier than 30 days after the date of the
Repurchase Notice) (the "Repurchase Exercise Date"), (ii) the Repurchase Date
(which must be a date not later than 75 days and no earlier than 60 days after
the date of the Repurchase Notice), (iii) the applicable Repurchase Price, and
(iv) the name and address of the Paying Agents. To exercise the
Change-in-Control Right, a Holder of Notes must timely deliver irrevocable
written notice to the Company (and the Trustee) of the Holder's exercise of such
right, together with the Notes with respect to which the right is being
exercised, duly endorsed for transfer. The submission of a Note pursuant to the
exercise of a Change-in-Control Right will be irrevocable on the part of the
Holder and the right to exercise the ADS Right will expire upon submission
(unless the Company shall fail to repurchase the Note on the Repurchase Date).
Repurchase will be effected in compliance with all applicable laws and the
procedures set forth in the Indenture will be modified to the extent necessary
to comply therewith. The notice of exercise of a Change-in-Control Right (A)
shall, in the case of Registered Notes, identify the name of such Holder, and
(B) shall identify the Notes (or the portion of the Principal Amount at Maturity
thereof (which portion must be $1,000 Principal Amount at Maturity or an amount
in excess thereof that is an integral multiple of $1,000; provided that the
remaining Principal Amount at Maturity of any Holder's Notes must be $10,000 or
an amount in excess thereof that is an integral multiple of $1,000)), that are
to be so purchased and their aggregate Principal Amount at Maturity. No such
notice shall be deemed to have been delivered, and no such Notes shall be deemed
to have been presented and surrendered, until such notice and Notes are actually
received by the Company or its designated agent.
With respect to each Note which has been presented and
surrendered and as to which notice has been given to the Company of the Holder's
intention to exercise its Change-in-Control Right in accordance herewith, such
Note shall become due and payable on the Repurchase Date. Upon presentation and
surrender of each Note in accordance herewith, such Note shall be purchased at
the applicable Repurchase Price therefor, together with interest accrued thereon
to but excluding the Repurchase Date. OID and interest on any Note so elected to
be put to the Company for purchase shall cease to accrue from and after the
Repurchase Date (unless there is a default in the payment of any such Note at
the applicable Repurchase Price, together with interest accrued thereon to but
excluding the Repurchase Date). The Company will be required to pay such accrued
interest, plus such portion of the Repurchase Price as is equal to (i) 101% of
the Adjusted Accreted Value of the Notes being repurchased, if the Repurchase
Date is on or prior to February 28, 1999, or (ii) the Adjusted Accreted Value of
such Notes, if the Repurchase Date is on or after March 1, 1999. (Simultaneously
therewith, HBL (in respect of the ADS Rights) will be required to pay, pursuant
to the ADS Rights, an amount equal to (1) the excess of the Repurchase Price
over 101% of the Adjusted Accreted Value of the Notes being repurchased, if the
Repurchase Date is on or prior to February 28, 1999, or (2) the excess of the
Repurchase Price over the Adjusted Accreted
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Value of the Notes being repurchased, if the Repurchase Date is on or after
March 1, 1999.)
There also will be an obligation to purchase (the "Tax
Repurchase") any outstanding Note, at the option of the Holder thereof (the "Tax
Repurchase Right"), at the Tax Repurchase Price (as defined below) if HBL or
Hanson has delivered a Withholding Tax Notice in the manner set forth in the
Indenture that states, among other things, that (1) HBL or Hanson has or will
become obligated to pay Tax Amounts as a result of any change in, or amendment
to, the laws (or any regulations, rulings or similar pronouncements promulgated
thereunder) of Bermuda or the United Kingdom or of any political subdivision or
taxing authority thereof or therein, or any change in the official position
regarding the application or interpretation of such laws, regulations, rulings
or similar pronouncements which change or amendment is announced or becomes
effective on or after March 4, 1994, and (2) HBL or Hanson has exercised its
right, pursuant to the ADS Rights Agreement such that, with effect from the date
on which such notice is given, HBL or Hanson will no longer be obligated to pay
such Tax Amounts. Before providing any Withholding Tax Notice, HBL or Hanson
shall deliver to the Company and the Company shall deliver to the Trustee an
Officer's Certificate (as defined in the ADS Rights Agreement) setting forth a
statement of facts showing that HBL or Hanson has or will become obligated to
pay Tax Amounts as a result of a change in, or amendment to, the laws (or any
regulations, rulings or similar pronouncements promulgated thereunder) of
Bermuda or the United Kingdom or of any political subdivision or taxing
authority thereof or therein, or any change in the official position regarding
the application or interpretation of such laws, regulations, rulings or similar
pronouncements, which change or amendment is announced or becomes effective on
or after March 4, 1994, and such obligation cannot be avoided by HBL or Hanson
taking reasonable measures available to it, and an opinion addressed to the
Company and the Trustee, of independent counsel of recognized standing to the
effect that HBL or Hanson has or will become obligated to pay such Tax Amounts
as a result of such change or amendment.
On the Tax Repurchase Date (i) there shall be accepted for
repayment Notes or portions thereof tendered pursuant to the Tax Repurchase, and
(ii) the Company and HBL, as applicable, shall deposit with the Trustee money
sufficient to pay the Tax Repurchase Price of all Notes or portions thereof so
tendered. "Tax Repurchase Price" means the greater of (x) the Accreted Value to
but excluding the Tax Repurchase Date plus accrued interest to but excluding the
Tax Repurchase Date and (y) the ADS Rights Amount. The Company will be required
to pay such accrued interest, plus such portion of the Tax Repurchase Price as
is equal to the Adjusted Accreted Value of the Notes being repurchased.
(Simultaneously therewith, HBL (in respect of the ADS Rights) will be required
to pay, pursuant to the ADS Rights, an amount equal to the excess of the Tax
Repurchase Price over the Adjusted Accreted Value (plus such accrued interest)
of the Notes being repurchased.)
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Holders have the right to withdraw any election for Tax
Repurchase by delivering to the Paying Agent a written notice of withdrawal in
accordance with the provisions of the Indenture.
Upon presentation and surrender of any Note which is to be
redeemed or purchased in part only, upon its redemption or purchase, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Note or Notes in authorized
denominations in an aggregate Principal Amount at Maturity equal to the portion
of the Note not redeemed or purchased.
In any case where the due date for the payment with respect to
any Note or the date fixed for redemption or repurchase of any Note shall be at
any place of payment a day which is not a Business Day, then payment need not be
made on such date at such place but may be made on the next succeeding day at
such place which is a Business Day, with the same force and effect as if made on
the date for such payment or the date fixed for redemption or repurchase, and no
additional OID or interest shall accrue for the period after such date.
Subject to certain limitations in the Indenture, at any time when
the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a Holder of a Note or of a beneficial owner of a Bearer Note, the
Company will promptly furnish or cause to be furnished Rule 144A Information (as
defined below) to such Holder, to such beneficial owner or to a prospective
purchaser of such Note designated by such Holder or such beneficial owner, as
the case may be, in order to permit compliance by such Holder or beneficial
owner with Rule 144A under the Securities Act. "Rule 144A Information" shall be
such information as is specified pursuant to Rule 144A(d) (4) under the
Securities Act (or any successor provision thereto).
If an Event of Default shall occur and be continuing, the
Accreted Value, the ADS Rights Amount, the Repurchase Price or the Tax
Repurchase Price, as the case may be, of all the Notes may be declared due and
payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and HMH and the rights of the Holders of the Notes
and coupons under the Indenture at any time by the Company, HMH and the Trustee
with the consent of the Holders of a majority in Principal Amount at Maturity of
the Notes at the time Outstanding (or such lesser amount as shall have acted at
a meeting pursuant to the provisions of the Indenture). The Indenture also
contains provisions permitting the Holders of specified percentages in Principal
Amount at Maturity of the Notes at the time Outstanding, on behalf of the
Holders of all the Notes and coupons, to waive compliance by the Company or HMH
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this
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Note and of any Note issued upon registration of transfer hereof or in exchange
herefore or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Note or such other Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the respective obligations of the
Company and HMH, which are absolute and unconditional, to make all payments
(including Additional Amounts, as described on the face hereof) on this Note at
the times, places and rate, and in the coin or currency, herein prescribed, or
the obligations of the Company to effect the redemption of this Note upon the
exercise of the ADS Rights, in each case as provided in the Indenture.
A Note will bear interest at a rate of 0% per annum during the
period commencing on an Interest Payment Date and ending on the day before the
next succeeding Interest Payment Date, if the ADS Right associated with such
Note is exercised during such period.
No service charge shall be made for any exchange of the Rule 144A
Global Notes, but the Company may require payment of a sum sufficient to recover
any tax or other governmental charge payable in connection therewith.
The Company, the Trustee, any agent of the Company or the
Trustee, HBL, Hanson and the ADS Rights Agent may treat the bearer of this Note
as the owner hereof for all purposes, whether or not this Note be overdue, and
neither the Company, the Trustee, any such agent, HBL, Hanson nor the ADS Rights
Agent shall be affected by notice to the contrary.
THE INDENTURE, THE NOTES AND ANY COUPONS APPERTAINING THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
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Annex D
FORM OF ADS RIGHT
ADS RIGHT
This ADS Right is one of a duly authorized issue of ADS Rights
associated with the 2.39% Senior Exchangeable Discount Notes Due 2001 of Hanson
America Inc. The ADS Rights are issued and to be issued under an ADS Rights
Agreement dated as of March 1, 1994 (the "ADS Rights Agreement"), among Hanson
(Bermuda) Limited ("HBL"), Hanson PLC ("Hanson") and Citibank, N.A., as ADS
Rights Agent (the "ADS Rights Agent", which term includes any successor ADS
Rights Agent under the ADS Rights Agreement), to which ADS Rights Agreement and
all supplements thereto and amendments thereof reference is made for a statement
of the respective rights, limitation of rights, duties and immunities thereunder
of HBL, Hanson, the ADS Rights Agent and the Holders and of the terms upon which
the ADS Rights are, and are to be, delivered.
Subject to and upon compliance with the provisions of the ADS
Rights Agreement, the Holder of a Note (or a portion thereof) is entitled
pursuant to this ADS Right, at such Holder's option, at any time on or after
June 8, 1994 and on or before the close of business on March 1, 2001, to
exercise this ADS Right against HBL by instructing the ADS Rights Agent, acting
on behalf of the Holder, to surrender such Holder's Note (or a portion thereof)
for redemption by the Company pursuant to the Indenture, at a redemption price
equal to the Adjusted Accreted Value thereof to but excluding the ADS Exercise
Date, and to apply the proceeds of such redemption to purchase ADSs
(representing Ordinary Shares deposited by Hanson with the Depositary) at the
ADS Ratio. HBL will deliver or cause such ADSs to be delivered to the ADS Rights
Agent, acting on behalf of the Holder, in accordance with the provisions of the
ADS Rights Agreement; provided, however, that HBL shall be obligated to deliver
ADSs (and cash in lieu of a fractional ADS) to the Holder only if, and to the
extent that, Hanson delivers or causes the delivery of Ordinary Shares, ADSs and
cash as requested by HBL pursuant to the terms of the ADS Issuance Agreement.
Notwithstanding the foregoing, (a) in case a Note (or a portion thereof) is
called for redemption, the Holder may exercise the ADS Right in respect of such
Note (or a portion thereof) until and including, but (unless there is a default
in making the payment due upon redemption) not after, the close of business on
the Redemption Date; (b) in case of a Change-in-Control for which the Holder
exercises its Change-in-Control Right with respect to a Note (or a portion
thereof), the Holder may exercise the ADS Right in respect of such Note (or a
portion thereof) until, but (unless there is a default in making the payment due
upon repurchase) not after, receipt of written notice by the Company of the
exercise of such Change-in-Control Right; and (c) in case a Withholding Tax
Notice is delivered by HBL or Hanson and the Holder exercises its Tax Repurchase
Right with respect to a Note (or a portion thereof), the Holder may exercise the
ADS Right in respect of such Note (or a portion thereof) until and including,
but (unless there is a default in making the payment due
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upon repurchase) not after, the close of business on the Tax Repurchase Date.
For purposes of this paragraph, any Person that is a participant in DTC having a
beneficial interest in the Rule 144A Global Receipts representing the Rule 144A
Global Notes may exercise this ADS Right in the manner (and subject to the
conditions) described below (on behalf of the Note Custodian).
The Corporate Trust Office of the ADS Rights Agent in the Borough
of Manhattan, The City of New York, will be the place where Registered Notes and
the Rule 144A Global Notes may be surrendered upon exercise of the ADS Right,
where Bearer Notes may be surrendered upon exercise of the ADS Right in the
circumstances described below (and not otherwise), and where notices and demands
to or upon HBL or Hanson in respect of the ADS Rights and this ADS Rights
Agreement may be served. Registered Notes and the Rule 144A Global Note also may
be surrendered at any of the offices of the ADS Rights Agent and the ADS Rights
sub-Agent outside the United States referred to below.
The offices of the ADS Rights Agent located in London and the ADS
Rights sub-Agent in Luxembourg, or any other designated office of the ADS Rights
Agent outside of the United States or its possessions, will be the place where,
subject to any applicable laws or regulations, Bearer Notes may be surrendered
upon exercise of the ADS Rights. No ADSs required to be delivered, and no
payments of HBL Amounts or Hanson Amounts, with respect to Bearer Notes, shall
be (a) delivered to or paid at the Corporate Trust Office of the ADS Rights
Agent in the Borough of Manhattan, The City of New York, or any other office or
agency of the ADS Rights Agent in the United States or its possessions, or (b)
in the case of such HBL Amounts or Hanson Amounts, made by check mailed to any
address in the United States or its possessions or by wire transfer to an
account maintained with a bank located in the United States or its possessions;
provided, however, that Bearer Notes may be, upon exercise of an ADS Right,
surrendered at, ADSs delivered to, or such HBL Amounts or Hanson Amounts paid
at, the Corporate Trust Office of the ADS Rights Agent in the Borough of
Manhattan, The City of New York if (but only if) such exercise, delivery or
payment at all offices of the ADS Rights Agent and the ADS Rights sub-Agent
outside the United States or its possessions maintained for such purposes in
accordance with this ADS Right and the ADS Rights Agreement is illegal or
effectively precluded by exchange controls or other similar restrictions, as
determined by HBL or Hanson, as the case may be.
A Holder may exercise the ADS Right with respect to a portion of
the Principal Amount at Maturity of such Holder's Note so long as (i) such
portion is $1,000 or an amount in excess thereof that is an integral multiple of
$1,000, and (ii) the remaining Principal Amount at Maturity of such Holder's
Note is $10,000 or an amount in excess thereof that is an integral multiple of
$1,000.
The "ADS Ratio" is 32.388 ADSs per $1,000 Principal Amount at
Maturity of Notes, subject to adjustment as described below. No fractional ADSs
will be issued on exercise of the ADS Rights. The ADS Rights Agent shall pay to
a Holder, otherwise
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entitled to a fractional ADS, an amount of cash in U.S. Dollars equal to the
equivalent value of such fractional ADS based on the Sale Price of a single ADS
on the Trading Day immediately preceding the ADS Exercise Date.
The ADS Rights are exercisable against HBL. To exercise an ADS
Right, a Holder (or any Person that is a participant in DTC having a beneficial
interest in the Rule 144A Global Receipts representing the Rule 144A Global
Notes) must (i) complete and manually sign the applicable exercise notice in
substantially the form following this ADS Right (or complete and manually sign a
facsimile thereof) and deliver such exercise notice to the ADS Rights Agent,
(ii) surrender (by physical or book-entry delivery) the Note(s) to the ADS
Rights Agent, (iii) if required by HBL or the ADS Rights Agent, furnish
appropriate endorsements and transfer documents, and (iv) if required by HBL or
the ADS Rights Agent, pay all transfer or similar taxes (other than any United
Kingdom stamp duty reserve taxes payable by Hanson under the ADS Rights
Agreement). If required by HBL or the ADS Rights Agent, such exercise notice
shall include, or be accompanied by, an agreement to abide by the transfer
restrictions applicable to ADSs and a certificate as to any relevant status of
the Holder (e.g., whether such Holder is a QIB). Book-entry delivery of a
beneficial interest in the Rule 144A Global Receipts representing the Rule 144A
Global Notes to the ADS Rights Agent acting on behalf of the Holders may only be
made by an institution that is a participant in DTC. Although such surrender may
be effected by book-entry delivery at DTC, a completed and manually signed
exercise notice (as well as the agreement and certificate referred to above, if
required) must, in any event, be delivered to, and received by, the ADS Rights
Agent acting on behalf of the Holders. The ADS Rights shall be deemed to have
been exercised immediately prior to the close of business on the Business Day on
which the Holder satisfies all the requirements set forth above (the "ADS
Exercise Date"); provided, however, if the Note(s), exercise notice and other
documents required to be delivered in accordance with this paragraph are not
delivered to and received in proper form by the ADS Rights Agent prior to 11:00
A.M. New York City time on the date on which such Note(s), exercise notice and
other documents are so delivered to the ADS Rights Agent, then the ADS Exercise
Date shall be the next succeeding Business Day after the day such Note(s),
exercise notice and other documents are delivered to and received in proper form
by the ADS Rights Agent (it being understood and agreed, however, that this
proviso shall not apply with respect to any such delivery to the ADS Rights
Agent on any Redemption Date, Repurchase Date or Tax Repurchase Date or on March
1, 2001).
As soon as practicable on or after an ADS Exercise Date, the ADS
Rights Agent will deliver to the Trustee, HBL and Hanson a copy of the
applicable exercise notice. The ADS Rights Agent, acting on behalf of the
Holder, will cause the Notes duly surrendered upon exercise of an ADS Right to
be presented to the Company for redemption pursuant to the Indenture for cash in
U.S. Dollars at a price equal to the Adjusted Accreted Value thereof to but
excluding the ADS Exercise Date. Failure to redeem the Notes and to deliver such
cash amount to the ADS Rights Agent, acting on behalf of the Holder of such
Notes, will constitute an Event of Default under the
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Indenture and the Notes will be returned to the Holder. In such event, the
Holder may elect, by notice (given within 20 Business Days of the ADS Exercise
Date) to the ADS Rights Agent, to exercise its ADS Right by delivering cash in
U.S. Dollars in an amount equal to the Adjusted Accreted Value of the Notes to
but excluding the ADS Exercise Date to the ADS Rights Agent. If such a cash
exercise is elected, the Holder also must (1) surrender (by physical delivery)
the relevant Note to the ADS Rights Agent in order for the ADS Rights Agent to
insert a legend thereon indicating exercise of the ADS Right, (2) if required by
HBL and the ADS Rights Agent, furnish appropriate endorsements and transfer
documents, and (3) if required by HBL and the ADS Rights Agent, pay all transfer
or similar taxes (except for United Kingdom stamp duty reserve taxes payable by
Hanson). If the Holder exercises the ADS Right for cash, the Holder will
continue to have a claim against the Company for failure to redeem the Note. The
ADS Rights Agent will deliver any cash received in connection with an exercise
of an ADS Right (whether such cash is received from the Company or, upon failure
to redeem the related Note, from a Holder) to, or at the direction of, HBL
(against delivery of the ADSs) as consideration for ADSs at the ADS Ratio.
Failure to deliver ADSs to the ADS Rights Agent, acting on behalf of the
Holders, will constitute an Event of Default under the Indenture, and, in such
event, the ADS Rights Agent will deliver cash in U.S. Dollars in the amount of
the Adjusted Accreted Value received from the Company (or the cash delivered by
the Holder as aforesaid) to the Holder; in addition, the Holder will have a
claim for failure to deliver ADSs. If an Event of Default occurs under the
Indenture and the Holders accelerate payment of the Notes in accordance with the
provisions of the Indenture, the ADS Rights may continue to be exercised until
(but not after), the Notes have been paid in full.
The ADS Ratio will not be adjusted at any time during the term of
the Notes for accrued OID or accrued interest. The Holder will receive only ADSs
(and cash in respect of any fractional ADS) upon exercise of an ADS Right. A
Note will bear interest at 0% per annum during the period commencing on an
Interest Payment Date and ending on the day before the next succeeding Interest
Payment Date, if the ADS Right associated with such Note is exercised during
such period. Registered Notes surrendered upon exercise of the ADS Rights during
the period from the close of business on the February 15 or August 15 next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date must be accompanied by payment of an amount equal to the interest
payable thereon which the Holder is to receive. Registered Notes surrendered
upon exercise of the ADS Right on an Interest Payment Date need not be
accompanied by such payment. Bearer Notes surrendered upon exercise of the ADS
Right must be delivered with all unmatured coupons and any matured coupons in
default appurtenant.
The ADS Ratio will be adjusted in accordance with the ADS Rights
Agreement if any of the following events occurs: (i) there shall be an
alteration in the number of Ordinary Shares represented by an ADS; (ii) the
nominal value of the Ordinary Shares shall be altered as a result of a
consolidation or sub-division; (iii) Hanson shall
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issue to holders of Ordinary Shares any Ordinary Shares credited as fully paid
by way of capitalization of reserves or profits; (iv) Hanson shall make any
capital distribution to holders of Ordinary Shares as a class (whether on a
reduction of capital or otherwise) or shall grant such holders rights to acquire
for cash, at less than 95% of their market value, assets of Hanson or any of its
subsidiaries; (v) Hanson shall offer or procure the offer to holders of Ordinary
Shares as a class of new Ordinary Shares for subscription or purchase by way of
rights, or shall offer or grant to holders of Ordinary Shares any options,
rights (including, without limitation, conversion rights attaching to
convertible securities) or warrants to subscribe for or purchase new Ordinary
Shares, in each case at a price that is less than 95% of the then market price
per Ordinary Share; (vi) Hanson shall issue to holders of Ordinary Shares as a
class by way of rights any securities, or grant to such holders as a class by
way of rights, options, warrants or other rights to subscribe for or purchase
any securities (other than, in each case, Ordinary Shares or options, warrants
or other rights to subscribe for or purchase Ordinary Shares); (vii) Hanson
shall issue or grant for cash any Ordinary Shares (other than pursuant to
warrants or other rights outstanding on the date of the ADS Rights Agreement) or
any options, warrants or other rights to subscribe for or purchase Ordinary
Shares, in each case at a price that is less than 95% of the then market price
per Ordinary Share; (viii) Hanson or any of its subsidiaries or (pursuant to a
legally binding agreement with Hanson or any of its subsidiaries) any other
Person shall issue wholly for cash or for no consideration any securities
convertible into, exchangeable for or which carry rights of subscription for
Ordinary Shares and the consideration per Ordinary Share receivable therefor
upon such conversion, exchange or subscription is less than 95% of the then
market price per Ordinary Share; (ix) any rights of conversion, exchange or
subscription attached or relating to any securities of Hanson or any of its
subsidiaries (other than the Notes) are modified (other than by way of
adjustment in accordance with the terms of such securities) so that following
such modification the consideration per Ordinary Share receivable by Hanson or
any of its subsidiaries shall be less than 95% of the then market price per
Ordinary Share; and (x) Hanson or any of its subsidiaries or (pursuant to a
legally binding agreement with Hanson or any of its subsidiaries) any other
Person shall offer any securities of Hanson or any of its subsidiaries in
connection with which offer the holders of Ordinary Shares as a class are
entitled to participate in arrangements whereby such securities may be acquired
by them at less than 95% of their market value (subject to certain exceptions).
No adjustment will, however, be made to the ADS Ratio in respect of (a) the
issue, offer or grant of Ordinary Share or other securities to employees
(including directors holding executive office) of Hanson or any subsidiary or
associated company of Hanson pursuant to an employees' share scheme, or (b) any
offer or issue of, or grant of rights to subscribe for, Ordinary Shares in lieu
of the whole or part of a cash dividend (which would not have constituted a
capital distribution) save to the extent that the market price of such Ordinary
Shares exceeds the amount of the cash dividend or part thereof. In addition, no
adjustment in the ADS Ratio will be made if such adjustment would be less than
one percent of the ADS Ratio then in force; any such adjustment not so made will
be carried forward and taken into account in any subsequent adjustment. In
addition, the ADS Rights Agreement permits HBL to increase the ADS
-5-
<PAGE>
<PAGE>
Ratio at any time, provided that such increase will not adversely affect the
interests of the Holders.
When a Holder receives ADSs evidenced by an ADR upon exercise of
the ADS Right, United Kingdom Stamp Duty Reserve Tax (currently at the rate of
1-1/2%) is payable in the United Kingdom on the issuance of Ordinary Shares to
the Depositary. In the ADS Rights Agreement, Hanson, rather than the Holder,
shall be responsible for the payments of United Kingdom Stamp Duty Reserve Tax
arising solely upon the issuance of such ADSs and the issuance by Hanson of
Ordinary Shares to the Depositary in connection with such exercise.
If Hanson shall merge with or into or sell, assign, transfer,
convey or lease ("transfer") its properties and assets substantially as an
entirety to any Person (other than a sale of Hanson's properties and assets
substantially as an entirety to any Person in a transaction or series of related
transactions in which the holders of Ordinary Shares immediately prior to such
transaction do not receive securities, cash or other assets of Hanson or any
other Person), then a Holder shall be entitled to receive from HBL, upon
exercise of an ADS Right, the kind and amount of securities, cash or other
assets, if any, which such Holder would have received in such merger or transfer
if such Holder had exercised its ADS Right immediately before the effective date
of any such transaction, assuming (to the extent applicable) that such Holder
(a) was not a constituent Person or an Affiliate of a constituent Person to such
transaction, and (b) was treated alike with the plurality of holders of Ordinary
Shares.
If the Notes (and the ADS Rights associated therewith) are
redeemed, HBL (in respect of the ADS Rights) will be required to pay such
portion of the Redemption Price as is equal to the excess of the Redemption
Price over the Adjusted Accreted Value to but excluding the Redemption Date of
the Notes being redeemed. (Simultaneously therewith, the Company (in respect of
the Notes, without giving effect to the ADS Rights) will be required to pay,
pursuant to the Notes, accrued interest, plus such portion of the Redemption
Price as is equal to the Adjusted Accreted Value to but excluding the Redemption
Date of the Notes being redeemed.) If the Notes (and the ADS Rights associated
therewith) are repurchased pursuant to the exercise of a Change-in-Control
Right, HBL (in respect of the ADS Rights) will be required to pay such portion
of the Repurchase Price as is equal to (i) the excess of the Repurchase Price
over 101% of the Adjusted Accreted Value (plus accrued interest) to but
excluding the Repurchase Date of the Notes being repurchased, if the Repurchase
Date is on or prior to February 28, 1999, or (ii) the excess of the Repurchase
Price over the Adjusted Accreted Value (plus accrued interest) to but excluding
the Repurchase Date of the Notes being repurchased, if the Repurchase Date is on
or after March 1, 1999. (Simultaneously therewith, the Company (in respect of
the Notes, without giving effect to the ADS Rights) will be required to pay,
pursuant to the Notes, accrued interest, plus such portion of the Repurchase
Price as is equal to (1) 101% of the Adjusted Accreted Value to but excluding
the Repurchase Date of the Notes being repurchased, if the Repurchase Date is on
or prior to February 28, 1999, or (2) 100% of the Adjusted Accreted Value to but
excluding the Repurchase Date
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<PAGE>
<PAGE>
of such Notes, if the Repurchase Date is on or after March 1, 1999.) If the
Notes (and the ADS Rights associated therewith) are repurchased pursuant to an
exercise of a Tax Repurchase Right, HBL (in respect of the ADS Rights) will be
required to pay such portion of the Tax Repurchase Price as is equal to the
excess of the Tax Repurchase Price over the Adjusted Accreted Value (plus
accrued interest) to but excluding the Tax Repurchase Date of the Notes being
repurchased. (Simultaneously therewith, the Company (in respect of the Notes,
without giving effect to the ADS Rights) will be required to pay, pursuant to
the Notes, accrued interest, plus such portion of the Tax Repurchase Price as is
equal to the Adjusted Accreted Value to but excluding the Tax Repurchase Date of
the Notes being repurchased.)
The Holders may be entitled to the payment of Tax Amounts,
subject to the terms and conditions of the ADS Rights Agreement.
This ADS Right is entitled to the benefits of certain guaranty
and indemnification obligations of Hanson under Article Six of the ADS Rights
Agreement. Reference is made to Article Six of the ADS Rights Agreement for a
statement of the respective rights, limitation of rights, duties and obligation
of Hanson in respect of such guaranty and indemnification obligations.
THIS ADS RIGHT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS, EXCEPT THAT MATTERS RELATING TO THE AUTHORIZATION AND
EXECUTION OF THIS ADS RIGHT SHALL BE GOVERNED BY THE LAWS OF BERMUDA.
All terms used in this ADS Right which are defined in the ADS
Rights Agreement shall have the meanings assigned to them in the ADS Rights
Agreement.
IN WITNESS WHEREOF, HBL has caused this ADS Right to be duly
executed.
Dated: ________, 1994
HANSON (BERMUDA) LIMITED,
By _____________________________
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<PAGE>
<PAGE>
ADS RIGHT EXERCISE NOTICE
(for ADS Right annexed to Bearer Note)
The undersigned Holder hereby (i) irrevocably exercises the ADS
Right associated with the Bearer Note (or portion thereof) delivered herewith,
to purchase ADSs in accordance with the terms of such ADS Right and the ADS
Rights Agreement referred to hereinabove, (ii) directs that such ADSs be
delivered to and registered in the name of the undersigned unless a different
name has been indicated below, and (iii) directs that any Bearer Notes
representing any unredeemed Principal Amount at Maturity, and any check
representing payment of cash in U.S. Dollars in respect of any fractional ADS,
be delivered to the undersigned unless a different name has been indicated
below. The address for delivery of ADSs, such Bearer Notes and such check must
be outside the United States and its possessions. If ADSs are to be registered
in the name of a Person other than the undersigned, the undersigned agrees to
pay all transfer taxes payable with respect thereto. The undersigned confirms
that all unmatured coupons (or matured coupons in default) in respect of the
Bearer Note (or portion thereof ) delivered herewith also are being delivered
herewith.
Dated: __________ __, ____
-----------------------------
Signature
<TABLE>
<S> <C>
If ADSs are to be registered
in the name of and delivered
to a Person other than the
Holder, please print such Please print name and
Person's name and address: address of Holder:
- ------------------------------- -----------------------------
Name Name
- ------------------------------- -----------------------------
Address Address
- -------------------------------
Social Security or other
Taxpayer Identification
Number, if any
</TABLE>
-8-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Name and address (outside the If only a portion of the Bearer Note
United States and its possessions) is to be redeemed in connection
to which any Bearer Notes representing with exercise, please indicate:
any unredeemed Principal Amount at
Maturity and any check referred to 1. Principal Amount at Maturity
above should be delivered: to be redeemed in connection
with exercise:
- ------------------------------------
Name $
------------------
- ------------------------------------ 2. Amount and denomination of
Address Bearer Notes representing
unredeemed Principal Amount at
- ------------------------------------ Maturity to be issued:
Social Security or other
Taxpayer Identification $
Number, if any ------------------
Denomination:
$
------------------
($10,000 or an
integral multiple of $1,000 in
excess thereof)
- ------------------------------------ [Signature Guaranteed]
</TABLE>
-9-
<PAGE>
<PAGE>
ADS RIGHT EXERCISE NOTICE
(for ADS Right annexed to Registered Note)
The undersigned Holder hereby (i) irrevocably exercises the ADS
Right associated with the Registered Note (or portion thereof) delivered
herewith, to purchase ADSs in accordance with the terms of such ADS Right and
the ADS Rights Agreement referred to hereinabove, (ii) delivers herewith the
amount of interest payable on the next Interest Payment Date on the Principal
Amount at Maturity being redeemed in connection with this exercise, if this
exercise is made during the period from the close of business on the Regular
Record Date for such Interest Payment Date to the opening of business on such
Interest Payment Date (unless the Registered Note was called for redemption on a
Redemption Date within such period), and (iii) directs that such ADSs, any
Registered Notes representing any unredeemed Principal Amount at Maturity, and
any check representing payment of cash in U.S. Dollars in respect of any
fractional ADS, be delivered to and be registered in the name of the undersigned
unless a different name has been indicated below. If ADSs or Registered Notes
are to be registered in the name of a Person other than the undersigned, the
undersigned agrees to pay all transfer taxes payable with respect thereto and,
if such Registered Notes are Restricted Notes, the undersigned is delivering
herewith a certificate in proper form certifying that the applicable
restrictions on transfer have been complied with.
Dated: __________ __, ____
---------------------------
Signature
-10-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
If ADSs, any Registered Notes representing If only a portion of the Registered
any unredeemed Principal Amount at Note is to be redeemed in
Maturity are to be registered in the name connection with exercise,
of a Person other than the Holder, or if please indicate:
any check referred to above should be
delivered to a Person other than the 1. Principal Amount at Maturity
Holder, please print such Person's to be redeemed in connection
name and address: with exercise:
$
- ------------------------------------ -----------------------------
Name 2. Amount and denomination of
Registered Notes representing
- ------------------------------------ unredeemed Principal Amount
Address at Maturity to be issued:
- ------------------------------------ $
Social Security or other -----------------------------
Taxpayer Identification Number,
if any Denomination:
$
-----------------------------
($10,000 or an integral
multiple of $1,000 in excess
thereof)
- ------------------------------------ [Signature Guaranteed]
</TABLE>
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<PAGE>
<PAGE>
ADS RIGHT EXERCISE NOTICE
(for ADS Right annexed to Rule 144A Global Note)
The undersigned Holder of the Rule 144A Global Note (or the
undersigned Person that is a participant in DTC having a beneficial interest in
the Rule 144A Global Receipt representing such Rule 144A Global Note) (the
"Undersigned Person") hereby (i) irrevocably exercises the ADS Right associated
with the Rule 144 Global Note (or portion thereof) delivered herewith, to
purchase ADSs in accordance with the terms of such ADS Right and the ADS Rights
Agreement referred to hereinabove, (ii) directs that such ADSs be delivered to
and registered in the name of the Undersigned Person unless a different name has
been indicated below, (iii) directs that any Rule 144A Global Notes representing
any unredeemed Principal Amount at Maturity be delivered to the Note Custodian,
and (iv) directs that any payment of cash in U.S. Dollars in respect of any
fractional ADS be delivered to the Undersigned Person. If ADSs are to be
registered in the name of a Person other than the Undersigned Person, the
Undersigned Person agrees to pay all transfer taxes payable with respect thereto
and, if the Rule 144A Global Note is a Restricted Note, the Undersigned Person
is delivering herewith a certificate in proper form certifying that the
applicable restrictions on transfer have been complied with.
Dated:
--------- --, ----
---------------------------
Signature
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<PAGE>
<PAGE>
<TABLE>
<S> <C>
If ADS are to be registered in the name If only a portion of the Rule 144A
of a Person other than the Undersigned Global Note is to be redeemed in
Person, please print such Person's connection with exercise, please
name and address: indicate:
- ----------------------------------- 1. Principal Amount at Maturity
Name to be redeemed in connection
with exercise;
- ----------------------------------- $
Address ------------------
2. Amount and denomination of
- ----------------------------------- Rule 144A Global Notes
Social Security or other representing unredeemed
Taxpayer Identification Principal Amount at Maturity
Number, if any to be issued:
$
------------------
Denomination:
$
------------------
($10,000 or an
integral multiple of $1,000 in
excess thereof)
------------------------------------- [Signature Guaranteed]
-13-
<PAGE>
<PAGE>
HANSON AMERICA INC., as Issuer
THE BANK OF NEW YORK, as Trustee
HM HOLDINGS, INC., as Guarantor
-----------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of May 16, 1994
-----------------
$1,255,115,000
2.39% Senior Exchangeable Discount Notes Due 2001
<PAGE>
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of May 16, 1994, among Hanson
America Inc., a Delaware corporation (the "Company"), as issuer, THE BANK OF NEW
YORK, a New York banking corporation ("Trustee"), as trustee, and HM Holdings,
Inc., a Delaware corporation (the "Guarantor"), as guarantor. Capitalized terms
used herein without definition have the meanings assigned to such terms in the
Indenture (as defined below).
R E C I T A L S
WHEREAS, the Company, the Trustee and the Guarantor are parties to the
Indenture, dated as of March 1, 1994 (the "Indenture"), regarding the
$1,255,115,000 in aggregate principal amount of 2.39% Senior Exchangeable
Discount Notes Due 2001 (the "Notes") of the Company;
WHEREAS, Section 801 of the Indenture permits the Company, the Trustee and
the Guarantor to enter into a Supplemental Indenture without the consent of the
Holders to cure any ambiguity, defect or inconsistency or make any other
provision which the Company and the Trustee may deem necessary or desirable and
which will not adversely affect the interest of the Holders of the Notes or the
coupons.
WHEREAS, the Company and the Guarantor, by action of their Boards of
Directors, hereby desire to amend the Indenture as herein provided.
NOW THEREFORE, in consideration of the foregoing and the mutual premises
and covenants contained herein and for other good and valuable consideration,
the parties hereto agree as follows.
ARTICLE ONE
AMENDMENTS TO THE INDENTURE
SECTION 1.01. Section 208 of the Indenture is hereby amended and restated
to read in its entirety as follows:
"(a) as Bearer Notes, with interest coupons attached, in denominations
of $1,000 and $10,000, (b) as Registered Notes, without coupons, in
denominations of $10,000
<PAGE>
<PAGE>
or any amount in excess thereof that is an integral multiple of $1,000, and
(c) as Rule 144A Global Notes, without coupons, in denominations of $10,000
or any amount in excess thereof that is an integral multiple of $1,000."
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. Effect.
This First Supplemental Indenture shall become binding upon execution and
delivery by the Company, the Trustee and the Guarantor. The provisions set forth
in this Supplemental Indenture shall be deemed to be, and shall be construed as
part of, the Indenture to the same extent as if set forth fully therein; and
every Holder of a Note heretofore or hereafter authenticated and delivered
thereunder and coupons shall be bound hereto. All references in the Indenture or
any other agreement, document or instrument delivered in connection with or
pursuant to the Indenture shall be deemed to refer to the Indenture as amended
by this First Supplemental Indenture. Except as amended hereby, the Indenture
shall remain in full force and effect.
SECTION 2.02. Governing Law.
The laws of the State of New York, without regard to principles of
conflicts of laws, shall govern this First Supplemental Indenture.
SECTION 2.03. Counterparts.
The parties may sign any number of copies of this First Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
SECTION 2.04. Separability Clause.
In the event that any provision in this First Supplemental Indenture shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of
2
<PAGE>
<PAGE>
the remaining provisions thereof shall not in any way be affected or impaired
thereby.
SECTION 2.05. Headings, etc.
The headings of the Articles and Sections of this First Supplemental
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, all as of the day and year first above written.
HANSON AMERICA INC.,
By: /s/ George H. Hempstead, III
--------------------------------
Name:
Title: VP
THE BANK OF NEW YORK,
By: /s/ Nancy Gill
--------------------------------
Name: Nancy Gill
Title: Assistant Treasurer
HM HOLDINGS, INC.,
By: /s/ George H. Hempstead, III
--------------------------------
Name:
Title: VP
3
<PAGE>
</TABLE>
<PAGE>
Exhibit 4.4(b)
ADS ISSUANCE AGREEMENT
Dated as of March 1, 1994
between
HANSON PLC
and
HANSON (BERMUDA) LIMITED
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE: DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION....................................... 2
SECTION 1.1. Provisions of General Application; Definitions........................................... 2
SECTION 1.2. Notices, Etc............................................................................. 3
ARTICLE TWO: REPRESENTATIONS AND WARRANTIES................................................................ 4
SECTION 2.1. Hanson................................................................................... 4
SECTION 2.2. HBL...................................................................................... 4
ARTICLE THREE: ADS ISSUANCE AND PAYMENT OBLIGATIONS OF HANSON.............................................. 5
SECTION 3.1. Issuance of ADSs......................................................................... 5
SECTION 3.2. Payments................................................................................. 5
SECTION 3.3. Indebtedness of Hanson................................................................... 5
ARTICLE FOUR: PAYMENT OBLIGATIONS OF HBL................................................................... 6
SECTION 4.1. Deposit.................................................................................. 6
SECTION 4.2. Subscription of Shares................................................................... 6
SECTION 4.3. Balance of Deposit....................................................................... 6
ARTICLE FIVE: UNDERTAKINGS OF HANSON....................................................................... 7
SECTION 5.1. Consolidation, Merger or Transfer........................................................ 7
SECTION 5.2. Unconditional Right to Receive payments, etc............................................. 12
SECTION 5.3. United Kingdom Regulations:
Exchange Listings........................................................................ 13
SECTION 5.4. Corporate Existence...................................................................... 13
SECTION 5.5. Judgment Currency........................................................................ 13
SECTION 5.6. Deposit Agreement........................................................................ 14
SECTION 5.7. Financial Information.................................................................... 15
SECTION 5.8. Stamp Duties............................................................................. 15
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE SIX: SECURITIES ACT REGISTRATION................................................................... 16
ARTICLE SEVEN: MISCELLANEOUS............................................................................... 17
SECTION 7.1. Effect of Headings and Table of Contents................................................. 17
SECTION 7.2. Successors and Assigns................................................................... 17
SECTION 7.3. Separability Clause...................................................................... 17
SECTION 7.4. Governing Law............................................................................ 18
SECTION 7.5. Submission to Jurisdiction............................................................... 18
SECTION 7.6. Modifications............................................................................ 19
</TABLE>
<PAGE>
<PAGE>
ADS ISSUANCE AGREEMENT dated as of March 1, 1994, between HANSON PLC, a
public limited company incorporated in England and Wales ("Hanson") and HANSON
(BERMUDA) LIMITED, a corporation with limited liability under the laws of
Bermuda ("HBL").
WHEREAS, Hanson America Inc., an indirect wholly owned subsidiary of Hanson
organised under the laws of the State of Delaware (the "Company"), has executed
and delivered an Indenture dated as of March 1, 1994 (as originally executed or
as it from time to time may be amended or supplemented, the "Indenture"), among
the Company, HMH Holdings Inc. and The Bank of New York acting thereunder as
trustee (in such capacity and together with any successor trustee under the
Indenture, the "Trustee");
WHEREAS, under and pursuant to the Indenture, the Company may issue up to
U.S.$1,380,626,500 aggregate Principal Amount at Maturity of its 2.39% Senior
Exchangeable Discount Notes Due 2001 (each, a "Note", collectively, the
"Notes");
WHEREAS, HBL, a direct wholly owned subsidiary of Hanson, and Hanson have
executed and delivered an ADS Rights Agreement dated as of March 1, 1994 (as
originally executed or as it from time to time may be amended or supplemented,
the "ADS Rights Agreement"), among HBL, Hanson and Citibank, N.A. as ADS Rights
Agent (in such capacity and together with any successor ADS Rights Agent under
the ADS Rights Agreement, the "ADS Rights Agent"), for the purpose of HBL
issuing its ADS Rights to be sold with, and issued for the benefit of holders
of, the Notes;
WHEREAS, on the terms and subject to the conditions of the ADS Rights
Agreement, the ADS Rights will be exercisable at the option of the Holder
thereof for a number of ADSs at the ADS Ratio per U.S.$1,000 Principal Amount at
Maturity of Notes, subject to
<PAGE>
<PAGE>
2
adjustment in certain events as provided in the ADS Rights Agreement;
and
WHEREAS, to enable HBL to satisfy its obligations in respect of the ADS
Rights and under the ADS Rights Agreement, HBL wishes to enter into this ADS
Issuance Agreement to provide for the issuance by Hanson of Ordinary Shares, the
delivery of ADSs representing such Ordinary Shares pursuant to the exercise of
the ADS Rights and the payment by Hanson of certain amounts, in satisfaction of
HBL's obligations in respect of the ADS Rights;
NOW, THEREFORE, the parties hereto agree as follows :
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
1.1. Provisions of General Application: Definitions. For all purposes
of this ADS Issuance Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires :
(a) Capitalized terms used but not defined herein shall have the
meaning assigned to such terms in the ADS Rights Agreement;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United Kingdom as from time to time in effect; and
(c) references to Articles and Sections herein shall be deemed to be
references to the Articles and Sections of this ADS Issuance Agreement
unless the context indicates otherwise.
<PAGE>
<PAGE>
3
1.2. Notices, Etc. Any request, demand, authorization, direction, notice,
consent, election, waiver, act or other document provided or permitted by this
ADS Issuance Agreement to be made upon, provided or furnished to, or filed with
either party shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and (i) mailed, first-class postage
prepaid, (ii) delivered or (iii) sent by facsimile transmission to the relevant
party as follows:-
(a) if to Hanson, to it at:
Address : 1 Grosvenor Place,
London SW1X 7JH,
England.
Fax No: 011-4471-245 9939
Attention : Legal Director
(b) if to HBL, to it at :
Address : Clarendon House,
2 Church Street,
Hamilton HM CX,
Bermuda.
Fax No: (809) 292 4720
Attention : Secretary
or to such other address or fax number, and/or marked for such other
attention, as the relevant party may notify to the other party.
<PAGE>
<PAGE>
4
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1. Hanson. Hanson represents and warrants to HBL that (i) this ADS
Issuance Agreement constitutes a valid and binding obligation of Hanson
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and may be subject 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 (ii) Hanson has full legal right, power and
authority, and has all necessary authorizations, to execute and deliver this ADS
Issuance Agreement, to cause delivery of the ADSs in the manner provided in this
ADS Issuance Agreement and to perform its other obligations under this ADS
Issuance Agreement. Without prejudice to the generality of the foregoing, Hanson
has available sufficient authorized but unissued Ordinary Share capital, and all
necessary authorities under sections 80 and 95 of the Companies Act 1985 of
Great Britain, to allot and issue Ordinary Shares in accordance with this ADS
Issuance Agreement, and such allotment and issue will be legal, valid and
binding.
2.2. HBL. HBL represents and warrants to Hanson that (i) this ADS Issuance
Agreement constitutes a valid and binding obligation of HBL enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and may be subject 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 (ii) HBL has full legal right, power and
authority, and has all necessary
<PAGE>
<PAGE>
5
authorizations, to execute and deliver this ADS Issuance Agreement and to
perform its obligations under this ADS Issuance Agreement.
ARTICLE THREE
ADS ISSUANCE AND PAYMENT OBLIGATIONS OF HANSON
3.1. Issuance of ADSs. Hanson hereby undertakes to HBL that Hanson will
from time to time issue Ordinary Shares and cause delivery of ADSs, securities
and other assets in such number and manner and at such times as to enable HBL
duly and punctually to perform its obligations in respect of the ADS Rights and
under the ADS Rights Agreement. Such Ordinary Shares shall be issued to the
Depositary (or its nominee), and such ADSs shall be delivered to the ADS Rights
Agent, for the benefit of the Holders, and HBL shall not at any time have any
right to, or interest in, such Ordinary Shares or ADSs.
3.2. Payments. Hanson hereby undertakes to HBL that if and whenever any
payment in any currency is required to be made by HBL to any Person
(other than Hanson) under the terms of the ADS Rights or the ADS Rights
Agreement, Hanson will pay to such Person or, if to Holders, to the ADS Rights
Agent, acting on behalf of the Holders, a like amount in immediately available
funds of the same currency on or before the date on which such payment by HBL
becomes due. Such payments by Hanson, if in respect of the Redemption Price, the
Repurchase Price or the Tax Repurchase Price, will, to the extent of the Deposit
referred to in Section 4.1, be made by way of return of that Deposit, but
Hanson's obligations to make payments shall not be limited to the amount of such
Deposit.
3.3. Indebtedness of Hanson. Hanson hereby acknowledges that it is indebted
to HBL in the amount of U.S.$1, which shall be repaid by Hanson to HBL on March
31, 2001.
<PAGE>
<PAGE>
6
ARTICLE FOUR
PAYMENT OBLIGATIONS OF HBL
4.1. Deposit. On the dates of delivery of the Firm Notes and the Optional
Notes, respectively, pursuant to and as defined in the Subscription Agreement
and the U.S. Purchase Agreement, HBL shall pay to Hanson by way of deposit an
amount equal to U.S.$52.12 per U.S.$1,000 in Principal Amount of Maturity of
such Notes. The total of the amounts so paid by HBL to Hanson is hereinafter
referred to as the "Deposit". The Deposit shall be utilised in accordance with
Section 4.2 and, to the extent not so utilised and subject always to Section
4.3, returnable in accordance with Section 3.2. The obligation of HBL to pay
the Deposit to Hanson shall be discharged by the payment of such sum to Hanson,
at the direction of HBL, by the International Managers and the U.S. Purchasers
under the Subscription Agreement and the U.S. Purchase Agreement.
4.2. Subscription of Shares. On or before each allotment of Ordinary Shares
by Hanson pursuant to Section 3.1 on the occasion of an exercise of ADS Rights,
HBL shall pay, or procure payment, to Hanson of the subscription moneys for the
Ordinary Shares, being an amount equal to the sum of (i) the Adjusted Accreted
Value of the Notes in respect of which ADS Rights have been exercised, and (ii)
U.S.$52.12 per U.S.$1,000 in Principal Amount at Maturity of the Notes in
respect of which ADS Rights have been exercised. The amount referred to in
Clause (ii) of the preceding sentence shall be transferred from the Deposit, to
the extent not already returned under Section 3.2, and appropriated by Hanson.
4.3 Balance of Deposit. Any balance of the Deposit held by Hanson following
termination or expiry or exercise of all ADS Rights shall belong to Hanson.
<PAGE>
<PAGE>
7
ARTICLE FIVE
UNDERTAKINGS OF HANSON
5.1. Consolidation, Merger or Transfer.
(a) When Hanson may merge or transfer assets. Hanson may not consolidate
with or merge into any other Person or convey, sell, transfer or lease its
properties and assets substantially as an entirety (in one transaction or series
of related transactions) to any Person unless:
(i) if Hanson is not the surviving corporation, the Person formed by
such consolidation or into which Hanson is merged or the Person
which acquires by conveyance, sale or transfer, or which leases,
the properties and assets of Hanson substantially as an entirety
is a corporation, partnership or trust and expressly assumes the
performance or observance of each covenant of Hanson under this
ADS Issuance Agreement;
(ii) such successor corporation or Person acquiring or leasing the
properties and assets of Hanson substantially as an entirety
expressly agrees to indemnify HBL against any tax,
assessment or other governmental charge payable by withholding or
deduction thereafter imposed on HBL solely as a consequence of
such consolidation, merger, acquisition or lease with respect to
any issue of Ordinary Shares or delivery of ADSs or any payment
to be made by Hanson under this ADS Issuance Agreement; and
(iii) such consolidation, merger, acquisition or lease complies with
this ADS Issuance Agreement, and all conditions precedent
provided for in this ADS Issuance Agreement and in the ADS
Rights Agreement relating to such transaction have been complied
with.
<PAGE>
<PAGE>
8
(b) Undertakings as to Hanson's Share Capital.
During such time as any ADS Rights remain exercisable,
Hanson will:-
(i) at all times keep available for issue free from pre-emptive
rights out of its authorised but unissued capital such number of
Ordinary Shares as would enable the ADS Rights and all other
rights of subscription and exchange for and conversion into
Ordinary Shares to be satisfied in full;
(ii) not issue or pay up any securities, in either case by way of
capitalisation of profits or reserves, other than (A) by the
issue of fully paid Ordinary Shares to the Ordinary Shareholders
and other persons entitled thereto, (B) by the issue of Ordinary
Shares paid up in full out of distributable profits or reserves,
share premium account or capital redemption reserve and issued
in lieu of the whole or part of a cash dividend or (C) by the
issue of fully paid equity share capital (other than Ordinary
Shares) to the holders of equity share capital of the same class
and other persons entitled thereto, unless in any such case the
same gives rise (or would, but for the fact that the adjustment
would be less than 1%, give rise) to an adjustment to the ADS
Ratio;
(iii) not in any way modify the rights attaching to the Ordinary
Shares with respect to voting, dividends or liquidation nor
issue or permit to be in issue any other class of equity share
capital carrying any rights which are more favourable than such
rights but so that nothing in this sub-paragraph (iii) shall
prevent (A) the issue of equity share capital to employees
(including directors holding executive office) whether of Hanson
or any Subsidiary or any Affiliate by virtue of their office or
employment pursuant to any scheme or plan now in existence or
which may in the future be
<PAGE>
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9
approved by Hanson in general meering, (B) any consolidation or
sub-division of the Ordinary Shares or the conversion of any
Ordinary Shares into stock or vice versa, (C) any modification
of such rights or any such issue which is not, in the opinion of
a reputable merchant bank reasonably selected by Hanson and
acting as expert (which opinion shall be, in the absence of
manifest error, conclusive and shall, in the case of an opinion
given after a modification or issue made in breach of the
undertaking contained in this sub-paragraph (iii)(C), cure such
breach), materially prejudicial to the interests of the Holders,
(D) without prejudice to any rule of law or legislation
(including regulations made under section 207 of the Companies
Act of 1989 of Great Britain or any other provisions of that or
any other legislation), the conversion of Ordinary Shares into,
or the issue of any Ordinary Shares in, uncertificated form (or
the conversion of Ordinary Shares in uncertificated form to
certificated form) or the amendment of the Articles of
Association of Hanson to enable title to securities of Hanson
(including Ordinary Shares) to be evidenced and transferred
without a written instrument or any other alteration to the
Articles of Association of Hanson made in connection with the
matters described in this sub-paragraph (iii) or which is
supplemental or incidental to any of the foregoing (including
any amendment made to enable or facilitate procedures relating
to such matters and any amendment dealing with the rights and
obligations of holders of securities, including Ordinary Shares,
dealt with under such procedures), (E) any issue of equity share
capital where the issue of such equity share capital results (or
would, but for the fact either (x) that the adjustment would be
less than 1%, or (y) that the consideration per Ordinary Share
receivable therefor (as described in Section 3.5(b)(i) of the
ADS Rights Agreement) is at least 95% of the market price per
Ordinary Share, otherwise result) in an adjustment to the ADS
Ratio, (F) any issue of equity share capital of a
<PAGE>
<PAGE>
10
class of equity share capital of Hanson in issue on the date of
this ADS Issuance Agreement or (G) any issue of equity share
capital, or modification of such rights attaching to the
Ordinary Shares (1) which is an amendment to Hanson's Articles
of Association to permit a transaction of a kind described in
paragraphs (i) to (x) of Section 3.5(a) or Section 3.5(b)(ii) of
the ADS Rights Agreement or to comply with a change in law,
rules of any stock exchange or any other regulations or (2)
where prior thereto the independent auditors of Hanson shall
have determined under Section 3.5 of the ADS Rights Agreement
either that no adjustment is required or that an adjustment is
required and, if so, the new ADS Ratio as a result thereof or
the basis upon which such adjustment is to be made and, in any
such case, the date on which such adjustment should take effect
(and so that such adjustment shall be made and shall take effect
accordingly);
(iv) procure (A) that no securities (whether issued by Hanson or any
of its Subsidiaries or pursuant to a legally binding agreement
with Hanson or any of its Subsidiaries to be issued) issued
without rights to convert into or exchange or subscribe
for Ordinary Shares shall subsequently include such rights
exercisable at a consideration per Ordinary Share which
is less than 95% of the market price (as defined in Section
3.5(a) of the ADS Rights Agreement) for the dealing day last
preceding the date of the announcement of the proposed inclusion
of such rights unless the same gives rise (or would, but for the
fact that the adjustment would be less than 1%, give rise) to an
adjustment to the ADS
<PAGE>
<PAGE>
11
Ratio and (B) that at no time shall there be in issue Ordinary
Share of differing nominal values;
(v) not make any issue, grant or distribution or take any other
action if the effect thereof would be that, on exercise of the
ADS Rights, Ordinary Shares would (but for the provisions of
Section 3.5 of the ADS Rights Agreement) have to be issued at a
discount or otherwise could not, under any applicable law then
in effect, be legally issued as fully paid;
(vi) not reduce its issued share capital or any uncalled liability in
respect thereof except pursuant to the terms of issue of the
relevant share capital or by means of a purchase or redemption
of share capital of Hanson expressly excluded from giving rise
to an adjustment under Section 3.5 of the ADS Rights Agreement
or where the reduction results in (or would, but for the fact
that the adjustment would be less than 1% of the ADS Ratio then
in effect, result in) an adjustment to the ADS Ratio under the
provisions of Section 3.5 of the ADS Rights Agreement;
(vii) if any offer is made to all (or nearly as may be practicable
all) holders of Ordinary Shares (or all (or as nearly as may be
practicable all) such holders other than the offeror and/or any
associates of the offeror (as defined in section 430E(4) of the
Companies Act 1985 of Great Britain)) to acquire all or a
majority of the issued ordinary share capital of Hanson, or if
any person proposes a scheme with regard to such acquisition,
give notice of such offer or scheme to the Holders at the same
time as any notice thereof is sent to its shareholders (or as
soon as practicable thereafter) stating that details concerning
such offer or scheme may be obtained from the specified offices
of the ADS Rights Agent and, where such an offer or scheme has
been recommended by the board of directors of Hanson or has
<PAGE>
<PAGE>
12
become or been declared unconditional or become effective, use all
reasonable endeavors to procure that a like offer or scheme is extended to
the holders of any Ordinary Shares issued during the period of the offer
arising out of the exercise of the ADS Rights and to the Holders (or to
HBL, so as to enable the Holders to participate through the exercise of
their ADS Rights).
For the above purposes, "ordinary share capital" has the meaning ascribed
to it in section 832 of the Income and Corporation Taxes Act 1988 of the United
Kingdom and "equity share capital" has the meaning ascribed to it in section 744
of the Companies Act 1985 of Great Britain.
(c) Successor Substituted. Upon any consolidation of Hanson with, or merger
of Hanson into, any other Person or any conveyance, sale, transfer or lease of
the properties of Hanson substantially as an entirety in accordance with Section
5.1(a) hereof, the successor Person formed by such consolidation or into which
Hanson is merged or to which such conveyance, sale, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and power
of, Hanson under this ADS Issuance Agreement with the same effect as if such
successor Person had been named as Hanson herein, and thereafter, except in the
case of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this ADS Issuance Agreement.
5.2. Unconditional Right to Receive Payments, etc. HBL shall have the
right, which is absolute and unconditional, (i) to receive (or, in the case of
payments made to Holders, require that each such Holder receives) any and all
payments which are required to be paid by Hanson to HBL (or such Holder)
hereunder (collectively, the "Hanson Amounts"), (ii) to require Hanson to cause
ADSs to be issued in accordance with the ADS Rights, the ADS Rights Agreement
and herewith, and (iii) to institute suit for the enforcement of any such right,
and such rights shall not be impaired or adversely affected
<PAGE>
<PAGE>
13
without the consent of HBL and the Holders. Hanson shall duly and punctually pay
the Hanson Amounts in accordance with the terms of the ADS Rights, the ADS
Rights Agreement and this ADS Issuance Agreement.
5.3. United Kingdom Regulations: Exchange Listings. (a) Hanson shall in
good faith use its best efforts to cause all registrations with, and to obtain
any approvals by, any governmental authority under any law of the United States
or of the United Kingdom that it has the power to cause and to obtain and that
may be required before the ADSs may be lawfully issued or transferred and
delivered pursuant to the ADS Rights Agreement and this ADS Issuance Agreement.
(b) Hanson shall in good faith use its best efforts to ensure the listing
of the Ordinary Shares represented by the ADSs required to be issued or
delivered upon exercising the ADS Rights on the Stock Exchange.
5.4. Corporate Existence. Subject to Section 5.1, Hanson will do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and its rights (charter and statutory) and franchises
except those the failure of which to preserve and keep in full force and effect
will not have a material adverse effect on the Holders.
5.5. Judgment Currency. Hanson agrees, to the fullest extent that it may
effectively do so under applicable law, that: (a) if for the purpose of
obtaining judgment in any court it is necessary to convert the sum due in
respect of any payments to be made hereunder (the "Required Currency") into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which Citibank, N.A. in New York City
could purchase the Required Currency with the Judgment Currency on the day on
which final unappealable judgment is entered, unless such day is not a New York
Banking Day, then, to the extent permitted by applicable law, the rate of
exchange used shall be the rate at which Citibank, N.A. in New York City could
purchase the Required Currency with the Judgment Currency
<PAGE>
<PAGE>
14
on the New York Banking Day preceding the day on which a final unappealable
judgment is entered; and (b) its obligations under this ADS Issuance Agreement
to make payments in the Required Currency (i) shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment (whether or
not entered in accordance with clause (a) above) in any currency other than the
Required Currency, except to the extent that such tender or recovery shall
result in the actual receipt, by the payee, of the full amount of the Required
Currency expressed to be payable in respect of such payments; (ii) shall be
enforceable as an alternative or additional cause of action for the purpose of
recovering in the Required Currency the amount if any, by which such actual
receipt shall fall short of the full amount of the Required Currency so
expressed to be payable; and (iii) shall not be affected by judgment being
obtained from any other sum due under this ADS Issuance Agreement. For purposes
of the foregoing, "New York Banking Day" means any day except a Saturday, Sunday
or a legal holiday in The City of New York or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to close.
5.6. Deposit Agreement; Registration Statement. (a) Hanson undertakes: (i)
to maintain throughout the duration of the ADS Rights Agreement the Deposit
Agreement or such other American depositary receipt facility in the United
States for the ADSs with Citibank, N.A., or such other major banking institution
as Hanson may reasonably select; (ii) not to amend the Deposit Agreement (during
the time that it is the agreement relating to such facility) if such amendment
would discriminate in any respect between holders of ADSs issued upon exercise
of ADS Rights and any other holders of ADSs, and (iii) not to enter into a
substitute deposit agreement in respect of such facility if such substitute
deposit agreement would discriminate in any respect between holders of ADSs
issued upon exercise of ADS Rights and any other holders of ADSs.
(b) Hanson undertakes to keep the Registration Statement on Form F-6 (File
No. 33-7419) under the Securities Act (the "Form F-6")
<PAGE>
<PAGE>
15
continuously effective such that Hanson or the Depositary can deliver a
prospectus as then may be required by the Securities Act in connection with the
delivery of ADSs upon exercise of an ADS Right.
5.7. Financial Information. (a) At any time during the period of five years
after the original issuance of the ADS Rights, if Hanson is subject to Section
13 or 15(d) of the Exchange Act, Hanson shall furnish or cause to be furnished
to HBL, the ADS Rights Agent and the Holders, copies of each report on Form 20-F
under the Exchange Act (or any successor form), and each other filing and report
requested by the ADS Rights Agent or the Holders, made by Hanson with the
Securities and Exchange Commission pursuant to the reporting and filing
requirements of Section 13 or 15(d) of the Exchange Act, within 15 days after
Hanson is required to file the same or such request is made.
(b) At any time during the period of five years after the original issuance
of the ADS Rights, if Hanson is not subject to Section 13 or 15(d) of the
Exchange Act, Hanson shall furnish, or cause to be furnished to HBL, the ADS
Rights Agent and the Holders annual audited financial statements as of its
fiscal year-end together with management's discussion and analysis of financial
condition and results of operations which would be suitable in a Form 20-F under
the Exchange Act (or any successor form) within 105 days of each fiscal year-end
of Hanson.
5.8. Stamp Duties. Hanson will pay the United Kingdom stamp duty reserve
tax arising solely upon the issuance of ADSs pursuant hereto and the issue of
Ordinary Shares to the Depositary in connection with the exercise of the ADS
Rights. The Holder of a Registered Note, however, shall pay any other
documentary stamp or similar issue or transfer tax, including United Kingdom
Stamp Duty Reserve Tax that is due as a result of any request by such Holder
that such ADSs be issued in a name other than the Holder's name. The ADS Rights
Agent may refuse to deliver certificates representing the ADSs being issued in a
name other than such a Holder's name until the ADS Rights Agent receives an
amount sufficient to pay any tax payable by such Holder.
<PAGE>
<PAGE>
16
ARTICLE SIX
SECURITIES ACT REGISTRATION
Hanson promptly will prepare and file with the Commission the Registration
Statement under the Securities Act with respect to the Ordinary Shares to be
represented by the ADSs issuable upon exercise of the ADS Rights. Hanson shall
use its best efforts to have the Registration Statement declared effective by
the Commission as soon as practicable after it is filed (and in no event later
than June 8, 1994). Hanson also shall keep the Registration Statement
continuously effective such that a Prospectus can be delivered as then may be
required by the Securities Act in connection with the delivery of ADSs upon
exercise of an ADS Right. Notwithstanding the foregoing, if, at the time an ADS
Right is exercised, the Prospectus contained in the Registration Statement is
not current because it fails to disclose a material business development or
transaction involving Hanson or its Subsidiaries, public disclosure of which, in
the good faith judgement of the Board of Directors of Hanson, could adversely
affect Hanson, Hanson may postpone delivery of a Current Prospectus and,
therefore, of the ADSs issuable upon exercise of the ADS Right for a reasonable
period (not to exceed 20 Business Days). The obligation of Hanson to keep such
Registration Statement effective shall terminate upon the earlier to occur of
(a) exercise of all the outstanding ADS Rights and (b) repayment (whether
through redemption or repurchase or otherwise) of all the Notes then
Outstanding.
So long as the ADS Rights are outstanding, Hanson will use its best efforts
to register or qualify the Ordinary Shares to be represented by the ADSs and the
ADSs under all applicable state securities or blue sky laws and will make all
other filings reasonably necessary or advisable in connection therewith and do
any and all other reasonable acts and things reasonably necessary or advisable
to comply with such state securities or blue sky laws in connection with
<PAGE>
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17
the exercise of ADS Rights (provided that Hanson will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Article Six, (ii) subject
itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction).
Hanson will take such actions as are necessary or advisable to list the
ADSs issuable upon exercise of the ADS Rights on the New York Stock Exchange.
ARTICLE SEVEN
MlSCELLANEOUS
7.1. 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.
7.2. Successors and Assigns. All covenants and agreements in this ADS
Issuance Agreement by each of the parties shall bind its permitted successors
and assigns, whether so expressed or not. Notwithstanding the foregoing and
subject to Section 5.1 of the ADS Rights Agreement, this ADS Issuance Agreement
shall not be assigned by either party hereto without the consent of Holders
given in accordance with the provisions of the ADS Rights Agreement.
7.3. Separability Clause. In the event that any provision in this ADS
Issuance Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions thereof shall not in any
way be affected or impaired thereby.
<PAGE>
<PAGE>
7.4. GOVERNING LAW. THIS ADS ISSUANCE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS EXCEPT THAT MATTERS RELATING TO THE
AUTHORIZATION AND EXECUTION BY HBL OR HANSON OF THIS ADS ISSUANCE AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF BERMUDA OR ENGLAND AND WALES, AS APPLICABLE.
7.5 Submission to Jurisdiction. Each of HBL and Hanson agrees that any
legal suit, action or proceeding arising out of or relating to this ADS Issuance
Agreement may be instituted in any state or federal court in the State and
County of New York, United States of America and to the extent it may
effectively do so, each of HBL and Hanson hereby waives, and agrees not to
assert, by way of motion, as a defense or otherwise, in any such suit, action or
proceeding any claim which it may now or hereafter have that it is not
personally subject to the jurisdiction of the above-named courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper, or that this ADS Issuance Agreement or
the subject matter hereof or thereof may not be enforced by such court, and
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding. Each of HBL and Hanson hereby designates HM
Anglo-American, Ltd. as its authorized agent to accept and acknowledge on its
behalf service of any and all process which may be served in any such suit,
action or proceeding in any such court and agrees that service of process upon
said agent at its office at 410 Park Avenue, New York, New York 10022 (or at
such other address in the Borough of Manhattan, The City of New York, as such
agent may designate by written notice to Hanson and HBL), and written notice of
said service to HBL or, as the case may be, Hanson, mailed or delivered to it,
in the case of HBL at Clarendon House, 2 Church Street, Hamilton HM CX, Bermuda,
Attn: Secretary, and in the case of Hanson at 1 Grosvenor Place, London, SW1X
7JH, England, Attn: Legal Director, shall be deemed in every respect effective
service of process upon HBL, or as the case may be, Hanson in any such suit,
action or proceeding and shall be taken and held to be valid personal service
upon HBL, or as the case may be, Hanson, whether or not HBL,
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19
or as the case may be, Hanson shall then be doing, or at any time shall have
done, business within the State of New York, and that any such service of
process shall be of the same force and validity as if service were made upon
it according to the laws governing the validity and requirements of such
service in such State, and waives all claim of error by reason of any such
service. Said designation and appointment shall be irrevocable until this
ADS Issuance Agreement shall have been satisfied and discharged and, if at
any time, HM Anglo-American, Ltd. does not have a business address in the
Borough of Manhattan, The City of New York, each of HBL and Hanson agrees to
appoint CT Corporation System, 1633 Broadway, New York, New York 10019, as
its successor authorized agent. Notwithstanding the foregoing, any suit,
action or proceeding arising out of or in connection with this ADS Issuance
Agreement may be instituted by HBL, in any competent court in England and
Wales.
7.6 Modifications. This ADS Issuance Agreement may be modified, amended or
terminated, and any obligations of Hanson hereunder or any rights or remedies of
HBL in respect thereof may be waived or discharged, by an agreement in writing
which has been duly approved by the parties and the Holders in accordance with
the provisions of the ADS Rights Agreement; provided, however, that no such
approval of the Holders will be required with respect to any modification,
amendment, termination, waiver or discharge that does not have an adverse effect
on the Holders.
<PAGE>
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20
IN WITNESS WHEREOF, the parties hereto have caused this ADS
Issuance Agreement to be duly executed as of the day and year first
above written.
(Executed and delivered HANSON PLC
as a deed by HANSON PLC
acting by two directors
or a director and the
company secretary)
By: John G. Raos
__________________________
Name: John G. Raos
Title: Director
By: William M. Landuyt
__________________________
Name: William M. Landuyt
Title: Director
HANSON (BERMUDA) LIMITED,
By: /s/ J.C. RICHMOND
__________________________
Name:
Title:
[SEAL]
[SIGNATURE]
______________________
ATTEST
<PAGE>
<PAGE>
Exhibit 4.4(c)
- --------------------------------------------------------------------------------
ADS RIGHTS AGREEMENT
Dated as of March 1, 1994
among
HANSON (BERMUDA) LIMITED,
HANSON PLC
and
CITIBANK, N.A.
ADS Rights Agent
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE ONE: DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.................2
<S> <C> <C>
SECTION 1.1. Provisions of General Application; Definitions..............2
SECTION 1.2. Compliance Certificates and Opinions........................8
SECTION 1.3. Form of Documents Delivered to ADS Rights Agent.............9
SECTION 1.4. Acts of Holders............................................10
SECTION 1.5. Persons Deemed Owners......................................11
SECTION 1.6. Notices, Etc., to ADS Rights Agent, HBL and Hanson.........11
SECTION 1.7. Notice to Holders; Waiver..................................12
SECTION 1.8. Non-separability...........................................13
ARTICLE TWO: REPRESENTATIONS AND WARRANTIES.........................................14
SECTION 2.1. HBL........................................................14
SECTION 2.2. Hanson.....................................................14
SECTION 2.3. ADS Rights Agent...........................................14
ARTICLE THREE: ADS RIGHTS...........................................................14
SECTION 3.1. ADS Rights.................................................14
SECTION 3.2. Exercise Procedure.........................................15
SECTION 3.3. Fractional Shares..........................................16
SECTION 3.4. Taxes on Exercise..........................................16
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SECTION 3.5. Adjustments................................................16
SECTION 3.6. Notice of Adjustment.......................................26
SECTION 3.7. Voluntary Increase.........................................26
SECTION 3.8. Notice of Certain Transactions.............................27
SECTION 3.9. Reorganization of Hanson...................................27
SECTION 3.10. Voluntary Winding-up of Hanson.............................27
SECTION 3.11. ADS Rights Agent's Adjustment Disclaimer...................28
SECTION 3.12. Successive Adjustments.....................................28
SECTION 3.13. Payments in Respect of ADS Rights..........................28
SECTION 3.14. Authentication.............................................29
SECTION 3.15. Notes with ADS Rights......................................29
ARTICLE FOUR: THE ADS RIGHTS AGENT..................................................29
SECTION 4.1. Notice of Defaults.........................................29
SECTION 4.2. Certain Rights and Duties of ADS Rights Agent..............29
SECTION 4.3. Not Responsible for Recitals or Issuance of ADS
Rights.....................................................32
SECTION 4.4. May Hold ADS Rights........................................32
SECTION 4.5. Money Held in Trust........................................32
SECTION 4.6. Compensation and Reimbursement.............................33
SECTION 4.7. ADS Rights Agent Required; Eligibility; Conflicting
Interests..................................................33
SECTION 4.8. Resignation and Removal; Appointment of Successor..........34
SECTION 4.9. Acceptance of Appointment by Successor.....................35
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SECTION 4.10. Merger, Exchange, Consolidation or Succession to
Business...................................................36
SECTION 4.11. Disclosure of Names and Addresses of Holders...............36
ARTICLE FIVE: COVENANTS.............................................................36
SECTION 5.1. Consolidation, Merger or Transfer..........................36
SECTION 5.2. Unconditional Right of Holders to Receive Payments,
etc. ......................................................40
SECTION 5.3. United Kingdom Regulations; Exchange Listings..............41
SECTION 5.4. Tax Amounts................................................41
SECTION 5.5. Maintenance of Offices or Agencies.........................44
SECTION 5.6. Statements as to Compliance................................44
SECTION 5.7. Corporate Existence........................................45
SECTION 5.8. Tax Repurchase.............................................45
SECTION 5.9. Judgment Currency..........................................45
SECTION 5.10. Deposit Agreement; Registration Statement..................45
SECTION 5.11. [Intentionally Omitted]....................................46
SECTION 5.12. HBL Information............................................46
SECTION 5.13. Enforcement of ADS Issuance Agreement.and Keepwell
Agreement..................................................46
SECTION 5.14. Certain Taxes and Duties...................................47
SECTION 5.15. Compliance.................................................47
ARTICLE SIX: GUARANTY AND INDEMNITY OF HANSON.......................................47
SECTION 6.1. Guaranty...................................................47
SECTION 6.2. No Guaranty of Payment of Hanson's Shares..................47
</TABLE>
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SECTION 6.3. Indemnity..................................................47
SECTION 6.4. Guaranty Absolute..........................................48
ARTICLE SEVEN: AMENDMENTS...........................................................48
SECTION 7.1. Without Consent of Holders.................................48
SECTION 7.2. With Consent of Holders....................................49
SECTION 7.3. Execution of Amendments....................................50
SECTION 7.4. Effect of Amendment........................................50
SECTION 7.5. Notice of Amendment........................................50
ARTICLE EIGHT: SECURITIES ACT REGISTRATION..........................................50
ARTICLE NINE: MEETINGS OF HOLDERS...................................................51
SECTION 9.1. Purposes for Which Meetings May Be Called..................51
SECTION 9.2. Call, Notice and Place of Meetings.........................51
SECTION 9.3. Persons Entitled to Vote at Meetings.......................52
SECTION 9.4. Quorum; Action.............................................52
SECTION 9.5. Determination of Voting Rights; Conduct and
Adjournment of Meetings....................................53
SECTION 9.6. Counting Votes and Recording Action of Meetings............53
ARTICLE TEN: MISCELLANEOUS..........................................................54
SECTION 10.1. Effect of Headings and Table of Contents...................54
SECTION 10.2. Successors and Assigns.....................................54
SECTION 10.3. Separability Clause........................................54
SECTION 10.4. Benefits of ADS Rights Agreement...........................54
SECTION 10.5. Governing Law..............................................54
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 10.6. Submission to Jurisdiction.................................54
SECTION 10.7. Legal Holidays.............................................55
SECTION 10.8. Interest...................................................56
SECTION 10.9. Continuing Obligations.....................................56
SECTION 10.10. ADS Rights sub-Agent.......................................56
ANNEX A - Form of ADS Right
</TABLE>
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ADS RIGHTS AGREEMENT dated as of March 1, 1994, among HANSON
(BERMUDA) LIMITED, which is incorporated with limited liability under the laws
of Bermuda ("HBL"), HANSON PLC, a public limited company incorporated in England
and Wales ("Hanson"), and CITIBANK, N.A. (the "ADS Rights Agent").
WHEREAS, Hanson America Inc., an indirect wholly owned subsidiary
of Hanson organized under the laws of the State of Delaware (the "Company"), has
executed and delivered an Indenture dated as of March 1, 1994 (as originally
executed or as it from time to time may be supplemented, the "Indenture"), among
the Company, HM Holdings, Inc. and The Bank of New York acting thereunder as
trustee (in such capacity and together with any successor trustee under the
Indenture, the "Trustee");
WHEREAS, under and pursuant to the Indenture, the Company may
issue up to $1,255,115,000 (subject to increase as provided in Section 207 of
the Indenture) aggregate Principal Amount at Maturity (as defined below) of its
2.39% Senior Exchangeable Discount Notes Due 2001 (each, a "Note", collectively,
the "Notes"), issuable in definitive registered form (the "Registered Notes"),
in definitive bearer form (the "Bearer Notes"), in temporary global form or in
the form of one or more Rule 144A Global Notes (as defined in the Indenture);
WHEREAS, HBL has duly authorized the creation of its ADS Rights
(as defined below) to be issued, for the benefit of holders of the Notes, under
this ADS Rights Agreement;
WHEREAS, on the terms and subject to the conditions of the
Indenture and this ADS Rights Agreement, the ADS Rights will be exercisable at
the option of the holders thereof to purchase a number of ADSs (as defined
below) at the ADS Ratio (as defined below), subject to adjustment in certain
events as provided in this ADS Rights Agreement;
WHEREAS, under an ADS Issuance Agreement dated as of March 1,
1994 (the "ADS Issuance Agreement"), between Hanson and HBL, Hanson has agreed
with HBL that it will deliver Ordinary Shares and cause the delivery of ADSs and
cash, so as to enable HBL to perform when due its obligations in respect of the
ADS Rights and under this ADS Rights Agreement;
WHEREAS, Hanson has agreed to guarantee certain of HBL's payment
obligations in respect of the ADS Rights and to indemnify holders of the ADS
Rights against the failure of Hanson to deliver Ordinary Shares and to cause the
delivery of ADSs in accordance with the ADS Issuance Agreement; and
WHEREAS, under a Keepwell Agreement dated as of March 1, 1994
(the "Keepwell Agreement"), between HBL and Hanson, Hanson has agreed to
undertake to
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(i) maintain ownership, directly or indirectly, of all of the outstanding
capital stock of HBL, and (ii) ensure that HBL's tangible assets exceed its
liabilities and that HBL can discharge its liabilities as they become due.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
1.1. Provisions of General Application; Definitions. (a) For all
purposes of this ADS Rights Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires:
(l) the terms defined in this ADS Rights Agreement have the
meanings assigned to them in this ADS Rights Agreement and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United Kingdom as from time to time in effect; and
(3) references to Articles and Sections herein shall be deemed to
be references to the Articles and Sections of this ADS Rights Agreement unless
the context indicates otherwise.
(b) Definitions.
"Accreted Value" of a Note has the meaning specified in the
Indenture.
"Adjusted Accreted Value" of a Note has the meaning specified in
the Indenture.
"Adjusted Issue Price" has the meaning specified in the
Indenture.
"ADRs" means American Depositary Receipts evidencing ADSs issued
from time to time by the Depositary; "ADR" means each such receipt.
"ADSs" means American Depositary Shares, evidenced by ADRs, of
Hanson, issued from time to time by the Depositary, each such share
representing, as of the date hereof, five Ordinary Shares, including evidence of
rights to receive such Ordinary Shares; "ADS" means each such American
Depositary Share.
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"ADS Right" means the right of a Holder to purchase ADSs for cash
as provided in the ADS Rights and this ADS Rights Agreement.
"ADS Rights Agent" means the person named as "ADS Rights Agent"
at the head of this ADS Rights Agreement until a successor ADS Rights Agent
shall have become such pursuant to the applicable provisions hereof.
"ADS Rights Amount" per $1,000 Principal Amount at Maturity of
Notes shall be equal to the Sale Price of an ADS on the Trading Day immediately
preceding the ADS Exercise Date, multiplied by the ADS Ratio in effect on such
Trading Day.
"ADS Rights sub-Agent" means any ADS Rights sub-Agent appointed
pursuant to Section 10.10.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authorized Newspaper" means a newspaper, in an official language
of the country of publication or in the English language, customarily published
on each Business Day, whether or not published on Saturdays, Sundays or
holidays, and of general circulation in the place in connection with which the
term is used or in the financial community of such place. Where successive
publications are required to be made in Authorized Newspapers, the successive
publications may be made in the same or in different newspapers in the same city
meeting the foregoing requirements and in each case on any Business Day.
"Board of Directors", when used with reference to Hanson or HBL,
means the board of directors of Hanson or HBL, or a duly authorized committee of
the board of directors of Hanson or HBL, as the case may be.
"Board Resolution", when used with reference to Hanson or HBL,
means a resolution or resolutions, certified by the Secretary or an Assistant
Secretary of Hanson or HBL, as the case may be, to have been duly adopted by its
Board of Directors, or a duly authorized committee thereof, and to be in full
force and effect on the date of such certification.
"Business Day" means, with respect to any act to be performed
pursuant to this ADS Rights Agreement, each Monday, Tuesday, Wednesday, Thursday
and Friday
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which is not a day on which banking institutions in the place where such act is
to occur are authorized or obligated by applicable law, regulation or executive
order to close.
"Change-in-Control Right" has the meaning specified in the
Indenture.
"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act.
"Corporate Trust Office" means the principal office of the ADS
Rights Agent in the Borough of Manhattan, The City of New York, at which at any
particular time its corporate trust business shall be administered.
"coupon" has the meaning specified in the Indenture.
"Deposit Agreement" means the Deposit Agreement dated as of
September 29, 1986, as amended and restated as of November 3, 1986, among
Hanson, Citibank, N.A., as Depositary, and the holders from time to time of
ADRs, as amended from time to time.
"Depositary" has the meaning specified in the Indenture.
"Dollar", "U.S. Dollar" or "$" means a United States dollar or
other equivalent unit in such coin or currency of the United States as at the
time shall be legal tender for the payment of public and private debts.
"DTC" means The Depository Trust Company, a limited-purpose trust
company organized under the New York Banking Law, or any successor thereto.
"Event of Default" has the meaning specified in the Indenture.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended from time to time.
"Guaranty" means the guaranty of Hanson set forth in Article Six.
"Hanson" means Hanson PLC, a public limited company incorporated
in England and Wales and, subject to Section 5.1(b), its successors and assigns.
"Hanson Request" and "Hanson Order" mean, respectively, a written
request or order signed in the name of Hanson by one of its directors or any
Person duly authorized thereto by a Board Resolution and delivered to the ADS
Rights Agent.
"HBL" means Hanson (Bermuda) Limited, a corporation with limited
liability under the laws of Bermuda and, subject to Section 5.1(a), its
successors and assigns.
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"HBL Request" and "HBL Order" mean, respectively, a written
request or order signed in the name of HBL by one of its directors or any Person
duly authorized thereto by a Board Resolution and delivered to the ADS Rights
Agent.
"Holder" means (i) in the case of a Registered Note and the ADS
Right associated therewith, the Person in whose name the Note is registered in
the Note Register, (ii) in the case of a Bearer Note and the ADS Right
associated therewith, the bearer thereof, or (iii) in the case of a Rule 144A
Global Note and the ADS Right associated therewith, the bearer thereof, the Note
Custodian; provided, however, that a holder of a Note that does not have an
associated ADS Right (by reason of a prior cash exercise of such ADS Right as
provided in Section 3.2) shall not be treated as a "Holder" for the purposes of
this ADS Rights Agreement.
"Interest Payment Date" has the meaning specified in the
Indenture.
"Issue Date" means, with respect to any Note and annexed ADS
Right, the date on which such Note and ADS Right were originally issued as set
forth on the face of such Note and ADS Right.
"Note" has the meaning specified in the Recitals and, unless the
context otherwise requires, includes the associated ADS Right.
"Note Custodian" has the meaning specified in the Indenture.
"Note Register" has the meaning specified in the Indenture.
"Officer", with respect to HBL or Hanson, means any Director, the
Treasurer, the Secretary, any Deputy Treasurer, or any Assistant Treasurer or
Secretary or any Assistant Secretary of HBL or Hanson.
"Officers' Certificate", when used with reference to HBL or
Hanson, means a written certificate containing the information specified in
Section 1.2, executed by two Officers of HBL or Hanson and delivered to the ADS
Rights Agent.
"OID" or "Original Issue Discount" of any Note has the meaning
specified in the Indenture.
"Opinion of Counsel" means a written opinion containing the
information specified in Section 1.2, furnished by legal counsel, who may be the
general counsel or legal director of HBL or Hanson, or other counsel reasonably
acceptable to the ADS Rights Agent.
"Ordinary Shares" means ordinary shares of 25p each in the
capital of Hanson as authorized from time to time and all other (if any) stock
or shares from time to time and for the time being ranking pari passu therewith
and all other (if any) shares or
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stock resulting from any subdivision, consolidation or reclassification of
Ordinary Shares, having as between themselves no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
winding-up of Hanson.
"Outstanding", when used with respect to Notes, has the meaning
specified in the Indenture.
"Person" or "person" means any individual, corporation,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Predecessor Note" has the meaning specified in the Indenture.
"Principal Amount at Maturity" of any Note means the principal
amount of such Note due at Maturity (as defined in the Indenture) as set forth
on the face of such Note.
"Principal Amount at Maturity of Notes then Outstanding" shall
mean the aggregate principal amount due at maturity on all the Outstanding Notes
other than Outstanding Notes without ADS Rights attached.
"Prospectus" means the prospectus included in any Registration
Statement which covers the offering of any portion of the Ordinary Shares to be
represented by the ADSs to be issued from time to time pursuant to this ADS
Rights Agreement, as well as any amendments and supplements to such prospectus,
and all material incorporated by reference in such prospectus.
"QIB" has the meaning specified in the Indenture.
"Redemption Date" has the meaning specified in the Indenture.
"Redemption Price" has the meaning specified in the Indenture.
"Registration Statement" means any registration statement, filed
pursuant to the Securities Act, of Hanson which covers any of the Ordinary
Shares to be represented by the ADSs to be issued pursuant to the provisions of
this ADS Rights Agreement, including the Prospectus, as well as any amendments
and supplements to such registration statement, including post-effective
amendments, and all exhibits and all material incorporated by reference in such
registration statement.
"Repurchase Date" has the meaning specified in the Indenture.
"Repurchase Price" has the meaning specified in the Indenture.
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"Responsible Officer" means any officer of the ADS Rights Agent
assigned by it to administer matters similar to the matters covered by this ADS
Rights Agreement.
"Rule 144A Global Note" has the meaning specified in the
Indenture.
"Rule 144A Global Receipt" has the meaning specified in the
Indenture.
"Sale Price" of a single ADS on any Trading Day means the closing
sale price per ADS (or, if no closing sale price is reported, the closing per
ADS bid price) on such Trading Day as reported in the composite transactions for
the New York Stock Exchange (or, if ADSs are not then traded on the New York
Stock Exchange, the principal securities exchange or market in the United States
on which such ADSs are then traded). In the absence of one or more such
quotations, HBL shall be entitled to determine the Sale Price on the basis of
such quotations as it considers appropriate, as evidenced by a resolution of its
Board of Directors.
"Securities Act" means the United States Securities Act of l933,
as amended from time to time.
"Stock Exchange" means The International Stock Exchange of the
United Kingdom and the Republic of Ireland.
"Subsidiary" means, with respect to any Person, any entity in
which such Person owns, directly or indirectly, at least 51% of the combined
voting power of such entity's then outstanding securities entitled to vote
generally in the election of directors.
"Tax Repurchase" has the meaning specified in the Indenture.
"Tax Repurchase Date" has the meaning specified in the Indenture.
"Tax Repurchase Price" has the meaning specified in the
Indenture.
"Tax Repurchase Right" has the meaning specified in the
Indenture.
"Trading Day" means each day on which the New York Stock Exchange
(or, if ADSs are not then traded on the New York Stock Exchange, the principal
securities exchange or market in the United States on which such ADSs are then
traded) is open for trading, other than a day on which such exchange is
scheduled to close prior to its regular weekday closing time.
"United States" and its "possessions" have the meanings specified
in the Indenture.
"United States Alien" means any person who, for United States
federal income tax purposes, is (i) a foreign corporation, (ii) a nonresident
alien individual,
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(iii) an estate or trust that is not an estate or trust that is subject to
United States federal income taxation regardless of the source of its income, or
(iv) a foreign partnership one or more of the members of which is, for United
States federal income tax purposes, a foreign corporation, a nonresident alien
individual or an estate or trust that is not an estate or trust that is subject
to United States federal income taxation regardless of the source of its income.
"Withholding Tax Notice" has the meaning specified in the
Indenture.
(c) Other Terms Defined Elsewhere in this ADS Rights Agreement.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C> <C>
Act............................ 1.4(a)
ADS Exercise Date.............. Annex A
ADS Issuance Agreement......... Recitals
ADS Ratio...................... Annex A
Bearer Notes................... Recitals
Company........................ Recitals
Current Prospectus............. 3.2
Form F-6....................... 5.10(b)
Hanson Amounts................. 5.2(b)
HBL Amounts.................... 3.13(a)
HBL Direction.................. 5.13(a)
Indenture...................... Recitals
Judgment Currency.............. 5.9
Keepwell Agreement............. Recitals
New York Banking Day........... 5.9
Note and Notes................. Recitals
Registered Notes............... Recitals
Required Currency.............. 5.9
Rule 144A Information.......... 5.12
Tax Amounts.................... 5.4(b)
Trustee........................ Recitals
</TABLE>
1.2. Compliance Certificates and Opinions. Upon any application
or request by HBL to the ADS Rights Agent to take any action under any provision
of this ADS Rights Agreement, HBL shall furnish to the ADS Rights Agent an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this ADS Rights Agreement relating to the proposed action have been
complied with and (if required by the ADS Rights Agent) an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with, except that in the case of
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any such application or request as to which the furnishing of an Officers'
Certificate and an Opinion of Counsel is specifically required by any provision
of this ADS Rights Agreement relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
covenant or condition provided for in or pursuant to this ADS Rights Agreement
(other than pursuant to Section 5.6) shall include:
(a) a statement that each individual executing such
certificate or 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, he or she has made such examination or investigation as is
necessary to enable him or her 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, such covenant or condition has been complied with.
1.3. Form of Documents Delivered to ADS Rights Agent. 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 HBL may be based,
insofar as such certificate or opinion 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 such
certificate or opinion is based are erroneous. Any such certificates or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an Officer or Officers of HBL,
on behalf of HBL, stating that the information with respect to such factual
matters is in the possession of HBL, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such certificate or
opinion are based are erroneous.
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In any instance in which any Person is required to make, provide
or execute two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this ADS Rights Agreement, they
may, but need not, be consolidated and form one instrument.
1.4. Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, election, waiver or other action provided by this
ADS Rights Agreement to be provided or taken by Holders may be embodied in, and
evidenced by, (i) one or more instruments of substantially similar tenor signed
by such Holders in person or by their agent duly appointed in writing, (ii) the
record of Holders voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders duly called and held in
accordance with Article Nine, or (iii) a combination of such instruments and
such record. Except as otherwise expressly provided herein, such action shall
become effective when such instrument or instruments or record or both are
delivered to the ADS Rights Agent and, where it is hereby expressly required, to
Hanson and HBL. Such instrument or instruments and record (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders executing such instrument or instruments or so voting at
any such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Note (and the
associated ADS Right), shall be sufficient for any purpose of this ADS Rights
Agreement, and conclusive in favor of the ADS Rights Agent, Hanson and HBL, if
made in the manner provided in this Section 1.4. The record of any meeting of
Holders shall be proven in the manner provided in Section 9.6.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner the ADS Rights
Agent deems sufficient. Where such execution is by a Person acting in a capacity
other than such signer's individual capacity, such certificate or affidavit
shall also constitute sufficient proof of such signer's 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 ADS
Rights Agent deems sufficient and in accordance with such reasonable rules as
the ADS Rights Agent may determine.
(c) The Principal Amount at Maturity and serial numbers of Bearer
Notes held by any Person, and the date of his holding the same, may be proved by
the production of such Bearer Notes or by a certificate executed by any trust
company, bank, banker or other depositary, wherever situated, if such
certificate shall be deemed by the ADS Rights Agent to be satisfactory, showing
that at the date therein mentioned such Person had on deposit with such
depositary, or exhibited to it, the Bearer Notes therein described; or such
facts may be proved by the certificate or affidavit of the Person holding such
Bearer Notes, if such certificate or affidavit is deemed by the ADS Rights Agent
to be satisfactory. The ADS Rights Agent, HBL and Hanson may assume that such
ownership of any Bearer Note continues until (i) another certificate or
affidavit bearing a
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later date issued in respect of the same Bearer Note is produced, (ii) such
Bearer Note is produced to the ADS Rights Agent by some other Person, (iii) such
Bearer Note is surrendered in exchange for a Registered Note, or (iv) such
Bearer Note is no longer Outstanding.
(d) The Principal Amount at Maturity and serial numbers of
Registered Notes held by any Person, and the date of such Person's holding the
same, shall be conclusively proven by reference to the Note Register, except in
cases of manifest error. The Principal Amount at Maturity and serial numbers of
Rule 144A Global Notes held by the Note Custodian, and the date of the Note
Custodian's holding the same, shall be conclusively proven by the production of
such Rule 144A Global Notes or by a certificate executed by the Note Custodian.
(e) Any request, demand, authorization, direction, notice,
consent, election, waiver, agreement or other Act of the Holder of any Note
shall bind every future Holder of the same Note, and the Holder of every Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
ADS Rights Agent, HBL or Hanson in reliance thereon, whether or not notation of
such action is made upon such Note.
1.5. Persons Deemed Owners. HBL, Hanson, the ADS Rights Agent and
any agent of HBL, Hanson or the ADS Rights Agent may treat the bearer of any
Bearer Note as the absolute owner of such Note for the purpose of exercising the
ADS Right associated therewith and for all other purposes whatsoever, and
notwithstanding any notice of ownership or writing thereon, or any notice of
previous loss or theft or other interest therein. HBL, Hanson, the ADS Rights
Agent and any agent of HBL, Hanson or the ADS Rights Agent may treat the Person
in whose name any Registered Note is registered as the owner of such Registered
Note for the purpose of exercising the ADS Right annexed thereto and for all
other purposes whatsoever, and notwithstanding any notice of ownership or
writing thereon, or any notice of previous loss or theft or other interest
therein. HBL, Hanson, the ADS Rights Agent and any agent of HBL, Hanson or the
ADS Rights Agent may treat the Note Custodian as the sole owner or Holder of the
Rule 144A Global Notes, so long as the Note Custodian holds the Rule 144A Notes,
for all purposes whatsoever, and notwithstanding any notice of ownership or
writing thereon, or any notice of previous loss or theft or other interest
therein; provided, however, that any Person that is a participant in DTC and has
a beneficial interest in the Rule 144A Global Receipts shall also be treated as
the Holder solely for purposes of exercising the ADS Right associated with a
Rule 144A Global Note (on behalf of the Note Custodian).
1.6. Notices, Etc., to ADS Rights Agent, HBL and Hanson. Any
request, demand, authorization, direction, notice, consent, election, waiver,
Act or other document provided or permitted by this ADS Rights Agreement to be
made upon, provided or furnished to, or filed with:
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(a) the ADS Rights Agent, by any Holder, HBL or Hanson,
shall be sufficient for every purpose hereunder if made, provided,
furnished or filed in writing to or with the ADS Rights Agent at 111
Wall Street (5th Floor), New York, New York 10014, Attention: ADR Dept.,
or such other notice address as shall have been most recently furnished
in writing to HBL, Hanson and the Holders by the ADS Rights Agent;
(b) Hanson, by the ADS Rights Agent, HBL or any Holder,
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing, mailed, first-class postage prepaid,
or delivered, or sent by facsimile transmission followed by mail
delivery (as aforesaid) of the same, to it at 1 Grosvenor Place, London
SW1X 7JH, England, Attn: Legal Director, or at such other notice address
as shall have been most recently furnished in writing to the ADS Rights
Agent, HBL and the Holders by Hanson; or
(c) HBL, by the ADS Rights Agent, Hanson or any Holder,
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing, mailed, first-class postage prepaid,
or delivered, or sent by facsimile transmission followed by mail
delivery (as aforesaid) of the same, to it at Clarendon House, 2 Church
Street, Hamilton HM CX, Bermuda, Attn: C.F.A. Cooper, or at such other
notice address as shall have been most recently furnished in writing to
the ADS Rights Agent, Hanson and the Holders by HBL.
Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this ADS Rights Agreement shall
be in the English language, except that any published notice may be in an
official language of the country of publication; provided, however, that a
notice published in Luxembourg shall be in English.
1.7. Notice to Holders; Waiver. Except as otherwise expressly
provided herein, where this ADS Rights Agreement provides for notice to Holders
of any event,
(a) such notice shall be sufficiently given to Holders of
Bearer Notes if published at least twice in an Authorized Newspaper in
The City of New York and in London and, so long as the Notes are listed
on the Luxembourg Stock Exchange and such stock exchange shall so
require, in Luxembourg or, if not practicable in either London or
Luxembourg, elsewhere in any country in Western Europe, on a Business
Day, the first such publication to be not earlier than the earliest date
and the second not later than the latest date prescribed for the giving
of such notice;
(b) such notice shall be sufficiently given to Holders of
Registered Notes if published in an Authorized Newspaper pursuant to
paragraph (1) above and given in writing and mailed, first-class postage
prepaid, to each
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Holder of a Registered Note affected by such event, at the address of
such Holder as it appears in the Note Register, not earlier than the
earliest date and not later than the latest date prescribed for the
giving of such notice; and
(c) such notice shall be sufficiently given to the Holder
of a Rule 144A Global Note if given in writing and mailed, first-class
postage prepaid, to the Note Custodian at the address notified to the
Trustee, not earlier than the earliest date and not later than the
latest date prescribed for the giving of such notice (or by such other
method as the Note Custodian may from time to time communicate to the
Trustee).
In case by reason of the suspension of publication of any
Authorized Newspaper or Authorized Newspapers or by reason of any other cause it
shall be impracticable to publish any notice to Holders as provided above, then
such notification to Holders as shall be given with the approval of the ADS
Rights Agent shall constitute sufficient notice to such Holders for every
purpose hereunder.
In any case where notice to Holders of Registered Notes is given
by mail, neither the failure to mail such notice, nor any defect in any notice
so mailed, to any particular Holder of a Registered Note shall affect the
sufficiency of such notice with respect to other Holders of Registered Notes or
the sufficiency of any notice by publication to Holders of Bearer Notes given as
provided above. In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification to Holders of Registered Notes or the Rule 144
Global Notes as shall be made with the approval of the ADS Rights Agent shall
constitute a sufficient notification to such Holders for every purpose
hereunder.
Such notices shall be deemed been to have given on the date of
such publication or mailing or, if published in Authorized Newspapers on
different dates, on the date of the first such publication.
Where this ADS Rights Agreement 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
ADS Rights Agent, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
1.8. Non-separability. Except as provided in the form of ADS
Right and this ADS Rights Agreement, neither a Note nor the ADS Right associated
therewith may be transferred separately from the other.
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ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1. HBL. HBL represents and warrants to the ADS Rights Agent and
to the Holders that it has and will have full legal right, power and authority,
and has and will have all necessary authorizations, to execute and deliver this
ADS Rights Agreement and the ADS Issuance Agreement, to issue the ADS Rights, to
deliver the ADSs in the manner provided in this ADS Rights Agreement and to
perform its obligations under this ADS Rights Agreement.
2.2. Hanson. Hanson represents and warrants to the ADS Rights
Agent and to the Holders that it has and will have full legal right, power and
authority, and has and will have all necessary authorizations, to execute and
deliver this ADS Rights Agreement and the ADS Issuance Agreement and to perform
its obligations under this ADS Rights Agreement.
2.3. ADS Rights Agent. The ADS Rights Agent represents and
warrants to Hanson, HBL and the Holders that it has and will have full legal
right, power and authority to execute and deliver this ADS Rights Agreement and
to perform its obligations under this ADS Rights Agreement.
ARTICLE THREE
ADS RIGHTS
3.1. ADS Rights. HBL hereby grants ADS Rights to the Holders,
each such ADS Right to be substantially in the form attached hereto as Annex A.
HBL covenants with the ADS Rights Agent, for the benefit of all Holders, that a
Holder shall have the right, at such Holder's option, at any time on or after
June 8, 1994 and on or before the close of business on March 1, 2001, to
exercise the ADS Right against HBL in the manner set forth in, and subject to
the conditions set forth in, the form of ADS Right attached hereto as Annex A.
HBL shall be obligated to deliver ADSs (and cash in lieu of fractional ADSs) and
to pay the HBL Amounts to the Holders only if, and to the extent that, Hanson
delivers or causes the delivery of Ordinary Shares, ADSs, and cash as requested
by HBL pursuant to the terms of the ADS Issuance Agreement.
A Holder may exercise the ADS Right for a portion of the
Principal Amount at Maturity of a Note so long as (i) such portion is $1,000 or
an amount in excess thereof that is an integral multiple of $1,000 and (ii) the
remaining Principal Amount at Maturity, if any, of such Holder's Notes is
$10,000 or an amount in excess thereof that is an integral multiple of $1,000.
Provisions of this ADS Rights Agreement that apply to exercise of an ADS Right
with respect to all of a Note also apply to exercise of an ADS Right with
respect to a portion of a Note.
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3.2. Exercise Procedure. To exercise an ADS Right, a Holder (or
any Person that is a participant in DTC and has a beneficial interest in the
Rule 144A Global Receipts representing the Rule 144A Global Notes) shall follow
the procedures specified in the form of ADS Right attached hereto as Annex A.
Registered Notes surrendered upon exercise of the ADS Right
during the period from the close of business on the February 15 or August 15
next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date must be accompanied by payment of an amount equal to the
interest payable thereon which the Holder is to receive. Registered Notes
surrendered upon exercise of the ADS Right on an Interest Payment Date need not
be accompanied by such payment. Bearer Notes surrendered upon exercise of the
ADS Right must be delivered with all unmatured coupons and any matured coupons
in default appurtenant thereto as provided in the Indenture.
HBL shall use its best efforts to deliver or cause to be
delivered, within five Business Days (but shall, in any event deliver or cause
to be delivered, within ten Business Days) after an ADS Exercise Date (or, if a
Prospectus that is current, usable and effective for the offer and sale of
securities (a "Current Prospectus") is not then available as permitted by
Article Eight, on such later date as the same shall become available, but in no
event later than 20 Business Days after the ADS Exercise Date), to the ADS
Rights Agent for further delivery to the Holder a certificate or certificates
for the number of full ADSs issuable upon such Holder's exercise of an ADS Right
(and cash in lieu of any fractional share determined pursuant to Section 3.3).
Any Person in whose name the certificate described in the
preceding paragraph is registered shall, subject to the terms of the Deposit
Agreement, be treated as a holder of record of ADSs on and after the ADS
Exercise Date; provided, however, that no exercise of an ADS Right on an ADS
Exercise Date when the stock transfer books of Hanson or transfer books of the
Depositary shall be closed shall be effective to constitute the Person or
Persons entitled to receive the ADSs upon such exercise as the record holder or
holders of such ADSs on such date, but such exercise shall be effective to
constitute the Person or Persons entitled to receive such ADSs as the record
holder or holders thereof for all purposes at the close of business on the next
succeeding day on which such stock transfer books of Hanson and the transfer
books of the Depositary are open; provided further, however, that such exercise
of an ADS Right shall be at the ADS Ratio in effect on the ADS Exercise Date, as
if the stock transfer books of Hanson and the transfer books of the Depositary
had not been closed; provided further, however, that if a Current Prospectus is
not available on the ADS Exercise Date, such Holder shall not be treated as a
holder of record of ADSs until such time as a Current Prospectus becomes
available but shall be entitled to receive all dividends and distributions
payable with respect to the ADSs on and after the ADS Exercise Date on such date
as the Holder receives its ADSs or on such later date as such dividends and
distributions become
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payable (and the ADS Ratio in effect on such ADS Exercise Date shall be the
applicable ADS Ratio).
In connection with the Deposit Agreement and for all purposes
thereunder any Person in whose name the certificate described in the third
paragraph of this Section 3.2 is registered shall be treated as the holder of
record of ADSs on the date on which ADSs are registered in such Person's name on
the books of the Depositary.
No payment or adjustment will be made for dividends on, or other
distributions with respect to, any ADSs except as provided in this Article
Three.
If the last day on which an ADS Right may be exercised is not a
Business Day in one of the places where the ADS Rights Agent is located, the ADS
Right may be exercised at such place on the next succeeding day that is a
Business Day.
3.3. Fractional Shares. No fractional ADSs will be issued on
exercise of an ADS Right. HBL shall pay to the ADS Rights Agent, and the ADS
Rights Agent shall pay to a Holder, otherwise entitled to a fractional ADS, an
amount of cash in U.S. Dollars equal to the equivalent value of such fractional
ADS based on the Sale Price of a single ADS on the Trading Date immediately
preceding the ADS Exercise Date.
3.4. Taxes on Exercise. If a Holder exercises an ADS Right,
Hanson, rather than the Holder, shall be responsible for the payment of United
Kingdom Stamp Duty Reserve Tax arising solely upon the issuance of ADSs upon
such exercise. The Holders, however, shall pay any other documentary, stamp or
similar issue or transfer tax, including United Kingdom Stamp Duty Reserve Tax,
that is due as a result of any request by such Holder that such ADSs be issued
in a name other than the Holder's name. The ADS Rights Agent may refuse to
deliver certificates representing the ADSs being issued in a name other than
such Holder's name until the ADS Rights Agent receives an amount sufficient to
pay any tax payable by such Holder.
3.5. Adjustments. (a) Subject to the provisions of Sections
3.5(b), 3.5(c) and 3.5(d), the ADS Ratio shall from time to time be adjusted in
accordance with the provisions of this Section 3.5(a), and so that if the event
giving rise to such adjustment shall be such as would be capable of falling
within more than one of sub-paragraphs (i) to (x) of this Section 3.5(a), it
shall fall within the first of the applicable sub-paragraphs to the exclusion of
the remaining sub-paragraphs:
(i) If and whenever there shall be an alteration in the number of
Ordinary Shares represented by an ADS, the ADS Ratio in force
immediately prior to such alteration shall be adjusted by multiplying it
by a fraction of which the numerator shall be the number of Ordinary
Shares represented by one ADS immediately before such alteration and the
denominator shall be the number of Ordinary Shares represented by one
ADS immediately after such alteration and
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such adjustment shall become effective immediately after the alteration
takes effect.
(ii) If and whenever there shall be an alteration in the nominal
value of the Ordinary Shares as a result of a consolidation or
sub-division, the ADS Ratio in force immediately prior to such
alteration shall be adjusted by multiplying it by a fraction of which
the numerator shall be the nominal amount in Sterling of one such
Ordinary Share immediately before such alteration and the denominator
shall be the nominal amount in Sterling of one such Ordinary Share
immediately after such alteration, and such adjustment shall become
effective immediately after the alteration takes effect.
(iii) If and whenever Hanson shall issue to holders of Ordinary
Shares any Ordinary Shares credited as fully paid by way of
capitalization of reserves or profits, the ADS Ratio in force
immediately prior to such issue shall be adjusted by multiplying it by a
fraction of which the numerator shall be the aggregate nominal amount in
Sterling of the issued Ordinary Shares immediately after such issue and
the denominator shall be the aggregate nominal amount in Sterling of the
issued Ordinary Shares immediately before such issue, and such
adjustment shall become effective as at the date of issue of such
Ordinary Shares.
(iv) If and whenever Hanson shall make any capital distribution
to holders of Ordinary Shares as a class (whether on a reduction of
capital or otherwise) or shall grant to such holders rights as a class
to acquire for cash, at less than 95% of their defined market value,
assets of Hanson or any of its Subsidiaries, the ADS Ratio in force
immediately prior to such distribution or grant shall be adjusted by
multiplying it by the following fraction:
A
-----
A - B
where:
"A" is the market price of one Ordinary Share for the dealing
day immediately preceding the date on which the capital
distribution or grant is publicly announced; and
"B" is the fair market value, expressed in Sterling, as at the
close of business on the day of such announcement as
determined in good faith by a reputable merchant bank
reasonably selected by HBL and acting as an expert (which
determination shall be, in the absence of manifest error,
conclusive), of the portion of the capital distribution or
of such rights attributable to one Ordinary Share.
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Such adjustments shall become effective on the first date on
which ADSs trade "ex" the capital distribution or grant.
(v) If and whenever Hanson shall offer or procure the offer to
holders of Ordinary Shares as a class of new Ordinary Shares for
subscription or purchase by way of rights, or shall offer or grant to
holders of Ordinary Shares as a class any options, rights (including,
without limitation, conversion rights attaching to convertible
securities) or warrants to subscribe for or purchase new Ordinary
Shares, in each case at a price that is less than 95% of the market
price per Ordinary Share on the dealing day last preceding the date of
the announcement of the terms of the offer or grant, the ADS Ratio shall
be adjusted by multiplying the ADS Ratio in force immediately before the
date of the announcement of such offer or grant by a fraction of which
the numerator is the number of Ordinary Shares in issue immediately
before the date of such announcement plus the aggregate number of
Ordinary Shares offered for subscription or purchase or comprised in the
options, rights or warrants and the denominator is the number of
Ordinary Shares in issue immediately before the date of such
announcement plus the number of Ordinary Shares which the aggregate of
the amount (if any) payable for the rights, options or warrants and of
the amount payable for the total number of Ordinary Shares comprised
therein would purchase at such market price. Such adjustment shall
become effective on the first date on which the ADSs trade "ex rights"
or "ex" such options, rights or warrants (as the case may be).
(vi) If and whenever Hanson or any of its Subsidiaries shall
issue to holders of Ordinary Shares as a class by way of rights or shall
issue or grant to holders of Ordinary Shares as a class by way of
rights, options or warrants or other rights to subscribe for or purchase
any securities of Hanson or any of its Subsidiaries (other than, in each
case, Ordinary Shares or options, warrants or other rights to subscribe
for or purchase Ordinary Shares), the ADS Ratio shall be adjusted by
multiplying the ADS Ratio in force immediately prior to such issue or
grant by the following fraction:
A
-----
A - B
where:
"A" is the market price per Ordinary Share on the dealing day
immediately preceding the date on which such issue or
grant is publicly announced; and
"B" is the fair market value, expressed in Sterling, as at
close of business on the day of such announcement, as
determined in good faith by a
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reputable merchant bank reasonably selected by HBL and
acting as an expert (which determination shall be, in the
absence of manifest error, conclusive) of the portion of
such rights attributable to one Ordinary Share.
Such adjustment shall become effective on the first date on which
ADSs trade "ex" the securities, rights, options or warrants.
(vii) If Hanson shall issue wholly for cash any Ordinary Shares
(other than Ordinary Shares issued on the exercise of ADS Rights or any
other warrants or rights of conversion into, or exchange or subscription
for, Ordinary Shares outstanding on the date of this ADS Rights
Agreement) or shall issue or grant wholly for cash any options, warrants
or other rights to subscribe for or purchase Ordinary Shares, in each
case, at a price which is less than 95% of the market price per Ordinary
Share for the dealing day immediately preceding the date of the
announcement of the terms of the issue of such Ordinary Shares or of the
issue or grant of such options, warrants or other rights, the ADS Ratio
shall be adjusted by multiplying the ADS Ratio in force immediately
prior to such issue or grant by a fraction of which the numerator shall
be the number of Ordinary Shares in issue immediately prior to the date
of such announcement plus the aggregate number of Ordinary Shares issued
or, as the case may be, comprised in the issue or grant (at the initial
conversion exchange or subscription price) and the denominator shall be
the number of Ordinary Shares in issue immediately prior to the date of
such announcement plus the number of Ordinary Shares which the aggregate
consideration receivable by Hanson for the issue of such additional
Ordinary Shares or the amount (if any) payable for the rights, options
or warrants granted plus the amount payable for the Ordinary Shares
comprised in such issue or grant (at the initial conversion, exchange or
subscription price) would purchase at such market price. Such adjustment
shall become effective on the date of such issue or grant.
(viii) If Hanson or any Subsidiary of Hanson or (pursuant to a
legally binding agreement with Hanson or any Subsidiary of Hanson) any
other Person (otherwise than in circumstances where the ADS Ratio would
be required to be adjusted pursuant to any of sub-paragraphs (v) or
(vii) if the relevant issue or grant was at a price which is less than
95% of the market price per Ordinary Share for the relevant dealing day)
shall issue wholly for cash or for no consideration any securities
(other than the Notes), which by their terms of issue are convertible
into or exchangeable for or carry rights of subscription for Ordinary
Shares (or shall grant any such rights in respect of any existing
securities where no such rights existed in the terms of issue thereof),
and the consideration per Ordinary Share receivable therefor by Hanson
upon conversion, exchange or subscription is less than 95% of the market
price per Ordinary Share for the dealing day immediately
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preceding the date of announcement of the terms of issue of such
securities or the grant of such rights, the ADS Ratio shall be adjusted
by multiplying the ADS Ratio in force immediately prior to the issue or
grant by a fraction of which the numerator shall be the number of
Ordinary Shares in issue on the date of the issue or grant plus the
maximum number of Ordinary Shares to be issued upon conversion or
exchange of such securities or upon the exercise of such rights of
subscription attached thereto at the initial conversion or exchange rate
or subscription price and the denominator shall be the number of
Ordinary Shares in issue on the date of the issue or grant plus the
number of Ordinary Shares which the aggregate consideration (if any)
receivable by Hanson for the Ordinary Shares to be issued upon
conversion or exchange of, or upon exercise of the right of subscription
attached to, such securities would purchase at such market price per
Ordinary Share. Such adjustment shall become effective on the date of
such issue or grant.
(ix) If any rights of conversion, exchange or subscription
attached or relating to any securities of Hanson or any of its
Subsidiaries (other than the Notes) are modified (other than by way of
adjustment in accordance with the terms of such securities) so that
following such modification the consideration per Ordinary Share
receivable by Hanson upon conversion or exchange of such securities or
subscription shall be less than 95% of the market price per Ordinary
Share on the dealing day immediately preceding the date of announcement
of the proposal to modify such rights of conversion, exchange or
subscription, the ADS Ratio shall be adjusted by multiplying the ADS
Ratio in force immediately prior to such modification by a fraction of
which the numerator shall be the number of Ordinary Shares in issue on
such date of modification plus the maximum number of Ordinary Shares to
be issued upon conversion or exchange of such securities or exercise of
such rights of subscription attached thereto, at the modified
conversion, exchange or subscription price or rate and the denominator
shall be the number of Ordinary Shares in issue on the date of such
modification plus the number of Ordinary Shares which the aggregate
consideration receivable for the Ordinary Shares to be issued upon
conversion or exchange or upon exercise of the rights of subscription
attached to such securities so modified would purchase at such market
price per Ordinary Share, or, if lower, the existing conversion,
exchange or subscription price of such securities, but giving credit in
such manner as a reputable merchant bank reasonably selected by HBL and
acting as an expert determines in good faith (which determination shall
be, in the absence of manifest error, conclusive) to be appropriate for
any previous adjustment under this Section 3.5(a). Such adjustment shall
become effective on the date of modification of the rights of
conversion, exchange or subscription attaching to such securities. A
right of conversion, exchange or subscription shall not be treated as
modified for the foregoing purposes where it is adjusted in accordance
with the terms of issue of (A) a security issued after the date of this
ADS Rights
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Agreement, to take account of rights or capitalization issues and other
events normally giving rise to adjustment of conversion, exchange or
subscription terms or (B) a security in issue on the date of this ADS
Rights Agreement, as such terms are in force on the date of this ADS
Rights Agreement.
(x) If Hanson or any of its Subsidiaries or (at the direction or
request of or pursuant to a legally binding agreement with Hanson or any
of its Subsidiaries) any other Person shall offer any securities in
connection with which offer the holders of Ordinary Shares as a class
are entitled to participate in arrangements whereby such securities may
be acquired by them at less than 95% of their defined market value
(except where the ADS Ratio is required to be adjusted pursuant to
sub-paragraph (iv) or (v), or would be required to be so adjusted if the
relevant issue or grant was at a price which is less than 95% of the
defined market value or the market price per Ordinary Share for the
relevant dealing day, as the case may be), the ADS Ratio shall be
adjusted by multiplying the ADS Ratio in force immediately prior to the
making of such offer by the following fraction:
A
-----
A - B
where:
"A" is the market price per Ordinary Share for the dealing day
immediately preceding the date of the announcement of the
terms of the offer; and
"B" is the fair market value, expressed in Sterling, as at
close of business on the day of such announcement, as
determined in good faith by a reputable merchant bank
reasonably selected by HBL and acting as an expert (which
determination shall be, in the absence of manifest error,
conclusive) of the portion of such rights attributable to
one Ordinary Share.
Such adjustment shall become effective on the first date on which
ADSs trade "ex" the rights.
(xi) For the purposes of sub-paragraphs (i) to (x) of this
Section 3.5(a):
(A) "announcement" shall include the release of an announcement
to the press or the delivery or transmission by telephone, telex
or otherwise of an announcement to the Stock Exchange and "date
of announcement" shall mean the date on which the announcement is
first so released, delivered or transmitted;
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(B) "capital distribution" shall (without prejudice to the
generality of that expression) include dividends and
distributions in cash or specie (distributions in specie to
include distributions of evidences of indebtedness or other
securities), but shall not include:
(x) any dividend or distribution to the extent that:
(1) when taken together with any dividend or
distribution previously made or paid in respect of
all periods after September 30, 1993, it does not
exceed an amount equal to the aggregate of the
consolidated cumulative net profits less the
aggregate of any consolidated net losses (after
taxation but including extraordinary items)
attributable to the members of Hanson for all
periods ending after September 30, 1993 as shown in
the audited consolidated accounts of Hanson for
such periods (provided that consolidated cumulative
net profits shall include any profit transferred
from any reserve other than amounts arising as a
result of a reduction of share capital, share
premium account or capital redemption reserve); and
(2) insofar as clause (1) above does not apply, the
rate of that dividend or distribution, together
with all other dividends and distributions on the
class of capital in question charged or provided
for in the accounts of Hanson for the financial
period in question, does not exceed the aggregate
rate of dividend or distribution on such class of
capital charged or provided for in the accounts for
the last preceding financial period. In computing
such rates such adjustments may be made as are in
the opinion of the auditors of Hanson for the time
being appropriate to the circumstances and shall be
made in the event that the lengths of such periods
differ;
(y) a distribution which comprises a purchase or
redemption of share capital of Hanson provided that (in the case
of purchases of listed share capital) the maximum price which may
be paid for any share (exclusive of advance corporation tax and
expenses) is an amount equal to 105% of the average of the middle
market quotations for such class of capital as derived from the
Stock Exchange Daily Official List for the ten dealing days
immediately preceding either (a) the day on which the share is
contracted to be purchased or (b) where an announcement has been
made of the intention to purchase share capital at some future
date at a specified price, the day immediately preceding the date
of such announcement; or
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(z) to the extent that it does not exceed the value of a
cash dividend which would not have constituted a capital
distribution by virtue of (x) above a distribution of assets in
specie in lieu of such a dividend;
(C) "issue" shall include allot;
(D) "market price" means the average, expressed in Sterling, of
the mean of the quotations published in the Stock Exchange Daily
Official List for one Ordinary Share for the five consecutive
dealing days ending on the dealing day immediately preceding the
day on which the market price is to be ascertained provided that,
if Ordinary Shares were quoted ex-dividend during some part and
cum-dividend during some other part of that five dealing day
period then:
(1) in circumstances outlined in sub-paragraph (iii),
(iv), (vi) or (vii) of this Section 3.5(a), if the
Ordinary Shares to be issued do not rank for the
dividend in question, the quotations on the dates
on which the Ordinary Shares were quoted
cum-dividend shall be reduced by an amount equal to
the amount of that dividend per Ordinary Share
(excluding any associated United Kingdom tax credit
and less the tax (if any) required to be deducted
on payment thereof to a resident of the United
Kingdom); and
(2) to the extent that (1) does not apply, the
quotations on the dates on which the Ordinary
Shares were quoted ex-dividend shall be increased
by such similar amount,
and provided further that, if the Ordinary Shares on each of
those five dealing days were quoted cum-dividend in respect of a
dividend which had been declared or announced but the Ordinary
Shares to be issued will not rank for that dividend, the
quotations on each of those dates shall be reduced by an amount
equal to the amount of that dividend per Ordinary Share
(excluding any associated United Kingdom tax credit and less the
tax (if any) required to be deducted on payment thereof to a
resident of the United Kingdom);
(E) "defined market value", for the purposes of sub-paragraphs
(iv) and (x), shall be taken to mean:
(1) in the case of securities which are traded on any
stock exchange, the average of the mean of the
closing quotations for those securities for the
five consecutive dealing days on that exchange
commencing with the later of (x) the date on
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which the securities may first be acquired by
holders of the Ordinary Shares pursuant to the
rights to acquire or offer referred to in those
sub-paragraphs and (y) the date on which such
securities are traded on that exchange; and
(2) in the case of any other assets, the fair market
value of such assets as at the close of business on
the date on which they may first be so acquired, as
determined in good faith by a reputable merchant
bank reasonably selected by HBL and acting as
expert (which determination shall be, in the
absence of manifest error, conclusive);
(F) "reserves" includes without prejudice to the generality of
such expression share premium account or capital redemption
reserve and the amount standing to the credit of the consolidated
profit and loss account of Hanson;
(G) "rights" includes rights in whatsoever form issued; and
(H) references to an issue or offer to holders of Ordinary Shares
"as a class" or "by way of rights" shall be taken to be
references to an issue or offer to holders other than holders to
whom, by reason of the laws of any territory or requirements of
any recognized regulatory body or any other stock exchange in any
territory or in connection with fractional entitlements, it is
determined not to make such issue or offer.
(b) (i) Subject to Section 3.5(a)(xi), for the purposes of any
calculation of the consideration receivable pursuant to sub-paragraph (vii) or
(viii) of Section 3.5(a):
(A) in the case of an issue of Ordinary Shares for cash, no
deduction shall be made for any commissions or expenses of
underwriting or otherwise in connection with the issue;
and
(B) in the case of the issue of securities convertible into or
exchangeable for, or carrying rights of subscription for,
Ordinary Shares (1) the aggregate consideration receivable
by Hanson for the Ordinary Shares to be issued upon
conversion or exchange of, or upon exercise of the rights
of subscription attached to, such securities shall be the
sum of (x) the consideration received or receivable by the
issuer and Hanson for any such securities and (y) the
additional minimum consideration (if any) to be received
by the issuer or Hanson upon such conversion, exchange or
exercise and (2) the consideration per Ordinary Share
receivable by Hanson upon such
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conversion, exchange or exercise shall be the result
of dividing such aggregate consideration by the number
of Ordinary Shares to be issued upon such conversion,
exchange or exercise at the initial conversion,
exchange or subscription price or rate.
(ii)...Notwithstanding any other provisions of this
Section 3.5, no adjustment will be made to the ADS Ratio:
(A) when Ordinary Shares or other securities, rights, options
or warrants are issued, offered or granted to employees
(including directors holding executive office) of Hanson
or any Subsidiary or associated company of Hanson pursuant
to any employees' share scheme (as defined in section 743
of the Companies Act 1985 of Great Britain); or
(B) in respect of any offer or issue of, or grant of rights to
subscribe for, Ordinary Shares in lieu of the whole or
part of a cash dividend, whether paid up by way of
capitalization of profits or reserves (where the cash
dividend would not have constituted a capital distribution
under Section 3.5(a)(xi)), save that if the value which is
ascribed to such Ordinary Shares in accordance with the
applicable rules and regulations of the Stock Exchange for
the purposes of such offer, issue or grant exceeds the
amount of such cash dividend or part thereof an adjustment
will be made to the ADS Ratio in respect of such excess.
(iii) Any currency translations required for the purposes
of any calculation under the provisions of this Section 3.5 shall be computed at
the spot rate of Citibank, N.A., New York City, for the purchase of the relevant
currency with the other currency at close of business on the day as at which the
relevant calculation is required to be made.
(iv) If and whenever any of one or more events or
circumstances specified in Section 3.5(a) (or any other events or circumstances
which Hanson in good faith reasonably determines should result in an adjustment
to the ADS Ratio) shall occur or exist, any adjustment (if appropriate) to the
ADS Ratio shall be such as shall be certified by the independent auditors for
the time being of Hanson to be fair and reasonable to take account thereof and
if the adjustment would result in an increase in the ADS Ratio where such
adjustment is made other than by reason of the consolidation of Ordinary Shares,
such adjustment shall take effect as so determined from the relevant date
specified in whichever of sub-paragraphs (i) to (x) of Section 3.5(a) shall
apply, but shall not otherwise take effect provided that an adjustment shall
only be made if such adjustment is determined or a notice given to Holders that
an adjustment is proposed not
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more than 21 days after the occurrence of the relevant event or circumstances
and notice of such adjustment is given to Holders.
(v) No adjustment will be made to the ADS Ratio (other
than by reason of a change in the number of Ordinary Shares represented by an
ADS or a consolidation of Ordinary Shares as referred to in sub-paragraphs (i)
and (ii) of Section 3.5(a)) if it would result in a decrease of the ADS Ratio.
The ADS Ratio may not be increased so that, on an exercise of ADS Rights,
Ordinary Shares would be required to be issued at a discount to their par value.
(vi) Where an event which gives or may give rise to an
adjustment to the ADS Ratio occurs and (whether by reason of its proximity in
time to another such event, the effect of record dates for the Ordinary Shares,
such event having already given rise to or which will already result in an
adjustment or otherwise) Hanson in good faith reasonably determines that the
foregoing provisions need to be operated subject to some modification in order
to give the intended result, such modification shall be made in the operation of
the foregoing provisions as may be advised by the independent auditors for the
time being of Hanson to be in their opinion reasonably appropriate in order to
give such intended result.
(c) No adjustment in the ADS Ratio will be made if such
adjustment would be less than one percent of the ADS Ratio then in force; any
such adjustment not so made will be carried forward and taken into account in
any subsequent adjustment. Adjustments will be rounded upwards or downwards to
three decimal places.
(d) The ADS Ratio will not be adjusted at any time during the
term of the Notes for accrued OID or accrued interest. The Holders shall receive
only ADSs (and cash in respect of any fractional ADS) upon exercise of the ADS
Rights.
3.6. Notice of Adjustment. Whenever the ADS Ratio is adjusted,
HBL shall file with the ADS Rights Agent a notice of such adjustment and a
certificate from Hanson's independent auditors stating the facts requiring the
adjustment and the manner of computing it. HBL shall promptly provide notice of
such adjustment to Holders in the manner provided in Section 1.7. Absent
manifest error, the certificate shall be conclusive evidence that the adjustment
is correct. The ADS Rights Agent shall not be under any duty or responsibility
with respect to any such certificate (including the calculations contained
therein) except to exhibit the same to any Holder desiring inspection thereof.
3.7. Voluntary Increase. HBL from time to time may increase the
ADS Ratio by any amount and for any period of time; provided, however, that such
period is not less than 20 Business Days; provided, further, that such increase
will not adversely affect the interests of the Holders. Whenever the ADS Ratio
is increased, HBL shall file with the ADS Rights Agent a notice of the increase
and give notice of such increase to Holders in the manner provided in Section
1.7. HBL shall file the notice at least 15 days
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before the date the increased ADS Ratio takes effect. The notice shall state the
increased ADS Ratio and the period it will be in effect.
3.8. Notice of Certain Transactions. If:
(a) Hanson takes any action that would require an
adjustment in the ADS Ratio pursuant to Section 3.5;
(b) Hanson enters into any of the transactions described
in Section 3.9; or
(c) there is a liquidation or dissolution of Hanson;
then HBL shall file with the ADS Rights Agent (and HBL shall provide such notice
to Holders in the manner provided in Section 1.7) a notice stating the proposed
record date for a dividend or distribution or the proposed effective date of a
subdivision, consolidation, merger, binding share exchange, transfer,
liquidation, dissolution or other transaction. HBL shall file such notice, and
HBL shall provide such notice to the Holders, at least 10 days before such date.
Failure to file or provide the notice or any defect in it shall not affect the
validity of the transaction.
3.9. Reorganization of Hanson. If Hanson shall merge with or into
or sell, assign, transfer, convey or lease ("transfer") its properties and
assets substantially as an entirety to any Person (other than a sale of Hanson's
properties and assets substantially as an entirety to any Person in a
transaction or series of related transactions in which the holders of Ordinary
Shares immediately prior to such transaction do not receive securities, cash or
other assets of Hanson or any other Person), then a Holder shall be entitled to
receive from HBL, upon exercise of an ADS Right, the kind and amount of
securities, cash or other assets, if any, which such Holder would have received
in such merger or transfer if such Holder had exercised its ADS Right
immediately before the effective date of any such transaction, assuming (to the
extent applicable) that such Holder (a) was not a constituent Person or an
Affiliate of a constituent Person to such transaction, and (b) was treated alike
with the plurality of holders of Ordinary Shares.
3.10 Voluntary Winding-up of Hanson. If an effective resolution
is passed in connection with the voluntary winding up of Hanson prior to the
earlier to occur of (x) exercise and satisfaction of all outstanding ADS Rights
and (y) repayment (whether through redemption or repurchase or otherwise) of all
the Notes then Outstanding, then:
(a) if such winding up is for the purpose of a
reconstruction or amalgamation pursuant to a scheme or arrangement to
which holders of Ordinary Shares have consented, the terms of such
scheme or arrangement shall be binding on all the Holders and Section
3.9 shall apply; and
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(b) in any other case, HBL shall forthwith give a notice
in accordance with Section 1.7 stating that a resolution for the
voluntary winding up of Hanson has been passed and each Holder shall be
entitled at any time within three months after the date such notice is
given to (i) exercise its ADS Rights, and (ii) elect by notice in
writing to HBL to be treated as if it had exercised its ADS Rights
immediately before the date of the passing of the resolution, and it
shall be entitled to receive out of the assets which would otherwise be
available in the liquidation to the holders of the Ordinary Shares such
a sum (if any) as it would have received had it been the holder of and
paid for the Ordinary Shares to which it would have become entitled by
virtue of such exercise. At the expiry of such three-month period, the
ADS Rights shall terminate.
3.11. ADS Rights Agent's Adjustment Disclaimer. The ADS Rights
Agent has no duty to determine when an adjustment under this Article Three
should be made, how it should be made or what it should be. The ADS Rights Agent
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon exercise of the ADS Rights. The
ADS Rights Agent shall not be responsible for HBL's or any other person's
failure to comply with this Article Three other than the ADS Rights Agent.
3.12. Successive Adjustments. After an adjustment to the ADS
Ratio under this Article Three, any subsequent event requiring an adjustment
under this Article Three shall cause an adjustment to the ADS Ratio as so
adjusted.
3.13. Payments in Respect of ADS Rights. (a) If the Company
elects to redeem the Notes, HBL shall duly and punctually pay (simultaneously
with, and in the same manner as, any payments required to be made, in respect of
such redemption, by the Company under the Notes) such portion of the Redemption
Price as is specified in the form of ADS Right attached hereto as Annex A. Upon
exercise of a Change-in-Control Right, HBL shall duly and punctually pay
(simultaneously with, and in the same manner as, any payments required to be
made, in respect of such exercise of a Change-in-Control Right, by the Company
under the Notes) such portion of the Repurchase Price as is specified in the
form of ADS Right attached hereto as Annex A. Upon exercise of a Tax Repurchase
Right, HBL shall duly and punctually pay (simultaneously with, and in the same
manner as, any payments required to be made in respect of such exercise of a Tax
Repurchase Right, by the Company under the Notes) such portion of the Tax
Repurchase Price as is specified in the form of ADS Right attached hereto as
Annex A. If an Event of Default and an acceleration of the maturity of the Notes
shall occur under the Indenture, HBL shall duly and punctually pay
(simultaneously with, and in the same manner as, any payments required to be
made, in respect of such Event of Default, by the Company under the Notes) the
excess of the total amount due to the Holders under the Indenture, the ADS
Rights and this ADS Rights Agreement in respect of such Event of Default and
acceleration over the amount payable by the Company under the Indenture. (Any
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amounts payable by HBL pursuant to the ADS Rights and this ADS Rights Agreement
(including without limitation this Section 3.13), plus any Tax Amounts, are
hereinafter collectively referred to as "HBL Amounts".)
(b) HBL will duly and punctually pay all HBL Amounts in
accordance with the terms of the ADS Rights and this ADS Rights Agreement;
provided, however, that HBL shall be obligated to pay the HBL Amounts to the
Holders only if, and to the extent that, Hanson delivers or causes to be
delivered cash as requested by HBL pursuant to the terms of the ADS Issuance
Agreement. HBL will deposit or cause to be deposited with the ADS Rights Agent
or its designee (as directed by the ADS Rights Agent or such designee), on or
prior to the due date of the HBL Amounts, the HBL Amounts so due.
3.14. Authentication. Authentication of a Note to which an ADS
Right is annexed shall constitute authentication of such ADS Right.
3.15. Notes with ADS Rights. Whenever a Note is issued under the
Indenture, HBL shall execute and deliver an ADS Right to be annexed thereto
(except in the case of a Note issued in replacement of a Note where a legend was
inserted thereon indicating a cash exercise of the ADS Right).
ARTICLE FOUR
THE ADS RIGHTS AGENT
4.1. Notice of Defaults. Within 30 days after the occurrence of a
failure by HBL to comply with any of the provisions of this ADS Rights Agreement
or the ADS Rights, the ADS Rights Agent shall transmit to the Trustee (in
accordance with Section 4.2(h) below) and the Holders, in the manner and to the
extent provided in Section 1.7, notice of such default hereunder known to the
ADS Rights Agent, unless such default shall have been cured or waived; provided,
however, that, except in the case of a failure by HBL to comply with the
provisions of Section 3.1, 3.2, 3.3 or 3.13, the ADS Rights Agent shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors or Responsible
Officers of the ADS Rights Agent in good faith determines that the withholding
of such notice is in the interest of the Holders.
4.2. Certain Rights and Duties of ADS Rights Agent. Subject to
the provisions hereof:
(a) the ADS Rights Agent may rely and shall be protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, affidavit, exercise notice,
notice, request, direction, consent, waiver, order, bond, debenture,
note (including a Note), other evidence of
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indebtedness or other paper or document (including facsimile
transmissions thereof) believed by it to be genuine and to have been
delivered, signed or presented by the proper party or parties;
(b) any request or direction of HBL or Hanson referred to
herein shall be sufficiently evidenced by an HBL Request or an HBL Order
or a Hanson Request or Hanson Order, as the case may be, and any
resolution of the Board of Directors of HBL or Hanson, as the case may
be, may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this ADS Rights
Agreement the ADS Rights Agent shall deem it necessary or appropriate
that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the ADS Rights Agent (unless other
evidence be herein specifically prescribed) shall have the right, in the
absence of bad faith on its part, to rely upon an Officers' Certificate;
(d) before the ADS Rights Agent acts or refrains from
acting, the ADS Rights Agent shall have the right to consult with legal
counsel and the written 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 it hereunder in good faith and
in reliance thereon;
(e) the ADS Rights Agent shall be under no obligation to
exercise any of the rights or powers vested in it by this ADS Rights
Agreement at the request or direction of any of the Holders pursuant to
this ADS Rights Agreement, unless such Holders shall have offered to the
ADS Rights Agent reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the ADS Rights Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, affidavit, exercise
notice, notice, request, direction, consent, waiver, order, bond,
debenture, note (including a Note), other evidence of indebtedness or
other paper or document (including facsimile transmissions thereof), but
the ADS Rights Agent, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and if
the ADS Rights Agent shall determine to make such further inquiry or
investigation, it shall be entitled to examine during normal business
hours the relevant books and records of HBL or Hanson, personally or by
agent or attorney;
(g) the ADS Rights Agent may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents (which agents may include the Trustee and any ADS
Rights sub-Agent) or
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attorneys and the ADS Rights Agent shall not be responsible for any
misconduct or negligence on the part of any agent (which agents may
include the Trustee and any ADS Rights sub-Agent) or attorney appointed
with due care by it hereunder; the ADS Rights Agent shall be liable
hereunder only for actions taken or omitted by it in bad faith or as the
result of its negligence or willful misconduct;
(h) the ADS Rights Agent hereby delegates to the Trustee
all of its duties and responsibilities (other than as to notification
pursuant to Section 4.1) in case of any default by Hanson or HBL in the
performance of its covenants or agreements contained in this ADS Rights
Agreement or the ADS Rights and, accordingly, except as otherwise
specifically provided herein, the ADS Rights Agent shall have no duty or
responsibility in case of any such default by HBL or Hanson or in the
case of the receipt of any written demand from a Holder with respect to
such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to initiate
any proceeding at law or otherwise or, except as provided in Section
4.2(j), to make any demand upon HBL or Hanson; provided, however, that
if the Trustee fails to enforce the rights of the Holders as requested
by the ADS Rights Agent or to exercise any of its obligations to enforce
the rights of the Holders required by this ADS Rights Agreement in
respect of a default by HBL or Hanson in the performance of its
covenants or agreements contained in this ADS Rights Agreement or the
ADS Rights, the ADS Rights Agent shall thereafter have full
responsibility to enforce the rights of the Holders in the manner
described in this ADS Rights Agreement;
(i) the ADS Rights Agent shall have power to institute and
to maintain such actions and proceedings as it may consider necessary or
expedient to preserve, protect or enforce its interests and the
interests of the Holders;
(j) if the ADS Rights Agent shall receive any notice or
demand addressed to HBL or Hanson by a Holder pursuant to the provisions
of this ADS Rights Agreement, the ADS Rights Agent shall promptly
forward such notice or demand to HBL or Hanson, as the case may be;
(k) the ADS Rights Agent 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 ADS Rights Agreement;
(l) the ADS Rights Agent is the agent of the Holders and
undertakes to perform such duties and only such duties as are
specifically set forth in this ADS Rights Agreement, and no implied
covenants or obligations shall be read into this ADS Rights Agreement
against the ADS Rights Agent;
(m) in the absence of bad faith on its part, the ADS
Rights Agent may conclusively rely, as to the truth of the statements
and the correctness of the
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opinions expressed therein, upon certificates or opinions furnished to
the ADS Rights Agent and conforming to the requirements of this ADS
Rights Agreement; but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the ADS Rights Agent, the ADS Rights Agent shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this ADS Rights Agreement;
(n) the ADS Rights Agent shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in Principal
Amount at Maturity of Notes then Outstanding (or such lesser amount as
shall have acted at a meeting pursuant to the provisions of this ADS
Rights Agreement), relating to the time, method and place of conducting
any proceeding for any remedy available to the ADS Rights Agent, or
exercising any trust or power conferred upon the ADS Rights Agent under
this ADS Rights Agreement;
(o) the ADS Rights Agent shall not be responsible for any
adjustment of the ADS Ratio pursuant to Section 3.5 or for the manner,
method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment.
The ADS Rights Agent shall not be required 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
has reasonable grounds for believing that repayment of such funds or adequate
indemnity against risk or liability is not reasonably assured to it.
4.3. Not Responsible for Recitals or Issuance of ADS Rights. The
recitals contained herein and in the ADS Rights shall be taken as the statements
of HBL and Hanson, as the case may be, and the ADS Rights Agent assumes no
responsibility for their correctness, except that the ADS Rights Agent
represents that it is duly authorized to execute and deliver this ADS Rights
Agreement, and perform its obligations hereunder. The ADS Rights Agent makes no
representations as to the validity or sufficiency of this ADS Rights Agreement,
the ADS Rights or the ADSs. The ADS Rights Agent shall not be accountable for
the use or application by HBL of any proceeds received in connection with the
issuance of the ADS Rights.
4.4. May Hold ADS Rights. The ADS Rights Agent, in its individual
or any other capacity, shall have the right to become the owner or pledgee of
Notes and the ADS Rights annexed thereto, and may otherwise deal with HBL and
Hanson with the same rights it would have if it were not ADS Rights Agent.
4.5. Money Held in Trust. Money held by the ADS Rights Agent in
trust hereunder need not be segregated from other funds except to the extent
required by law.
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The ADS Rights Agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with HBL or Hanson, as
applicable.
4.6. Compensation and Reimbursement. HBL and Hanson covenant and
agree:
(a) to pay (without duplication) to the ADS Rights Agent
from time to time reasonable compensation for all services rendered by
it hereunder (which compensation shall not be limited by any provision
of law in regard to the compensation of an agent of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse (without duplication) the ADS Rights Agent upon its request
for all reasonable expenses, disbursements and advances incurred or made
by the ADS Rights Agent in accordance with any provision hereof
(including the reasonable compensation, expenses and disbursements of
its agents and counsel), except to the extent that any such expense,
disbursement or advance may be attributable to its negligence, willful
misconduct or bad faith; and
(c) to indemnify (without duplication) the ADS Rights
Agent for, and to hold it harmless against, any loss, liability, claim,
cost, action, demand or expense, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder which
it may incur or which may be made against it as a result of, arising out
of, or in connection with, the acceptance or administration of this
trust or performance of its duties hereunder or the exercise or
non-exercise by it of its powers, discretions and duties, or for any
acts taken or omitted by any ADS Rights Agent appointed pursuant to the
terms of this ADS Rights Agreement, except to the extent that any such
loss, liability, claim, cost, action, demand or expense may be
attributable to its negligence, willful misconduct or bad faith.
The term "ADS Rights Agent" shall include any predecessor ADS
Rights Agent, but the negligence of any ADS Rights Agent shall not affect the
rights of any other ADS Rights Agent hereunder.
The payment obligations of HBL and Hanson pursuant to this
Section 4.6 shall survive discharge of this ADS Rights Agreement.
4.7. ADS Rights Agent Required; Eligibility; Conflicting
Interests. There shall at all times be an ADS Rights Agent hereunder which shall
be eligible to act as ADS Rights Agent and shall have a combined capital and
surplus of at least $50,000,000. If such ADS Rights Agent 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 4.7, the combined capital and
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surplus of such ADS Rights Agent 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 ADS Rights Agent shall cease to be eligible in accordance with the
provisions of this Section 4.7, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article Four.
4.8. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the ADS Rights Agent and no appointment by the
successor ADS Rights Agent pursuant to this Article Four shall become effective
until the acceptance of appointment of a successor ADS Rights Agent in
accordance with the applicable requirements of Section 4.9.
(b) The ADS Rights Agent may resign at any time by giving written
notice thereof to HBL and Hanson. If the instrument of acceptance by a successor
ADS Rights Agent required by Section 4.9 shall not have been delivered to the
ADS Rights Agent within 30 days after the giving of such notice of resignation,
the resigning ADS Rights Agent may petition any court of competent jurisdiction
for the appointment of a successor ADS Rights Agent.
(c) The ADS Rights Agent may be removed at any time by Act of the
Holders of a majority in Principal Amount at Maturity of the Notes then
Outstanding (or such lesser amount as shall have acted at a meeting pursuant to
the provisions of this ADS Rights Agreement), delivered to the ADS Rights Agent,
HBL and Hanson.
(d) If at any time:
(1) the ADS Rights Agent shall cease to be eligible under Section
4.7 and shall fail to resign after written request therefor by HBL,
Hanson or any Holder which has been a bona fide Holder for at least six
months, or
(2) the ADS Rights Agent shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the ADS
Rights Agent or of its property shall be appointed or any public officer
shall take charge or control of the ADS Rights Agent or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such event, (i) HBL or Hanson by a Board Resolution shall have the
right to remove the ADS Rights Agent, or (ii) any Holder which has been a bona
fide Holder for at least six months may, on behalf of itself and all other
Holders similarly situated, petition any court of competent jurisdiction for the
removal of the ADS Rights Agent and the appointment of a successor ADS Rights
Agent.
(e) If the ADS Rights Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of ADS Rights
Agent for any
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cause, HBL or Hanson, by a Board Resolution, shall promptly appoint a successor
ADS Rights Agent and HBL, Hanson and such successor ADS Rights Agent shall
comply with the applicable requirements of Section 4.9. If, within one year
after such resignation, removal or incapacity, or the occurrence of such
vacancy, a successor ADS Rights Agent shall be appointed by Act of the Holders
of a majority in Principal Amount at Maturity of the Notes then Outstanding (or
such lesser amount as shall have acted at a meeting pursuant to the provisions
of this ADS Rights Agreement) delivered to HBL, Hanson and the retiring ADS
Rights Agent, the successor ADS Rights Agent so appointed shall, forthwith upon
its acceptance of such appointment in accordance with the applicable
requirements of Section 4.9, become the successor ADS Rights Agent and supersede
the successor ADS Rights Agent appointed by HBL or Hanson. If no successor ADS
Rights Agent shall have been so appointed by Hanson or the Holders and accepted
appointment in the manner required by Section 4.9, any Holder which has been a
bona fide Holder for at least six months may, on behalf of itself and all other
Holders similarly situated, petition any court of competent jurisdiction for the
appointment of a successor ADS Rights Agent.
(f) HBL or Hanson shall provide notice of each resignation and
each removal of the ADS Rights Agent and each appointment of a successor ADS
Rights Agent to the Holders in the manner provided in Section 1.7. Each notice
shall include the name of the successor ADS Rights Agent and the address of its
Corporate Trust Office.
4.9. Acceptance of Appointment by Successor. Every successor ADS
Rights Agent appointed hereunder shall execute, acknowledge and deliver to HBL,
Hanson and to the retiring ADS Rights Agent an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring ADS Rights
Agent shall become effective and such successor ADS Rights Agent, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring ADS Rights Agent; but, on request of
HBL, Hanson or the successor ADS Rights Agent, such retiring ADS Rights Agent
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor ADS Rights Agent all the rights, powers and
trusts of the retiring ADS Rights Agent and shall duly assign, transfer and
deliver to such successor ADS Rights Agent all property and money held by such
retiring ADS Rights Agent hereunder. Upon request of any such successor ADS
Rights Agent, HBL and Hanson shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor ADS Rights Agent
all such rights, powers and trusts.
No successor ADS Rights Agent shall accept its appointment unless
at the time of such acceptance such successor ADS Rights Agent shall be eligible
under this Article Four.
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4.10. Merger, Exchange, Consolidation or Succession to Business.
Any corporation into which the ADS Rights Agent may be merged or exchanged or
with which it may be consolidated, or any corporation resulting from any merger,
exchange or consolidation to which the ADS Rights Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the ADS Rights Agent, shall be the successor of the ADS Rights Agent
hereunder without the execution or filing of any instrument or any further act
on the part of any of the parties hereto; provided, however, that such
corporation shall be otherwise eligible under this Article Four.
4.11. Disclosure of Names and Addresses of Holders. Every Holder,
by receiving and holding any ADS Rights, agrees with HBL, Hanson and the ADS
Rights Agent that none of HBL, Hanson and the ADS Rights Agent nor any agent of
any of them shall be held accountable by reason of the disclosure of any
information as to the names and addresses of the Holders, irrespective of the
source from which such information was derived, and that the ADS Rights Agent
shall not be held accountable by reason of mailing any material pursuant to a
request of any Holder, HBL or Hanson.
ARTICLE FIVE
COVENANTS
5.1. Consolidation, Merger or Transfer.
(a) When HBL May Merge or Transfer Assets. HBL may not
consolidate with or merge into any other Person or convey, sell, transfer or
lease its properties and assets substantially as an entirety (in one transaction
or series of related transactions) to any Person, unless:
(i) if HBL is not the surviving corporation, the Person
formed by such consolidation or into which HBL is merged or the Person
which acquires by conveyance, sale or transfer, or which leases, the
properties and assets of HBL substantially as an entirety is a
corporation, partnership or trust and expressly assumes (A) HBL's
obligations in respect of the ADS Rights, and (B) the performance or
observance of each covenant of HBL under this ADS Rights Agreement, the
ADS Issuance Agreement and the Keepwell Agreement;
(ii) such successor corporation or Person acquiring or
leasing the properties and assets of HBL substantially as an entirety
expressly agrees (A) to indemnify each Holder against any tax,
assessment or other governmental charge payable by withholding or
deduction thereafter imposed on such Holder solely as a consequence of
such consolidation, merger, acquisition or lease with respect to any
delivery of ADSs or any payment to be made by HBL in respect of the ADS
Rights, and (B) to deliver a substitute undertaking to the ADS Rights
Agent in
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form and substance satisfactory to the ADS Rights Agent to pay any Tax
Amounts required to be paid with respect to any delivery of ADSs (or any
payment to be made by HBL with respect to the ADS Rights), solely as a
result of such consolidation, merger, acquisition or lease; and
(iii) such consolidation, merger, acquisition or lease
complies with this ADS Rights Agreement and the ADS Issuance Agreement
and all conditions precedent provided for in the ADS Rights Agreement
and the ADS Issuance Agreement relating to such transaction have been
complied with.
(b) When Hanson May Merge or Transfer Assets. Hanson may not
consolidate with or merge into any other Person or convey, sell, transfer or
lease its properties and assets substantially as an entirety (in one transaction
or series of related transactions) to any Person, unless:
(i) if Hanson is not the surviving corporation, the Person
formed by such consolidation or into which Hanson is merged or the
Person which acquires by conveyance, sale or transfer, or which leases,
the properties and assets of Hanson substantially as an entirety is a
corporation, partnership or trust and expressly assumes the performance
or observance of each covenant of Hanson under this ADS Rights
Agreement, the ADS Issuance Agreement and the Keepwell Agreement;
(ii) such successor corporation or Person acquiring or
leasing the properties and assets of Hanson substantially as an entirety
expressly agrees (A) to indemnify each Holder against any tax,
assessment or other governmental charge payable by withholding or
deduction thereafter imposed on such Holder solely as a consequence of
such consolidation, merger, acquisition or lease with respect to any
delivery of ADSs (or any payment to be made by Hanson with respect to
the ADS Rights), and (B) to deliver a substitute undertaking to the ADS
Rights Agent in form and substance satisfactory to the ADS Rights Agent
to pay any Tax Amounts required to be paid with respect to ADSs (or any
payment to be made by Hanson with respect to the ADS Rights) solely as a
result of such consolidation, merger, acquisition or lease; and
(iii) such consolidation, merger, acquisition or lease
complies with this ADS Rights Agreement and the ADS Issuance Agreement
and all conditions precedent provided for in the ADS Rights Agreement
and the ADS Issuance Agreement relating to such transaction have been
complied with.
(c) Undertakings as to Hanson's Share Capital. During such time
as any ADS Rights remain exercisable, Hanson will:
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(i) at all times keep available for issue free from
pre-emptive rights out of its authorized but unissued capital such
number of Ordinary Shares as would enable the ADS Rights and all other
rights of subscription and exchange for and conversion into Ordinary
Shares to be satisfied in full;
(ii) not issue or pay up any securities, in either case by
way of capitalization of profits or reserves, other than (A) by the
issue of fully paid Ordinary Shares to the holders of Ordinary Shares
and other persons entitled thereto, (B) by the issue of Ordinary Shares
paid up in full out of distributable profits or reserves, share premium
account or capital redemption reserve and issued in lieu of the whole or
part of a cash dividend, or (C) by the issue of fully paid equity share
capital (other than Ordinary Shares) to the holders of equity share
capital of the same class and other persons entitled thereto, unless in
any such case the same gives rise (or would, but for the fact that the
adjustment would be less than 1%, give rise) to an adjustment to the ADS
Ratio;
(iii) not in any way modify the rights attaching to the
Ordinary Shares with respect to voting, dividends or liquidation nor
issue or permit to be in issue any other class of equity share capital
carrying any rights which are more favorable than such rights, but so
that nothing in this sub-paragraph (iii) shall prevent (A) the issue of
equity share capital to employees (including directors holding executive
office) whether of Hanson or any Subsidiary or any Affiliate by virtue
of their office or employment pursuant to any scheme or plan now in
existence or which may in the future be approved by Hanson in general
meeting, (B) any consolidation or sub-division of the Ordinary Shares or
the conversion of any Ordinary Shares into stock or vice versa, (C) any
modification of such rights or any such issue which is not, in the
opinion of a reputable merchant bank reasonably selected by Hanson and
acting as expert (which opinion shall be, in the absence of manifest
error, conclusive and shall, in the case of an opinion given after a
modification or issue made in breach of the undertaking contained in
this sub-paragraph (iii)(C), cure such breach), materially prejudicial
to the interests of the Holders, (D) without prejudice to any rule of
law or legislation (including regulations made under section 207 of the
Companies Act of 1989 of Great Britain or any other provisions of that
or any other legislation), the conversion of Ordinary Shares into, or
the issue of any Ordinary Shares in, uncertificated form (or the
conversion of Ordinary Shares in uncertificated form to certificated
form) or the amendment of the Articles of Association of Hanson to
enable title to securities of Hanson (including Ordinary Shares) to be
evidenced and transferred without a written instrument or any other
alteration to the Articles of Association of Hanson made in connection
with the matters described in this sub-paragraph (iii) or which is
supplemental or incidental to any of the foregoing (including any
amendment made to enable or facilitate procedures relating to such
matters and any amendment dealing with the rights and obligations of
holders of securities,
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including Ordinary Shares, dealt with under such procedures), (E) any
issue of equity share capital where the issue of such equity share
capital results (or would, but for the fact either (x) that the
adjustment would be less than 1%, or (y) that the consideration per
Ordinary Share receivable therefor (as described in Section 3.5(b)(i))
is at least 95% of the market price per Ordinary Share, otherwise
result) in an adjustment to the ADS Ratio, (F) any issue of equity share
capital of a class of equity share capital of Hanson in issue on the
date of this ADS Rights Agreement or (G) any issue of equity share
capital, or modification of such rights attaching to the Ordinary
Shares, (1) which is an amendment to Hanson's Articles of Association to
permit a transaction of a kind described in sub-paragraphs (i) to (x) of
Section 3.5(a) or of Section 3.5(b)(ii) to comply with a change in law,
the rules of any stock exchange or any other regulations, or (2) where
prior thereto the independent auditors of Hanson shall have determined
under Section 3.5 either that no adjustment is required or that an
adjustment is required and, if so, the new ADS Ratio as a result thereof
or the basis upon which such adjustment is to be made and, in any such
case, the date on which such adjustment should take effect (and so that
such adjustment shall be made and shall take effect accordingly);
(iv) procure (A) that no securities (whether issued by
Hanson or any of its Subsidiaries or pursuant to a legally binding
agreement with Hanson or any of its Subsidiaries to be issued) issued
without rights to convert into or exchange or subscribe for Ordinary
Shares shall subsequently include such rights exercisable at a
consideration per Ordinary Share which is less than 95% of the market
price (as defined in Section 3.5(a)) for the dealing day last preceding
the date of the announcement of the proposed inclusion of such rights
unless the same gives rise (or would, but for the fact that the
adjustment would be less than 1%, give rise) to an adjustment to the ADS
Ratio and (B) that at no time shall there be in issue Ordinary Shares of
differing nominal values;
(v) not make any issue, grant or distribution or take any
other action if the effect thereof would be that, on exercise of the ADS
Rights, Ordinary Shares would (but for the provisions of Section 3.5)
have to be issued at a discount or otherwise could not, under any
applicable law then in effect, be legally issued as fully paid;
(vi) not reduce its issued share capital or any uncalled
liability in respect thereof except pursuant to the terms of issue of
the relevant share capital or by means of a purchase or redemption of
share capital of Hanson expressly excluded from giving rise to an
adjustment under Section 3.5 or where the reduction results in (or
would, but for the fact that the adjustment would be less than 1% of the
ADS Ratio then in effect, result in) an adjustment to the ADS Ratio
under the provisions of Section 3.5; and
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(vii) if any offer is made to all (or nearly as may be
practicable all) holders of Ordinary Shares (or all (or as nearly as may
be practicable all) such holders other than the offeror and/or any
associates of the offeror (as defined in section 430E(4) of the
Companies Act 1985 of Great Britain)) to acquire all or a majority of
the issued ordinary share capital of Hanson, or if any person proposes a
scheme with regard to such acquisition, give notice of such offer or
scheme to the Holders at the same time as any notice thereof is sent to
its shareholders (or as soon as practicable thereafter) stating that
details concerning such offer or scheme may be obtained from the
specified offices of the ADS Rights Agent and, where such an offer or
scheme has been recommended by the board of directors of Hanson or has
become or been declared unconditional or become effective, use all
reasonable endeavors to procure that a like offer or scheme is extended
to the holders of any Ordinary Shares issued during the period of the
offer arising out of the exercise of the ADS Rights and to the Holders
(or to HBL, so as to enable the Holders to participate through their ADS
Rights).
For the above purposes, "ordinary share capital" has the meaning ascribed to it
in section 832 of the Income and Corporation Taxes Act 1988 of the United
Kingdom and "equity share capital" has the meaning ascribed to it in section 744
of the Companies Act 1985 of Great Britain.
(d) Successor Substituted. Upon any consolidation of HBL (or
Hanson) with, or merger of HBL (or Hanson) into, any other Person or any
conveyance, sale, transfer or lease of the properties of HBL (or Hanson)
substantially as an entirety in accordance with Section 5.1(a) (or Section
5.1(b)), the successor Person formed by such consolidation or into which HBL (or
Hanson) is merged or to which such conveyance, sale, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and power
of, HBL (or Hanson) under this ADS Rights Agreement with the same effect as if
such successor Person had been named as HBL (or Hanson) herein, and thereafter,
except in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this ADS Rights Agreement and, in the case of
HBL, the ADS Rights.
5.2. Unconditional Right of Holders to Receive Payments, etc. (a)
Notwithstanding any other provision of this ADS Rights Agreement that may be to
the contrary, each Holder shall have the right, which is absolute and
unconditional, (i) to receive from HBL any and all HBL Amounts, provided that
Hanson has caused such amounts to be delivered pursuant to the ADS Issuance
Agreement, (ii) to require HBL to cause delivery of ADSs in accordance with the
ADS Rights and this ADS Rights Agreement, provided that Hanson has caused such
ADSs to be delivered pursuant to the ADS Issuance Agreement, and (iii) to
institute suit for the enforcement of any such right, and such rights shall not
be impaired or adversely affected without the consent of such Holder.
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(b) Notwithstanding any other provision of this ADS Rights
Agreement that may be to the contrary, each Holder shall have the right, which
is absolute and unconditional, (i) to receive any and all payments with respect
to the ADS Rights and otherwise which are required to be paid by Hanson under
this ADS Rights Agreement, including, without limitation, pursuant to Article
Six (collectively, "Hanson Amounts"), and (ii) to institute suit for the
enforcement of any such right, and such rights shall not be impaired or
adversely affected without the consent of such Holder.
(c) Any or all of the rights conferred upon any Holder by any of
the terms of the ADS Rights or this ADS Rights Agreement may be enforced by the
ADS Rights Agent (or its designee), which may proceed in its own name or in the
name of such Holder subject to Section 4.2.
5.3. United Kingdom Regulations; Exchange Listings. (a) Hanson
shall in good faith use its best efforts to cause all registrations with, and to
obtain any approvals by, any governmental authority under any law of the United
States or of the United Kingdom that it has the power to cause and to obtain and
that may be required before the ADSs may be lawfully issued or transferred and
delivered pursuant to this ADS Rights Agreement.
(b) Hanson shall in good faith use its best efforts to ensure the
listing of the Ordinary Shares represented by the ADSs required to be issued or
delivered upon exercise the ADS Rights on the Stock Exchange and the listing of
such ADSs on each securities exchange or securities association on which
outstanding ADSs are listed at the time of such issuance or delivery.
5.4. Tax Amounts. (a) HBL (in the case of HBL Amounts) or Hanson
(in the case of Hanson Amounts) shall pay to each Holder Tax Amounts as provided
in Section 5.4(b). Whenever in this ADS Rights Agreement there is mentioned, in
any context, the payment of the HBL Amounts or the Hanson Amounts, interest or
other amounts payable hereunder, such mention shall be deemed to include mention
of the payment of Tax Amounts provided for in this Section 5.4 to the extent
that, in such context, Tax Amounts are, were or would be payable in respect
thereof pursuant to the provisions of this Section and express mention of the
payment of Tax Amounts (if applicable) in any provisions hereof shall not be
construed as excluding Tax Amounts in those provisions hereof where such express
mention is not made.
At least 10 days prior to June 8, 1994 (and, if there has been
any change with respect to the matters set forth in the below-mentioned
Officers' Certificate, promptly following such change), HBL (or Hanson) will
furnish the ADS Rights Agent with an Officers' Certificate instructing the ADS
Rights Agent whether the delivery of ADSs upon exercise of ADS Rights and
whether the payment of any HBL Amounts (or Hanson Amounts) shall be made to
Holders without withholding for or on account any
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tax, assessment or other governmental charge described in Section 5.4(b). If any
such withholding shall be required, then such Officers' Certificate shall
specify by Holder (or class of Holder) the amount, if any, required to be
withheld on any such delivery or payment to such Holder and HBL (or Hanson) will
pay to the ADS Rights Agent the Tax Amounts required by this Section 5.4 to be
paid in the event of any such withholding. HBL (and Hanson) covenants to
indemnify the ADS Rights Agent for, and to hold it harmless against, any loss,
liability, claim, cost, action, demand or expense which it may incur or which
may be made against it reasonably arising out of or in connection with actions
taken or omitted by it in reliance on any Officers' Certificate furnished
pursuant to this Section 5.4, except to the extent such loss, liability or
expense is attributable to the ADS Rights Agent's negligence, willful misconduct
or bad faith.
(b) All payments in respect of the delivery of ADSs upon the
exercise of an ADS Right (including the delivery of such ADSs and any cash in
lieu of fractional ADSs) and each payment of an HBL Amount or Hanson Amount will
be made without deduction or withholding for or on account of any present or
future tax, assessment or governmental charge imposed or levied by Bermuda or
the United Kingdom (or any political subdivision or tax or administrative
authority of Bermuda or the United Kingdom), unless the withholding or deduction
of such tax, assessment or governmental charge is required by law. In the event
such withholding or deduction is so required, HBL (or, in the case of Hanson
Amounts, Hanson) will pay to the Holder of the applicable ADS Right such
additional amounts ("Tax Amounts") as may be necessary in order that every net
payment to the Holder in respect of delivery of the ADSs, the HBL Amounts or the
Hanson Amounts, after deduction or withholding of or on account of any present
or future tax, assessment or governmental charge imposed upon or as a result of
such delivery by Bermuda or the United Kingdom (or any political subdivision or
tax or administrative authority of Bermuda or the United Kingdom), will not be
less than the quantity or amount provided for in this ADS Rights Agreement to be
then delivered or then due and payable to the Holders; provided, however, that
(1) no payment of Tax Amounts will be required to be made for or on account of
any tax, assessment or governmental charge payable in respect of delivery of
ADSs, the HBL Amounts or the Hanson Amounts at any time on or after the date of
which a Withholding Tax Notice is given by HBL or Hanson (as the case may be) in
the manner described in Section 5.8, and (2) no payment of Tax Amounts will be
required to be made for or on account of:
(i) any tax, assessment or other governmental charge that
would not have been so imposed but for the existence of any present or
former connection between such Holder or beneficial owner (or between a
fiduciary, settlor, beneficiary, member or shareholder of, or possessor
of a power over, such Holder or beneficial owner, if such Holder or
beneficial owner is an estate, a trust, a partnership or a corporation)
and Bermuda or the United Kingdom, including, without limitation, such
Holder or beneficial owner (or such fiduciary, settlor, beneficiary,
member, shareholder or possessor) being or having been a citizen or
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resident of Bermuda or the United Kingdom or treated as a resident
thereof, or being or having been engaged in a trade or business or
present therein, or having or having had an office, fixed place of
business or permanent establishment therein, or making or having made an
election the effect of which is to subject such Holder or beneficial
owner (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) to such tax, assessment or other governmental charge;
(ii) any tax, assessment, or other governmental charge
that would not have been so imposed but for the presentation by the
Holder of any Note with ADS Rights annexed for payment on a date more
than 15 days after the date on which such payment becomes due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later;
(iii) any estate, inheritance, gift, sales, transfer,
excise, personal property, or similar tax, assessment or governmental
charge;
(iv) any tax, assessment or other governmental charge that
is imposed or withheld by reason of the failure by the Holder or the
beneficial owner of an ADS Right to comply with any requirement under a
statute, treaty, regulation or administrative practice of Bermuda or the
United Kingdom to establish entitlement to exemption from all or part of
such tax, assessment or other governmental charge;
(v) any tax, assessment or other governmental charge that
is payable otherwise than by deduction or withholding from a payment on
an ADS Right or from the delivery (or a payment in respect of the
delivery) of ADSs;
(vi) any tax, assessment or other governmental charge
required to be withheld by the ADS Rights Agent from any payment with
respect to an ADS Right or from the delivery (or a payment in respect of
the delivery) of ADSs, if such delivery or payment could be made without
such withholding by any other office of the ADS Rights Agent;
(vii) any tax, assessment or other governmental charge
imposed on any payment with respect to an ADS Right or on the delivery
(or a payment in respect of the delivery) of ADSs, to a Holder that is a
fiduciary or partnership or other than the sole beneficial owner of such
ADSs or payment to the extent a beneficiary or settlor with respect to
such fiduciary or a member of such partnership or a beneficial owner
would not have been entitled to the payment of Tax Amounts had such
beneficiary, settlor, member or beneficial owner directly received its
beneficial or distributive share of such delivery or payment; or
(viii) any combination of items (i), (ii), (iii), (iv),
(v), (vi) and (vii) above.
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Except as specifically provided herein or otherwise provided by
law, neither HBL nor Hanson shall be required to make any payment with respect
to any tax, assessment or other governmental charge imposed by any government or
any political subdivision or tax or administrative authority thereof or therein.
5.5. Maintenance of Offices or Agencies. The Corporate Trust
Office of the ADS Rights Agent in the Borough of Manhattan, The City of New
York, will be the place where Registered Notes and the Rule 144A Global Notes
may be surrendered upon exercise of the ADS Right, where Bearer Notes may be
surrendered upon exercise of the ADS Right in the circumstances described below
(and not otherwise), and where notices and demands to or upon HBL or Hanson in
respect of the ADS Rights and this ADS Rights Agreement may be served.
Registered Notes and the Rule 144A Global Notes also may be surrendered at any
of the offices of the ADS Rights Agent and the ADS Rights sub-Agent outside the
United States referred to below.
The offices of the ADS Rights Agent located in London and the ADS
Rights sub-Agent in Luxembourg, or any other designated office of the ADS Rights
Agent outside of the United States or its possessions, will be the place where,
subject to any applicable laws or regulations, Bearer Notes may be surrendered
upon exercise of the ADS Rights. No ADSs required to be delivered, and no
payments of HBL Amounts or Hanson Amounts, with respect to Bearer Notes, shall
be (a) delivered to or paid at the Corporate Trust Office of the ADS Rights
Agent in the Borough of Manhattan, The City of New York, or any other office or
agency of the ADS Rights Agent in the United States or its possessions, or (b)
in the case of such HBL Amounts or Hanson Amounts, made by check mailed to any
address in the United States or its possessions or by wire transfer to an
account maintained with a bank located in the United States or its possessions;
provided, however, that Bearer Notes may be, upon exercise of an ADS Right,
surrendered at, ADSs delivered to, or such HBL Amounts or Hanson Amounts paid
at, the Corporate Trust Office of the ADS Rights Agent in the Borough of
Manhattan, The City of New York if (but only if) such exercise, delivery or
payment at all offices of the ADS Rights Agent and the ADS Right sub-Agent
outside the United States or its possessions maintained for such purposes in
accordance with the ADS Rights and this ADS Rights Agreement is illegal or
effectively precluded by exchange controls or other similar restrictions, as
determined by HBL or Hanson, as the case may be.
5.6. Statements as to Compliance. Each of HBL and Hanson will
deliver to the ADS Rights Agent, within 120 days after the end of each fiscal
year ending after the date hereof, a certificate (which need not comply with
Section 1.2) of its principal executive officer, principal financial officer or
principal accounting officer stating whether, to such officer's knowledge, it is
in compliance with all covenants and conditions to be complied with by it under
this ADS Rights Agreement, the ADS Issuance Agreement and the Keepwell
Agreement. For purposes of this Section 5.6, such
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compliance shall be determined without regard to any period of grace or
requirement of notice under this ADS Rights Agreement.
5.7. Corporate Existence. Subject to Section 5.1, each of HBL and
Hanson will each do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and its rights (charter
and statutory) and franchises, except for those that the failure of which to
preserve and keep in full force and effect will not have a material adverse
effect on the Holders.
5.8. Tax Repurchase. If the circumstances set forth in Section
304 of the Indenture occur, HBL or Hanson may deliver to the Holders a
Withholding Tax Notice containing the information required pursuant to items (1)
through (11) of such Section 304. HBL or Hanson shall also comply with any
additional requirements required pursuant to Section 304 of the Indenture.
5.9. Judgment Currency. Each of HBL and Hanson agrees, to the
fullest extent that it may effectively do so under applicable law, that: (a) if
for the purpose of obtaining judgment in any court it is necessary to convert
the sum due in respect of any payments to be made hereunder (the "Required
Currency") into a currency in which a judgment will be rendered (the "Judgment
Currency"), the rate of exchange used shall be the rate at which at Citibank,
N.A. in New York City could purchase the Required Currency with the Judgment
Currency on the day on which final unappealable judgment is entered, unless such
day is not a New York Banking Day, then, to the extent permitted by applicable
law, the rate of exchange used shall be the rate at which at Citibank, N.A. in
New York City could purchase the Required Currency with the Judgment Currency on
the New York Banking Day preceding the day on which a final unappealable
judgment is entered; and (b) its obligations under this ADS Rights Agreement or
the ADS Rights to make payments in the Required Currency (i) shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment
(whether or not entered in accordance with clause (a) above) in any currency
other than the Required Currency, except to the extent that such tender or
recovery shall result in the actual receipt, by the payee, of the full amount of
the Required Currency expressed to be payable in respect of such payments; (ii)
shall be enforceable as an alternative or additional cause of action for the
purpose of recovering in the Required Currency the amount, if any, by which such
actual receipt shall fall short of the full amount of the Required Currency so
expressed to be payable; and (iii) shall not be affected by judgment being
obtained for any other sum due under this ADS Rights Agreement. For purposes of
the foregoing, "New York Banking Day" means any day except a Saturday, Sunday or
a legal holiday in The City of New York or a day on which banking institutions
in The City of New York are authorized or required by law or executive order to
close.
5.10. Deposit Agreement; Registration Statement. (a) Hanson
undertakes: (i) to maintain throughout the duration of this ADS Rights Agreement
the Deposit
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Agreement or such other American depositary receipt facility in the United
States for the ADSs with Citibank, N.A. or such other major banking institution
as Hanson may reasonably select; (ii) not to amend the Deposit Agreement (during
the time that it is the agreement relating to such facility) if such amendment
would discriminate in any respect between holders of ADSs issued upon exercise
of ADS Rights and any other holders of ADSs, and (iii) not to enter into a
substitute deposit agreement in respect of such facility if such substitute
deposit agreement would discriminate in any respect between holders of ADSs
issued upon exercise of ADS Rights and any other holders of ADSs.
(b) Hanson undertakes to keep the Registration Statement on Form
F-6 (File No. 33-7419) under the Securities Act (the "Form F-6") continuously
effective such that Hanson or the Depositary can deliver a prospectus as then
may be required by the Securities Act in connection with the delivery of ADSs
upon exercise of an ADS Right.
5.11. [Intentionally Omitted.]
5.12. HBL Information. At any time when HBL is not subject to
Section 13 or 15(d) of the Exchange Act, upon the request of a Holder or of a
beneficial owner of an ADS Right which is associated with a Bearer Note, HBL
will promptly furnish or cause to be furnished Rule 144A Information (as defined
below) to such Holder, to such beneficial owner or to a prospective purchaser of
an ADS Right designated by such Holder or such beneficial owner, as the case may
be, in order to permit compliance by such Holder or beneficial owner with Rule
144A under the Securities Act; provided, however, that HBL shall not be required
to furnish such information in connection with any request made on or after the
date which is three years from the later of (i) the date such ADS Right (or ADS
Right attached to a Predecessor Note (as defined in the Indenture)) was
originally acquired from HBL and (ii) the date such ADS Right (or ADS Right
attached to a Predecessor Note) was last acquired from the Company, Hanson, HBL
or an "affiliate" of any of them within the meaning of Rule 144 under the
Securities Act. "Rule 144A Information" shall be such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto).
5.13. Enforcement of ADS Issuance Agreement and Keepwell
Agreement. HBL hereby undertakes to the ADS Rights Agent and the Holders that so
long as there is any ADS Right outstanding:
(a) it will, if so required by the ADS Rights Agent or by the
direction of the Holders of a majority in Principal Amount at Maturity of Notes
then Outstanding (or such lesser amount as shall have acted at a meeting
pursuant to the provisions of this ADS Rights Agreement) (collectively, an "HBL
Direction") take such action as they may require to protect and enforce HBL's
rights under the ADS Issuance Agreement and the Keepwell Agreement;
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(b) if a scheme of arrangement is proposed in relation to Hanson
under section 425 of the Companies Act 1985 of Great Britain, it will forthwith
give notice thereof to the ADS Rights Agent and to the Holders in accordance
with the provisions of Section 1.7 and shall exercise its rights as a creditor
of Hanson in such manner as may be required by an HBL Direction;
(c) it will not terminate, amend or modify the ADS Issuance
Agreement or the Keepwell Agreement, nor will it waive or discharge any
obligations of Hanson under the ADS Issuance Agreement or the Keepwell Agreement
or any rights or remedies of HBL in respect thereof, except (i) by an agreement
in writing which has been duly approved by the Holders in accordance with the
provisions of this ADS Rights Agreement or (ii) in any case where such
termination, amendment, modification, waiver or discharge does not have an
adverse effect on the Holders.
5.14. Certain Taxes and Duties. Upon exercise of an ADS Right,
Hanson will pay any United Kingdom Stamp Duty Reserve Tax payable in the United
Kingdom on the issuance of Ordinary Shares to the Depositary.
5.15. Compliance. Each of HBL and Hanson covenants and agrees,
for the benefit of the Holders and the ADS Rights Agent, to comply with and
perform all its duties, obligations and responsibilities under the ADS Issuance
Agreement and the Keepwell Agreement.
ARTICLE SIX
GUARANTY AND INDEMNITY OF HANSON
6.1. Guaranty. Subject to Section 6.2, Hanson hereby absolutely,
unconditionally and irrevocably guarantees to the ADS Rights Agent and the
Holders the due and punctual payment by HBL of all HBL Amounts and the
performance of all other obligations of HBL under this ADS Rights Agreement
other than those set forth in Sections 3.1 and 3.2 hereof.
6.2. No Guaranty of Payment of Hanson's Shares. The Guaranty
contained in Section 6.1 shall not extend to payment of subscription money in
respect of Hanson's Ordinary Shares.
6.3. Indemnity. As a separate and independent stipulation, Hanson
hereby undertakes to indemnify HBL, the ADS Rights Agent and the Holders against
any losses, claims, damages, costs or expenses (including without limitation
reasonable attorneys' fees) or liabilities arising out of or relating to the
failure by Hanson to deliver Ordinary Shares or ADSs in accordance with this ADS
Rights Agreement or the terms of the ADS Issuance Agreement.
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6.4. Guaranty Absolute. Hanson hereby agrees that its obligations
under this Article Six shall be as if it were principal obligor and not merely
surety and absolute and unconditional, irrespective of, and shall be unaffected
by, any invalidity, irregularity or unenforceability of the ADS Rights or this
ADS Rights Agreement, any failure to enforce the provisions of such ADS Rights
or this ADS Rights Agreement, any waiver, modification, or indulgence granted to
HBL with respect thereto, by the Holders or the ADS Rights Agent, 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 circumstances shall without the consent
of Hanson increase the HBL Amounts. Hanson hereby agrees that the guaranty
granted under this Article Six shall be enforceable without any demand, suit or
proceeding first against HBL. Hanson hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of merger,
amalgamation, consolidation or bankruptcy of HBL or Hanson, any right to require
a proceeding first against HBL, protest or notice with respect to any ADS Rights
or the obligations evidenced thereby and demands whatsoever, and covenants that
the Guaranty granted under this Article Six will not be discharged as to any ADS
Right except by payment in full of the HBL Amounts.
Hanson shall be subrogated to the rights of the ADS Rights Agent
and the Holders against HBL, and will have recourse against HBL, in respect of
any amounts paid to the ADS Rights Agent and the Holders by Hanson pursuant to
the provisions of the Guaranty granted under this Article Six; provided,
however, that Hanson shall not be entitled to enforce, or to receive any
payments arising out of or based upon, such right of subrogation and recourse
until the payment of all HBL Amounts shall have been paid in full. Such
limitation on the subrogation and recourse shall not limit or affect the
enforceability of the Guaranty granted under this Article Six.
ARTICLE SEVEN
AMENDMENTS
7.1. Without Consent of Holders. Without the consent of the
Holders, HBL, Hanson and the ADS Rights Agent, when authorized by or pursuant to
a Board Resolution of each of HBL and Hanson, at any time and from time to time,
may amend the ADS Rights Agreement for any of the following purposes:
(a) to cure any ambiguity, defect or inconsistency or make
any other provision which HBL, Hanson and the ADS Rights Agent may deem
necessary or desirable and which will not adversely affect the interests
of the Holders of the ADS Rights;
(b) to provide for the assumption by a successor to HBL or
Hanson of its obligations under this ADS Rights Agreement;
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(c) to add to the covenants or obligations of HBL or
Hanson under this ADS Rights Agreement or surrender any right, power or
option conferred by this ADS Rights Agreement on HBL or Hanson; or
(d) increase the ADS Ratio, provided that such increase
does not and will not adversely affect the interests of the Holders of
the ADS Rights.
7.2. With Consent of Holders. The voting power of Holders with
respect to this ADS Rights Agreement is calculated, for ease of reference, in
terms of the Principal Amount at Maturity of the Notes associated with the ADS
Rights (subject, however, to the proviso contained in the definition of "Holder"
in Section 1.1(b)). Either (i) with the consent of the Holders of at least a
majority in aggregate Principal Amount at Maturity of the Notes then
Outstanding, by Act of such Holders delivered to HBL, Hanson and the ADS Rights
Agent, or (ii) by the adoption of a resolution, at a meeting of Holders of the
Notes then Outstanding at which a quorum is present, by the Holders of 66-2/3%
in Principal Amount at Maturity of the Notes represented at such meeting, HBL or
Hanson, when authorized by or pursuant to a Board Resolution, and the ADS Rights
Agent may amend this ADS Rights Agreement for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this ADS Rights Agreement or of modifying in any manner the rights of the
Holders under this ADS Rights Agreement; provided, however, that no such
amendment shall, without the consent of each Holder affected thereby:
(a) make the ADS Rights exercisable for money or
securities other than as provided in this ADS Rights Agreement;
(b) adversely affect the ADS Rights or the rights of the
Holders to receive payments in respect thereof;
(c) change the obligation of HBL or Hanson to pay Tax
Amounts;
(d) amend or modify any provision of Article Six;
(e) reduce the percentage of the Principal Amount at
Maturity of Notes the Holders of which must consent to any amendment or
waiver under this ADS Rights Agreement or modify the provisions relating
to such amendments and waivers or reduce the requirements of Section 9.4
for quorum or voting; or
(f) impair the right to institute suit for the enforcement
of any payment with respect to, or exercise of, the ADS Rights.
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It shall not be necessary for any Act of Holders under this
Section 7.2 to approve the particular form of any proposed amendment, but it
shall be sufficient if such Act shall approve the substance thereof.
7.3. Execution of Amendments. In executing any amendment
permitted by this Article Seven or the modification thereby of this ADS Rights
Agreement, the ADS Rights Agent shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such amendment is authorized or permitted by this ADS Rights Agreement. The ADS
Rights Agent may, but shall not be obligated to, enter into any such amendment
which affects the ADS Rights Agent's own rights, duties or immunities under this
ADS Rights Agreement or otherwise.
7.4. Effect of Amendment. Upon the execution of any amendment
under this Article Seven, this ADS Rights Agreement shall be modified in
accordance therewith, and such amendment shall form a part of this ADS Rights
Agreement for all purposes; and every Holder of an ADS Right theretofore or
thereafter authenticated and delivered under this ADS Rights Agreement shall be
bound thereby.
7.5. Notice of Amendment. Promptly after the execution by HBL,
Hanson and the ADS Rights Agent of any amendment pursuant to the provisions of
Article Seven, HBL shall provide notice, setting forth in general terms the
substance of such amendment, in the manner provided in Section 1.7. Any failure
of HBL to give such notice, or any defect therein, shall not in any way impair
or affect the validity of any such amendment.
ARTICLE EIGHT
SECURITIES ACT REGISTRATION
Hanson promptly will prepare and file with the Commission the
Registration Statement under the Securities Act with respect to the Ordinary
Shares to be represented by the ADSs issuable upon exercise of the ADS Rights.
Hanson shall use its best efforts to have the Registration Statement declared
effective by the Commission as soon as practicable after it is filed (and in no
event later than June 8, 1994). Hanson also shall keep the Registration
Statement continuously effective such that a Prospectus can be delivered as then
may be required by the Securities Act in connection with the delivery of ADSs
upon exercise of an ADS Right. Notwithstanding the foregoing, if, at the time an
ADS Right is exercised, the Prospectus contained in the Registration Statement
is not current because it fails to disclose a material business development or
transaction involving Hanson or its Subsidiaries, public disclosure of which, in
the good faith judgment of the Board of Directors of Hanson, could adversely
affect Hanson, Hanson may postpone delivery of a Current Prospectus and,
therefore, of the ADSs issuable upon exercise of the ADS Rights for a reasonable
period (not to exceed 20 Business Days). The obligation of Hanson to keep such
Registration Statement effective shall terminate
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upon the earlier to occur of (a) exercise of all the outstanding ADS Rights and
(b) repayment (whether through redemption or repurchase or otherwise) of all the
Notes then Outstanding.
So long as any ADS Right is outstanding, Hanson will use its best
efforts to register or qualify the Ordinary Shares to be represented by the ADSs
and the ADSs under all applicable state securities or blue sky laws and will
make all other filings reasonably necessary or advisable in connection therewith
and do any and all other reasonable acts and things necessary or advisable to
comply with such state securities or blue sky laws in connection with the
exercise of ADS Rights (provided that Hanson will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Article Eight, (ii) subject itself to taxation
in any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction).
Hanson will take such actions as are necessary or advisable to
list the ADSs issuable upon exercise of the ADS Rights on the New York Stock
Exchange.
ARTICLE NINE
MEETINGS OF HOLDERS
9.1. Purposes for Which Meetings May Be Called. A meeting of
Holders may be called at any time and from time to time pursuant to this Section
9.1 to make, give or take any request, demand, authorization, direction, notice,
consent, waiver or other Act provided by this ADS Rights Agreement to be made,
given or taken by Holders.
9.2. Call, Notice and Place of Meetings. (a) The ADS Rights Agent
may at any time call a meeting of Holders for any purpose specified in Section
9.1, to be held at such time and at such place in the Borough of Manhattan, The
City of New York, or in London as the ADS Rights Agent shall determine. Notice
of every meeting of Holders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be given, in the manner provided in Section 1.7, not less than 21 nor more
than 180 days prior to the date fixed for the meeting.
(b) In case at any time HBL or Hanson, pursuant to a Board
Resolution, or the Holders of at least 10% in Principal Amount at Maturity of
the Notes then Outstanding shall have requested the ADS Rights Agent to call a
meeting of the Holders for any purpose specified in Section 9.1, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting, and the ADS Rights Agent shall not have made the first publication
of the notice of such meeting within 21 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as provided herein,
then HBL, Hanson or the Holders of the specified amount of Notes, as the case
may be, may determine the time and the place in the Borough of Manhattan, The
City of
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New York, or in London for such meeting and may call such meeting for such
purposes by giving notice thereof as provided in Section 9.2(a).
9.3. Persons Entitled to Vote at Meetings. To be entitled to vote
at any meeting of Holders, a Person shall be (a) a Holder of one or more Notes
then Outstanding, or (b) a Person appointed by an instrument in writing as proxy
for a Holder or Holders of one or more Notes then Outstanding by such Holder or
Holders. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders shall be the Persons entitled to vote at such meeting and
their counsel, any representatives of the ADS Rights Agent and its counsel and
any representatives of HBL and Hanson and their respective counsel. The ADS
Rights Agent, in consultation with HBL, will have the discretion to establish a
record date for the purpose of determining Holders of Registered Notes and
associated ADS Rights entitled to vote at such meetings.
9.4. Quorum; Action. The Persons entitled to vote a majority in
Principal Amount at Maturity of the Notes then Outstanding shall constitute a
quorum. In the absence of a quorum within 30 minutes of the time appointed for
any such meeting, the meeting shall, if convened at the request of Holders, be
dissolved. In any other case the meeting may be adjourned for a period of not
less than 10 days as determined by the chairman of the meeting prior to the
adjournment of such meeting. In the absence of a quorum at any such adjourned
meeting, such adjourned meeting may be further adjourned for a period not less
than 10 days as determined by the chairman of the meeting prior to the
adjournment of such adjourned meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 9.2(a), except that such
notice need be given only once and not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned meeting shall state expressly the percentage of the Principal Amount
at Maturity of the Notes then Outstanding which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the Persons entitled to vote 25% in Principal
Amount at Maturity of the Notes then Outstanding at the time shall constitute a
quorum for the taking of any action set forth in the notice of the original
meeting.
At a meeting or an adjourned meeting duly reconvened and at which
a quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 7.2) shall be effectively passed and decided
if passed or decided by the Persons entitled to vote not less than 66-2/3% in
Principal Amount at Maturity of Notes then Outstanding represented and voting at
such meeting.
Any resolution passed or decisions taken at any meeting of
Holders duly held in accordance with this Section 9.4 shall be binding on all
the Holders, whether or not present or represented at the meeting.
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9.5. Determination of Voting Rights; Conduct and Adjournment of
Meetings. (a) Notwithstanding any other provisions of this ADS Rights Agreement,
the ADS Rights Agent may make such reasonable regulations as it may deem
advisable for any meeting of Holders in regard to proof of status as a Holder
and of the appointment of proxies and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall deem appropriate. Except as otherwise
permitted or required by any such regulations, the status as a Holder shall be
proved in the manner specified in Section 1.4 and the appointment of any proxy
shall be proved in the manner specified in Section 1.4 or by having the
signature of the Person executing the proxy witnessed or guaranteed by any trust
company, bank or banker authorized by Section 1.4 to certify to the holding of
Bearer Notes. Such regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and genuine without the
proof specified in Section 1.4 or other proof.
(b) The ADS Rights Agent shall, by an instrument in writing,
appoint a temporary chairman (which may be the ADS Rights Agent) of the meeting,
unless the meeting shall have been called by HBL or by Holders as provided in
Section 9.2(b) in which case HBL or the Holders calling the meeting, as the case
may be, shall in like manner appoint a temporary chairman. A permanent chairman
and a permanent secretary of the meeting shall be elected by vote of the Persons
entitled to vote a majority in Principal Amount at Maturity of the Notes then
Outstanding represented at the meeting.
(c) At any meeting each Holder or holder of a proxy shall be
entitled to one vote for each $1,000 Principal Amount at Maturity of Notes (with
ADS Rights annexed thereto) held or represented by him; provided, however, that
no vote shall be cast or counted at any meeting in respect of any Note
challenged as not Outstanding and ruled by the chairman of the meeting to be not
Outstanding. The chairman of the meeting shall have no right to vote, except as
a Holder or holder of a proxy.
(d) Any meeting of Holders duly called pursuant to Section 9.2 at
which a quorum is present may be adjourned from time to time by Persons entitled
to vote a majority in Principal Amount at Maturity of the Notes then Outstanding
represented at the meeting, and the meeting may be held as so adjourned without
further notice.
9.6. Counting Votes and Recording Action of Meetings. The vote
upon any resolution submitted to any meeting of Holders shall be by written
ballots on which shall be subscribed the signatures of the Holders or of their
representatives by proxy and the principal amounts and serial numbers of the
Notes then Outstanding held or represented by them. The permanent chairman of
the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record, at least in triplicate,
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of the proceedings of each meeting of Holders shall be prepared by the secretary
of the meeting and there shall be attached to said record the original reports
of the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more Persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was given as provided in
Section 9.2 and, if applicable, Section 9.4. Each copy shall be signed and
verified by the affidavits of the permanent chairman and secretary of the
meeting and one such copy shall be delivered to HBL, another to Hanson and
another to the ADS Rights Agent to be preserved by the ADS Rights Agent, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
ARTICLE TEN
MISCELLANEOUS
10.1. 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.
10.2. Successors and Assigns. All covenants and agreements in
this ADS Rights Agreement by each of the parties shall bind its permitted
successors and assigns, whether so expressed or not.
10.3. Separability Clause. In the event that any provision in
this ADS Rights Agreement or in the ADS Rights shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions thereof shall not in any way be affected or impaired thereby.
10.4. Benefits of ADS Rights Agreement. Nothing in this ADS
Rights Agreement or in the ADS Rights, express or implied, shall provide to any
Person, other than the parties hereto and their successors hereunder and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
ADS Rights Agreement.
10.5. GOVERNING LAW. THIS ADS RIGHTS AGREEMENT AND THE ADS RIGHTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS EXCEPT THAT MATTERS
RELATING TO THE AUTHORIZATION AND EXECUTION BY HBL OR HANSON OF THIS ADS RIGHTS
AGREEMENT AND THE ADS RIGHTS SHALL BE GOVERNED BY THE LAWS OF BERMUDA OR ENGLAND
AND WALES, AS APPLICABLE.
10.6. Submission to Jurisdiction. Each of HBL and Hanson agrees
that any legal suit, action or proceeding arising out of or relating to this ADS
Rights Agreement,
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the ADS Rights or the ADSs may be instituted in any state or federal court in
the State and County of New York, United States of America and to the extent it
may effectively do so, each of HBL and Hanson hereby waives, and agrees not to
assert, by way of motion, as a defense or otherwise, in any such suit, action or
proceeding any claim which it may now or hereafter have that it is not
personally subject to any the jurisdiction of the above-named courts, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper, or that this ADS Rights
Agreement, the ADS Rights or the ADSs or the subject matter hereof or thereof
may not be enforced by such court, and irrevocably submits to the jurisdiction
of any such court in any such suit, action or proceeding. Each of HBL and Hanson
hereby designates HM Anglo-American, Ltd. as its authorized agent to accept and
acknowledge on its behalf service of any and all process which may be served in
any such suit, action or proceeding in any such court and agrees that service of
process upon said agent at its office at 410 Park Avenue, New York, New York
10022 (or at such other address in the Borough of Manhattan, The City of New
York, as such agent may designate by written notice to HBL or, as the case may
be, Hanson and the ADS Rights Agent), and written notice of said service to HBL
or, as the case may be, mailed or delivered to it, in the case of HBL, at
Clarendon House, 2 Church Street, Hamilton HM CX, Bermuda, Attn: Secretary, and,
in the case of Hanson, at 1 Grosvenor Place, London, SW1X 7JH, England, Attn:
Legal Director, shall be deemed in every respect effective service of process
upon HBL or, as the case may be, Hanson in any such suit, action or proceeding
and shall be taken and held to be valid personal service upon HBL or, as the
case may be, Hanson, whether or not HBL or, as the case may be, Hanson shall
then be doing, or at any time shall have done, business within the State of New
York, and that any such service of process shall be of the same force and
validity as if service were made upon it according to the laws governing the
validity and requirements of such service in such State, and waives all claim of
error by reason of any such service. Said designation and appointment shall be
irrevocable until this ADS Rights Agreement shall have been satisfied and
discharged and, if at any time, HM Anglo-American, Ltd. does not have a business
address in the Borough of Manhattan, The City of New York, each of HBL and
Hanson agrees to appoint CT Corporation System, 1633 Broadway, New York, New
York 10019, as its successor authorized agent. Notwithstanding the foregoing,
any suit, action or proceeding arising out of or in connection with this ADS
Rights Agreement may be instituted by the ADS Rights Agent, the Trustee or any
Holder in any competent court in Bermuda or England and Wales.
10.7. Legal Holidays. If any date specified in this ADS Rights
Agreement or in the ADS Rights for the occurrence of any event (including,
without limitation, the delivery of ADSs, the providing of notice and the making
of a payment) shall not be a Business Day at the place of the occurrence of the
event, then such event shall occur on the next succeeding date that is a
Business Day at such place with the same force and effect as if such event had
occurred on the date originally specified.
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10.8. Interest. If any payment hereunder or under the ADS Rights
is not made by HBL or Hanson, as the case may be, when due, then interest shall
accrue thereon at the rate of 6.00% per annum, compounded semiannually, and
shall be payable by HBL or Hanson, as the case may be, upon the demand of the
Holders, in each case to the extent payment of such interest shall be legally
enforceable under applicable law. Such interest shall accrue from and including
the date such payment was due to, but excluding, the date such payment,
including interest thereon, has been duly made or provided for.
10.9. Continuing Obligations. So long as any ADS Right is
outstanding, Hanson and HBL will remain subject to all of the provisions of this
ADS Rights Agreement, the ADS Rights, the ADS Issuance Agreement and the
Keepwell Agreement, notwithstanding any satisfaction and discharge of the
Company's obligations under the Indenture or any covenant defeasance in respect
of the Company under the Indenture.
10.10. ADS Rights sub-Agent. Subject to the approval of Hanson
and HBL, the ADS Rights Agent may appoint one or more ADS Rights sub-Agent to
act on its behalf under this ADS Rights Agreement. The ADS Rights Agent hereby
appoints Commerzbank International S.A. to act as such ADS Rights sub-Agent, and
Hanson and HBL hereby approve such appointment.
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IN WITNESS WHEREOF, the parties hereto have caused this ADS
Rights Agreement to be duly executed as of the day and year first above written.
[SEAL] HANSON (BERMUDA) LIMITED,
/s/ A. MCKAY By: /s/ J.C. RICHMOND
______________________ __________________________
ATTEST Name: J.C. Richmond
Title: Treasurer
HANSON PLC,
(Executed and delivered as a deed by
HANSON PLC acting by two directors
or a director and the company secretary)
By: /s/ John G. Raos
__________________________
Name: J.G. Raos
Title: Director
By: /s/ William M. Landuyt
__________________________
Name: W.M. Landuyt
Title: Director
[SEAL] CITIBANK, N.A.,
ADS Rights Agent,
/s/ NANCY A. WARD By: /s/ ACHSON CHIN
______________________ __________________________
ATTEST Name: Achson Chin
Title: Vice President
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Exhibit A
FORM OF ADS RIGHT
ADS RIGHT
This ADS Right is one of a duly authorized issue of ADS Rights
associated with the 2.39% Senior Exchangeable Discount Notes Due 2001 of Hanson
America Inc. The ADS Rights are issued and to be issued under an ADS Rights
Agreement dated as of March 1, 1994 (the "ADS Rights Agreement"), among Hanson
(Bermuda) Limited ("HBL"), Hanson PLC ("Hanson") and Citibank, N.A., as ADS
Rights Agent (the "ADS Rights Agent", which term includes any successor ADS
Rights Agent under the ADS Rights Agreement), to which ADS Rights Agreement and
all supplements thereto and amendments thereof reference is made for a statement
of the respective rights, limitation of rights, duties and immunities thereunder
of HBL, Hanson, the ADS Rights Agent and the Holders and of the terms upon which
the ADS Rights are, and are to be, delivered.
Subject to and upon compliance with the provisions of the ADS
Rights Agreement, the Holder of a Note (or a portion thereof) is entitled
pursuant to this ADS Right, at such Holder's option, at any time on or after
June 8, 1994 and on or before the close of business on March 1, 2001, to
exercise this ADS Right against HBL by instructing the ADS Rights Agent, acting
on behalf of the Holder, to surrender such Holder's Note (or a portion thereof)
for redemption by the Company pursuant to the Indenture, at a redemption price
equal to the Adjusted Accreted Value thereof to but excluding the ADS Exercise
Date, and to apply the proceeds of such redemption to purchase ADSs
(representing Ordinary Shares deposited by Hanson with the Depositary) at the
ADS Ratio. HBL will deliver or cause such ADSs to be delivered to the ADS Rights
Agent, acting on behalf of the Holder, in accordance with the provisions of the
ADS Rights Agreement; provided, however, that HBL shall be obligated to deliver
ADSs (and cash in lieu of a fractional ADS) to the Holder only if, and to the
extent that, Hanson delivers or causes the delivery of Ordinary Shares, ADSs and
cash as requested by HBL pursuant to the terms of the ADS Issuance Agreement.
Notwithstanding the foregoing, (a) in case a Note (or a portion thereof) is
called for redemption, the Holder may exercise the ADS Right in respect of such
Note (or a portion thereof) until and including, but (unless there is a default
in making the payment due upon redemption) not after, the close of business on
the Redemption Date; (b) in case of a Change-in-Control for which the Holder
exercises its Change-in-Control Right with respect to a Note (or a portion
thereof), the Holder may exercise the ADS Right in respect of such Note (or a
portion thereof) until, but (unless there is a default in making the payment due
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upon repurchase) not after, receipt of written notice by the Company of the
exercise of such Change-in-Control Right; and (c) in case a Withholding Tax
Notice is delivered by HBL or Hanson and the Holder exercises its Tax Repurchase
Right with respect to a Note (or a portion thereof), the Holder may exercise the
ADS Right in respect of such Note (or a portion thereof) until and including,
but (unless there is a default in making the payment due upon repurchase) not
after, the close of business on the Tax Repurchase Date. For purposes of this
paragraph, any Person that is a participant in DTC having a beneficial interest
in the Rule 144A Global Receipts representing the Rule 144A Global Notes may
exercise this ADS Right in the manner (and subject to the conditions) described
below (on behalf of the Note Custodian).
The Corporate Trust Office of the ADS Rights Agent in the Borough
of Manhattan, The City of New York, will be the place where Registered Notes and
the Rule 144A Global Notes may be surrendered upon exercise of the ADS Right,
where Bearer Notes may be surrendered upon exercise of the ADS Right in the
circumstances described below (and not otherwise), and where notices and demands
to or upon HBL or Hanson in respect of the ADS Rights and this ADS Rights
Agreement may be served. Registered Notes and the Rule 144A Global Note also may
be surrendered at any of the offices of the ADS Rights Agent and the ADS Rights
sub-Agent outside the United States referred to below.
The offices of the ADS Rights Agent located in London and the ADS
Rights sub-Agent in Luxembourg, or any other designated office of the ADS Rights
Agent outside of the United States or its possessions, will be the place where,
subject to any applicable laws or regulations, Bearer Notes may be surrendered
upon exercise of the ADS Rights. No ADSs required to be delivered, and no
payments of HBL Amounts or Hanson Amounts, with respect to Bearer Notes, shall
be (a) delivered to or paid at the Corporate Trust Office of the ADS Rights
Agent in the Borough of Manhattan, The City of New York, or any other office or
agency of the ADS Rights Agent in the United States or its possessions, or (b)
in the case of such HBL Amounts or Hanson Amounts, made by check mailed to any
address in the United States or its possessions or by wire transfer to an
account maintained with a bank located in the United States or its possessions;
provided, however, that Bearer Notes may be, upon exercise of an ADS Right,
surrendered at, ADSs delivered to, or such HBL Amounts or Hanson Amounts paid
at, the Corporate Trust Office of the ADS Rights Agent in the Borough of
Manhattan, The City of New York if (but only if) such exercise, delivery or
payment at all offices of the ADS Rights Agent and the ADS Rights sub-Agent
outside the United States or its possessions maintained for such purposes in
accordance with this ADS Right and the ADS Rights Agreement is illegal or
effectively precluded by exchange controls or other similar restrictions, as
determined by HBL or Hanson, as the case may be.
A Holder may exercise the ADS Right with respect to a portion of
the Principal Amount at Maturity of such Holder's Note so long as (i) such
portion is $1,000 or an amount in excess thereof that is an integral multiple of
$1,000, and (ii) the remaining Principal Amount at Maturity of such Holder's
Note is $10,000 or an amount in excess thereof that is an integral multiple of
$1,000.
The "ADS Ratio" is 32.388 ADSs per $1,000 Principal Amount at
Maturity of Notes, subject to adjustment as described below. No fractional ADSs
will be issued on exercise of the ADS Rights. The ADS Rights Agent shall pay to
a Holder, otherwise
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<PAGE>
<PAGE>
entitled to a fractional ADS, an amount of cash in U.S. Dollars equal to the
equivalent value of such fractional ADS based on the Sale Price of a single ADS
on the Trading Day immediately preceding the ADS Exercise Date.
The ADS Rights are exercisable against HBL. To exercise an ADS
Right, a Holder (or any Person that is a participant in DTC having a beneficial
interest in the Rule 144A Global Receipts representing the Rule 144A Global
Notes) must (i) complete and manually sign the applicable exercise notice in
substantially the form following this ADS Right (or complete and manually sign a
facsimile thereof) and deliver such exercise notice to the ADS Rights Agent,
(ii) surrender (by physical or book-entry delivery) the Note(s) to the ADS
Rights Agent, (iii) if required by HBL or the ADS Rights Agent, furnish
appropriate endorsements and transfer documents, and (iv) if required by HBL or
the ADS Rights Agent, pay all transfer or similar taxes (other than any United
Kingdom stamp duty reserve taxes payable by Hanson under the ADS Rights
Agreement). If required by HBL or the ADS Rights Agent, such exercise notice
shall include, or be accompanied by, an agreement to abide by the transfer
restrictions applicable to ADSs and a certificate as to any relevant status of
the Holder (e.g., whether such Holder is a QIB). Book-entry delivery of a
beneficial interest in the Rule 144A Global Receipts representing the Rule 144A
Global Notes to the ADS Rights Agent acting on behalf of the Holders may only be
made by an institution that is a participant in DTC. Although such surrender may
be effected by book-entry delivery at DTC, a completed and manually signed
exercise notice (as well as the agreement and certificate referred to above, if
required) must, in any event, be delivered to, and received by, the ADS Rights
Agent acting on behalf of the Holders. The ADS Rights shall be deemed to have
been exercised immediately prior to the close of business on the Business Day on
which the Holder satisfies all the requirements set forth above (the "ADS
Exercise Date"); provided, however, if the Note(s), exercise notice and other
documents required to be delivered in accordance with this paragraph are not
delivered to and received in proper form by the ADS Rights Agent prior to 11:00
A.M. New York City time on the date on which such Note(s), exercise notice and
other documents are so delivered to the ADS Rights Agent, then the ADS Exercise
Date shall be the next succeeding Business Day after the day such Note(s),
exercise notice and other documents are delivered to and received in proper form
by the ADS Rights Agent (it being understood and agreed, however, that this
proviso shall not apply with respect to any such delivery to the ADS Rights
Agent on any Redemption Date, Repurchase Date or Tax Repurchase Date or on March
1, 2001).
As soon as practicable on or after an ADS Exercise Date, the ADS
Rights Agent will deliver to the Trustee, HBL and Hanson a copy of the
applicable exercise notice. The ADS Rights Agent, acting on behalf of the
Holder, will cause the Notes duly surrendered upon exercise of an ADS Right to
be presented to the Company for redemption pursuant to the Indenture for cash in
U.S. Dollars at a price equal to the Adjusted Accreted Value thereof to but
excluding the ADS Exercise Date. Failure to redeem the Notes and to deliver such
cash amount to the ADS Rights Agent, acting on behalf of the Holder of such
Notes, will constitute an Event of Default under the
-3-
<PAGE>
<PAGE>
Indenture and the Notes will be returned to the Holder. In such event, the
Holder may elect, by notice (given within 20 Business Days of the ADS Exercise
Date) to the ADS Rights Agent, to exercise its ADS Right by delivering cash in
U.S. Dollars in an amount equal to the Adjusted Accreted Value of the Notes to
but excluding the ADS Exercise Date to the ADS Rights Agent. If such a cash
exercise is elected, the Holder also must (1) surrender (by physical delivery)
the relevant Note to the ADS Rights Agent in order for the ADS Rights Agent to
insert a legend thereon indicating exercise of the ADS Right, (2) if required by
HBL and the ADS Rights Agent, furnish appropriate endorsements and transfer
documents, and (3) if required by HBL and the ADS Rights Agent, pay all transfer
or similar taxes (except for United Kingdom stamp duty reserve taxes payable by
Hanson). If the Holder exercises the ADS Right for cash, the Holder will
continue to have a claim against the Company for failure to redeem the Note. The
ADS Rights Agent will deliver any cash received in connection with an exercise
of an ADS Right (whether such cash is received from the Company or, upon failure
to redeem the related Note, from a Holder) to, or at the direction of, HBL
(against delivery of the ADSs) as consideration for ADSs at the ADS Ratio.
Failure to deliver ADSs to the ADS Rights Agent, acting on behalf of the
Holders, will constitute an Event of Default under the Indenture, and, in such
event, the ADS Rights Agent will deliver cash in U.S. Dollars in the amount of
the Adjusted Accreted Value received from the Company (or the cash delivered by
the Holder as aforesaid) to the Holder; in addition, the Holder will have a
claim for failure to deliver ADSs. If an Event of Default occurs under the
Indenture and the Holders accelerate payment of the Notes in accordance with the
provisions of the Indenture, the ADS Rights may continue to be exercised until
(but not after), the Notes have been paid in full.
The ADS Ratio will not be adjusted at any time during the term of
the Notes for accrued OID or accrued interest. The Holder will receive only ADSs
(and cash in respect of any fractional ADS) upon exercise of an ADS Right. A
Note will bear interest at 0% per annum during the period commencing on an
Interest Payment Date and ending on the day before the next succeeding Interest
Payment Date, if the ADS Right associated with such Note is exercised during
such period. Registered Notes surrendered upon exercise of the ADS Rights during
the period from the close of business on the February 15 or August 15 next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date must be accompanied by payment of an amount equal to the interest
payable thereon which the Holder is to receive. Registered Notes surrendered
upon exercise of the ADS Right on an Interest Payment Date need not be
accompanied by such payment. Bearer Notes surrendered upon exercise of the ADS
Right must be delivered with all unmatured coupons and any matured coupons in
default appurtenant.
The ADS Ratio will be adjusted in accordance with the ADS Rights
Agreement if any of the following events occurs: (i) there shall be an
alteration in the number of Ordinary Shares represented by an ADS; (ii) the
nominal value of the Ordinary Shares shall be altered as a result of a
consolidation or sub-division; (iii) Hanson shall
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<PAGE>
<PAGE>
issue to holders of Ordinary Shares any Ordinary Shares credited as fully paid
by way of capitalization of reserves or profits; (iv) Hanson shall make any
capital distribution to holders of Ordinary Shares as a class (whether on a
reduction of capital or otherwise) or shall grant such holders rights to acquire
for cash, at less than 95% of their market value, assets of Hanson or any of its
subsidiaries; (v) Hanson shall offer or procure the offer to holders of Ordinary
Shares as a class of new Ordinary Shares for subscription or purchase by way of
rights, or shall offer or grant to holders of Ordinary Shares any options,
rights (including, without limitation, conversion rights attaching to
convertible securities) or warrants to subscribe for or purchase new Ordinary
Shares, in each case at a price that is less than 95% of the then market price
per Ordinary Share; (vi) Hanson shall issue to holders of Ordinary Shares as a
class by way of rights any securities, or grant to such holders as a class by
way of rights, options, warrants or other rights to subscribe for or purchase
any securities (other than, in each case, Ordinary Shares or options, warrants
or other rights to subscribe for or purchase Ordinary Shares); (vii) Hanson
shall issue or grant for cash any Ordinary Shares (other than pursuant to
warrants or other rights outstanding on the date of the ADS Rights Agreement) or
any options, warrants or other rights to subscribe for or purchase Ordinary
Shares, in each case at a price that is less than 95% of the then market price
per Ordinary Share; (viii) Hanson or any of its subsidiaries or (pursuant to a
legally binding agreement with Hanson or any of its subsidiaries) any other
Person shall issue wholly for cash or for no consideration any securities
convertible into, exchangeable for or which carry rights of subscription for
Ordinary Shares and the consideration per Ordinary Share receivable therefor
upon such conversion, exchange or subscription is less than 95% of the then
market price per Ordinary Share; (ix) any rights of conversion, exchange or
subscription attached or relating to any securities of Hanson or any of its
subsidiaries (other than the Notes) are modified (other than by way of
adjustment in accordance with the terms of such securities) so that following
such modification the consideration per Ordinary Share receivable by Hanson or
any of its subsidiaries shall be less than 95% of the then market price per
Ordinary Share; and (x) Hanson or any of its subsidiaries or (pursuant to a
legally binding agreement with Hanson or any of its subsidiaries) any other
Person shall offer any securities of Hanson or any of its subsidiaries in
connection with which offer the holders of Ordinary Shares as a class are
entitled to participate in arrangements whereby such securities may be acquired
by them at less than 95% of their market value (subject to certain exceptions).
No adjustment will, however, be made to the ADS Ratio in respect of (a) the
issue, offer or grant of Ordinary Share or other securities to employees
(including directors holding executive office) of Hanson or any subsidiary or
associated company of Hanson pursuant to an employees' share scheme, or (b) any
offer or issue of, or grant of rights to subscribe for, Ordinary Shares in lieu
of the whole or part of a cash dividend (which would not have constituted a
capital distribution) save to the extent that the market price of such Ordinary
Shares exceeds the amount of the cash dividend or part thereof. In addition, no
adjustment in the ADS Ratio will be made if such adjustment would be less than
one percent of the ADS Ratio then in force; any such adjustment not so made will
be carried forward and taken into account in any subsequent adjustment. In
addition, the ADS Rights Agreement permits HBL to increase the ADS
-5-
<PAGE>
<PAGE>
Ratio at any time, provided that such increase will not adversely affect the
interests of the Holders.
When a Holder receives ADSs evidenced by an ADR upon exercise of
the ADS Right, United Kingdom Stamp Duty Reserve Tax (currently at the rate of
1-1/2%) is payable in the United Kingdom on the issuance of Ordinary Shares to
the Depositary. In the ADS Rights Agreement, Hanson, rather than the Holder,
shall be responsible for the payments of United Kingdom Stamp Duty Reserve Tax
arising solely upon the issuance of such ADSs and the issuance by Hanson of
Ordinary Shares to the Depositary in connection with such exercise.
If Hanson shall merge with or into or sell, assign, transfer,
convey or lease ("transfer") its properties and assets substantially as an
entirety to any Person (other than a sale of Hanson's properties and assets
substantially as an entirety to any Person in a transaction or series of related
transactions in which the holders of Ordinary Shares immediately prior to such
transaction do not receive securities, cash or other assets of Hanson or any
other Person), then a Holder shall be entitled to receive from HBL, upon
exercise of an ADS Right, the kind and amount of securities, cash or other
assets, if any, which such Holder would have received in such merger or transfer
if such Holder had exercised its ADS Right immediately before the effective date
of any such transaction, assuming (to the extent applicable) that such Holder
(a) was not a constituent Person or an Affiliate of a constituent Person to such
transaction, and (b) was treated alike with the plurality of holders of Ordinary
Shares.
If the Notes (and the ADS Rights associated therewith) are
redeemed, HBL (in respect of the ADS Rights) will be required to pay such
portion of the Redemption Price as is equal to the excess of the Redemption
Price over the Adjusted Accreted Value to but excluding the Redemption Date of
the Notes being redeemed. (Simultaneously therewith, the Company (in respect of
the Notes, without giving effect to the ADS Rights) will be required to pay,
pursuant to the Notes, accrued interest, plus such portion of the Redemption
Price as is equal to the Adjusted Accreted Value to but excluding the Redemption
Date of the Notes being redeemed.) If the Notes (and the ADS Rights associated
therewith) are repurchased pursuant to the exercise of a Change-in-Control
Right, HBL (in respect of the ADS Rights) will be required to pay such portion
of the Repurchase Price as is equal to (i) the excess of the Repurchase Price
over 101% of the Adjusted Accreted Value (plus accrued interest) to but
excluding the Repurchase Date of the Notes being repurchased, if the Repurchase
Date is on or prior to February 28, 1999, or (ii) the excess of the Repurchase
Price over the Adjusted Accreted Value (plus accrued interest) to but excluding
the Repurchase Date of the Notes being repurchased, if the Repurchase Date is on
or after March 1, 1999. (Simultaneously therewith, the Company (in respect of
the Notes, without giving effect to the ADS Rights) will be required to pay,
pursuant to the Notes, accrued interest, plus such portion of the Repurchase
Price as is equal to (1) 101% of the Adjusted Accreted Value to but excluding
the Repurchase Date of the Notes being repurchased, if the Repurchase Date is on
or prior to February 28, 1999, or (2) 100% of the Adjusted Accreted Value to but
excluding the Repurchase Date
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<PAGE>
<PAGE>
of such Notes, if the Repurchase Date is on or after March 1, 1999.) If the
Notes (and the ADS Rights associated therewith) are repurchased pursuant to an
exercise of a Tax Repurchase Right, HBL (in respect of the ADS Rights) will be
required to pay such portion of the Tax Repurchase Price as is equal to the
excess of the Tax Repurchase Price over the Adjusted Accreted Value (plus
accrued interest) to but excluding the Tax Repurchase Date of the Notes being
repurchased. (Simultaneously therewith, the Company (in respect of the Notes,
without giving effect to the ADS Rights) will be required to pay, pursuant to
the Notes, accrued interest, plus such portion of the Tax Repurchase Price as is
equal to the Adjusted Accreted Value to but excluding the Tax Repurchase Date of
the Notes being repurchased.)
The Holders may be entitled to the payment of Tax Amounts,
subject to the terms and conditions of the ADS Rights Agreement.
This ADS Right is entitled to the benefits of certain guaranty
and indemnification obligations of Hanson under Article Six of the ADS Rights
Agreement. Reference is made to Article Six of the ADS Rights Agreement for a
statement of the respective rights, limitation of rights, duties and obligation
of Hanson in respect of such guaranty and indemnification obligations.
THIS ADS RIGHT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS, EXCEPT THAT MATTERS RELATING TO THE AUTHORIZATION AND
EXECUTION OF THIS ADS RIGHT SHALL BE GOVERNED BY THE LAWS OF BERMUDA.
All terms used in this ADS Right which are defined in the ADS
Rights Agreement shall have the meanings assigned to them in the ADS Rights
Agreement.
IN WITNESS WHEREOF, HBL has caused this ADS Right to be duly
executed.
Dated: , 1994
--------
HANSON (BERMUDA) LIMITED,
By
------------------------------
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<PAGE>
<PAGE>
ADS RIGHT EXERCISE NOTICE
(for ADS Right annexed to Bearer Note)
The undersigned Holder hereby (i) irrevocably exercises the ADS
Right associated with the Bearer Note (or portion thereof) delivered herewith,
to purchase ADSs in accordance with the terms of such ADS Right and the ADS
Rights Agreement referred to hereinabove, (ii) directs that such ADSs be
delivered to and registered in the name of the undersigned unless a different
name has been indicated below, and (iii) directs that any Bearer Notes
representing any unredeemed Principal Amount at Maturity, and any check
representing payment of cash in U.S. Dollars in respect of any fractional ADS,
be delivered to the undersigned unless a different name has been indicated
below. The address for delivery of ADSs, such Bearer Notes and such check must
be outside the United States and its possessions. If ADSs are to be registered
in the name of a Person other than the undersigned, the undersigned agrees to
pay all transfer taxes payable with respect thereto. The undersigned confirms
that all unmatured coupons (or matured coupons in default) in respect of the
Bearer Note (or portion thereof) delivered herewith also are being delivered
herewith.
Dated: ----------- --, ----
-----------------------------
Signature
If ADSs are to be registered
in the name of and delivered
to a Person other than the
Holder, please print such Please print name and
Person's name and address: address of Holder:
- ----------------------------- -----------------------------
Name Name
- ----------------------------- -----------------------------
Address Address
- -----------------------------
Social Security or other
Taxpayer Identification
Number, if any
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<PAGE>
<PAGE>
Name and address (outside the If only a portion of the
United States and its possessions) Bearer Note is to be redeemed
to which any Bearer Notes representing in connection with exercise,
any unredeemed Principal Amount at please indicate:
Maturity and any check referred to
above should be delivered: 1. Principal Amount at Maturity
to be redeemed in connection
with exercise:
- ------------------------------------ $
Name -------------------
- ------------------------------------ 2. Amount and denomination of
Address Bearer Notes representing
unredeemed Principal Amount
- ------------------------------------ at Maturity to be issued:
Social Security or other
Taxpayer Identification $
Number, if any ------------------
Denomination:
$
-------------------
($10,000 or an
integral multiple of $1,000
in excess thereof)
[Signature Guaranteed]
- ------------------------------------
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<PAGE>
<PAGE>
ADS RIGHT EXERCISE NOTICE
(for ADS Right annexed to Registered Note)
The undersigned Holder hereby (i) irrevocably exercises the ADS
Right associated with the Registered Note (or portion thereof) delivered
herewith, to purchase ADSs in accordance with the terms of such ADS Right and
the ADS Rights Agreement referred to hereinabove, (ii) delivers herewith the
amount of interest payable on the next Interest Payment Date on the Principal
Amount at Maturity being redeemed in connection with this exercise, if this
exercise is made during the period from the close of business on the Regular
Record Date for such Interest Payment Date to the opening of business on such
Interest Payment Date (unless the Registered Note was called for redemption on a
Redemption Date within such period), and (iii) directs that such ADSs, any
Registered Notes representing any unredeemed Principal Amount at Maturity, and
any check representing payment of cash in U.S. Dollars in respect of any
fractional ADS, be delivered to and be registered in the name of the undersigned
unless a different name has been indicated below. If ADSs or Registered Notes
are to be registered in the name of a Person other than the undersigned, the
undersigned agrees to pay all transfer taxes payable with respect thereto and,
if such Registered Notes are Restricted Notes, the undersigned is delivering
herewith a certificate in proper form certifying that the applicable
restrictions on transfer have been complied with.
Dated: ----------- --, ----
---------------------------
Signature
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<PAGE>
<PAGE>
If ADSs, any Registered Notes If only a portion of the Registered
representing any unredeemed Principal Note is to be redeemed in
Amount at Maturity are to be connection with exercise,
registered in the name of a Person please indicate:
other than the Holder, or if any check
referred to above should be delivered 1. Principal Amount at Maturity to
to a Person other than the Holder, be redeemed in connection with
please print such Person's name and exercise:
address: $
-------------------------------
- ------------------------------------
Name 2. Amount and denomination of
Registered Notes representing
- ------------------------------------ unredeemed Principal Amount
Address at Maturity to be issued:
- ------------------------------------ $
Social Security or other -----------------------------
Taxpayer Identification Number,
if any Denomination:
$
-----------------------------
($10,000 or an integral
multiple of $1,000 in excess
thereof)
[Signature Guaranteed]
- ------------------------------------
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<PAGE>
<PAGE>
ADS RIGHT EXERCISE NOTICE
(for ADS Right annexed to Rule 144A Global Note)
The undersigned Holder of the Rule 144A Global Note (or the
undersigned Person that is a participant in DTC having a beneficial interest in
the Rule 144A Global Receipt representing such Rule 144A Global Note) (the
"Undersigned Person") hereby (i) irrevocably exercises the ADS Right associated
with the Rule 144 Global Note (or portion thereof) delivered herewith, to
purchase ADSs in accordance with the terms of such ADS Right and the ADS Rights
Agreement referred to hereinabove, (ii) directs that such ADSs be delivered to
and registered in the name of the Undersigned Person unless a different name has
been indicated below, (iii) directs that any Rule 144A Global Notes representing
any unredeemed Principal Amount at Maturity be delivered to the Note Custodian,
and (iv) directs that any payment of cash in U.S. Dollars in respect of any
fractional ADS be delivered to the Undersigned Person. If ADSs are to be
registered in the name of a Person other than the Undersigned Person, the
Undersigned Person agrees to pay all transfer taxes payable with respect thereto
and, if the Rule 144A Global Note is a Restricted Note, the Undersigned Person
is delivering herewith a certificate in proper form certifying that the
applicable restrictions on transfer have been complied with.
Dated: ----------- --, ----
---------------------------
Signature
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<PAGE>
<PAGE>
If ADS are to be registered in the name If only a portion of the Rule 144A
of a Person other than the Undersigned Global Note is to be redeemed in
Person, please print such Person's connection with exercise, please
name and address: indicate:
- --------------------------------------- 1. Principal Amount at Maturity
Name to be redeemed in connection
with exercise;
$
- --------------------------------------- ------------------
Address
2. Amount and denomination of
- --------------------------------------- Rule 144A Global Notes
Social Security or other representing unredeemed
Taxpayer Identification Principal Amount at Maturity
Number, if any to be issued:
$
------------------
Denomination:
$
------------------
($10,000 or an
integral multiple of $1,000 in
excess thereof)
[Signature Guaranteed]
- ------------------------------------
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<PAGE>
<PAGE>
Exhibit 4.4(d)
KEEPWELL AGREEMENT
Dated as of March 1, 1994
between
HANSON PLC
and
HANSON (BERMUDA) LIMITED
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE: DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION .................................................. 2
SECTION 1.1. Provisions of General Application:
Definitions ............................................. 2
SECTION 1.2. Notices, Etc. ........................................... 3
ARTICLE TWO: REPRESENTATIONS AND WARRANTIES ............................. 4
SECTION 2.1. Hanson .................................................. 4
SECTION 2.2. HBL ..................................................... 4
ARTICLE THREE: OWNERSHIP AND SOLVENCY OF HBL ............................ 5
SECTION 3.1. Undertakings of Hanson .................................. 5
SECTION 3.2. Performance of Undertakings ............................. 5
SECTION 3.3. Liquidated Damages ...................................... 6
ARTICLE FOUR: MISCELLANEOUS ............................................. 6
SECTION 4.1. Effect of Headings and Table of
Contents ................................................ 6
SECTION 4.2. Successors and Assigns .................................. 6
SECTION 4.3. Separability Clause ..................................... 7
SECTION 4.4. Governing Law ........................................... 7
SECTION 4.5. Submission to Jurisdiction .............................. 7
SECTION 4.6. Judgment Currency ....................................... 8
SECTION 4.7. Modifications ........................................... 9
</TABLE>
<PAGE>
<PAGE>
KEEPWELL AGREEMENT dated as of March 1, 1994, between HANSON PLC, a
public limited company incorporated in England and Wales ("Hanson") and HANSON
(BERMUDA) LIMITED, a corporation with limited liability under the laws of
Bermuda ("HBL").
WHEREAS, Hanson America Inc., an indirect wholly owned subsidiary of
Hanson organised under the laws of the State of Delaware (the "Company"), has
executed and delivered an Indenture dated as of March 1, 1994 (as originally
executed or as it from time to time may be supplemented, the "Indenture"), among
the Company, HM Holdings Inc., and The Bank of New York acting thereunder as
trustee (in such capacity and together with any successor trustee under the
Indenture, the "Trustee") ;
WHEREAS, under and pursuant to the Indenture, the Company may issue up
to U.S.$1,380,626,500 aggregate Principal Amount at Maturity of its 2.39% Senior
Exchangeable Discount Notes Due 2001 (each, a "Note", collectively, the
"Notes");
WHEREAS, HBL, a direct wholly owned subsidiary of Hanson, and Hanson
have executed and delivered an ADS Rights Agreement dated as of March 1, 1994
(as originally executed or as it from time to time may be supplemented, the "ADS
Rights Agreement"), among HBL, Hanson and Citibank, N.A. as ADS Rights Agent (in
such capacity and together with any successor ADS Rights Agent under the ADS
Rights Agreement, the "ADS Rights Agent"), for the purpose of HBL issuing its
ADS Rights to be sold with, and issued for the benefit of holders of, the Notes;
WHEREAS, on the terms and subject to the conditions of the ADS Rights
Agreement, the ADS Rights will be exercisable at the option of the Holder
thereof for a number of ADSs at the ADS Ratio per U.S.$1,000 Principal Amount at
Maturity of Notes, subject to
<PAGE>
<PAGE>
2
adjustment in certain events as provided in the ADS Rights Agreement; and
WHEREAS, HBL and Hanson have executed and delivered an ADS Issuance
Agreement dated as of March 1, 1994 (as originally executed or as it from time
to time may be supplemented, the "ADS Issuance Agreement") to provide for the
issuance by Hanson of Ordinary Shares, the delivery of ADSs representing such
Ordinary Shares pursuant to the exercise of the ADS Rights and the payment by
Hanson of certain amounts, in satisfaction of HBL's obligations in respect of
the ADS Rights and the ADS Rights Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
1.1. Provisions of General Application: Definitions. For all purposes
of this Keepwell Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires :
(a) Capitalized terms used but not defined herein shall have the
meaning assigned to such terms in the ADS Rights Agreement and the ADS Issuance
Agreement;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United Kingdom as from time to time in effect; and
(c) references to Articles and Sections herein shall be deemed to be
references to the Articles and Sections of this Keepwell Agreement unless the
context indicates otherwise.
<PAGE>
<PAGE>
3
1.2. Notices, Etc. Any request, demand, authorization, direction,
notice, consent, election, waiver, act or other document provided or permitted
by this Keepwell Agreement to be made upon, provided or furnished to, or filed
with either party shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and (i) mailed, first-class
postage prepaid, (ii) delivered or (iii) sent by facsimile transmission to the
relevant party as follows :-
(a) if to Hanson, to it at:
Address : 1 Grosvenor Place,
London SW1X 7JH,
England.
Fax No: 011-4471-245 9939
Attention : Legal Director
(b) if to HBL, to it at:
Address : Clarendon House,
2 Church Street,
Hamilton HM CX,
Bermuda.
Fax No: (809) 292 4720
Attention : Secretary
or to such other address or fax number, and/or marked for such other attention,
as the relevant party may notify to the other party.
<PAGE>
<PAGE>
4
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1 Hanson. Hanson represents and warrants to HBL that (i) this
Keepwell Agreement constitutes a valid and binding obligation of Hanson
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and may be subject 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 (ii) Hanson has full legal right, power and
authority, and has all necessary authorizations, to execute and deliver this
Keepwell Agreement and to perform its obligations under this Keepwell Agreement.
2.2 HBL. HBL represents and warrants to Hanson that (i) this Keepwell
Agreement constitutes a valid and binding obligation of HBL enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and may be subject 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 (ii) HBL has full legal right, power and
authority, and has all necessary authorizations, to execute and deliver this
Keepwell Agreement and to perform its obligations under this Keepwell Agreement.
<PAGE>
<PAGE>
5
ARTICLE THREE
OWNERSHIP AND SOLVENCY OF HBL
3.1. Undertakings of Hanson. Hanson hereby undertakes to HBL that
until the earlier to occur of (1) exercise of all the outstanding ADS Rights,
and (2) repayment (whether through redemption or repurchase or otherwise) of all
the Notes and ADS Rights then outstanding :-
(i) Hanson will own, directly or indirectly, all the outstanding shares of
capital stock of HBL, free from all liens and other encumbrances;
(ii) Hanson shall ensure that at all times the aggregate realisable value of
the tangible assets of HBL exceeds the sum of its liabilities (including
reasonable provision for contingent liabilities) by at least
U.S.$10,000;
(iii) Hanson shall ensure that HBL has at all times sufficient cash or other
liquid assets to discharge its debts and other liabilities as and when
they fall due; and
(iv) so far as is permitted by applicable law in any jurisdiction, Hanson
shall take, and shall procure that HBL takes, all necessary steps to
preserve and maintain HBL's corporate existence and to prevent HBL from
entering into or commencing winding-up, liquidation, administration or
other proceedings which would affect the enforceability of debts or
other obligations of HBL.
3.2 Performance of Undertakings. The undertakings of Hanson in
paragraphs (ii) and (iii) of Section 3.1 shall be performed by Hanson:-
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(i) subscribing at not less than par for shares of HBL in such amounts and
at such times as are necessary to fulfil such undertakings; or
(ii) in any other manner which is not prohibited by Chapter VI of Part V of
the Companies Act 1985 of Great Britain and other applicable laws.
3.3. Liquidated Damages. Hanson agrees that if it fails to perform its
obligations under Section 3.1 and Section 3.2 and HBL enters into liquidation,
Hanson shall be liable to pay to HBL by way of liquidated damages for such
breach the amount by which the aggregated claims of all creditors and other
claimants of HBL admissible in HBL's liquidation exceed the net realisable
assets of HBL (excluding HBL'S rights under this paragraph) in the liquidation.
ARTICLE FOUR
MISCELLANEOUS
4.1. 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.
4.2. Successors and Assigns; No Third Party Beneficiaries. All
covenants and agreements in this Keepwell Agreement by each of the parties shall
bind its permitted successors and assigns, whether so expressed or not.
Notwithstanding the foregoing and subject to Section 5.1 of the ADS Rights
Agreement, this Keepwell Agreement shall not be assigned by either party hereto
without the consent of Holders given in accordance with the provisions of the
ADS Rights Agreement; provided, however, that, subject to Article Five of the
Indenture and Section 5.13 of the ADS Rights Agreement, neither the Holders nor
any other person shall have or be construed to have any other legal or
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7
equitable right, remedy or claim under or in respect of or by virtue of this
Keepwell Agreement or any provision herein contained.
4.3. Separability Clause. In the event that any provision in this
Keepwell Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions thereof shall not in any
way be affected or impaired thereby.
4.4. GOVERNING LAW. THIS KEEPWELL AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS EXCEPT THAT MATTERS RELATING TO THE
AUTHORIZATION AND EXECUTION BY HBL OR HANSON OF THIS KEEPWELL AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF BERMUDA OR ENGLAND AND WALES, AS APPLICABLE.
4.5 Submission to Jurisdiction. Each of HBL and Hanson agrees that any
legal suit, action or proceeding arising out of or relating to this Keepwell
Agreement may be instituted in any state or federal court in the State and
County of New York, United States of America and to the extent it may
effectively do so, each of HBL and Hanson hereby waives, and agrees not to
assert, by way of motion, as a defense or otherwise, in any such suit, action or
proceeding any claim which it may now or hereafter have that it is not
personally subject to the jurisdiction of the above-named courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper, or that this Keepwell Agreement or the
subject matter hereof or thereof may not be enforced by such court, and
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding. Each of HBL and Hanson hereby designates HM
Anglo-American, Ltd. as its authorized agent to accept and acknowledge on its
behalf service of any and all process which may be served in any such suit,
action or proceeding in any such court and agrees that service of process upon
said agent at its office at 410 Park Avenue, New York, New York 10022 (or at
such other address in the Borough of Manhattan, The City of New York, as such
agent may designate by written notice to Hanson and HBL), and written notice of
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8
said service to HBL or, as the case may be, Hanson, mailed or delivered to it,
in the case of HBL at Clarendon House, 2 Church Street, Hamilton HM CX, Bermuda,
Attn: Secretary, and in the case of Hanson at 1 Grosvenor Place, London, SW1X
7JH, England, Attn: Legal Director, shall be deemed in every respect effective
service of process upon HBL, or as the case may be, Hanson in any such suit,
action or proceeding and shall be taken and held to be valid personal service
upon HBL, or as the case may be, Hanson, whether or not HBL, or as the case may
be, Hanson shall then be doing, or at any time shall have done, business within
the State of New York, and that any such service of process shall be of the same
force and validity as if service were made upon it according to the laws
governing the validity and requirements of such service in such State, and
waives all claim of error by reason of any such service. Said designation and
appointment shall be irrevocable until this Keepwell Agreement shall have been
satisfied and discharged and, if at any time, HM Anglo-American, Ltd. does not
have a business address in the Borough of Manhattan, The City of New York, each
of HBL and Hanson agrees to appoint CT Corporation System, 1633 Broadway, New
York, New York 10019, as its successor authorized agent. Notwithstanding the
foregoing, any suit, action or proceeding arising out of or in connection with
this Keepwell Agreement may be instituted by HBL, in any competent court in
England and Wales.
4.6. Judgment Currency. Hanson agrees, to the fullest extent that it
may effectively do so under applicable law, that: (a) if for the purpose of
obtaining judgment in any court it is necessary to convert the sum due in
respect of any payments to be made hereunder the "Required Currency") into a
currency in which a judgment will be rendered (the "Judgment Currency"), the
rate of exchange used shall be the rate at which The Bank of New York in New
York City could purchase the Required Currency with the Judgment Currency on the
day on which final unappealable judgment is entered, unless such day is not a
New York Banking Day, then, to the extent permitted by applicable law, the rate
of exchange used shall be the rate at which The Bank of New York in New York
City could purchase the Required Currency with the
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9
Judgment Currency on the New York Banking Day preceding the day on which a final
unappealable judgment is entered; and (b) its obligations under this Keepwell
Agreement to make payments in the Required Currency (i) shall not be discharged
or satisfied by any tender, or any recovery pursuant to any judgment (whether or
not entered in accordance with clause (a) above) in any currency other than the
Required Currency, except to the extent that such tender or recovery shall
result in the actual receipt, by the payee, of the full amount of the Required
Currency expressed to be payable in respect of such payments; (ii) shall be
enforceable as an alternative or additional cause of action for the purpose of
recovering in the Required Currency the amount if any, by which such actual
receipt shall fall short of the full amount of the Required Currency so
expressed to be payable; and (iii) shall not be affected by judgment being
obtained from any other sum due under this Keepwell Agreement. For purposes of
the foregoing, "New York Banking Day" means any day except a Saturday, Sunday or
a legal holiday in The City of New York or a day on which banking institutions
in The City of New York are authorized or required by law or executive order to
close.
4.7. Modifications. This Keepwell Agreement may be modified, amended
or terminated, and any obligations of Hanson hereunder or any rights or remedies
of HBL in respect thereof may be waived or discharged, by an agreement in
writing which has been duly approved by the parties and the Holders in
accordance with the provisions of the ADS Rights Agreement; provided, however,
that no such approval of the Holders will be required with respect to any
modification, amendment, termination, waiver or discharge that does not have an
adverse effect on the Holders.
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10
IN WITNESS WHEREOF, the parties hereto have caused this Keepwell
Agreement to be duly executed as of the day and year first above written.
(Executed and delivered as HANSON PLC
a deed by HANSON PLC acting by
two directors or a director
and the company secretary) By: /s/ John G. Raos
-----------------------------
Name: John G. Raos
Title: Director
By: /s/ William M. Landuyt
-----------------------------
Name: William M. Landuyt
Title: Director
HANSON (BERMUDA) LIMITED
By: /s/ J. C. Richmond
-----------------------------
Name:
Title:
[SEAL]
[Signature]
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ATTEST
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Exhibit 10.1
FORM OF PRE-DEMERGER
STOCK PURCHASE AGREEMENT
THIS PRE-DEMERGER STOCK PURCHASE AGREEMENT (the "Agreement") is made the ____
day of September, 1996
BETWEEN:
(1) HM HOLDINGS, INC., a Delaware corporation ("Seller");
and
(2) HANSON PLC, a public limited company incorporated in
England ("Purchaser").
WHEREAS:
(A) Seller is the registered and beneficial owner of the shares
(collectively, the "Sale Shares") of the companies (each, a "Company"
and collectively, the "Companies"), details of which are set out on
Annex A hereto.
(B) Seller wishes to sell and Purchaser wishes to purchase the Sale Shares
on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sale and Purchase of Sale Shares.
Subject to the terms and conditions of this Agreement, Seller
shall sell and transfer to Purchaser, and Purchaser shall purchase from Seller,
the Sale Shares free from any lien, option, charge and encumbrance, right of
preemption or any other third party right and together with all benefits and
rights attached thereto.
2. Purchase Price.
The total consideration for the sale of all of the Sale Shares
shall be _______________________________ United States Dollars (US$___________)
(the "Purchase Price"), payable in cash at the Closing (as defined below),
subject to post-Closing adjustment as provided herein. The Purchase Price shall
be allocated among the Sale Shares of each Company in the manner mutually agreed
upon by the parties.
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3. Closing.
3.1 Date of Closing. Subject to the satisfaction of each of the
conditions set forth in Section 5, the closing of the sale and purchase of the
Sale Shares hereunder (the "Closing") shall take place at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, 10153 (or at such
other place as the parties may agree in writing) at 10:00 a.m., New York City
time, on September 30, 1996 (the "Closing Date").
3.2 Title to Sale Shares Prior to Closing. Until the Closing,
Seller shall continue to have full right, title and interest in and to the Sale
Shares, including the right to receive any dividends, distributions or payments
made with respect to the Sale Shares, and the right to vote the Sale Shares.
4. Actions Prior to Closing.
4.1 Best Efforts. Each of the parties shall use its reasonable
best efforts (without undue expense) to cause the fulfillment, at or prior to
the Closing Date, of all of the conditions to their respective obligations to
consummate the sale and purchase of the Sale Shares under this Agreement.
4.2 Conduct of the Company's Business Prior to Closing. Seller
agrees to use its reasonable best efforts to cause each of the Companies and
their subsidiaries to conduct their respective businesses in the ordinary and
usual course consistent with past practices during the period from the date of
this Agreement through the Closing.
5. Conditions of Closing.
The obligations of Seller to sell, and Purchaser to purchase, all
of the Sale Shares are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
(a) Seller and Purchaser shall have executed an Indemnification
Agreement in the form attached as Annex B (the "Indemnification
Agreement");
(b) Seller, Purchaser and HM Anglo American Ltd. ("Anglo") shall
have executed a Tax Sharing and Indemnification Agreement in the form attached
as Annex C (the "Tax Sharing Agreement");
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(c) There shall not be in effect any injunction or restraining
order issued by a court of competent jurisdiction barring the
consummation of the sale and purchase of the Sale Shares pursuant to
this Agreement;
(d) Millennium Chemicals Inc. ("Millennium"), Purchaser and
Hanson Overseas Holdings Limited ("HOH") shall have executed a Demerger
Agreement pursuant to which Millennium will issue shares representing
all of its then outstanding Common Stock to Purchaser's shareholders on
a pro rata basis on the basis of one share of Common Stock for every 70
Ordinary Shares of Purchaser (other than those represented by American
Depositary Shares) and every 14 American Depositary Shares of Purchaser
in consideration for the transfer by Purchaser to Millennium of all of
the outstanding stock in HOH; and
(e) All representations and warranties of Seller to Purchaser set
forth in Section 8 shall be true and correct in all material respects at
and as of the time of the Closing with the same effect as though made
again at and as of that time.
In addition to the foregoing and subject to the provisions of Section 7, the
obligation of Purchaser to purchase the Sale Shares is subject to the additional
condition that there shall not have occurred a material adverse change in the
assets, business, operations or financial condition of any Company and its
subsidiaries, taken as a whole, during the period from the date of this
Agreement through the Closing (a "Material Adverse Change"); provided, however,
that the failure to satisfy this condition insofar as it relates to any Company
shall not affect the parties' obligations with respect to the purchase and sale
of the Sale Shares of all other Companies.
6. Deliveries at Closing.
At the Closing, the parties shall make the following deliveries
and take the following actions:
(a) Seller and Purchaser shall deliver the Indemnification
Agreement;
(b) Seller, Purchaser and Anglo shall deliver the Tax Sharing
Agreement;
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(c) Seller shall deliver to Purchaser share certificates
representing the Sale Shares, accompanied by stock powers or other appropriate
transfer forms duly endorsed by Seller;
(d) Purchaser shall transfer to Seller (to such account as shall
be designated by Seller) the Purchase Price in immediately available funds; and
(e) Seller shall deliver to Purchaser a certificate dated the
Closing Date and executed by a duly authorized officer of Seller to the effect
that all of the conditions of Closing specified in Section 5 have been fulfilled
or waived.
7. Material Adverse Change.
Seller shall promptly notify Purchaser if, during the period from
the date of this Agreement to the Closing, a Material Adverse Change occurs.
Furthermore, during the period from the date of this Agreement to the Closing,
Purchaser will have full opportunity to confirm whether a Material Adverse
Change has occurred, and at any time prior to the Closing, Purchaser may deliver
to Seller a notification that, in Purchaser's reasonable judgment, a Material
Adverse Change has occurred and setting forth, in reasonable detail, the basis
therefore (a "MAC Notice"). Following Seller's receipt of such MAC Notice,
Seller and Purchaser shall attempt to reach an agreement on (i) whether, in
fact, a Material Adverse Change has occurred, and (ii) if a Material Adverse
Change has occurred, an appropriate adjustment to the Purchase Price for the
Sale Shares of the affected Company to reflect the change in the fair market
value of such Sale Shares resulting from such Material Adverse Change. If the
parties reach agreement on the foregoing prior to the Closing, and if all other
conditions to the Closing have been satisfied, the Closing shall take place as
provided herein except that the Purchase Price for the Sale Shares of the
affected Company shall be adjusted in accordance with such agreement. If the
parties are unable to reach agreement on the foregoing prior to the Closing, and
if all other conditions to the Closing have been satisfied, then notwithstanding
the provisions of the last sentence of Section 5, the Closing of the purchase
and sale of the Sale Shares of the affected Company shall be held as scheduled
on the Closing Date, the Sale Shares of such Company shall be purchased by the
Purchaser at the original, unadjusted Purchase Price, and the parties' dispute
concerning the alleged Material Adverse
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Change shall be resolved (and the adjustment to the Purchase Price for such Sale
Shares, if any, shall be made), after the Closing. If the parties are unable to
reach agreement on the existence and/or effect of an alleged Material Adverse
Change within 30 days after delivery of the MAC Notice, the matter shall be
resolved by arbitration pursuant to Section 11.
If Purchaser does not deliver a MAC Notice to Seller prior to the
Closing, Purchaser (and its permitted successors and assigns) shall waive any
right it might otherwise have to assert after the Closing that a Material
Adverse Change with respect to any Company had occurred whether or not Purchaser
knew or should have known of such Material Adverse Change.
8. Representations and Warranties of Seller.
Seller hereby represents and warrants to Purchaser that with
respect to Seller and each Company and its subsidiaries, as the case may be:
8.1 Organization, Standing and Authority of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to enter
into and perform this Agreement.
8.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by Seller have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes the valid
and binding obligation of Seller enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
8.3 Organization, Standing and Qualification of the Companies and
each of their Respective Subsidiaries. The Company and each of its subsidiaries
are corporations duly organized, validly existing and in good standing under the
laws of their jurisdiction of incorporation and have full corporate power and
authority to carry on their respective business as now conducted and to own,
lease and operate their respective properties as now done. The
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Company and each of its subsidiaries are qualified to do business and are in
good standing in each jurisdiction in which the nature of their respective
businesses or the properties owned or leased by them requires qualification,
except where the failure to be so qualified or in good standing would not have a
material adverse effect upon the business properties or financial condition of
the Company and its subsidiaries taken as a whole.
8.4 Consents of Third Parties. The execution, delivery and
performance of this Agreement by Seller will not (i) violate or conflict with
the certificate of incorporation or by-laws (or comparable organizational
documents) of Seller or the Company and any of its subsidiaries; or (ii)
constitute a violation of any law, regulation, order, writ, judgment, injunction
or decree applicable to Seller or the Company and any of its subsidiaries. No
material consent, approval or authorization of any governmental authority is
required on the part of Seller in connection with the execution, delivery and
performance of this Agreement other than those which have been or will be
obtained prior to the Closing.
8.5 Ownership of Sale Shares. Seller is, and at the Closing will
be, the record and beneficial owner of the Sale Shares free and clear of any
claim, lien, security interest or other encumbrance ("Lien"). At the Closing,
Seller will transfer and deliver to Purchaser valid title to all the Sale
Shares, free and clear of any Lien. The Company is the record and beneficial
owner of all of the outstanding capital stock of each of its subsidiaries, free
and clear of any Lien.
8.6 Financial Statements.
(a) The consolidated balance sheet of the
Company and its subsidiaries as of June 30, 1996 (the "Balance Sheet"), a copy
of which is attached hereto as Annex D, has been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") and
presents fairly the consolidated financial position of the Company and its
subsidiaries as at such date.
(b) Except to the extent reflected or
reserved for in the Balance Sheet, there are no liabilities or obligations
material to the Company's and its subsidiaries' businesses that would normally
be shown on a balance sheet prepared in accordance with GAAP, except
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liabilities or obligations incurred in the ordinary course of business since
June 30, 1996.
8.7 Absence of Certain Liabilities and Changes. Since June 30,
1996, the Company and its subsidiaries have operated their respective businesses
in the ordinary course and there has not been:
(a) any declaration, setting aside or payment of any
dividend on, or any other distribution with respect to, any capital stock of the
Company, or any repurchase redemption or other acquisition of any capital stock
of the Company, except for the US$_________ dividend paid on __________________,
1996; or
(b) any incurrence, assumption or guarantee by the Company
or any subsidiary of the Company of any indebtedness or liability for or in
respect of borrowed money or any commitment to do the same other than borrowings
in the ordinary course of business consistent with past practice; provided,
however, that Kaiser Cement Corporation and Crane Holdings, Inc. may incur up
to US$_________ million and US$_________ million of unsecured indebtedness,
respectively.
9. Further Agreements of the Parties.
9.1 Certain Employee Benefit Matters. Following the completion of
the purchase and sale of the Sale Shares, Purchaser shall cause each Company and
its subsidiaries to continue in effect any "employee benefit plans" (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained or sponsored by such Company and its
subsidiaries which cover the employees of such Company and its subsidiaries
immediately prior to the date of this agreement (the "Plans") for a period at
least until the completion of the transfer of all of the assets attributable to
such Plans which are "pension plans" (within the meaning of Section 3(2) of
ERISA) as set forth herein. As soon as practicable after the Closing, the Seller
shall cause assets to be transferred from (A) any trust or trusts maintained by
Seller or one of its subsidiaries or affiliates which is tax-exempt under
Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and which is associated with one or more defined contribution plans maintained
by Seller or one of its subsidiaries or affiliates (the "Seller DC Trust") to a
mirror trust or trusts established by Purchaser (the "Purchaser DC Trust") in an
amount determined as of the most recent valuation date of the Seller DC Trust
equal to the assets attributable to the account balances for each Plan which is
a defined contribution plan, and (B) the Master Trust Agreement, between,
between HM Holdings, Inc.
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and The Bank of New York, dated as of January 1, 1988, as amended (the "HMH
Master Trust") to a mirror trust established by Hanson North America Inc. (the
"HNA Master Trust"), in an amount determined as of the most recent valuation
date of the HMH Master Trust in accordance with ERISA for each Plan which is a
defined benefit plan, in each case together with an allocable share of earnings
and/or losses of the respective distributing trusts from such respective
valuation dates to the actual dates of transfer of assets; provided, however
that in no event shall such transfer take place until the Purchaser has
furnished to Seller either: (A) a favorable determination letter from the
Internal Revenue Service with respect to the qualification of the Plans that are
intended to be qualified plans under Section 401(a) of the Code and the
tax-exempt status of the Purchaser DC Trust and the HNA Master Trust under
Section 501(a) of the Code or (B) an opinion of counsel of Purchaser that such
plans and trusts are qualified under the Code. Following the Closing, the
Purchaser shall continue in effect any Plan which is a "pension plan" (within
the meaning of Section 3(2) of ERISA) for a period at least until the completion
of the transfer of all of the assets attributable to such Plans from the Seller
DC Trust and the HMH Master Trust to the Purchaser DC Trust and the HNA Master
Trust, respectively. Following the transfer of assets as contemplated hereunder,
neither Seller nor any of its subsidiaries or affiliates shall have any further
obligation or responsibility with respect to such benefit liabilities under any
Plan, which shall be considered for all purposes as having been satisfied as a
result of such transfer.
9.2 Further Assurance. The parties hereto undertake to co-operate
in good faith to ensure that they do such acts and things as may reasonably be
necessary to complete the sale and purchase of the Sale Shares. At all times
after the date of this Agreement and after the completion of the sale and
purchase of the Sale Shares, the parties shall use their reasonable best efforts
to procure that any necessary third party shall execute such documents and do
such acts and things as may reasonably be required for the purpose of giving to
Seller and Purchaser, respectively, the full benefit of all the provisions of
this Agreement. Seller and Purchaser will use their reasonable best efforts to
obtain any consent, substitution, approval or amendment required to novate or
assign all agreements, leases, licenses and other rights of any nature
whatsoever relating to the assets, rights and other things of the Companies and
their subsidiaries of value to Purchaser,
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including without limitation the release of Seller and its subsidiaries and
affiliates from any guarantees, surety bonds, letters of credit or similar items
previously entered into or made for the benefit of the Companies or their
subsidiaries; provided, however, that neither Seller nor Purchaser shall be
obligated to pay any consideration therefor (except for filing fees and other
similar charges) to the third party from whom such consents, approvals,
substitutions and amendments are requested. If Seller or Purchaser is unable to
obtain any such required consent, approval, substitution or amendment, Seller
(or its subsidiaries or affiliates) shall continue to be bound by such
agreements, leases, licenses and other rights and, unless not permitted by law
or the terms thereof, Purchaser (or its subsidiaries or affiliates) shall, as
agent for Seller (or its subsidiaries or affiliates) or as subcontractor, pay,
perform and discharge fully all the obligations of Seller (or its subsidiaries
or affiliates) thereunder from and after the Closing and indemnify and hold
harmless Seller and its subsidiaries from and against, all losses, claims,
damages, taxes, liabilities and expenses whatsoever arising out of or in
connection with Purchaser's (or its subsidiaries' or affiliates') performance of
or omission to perform its obligations thereunder and hereunder. Seller (or its
subsidiaries or affiliates) shall, without further consideration, pay and remit
to Purchaser (or its subsidiaries or affiliates) promptly all money, rights and
other consideration received in respect of such performance after payment of any
taxes due from Seller (or its subsidiaries or affiliates) with respect to such
receipt. Seller (or its subsidiaries or affiliates) shall exercise their rights
and options under all such agreements, leases, licenses and other rights and
commitments referred to in this Section 9.2 only as reasonably directed by
Purchaser and at Purchaser's expense. If and when any such consent shall be
obtained or such agreement, lease, license or other rights shall otherwise
become assignable or able to be novated, Seller (or its subsidiaries or
affiliates) shall promptly assign all its rights and obligations thereunder to
Purchaser (or its subsidiaries or affiliates) without payment of further
consideration and Purchaser (or its subsidiaries or affiliates) shall, without
the payment of any further consideration, assume such rights and obligations. To
the extent that the assignment of any contract or agreement or the proceeds
thereof pursuant to this Section 9.2 is prohibited by law, the assignment
provisions of this paragraph shall operate to create a subcontract with the
Purchaser to perform each relevant, unassignable contract or agreement, and the
Seller to pay
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the Purchaser the subcontract price which shall be equal to the money, rights
and other consideration (after tax) received by Seller (or its subsidiaries or
affiliates) with respect to the relevant, unassignable contract or agreement,
performed by Purchaser under such subcontract.
9.3 Access to Information. Prior to the Closing, Purchaser may
make such investigation of the business and properties of the Companies and
their respective subsidiaries as Purchaser may desire, and, upon reasonable
notice, Seller shall give to Purchaser and its counsel, accountants and other
representatives reasonable access, during normal business hours throughout the
period prior to the Closing, to the property, books, commitments, agreements,
records, files and personnel of the Companies and their respective subsidiaries
and Seller shall furnish to Purchaser during that period all copies of documents
and information concerning the Companies and their respective subsidiaries as
Purchaser may reasonably request subject to applicable law.
9.4 Transfer Taxes. Any and all transfer taxes, stamp duties and
similar charges relating to the purchase and sale of the Sale Shares shall be
paid by . Except as provided in the preceding sentence, all matters
under this Agreement relating to Taxes and Tax Returns (both as defined in the
Tax Sharing Agreement) shall be governed by the Tax Sharing Agreement.
10. Survival of Representations and Warranties and
Related Matters.
10.1 Survival of Representations of Warranties and Notice of
Claims. It is understood and acknowledged that the representations and
warranties set forth in this Agreement shall not survive the Closing, provided,
however, that the representations and warranties set forth in Section 8.5 shall
survive the Closing indefinitely, and the representations and warranties set
forth in Section 8.7 shall survive the Closing but only until the close of
business on December 31, 1996 and Seller shall be liable for damages under
Section 8.7 hereof only to the extent that notice of a claim therefor
is asserted by the Purchaser in writing and delivered on or prior to the close
of business on December 31, 1996. Any notice of a claim by any reason of an
alleged breach of any of the representations and warranties contained in this
Agreement shall state specifically the representations or warranties with
respect to which the claim is made, the facts giving rise to the alleged basis
for the claim and the
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amount of liability asserted against the other party by reason of the claim.
10.2 Determination of Damages and Related Matters. In calculating
any amounts payable to Purchaser pursuant to Section 10.1, no amount shall be
included for Purchaser's consequential damages. Other than as explicitly
provided in this Agreement (i) Seller does not, in this Agreement or any other
agreement, instrument or document contemplated by this Agreement, make any
representation as to, warranty of or covenant (whether express or implied) with
respect to, the value of the Sale Shares. Purchaser acknowledges and agrees that
Purchaser and its representatives have the experience and knowledge to evaluate
the business, financial condition, assets and liabilities of each of the
Companies' businesses; that Purchaser and its representatives have had access to
such of the information and documents referred to in Section 9.3 and to such of
the real property, fixtures and tangible personal property of the Companies'
businesses as Purchaser and its representatives shall have requested to see
and/or review; that Purchaser and its representatives have had a full
opportunity to meet with appropriate management and employees of Seller and each
of the Companies and their respective subsidiaries to discuss the businesses and
assets of the Companies and their respective subsidiaries; and that, in
determining to acquire the Sale Shares and, therefore, the underlying assets of
the Companies and their respective subsidiaries (including the real property,
fixtures and the tangible personal property), Purchaser has made its own
investigation into, and based thereon Purchaser has formed an independent
judgment concerning, the Sale Shares and the underlying assets of each of the
Companies and their respective subsidiaries (including the real property,
fixtures and the tangible personal property). Other than as explicitly provided
herein, the Sale Shares, as well as all assets of the Companies, to be acquired,
directly or indirectly, by the Purchaser hereunder are transferred on an "AS IS,
WHERE IS" basis. The parties acknowledge and agree that the Purchase Price for
the Sale Shares of each of the Companies represents the mutually agreed upon
fair market value of such Sale Shares, and neither party (or their respective
permitted successors and assigns) shall have the right at any time in the future
to make any claim or raise any dispute with respect to the adequacy or fairness
of the consideration paid for the Sale Shares.
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11. Arbitration.
Resolution of any and all disputes arising from or in connection
with this Agreement, whether based on contract, tort, statute or otherwise,
including, but not limited to, disputes over arbitrability and disputes in
connection with claims by third parties (collectively, "Disputes") shall be
exclusively governed by and settled in accordance with the provisions of this
Section 11; provided, however, that nothing contained herein shall preclude
either party from seeking or obtaining (a) injunctive relief or (b) equitable or
other judicial relief to enforce the provisions hereof or, pending resolution of
Disputes hereunder, to preserve the status quo. Seller or Purchaser (each a
"Party") may commence proceedings hereunder by delivering a written notice to
the other Party providing reasonable description of the Dispute to the other,
and expressly requesting arbitration hereunder. The Parties hereby agree to
submit all Disputes to arbitration under the terms hereof, which arbitration
shall be final, conclusive and binding upon the Parties, their successors and
assigns. The arbitration shall be conducted in New York City by three
arbitrators acting by majority vote (the "Panel") selected by agreement of the
Parties not later than ten (10) days after delivery of the demand or, failing
such agreement, appointed pursuant to the commercial arbitration rules of the
American Arbitration Association, as amended from time to time (the "AAA
Rules"). If an arbitrator so selected becomes unable to serve, his or her
successors shall be similarly selected or appointed. The arbitration shall be
conducted pursuant to the Federal Arbitration Act and such procedures as the
Parties may agree, or, in the absence of or failing such agreement, pursuant to
the AAA Rules. Notwithstanding the foregoing: (i) each Party shall have the
right to audit the books and records of the other Party that are reasonably
related to the Dispute; (ii) each Party shall provide to the other, reasonably
in advance of any hearing, copies of all documents which a Party intends to
present in such hearing; and (iii) each Party shall be allowed to conduct
reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days
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after its selection or appointment, and shall make a final award not later than
thirty (30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages. Any arbitration award
shall be binding and enforceable against the Parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.
12. Miscellaneous.
12.1 No Impeachment. Neither of the parties hereto shall impeach
this Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
12.2 Assignments. Except as provided in this Section 12.2,
neither party may assign or transfer any of its rights and obligations under
this Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Seller and Purchaser acknowledge and agree that
either party may assign its rights and delegate its obligations under this
Agreement, including without limitation its rights and obligations under the
Indemnification Agreement and the Tax Sharing Agreement annexed hereto, to one
or more of its respective subsidiaries or affiliates, provided that such an
assignment shall have no effect on, and shall not be deemed to constitute a
release of either party from, its obligations under this Agreement.
12.3 Governing Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York and may be executed in more than one counterpart and by different
parties of each counterpart and all such counterparts when executed shall form
one and the same agreements.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
HM HOLDINGS, INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
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ANNEX A
Details of Companies and Sale Shares
<TABLE>
<CAPTION>
Sale Shares
Company (and %)
------- -----------
<S> <C> <C>
1. Kaiser Cement Corporation (100%)
2. [Duke City Lumber Company, Inc. ( %)]
3. HM Industries, Inc. (100%)
4. Crane Holdings Inc. (100%)
</TABLE>
<PAGE>
<PAGE>
ANNEX B
Form of Indemnification Agreement
<PAGE>
<PAGE>
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as of
September __, 1996, between HM Holdings, Inc., a Delaware corporation
("Seller"), and Hanson PLC, a public limited company incorporated in England
("Purchaser").
RECITALS
A. The parties have entered into a Pre-Demerger Stock Purchase
Agreement, dated as of September __, 1996 (the "SPA"), pursuant to which Seller
will sell to Purchaser capital stock of the companies listed on Annex A hereto
(each, a "Company" and collectively, the "Companies").
B. The parties acknowledge that it is their intention that,
effective upon the Closing (as defined in the SPA), (i) Purchaser shall assume
and accept responsibility for the Purchaser Liabilities (as hereinafter
defined), and (ii) Seller shall retain responsibility for the Seller Liabilities
(as hereinafter defined), in each case except as otherwise provided in the SPA
or the Tax Sharing and Indemnification Agreement (the "Tax Sharing Agreement")
contemplated by the SPA.
C. It is a condition to the consummation of the transactions
contemplated by the SPA that the parties enter into this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, Seller and Purchaser agree as
follows:
ARTICLE I.
DEFINITIONS
"Chemicals Subsidiaries" means all of the direct and indirect
subsidiaries of Purchaser that are transferred to Millennium Chemicals Inc.
("Millennium") or its subsidiaries, including without limitation the Seller, as
part of or in connection with the contemplated demerger of Purchaser's chemicals
business (the "Demerger"), but excluding the Discontinued Businesses.
"Company Businesses" means all of the businesses, operations and
assets of each of the Companies, including all of the businesses, operations and
assets that were previously
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conducted, owned or used by any business or operation of any Company (or any
predecessor to such business or operation), but limited in the case of Crane
Holdings Inc. to the businesses and operations presently or previously
conducted by National Crane, notwithstanding the fact that prior to the
Closing (i) any such business or operation was closed, wound up or
otherwise terminated, (ii) such asset ceased to be used in connection with such
business or operation, or (iii) any such business, operation or asset was sold
or otherwise disposed of to any person or entity other than the Chemicals
Subsidiaries. Company Businesses do not include the Seller Businesses. For the
purpose of the definition of "Company Businesses", the term the "Company"
includes all direct and indirect subsidiaries of such Company and any
partnerships in which it or any of its subsidiaries owns or at any time in the
past owned an interest.
"Discontinued Businesses" has the meaning ascribed to such term
in the Information Statement dated August ____, 1996 delivered to Purchaser's
shareholders in connection with the Demerger.
"Litigation and Claims" means litigation pending or threatened or
claims alleged against Seller and/or Purchaser Parties, including, without
limitation, civil and criminal actions, workers' compensation proceedings,
administrative and regulatory proceedings, investigations, audits, inquiries,
demands, claims (including any title claims relating to real properties) and
threatened actions.
"Purchaser Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Seller Liabilities,
any and all of the obligations, liabilities and expenses incurred by Seller,
Purchaser or any of their respective affiliates or subsidiaries or affiliates
of such subsidiaries arising out of or associated with, or any Litigation and
Claims alleged to arise out of or be associated with, the Company Businesses,
whether or not in the ordinary course of business, in each case whether matured
or unmatured, liquidated or unliquidated, fixed or contingent, known or
unknown, and whether arising out of circumstances existing prior to, on or
subsequent to the Closing, and regardless of where or against whom such
obligations, liabilities and expenses are asserted or determined or whether
asserted or determined prior to, on or subsequent to the Closing, and regardless
of whether arising from or alleged to arise from negligence, recklessness,
violation of law, fraud or misrepresentation by any of the Seller Parties, and
including, without limitation, the following items:
(i) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual breach
or violation of any obligation or requirement arising
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out of or associated with the Company Businesses, including, without
limitation, (A) all product warranty obligations with respect to
products developed, produced, manufactured, marketed, used or
distributed by the Company Businesses ("Company Products"), whether
shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury or
consequential damage which is caused or alleged to have been or to be
caused by any defect in or breach of warranty related to any Company
Product or other asset of the Company Businesses;
(ii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Purchaser
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller, Purchaser or any of their respective affiliates
or subsidiaries or affiliates of such subsidiaries after the Closing
("New Purchaser Litigation"), in each case if and solely to the extent
that such Litigation and Claims (in whole or in part) arise out of or
are associated with, or are alleged (regardless of the party named in
the allegation or complaint) to arise out of or be associated with the
Company Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorney or consultant fees or
remediation costs) of Seller, or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to
the Company Businesses;
(iv) any Litigation and Claims brought after the Closing against
Seller or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to the
Closing, arising out of, or alleged to arise out of, the Company
Businesses;
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(v) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of
Section 3(37) of ERISA), maintained by, contributed to, or obligated to
contribute to, at any time, by any of the Companies or any of their
subsidiaries, including but not limited to any liability with respect
to: (A) the Pension Benefit Guaranty Corporation under Title IV of
ERISA; (B) a multiemployer plan (within the meaning of Section 3(37) of
ERISA); (C) any non-compliance with the notice and benefit continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; (D) any non-compliance with ERISA or any other
applicable laws; and (E) any suit, proceeding or claim which is brought
against the Seller or any of its affiliates, any such plan, and any
fiduciary or former fiduciary of any such plan; and
(vi) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of any of the Companies or any of their subsidiaries) by (A)
any of the Companies or any of the Company Businesses, or (B) any
officer, director, employee or agent of any of the Companies or any of
the Company Businesses attributable to any actions or inactions by any
of the Companies or any of the Company Businesses.
"Purchaser Parties" means Purchaser and any direct or indirect
subsidiary or affiliate of Purchaser other than the Chemicals Subsidiaries, and
any of their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees.
"Seller Businesses" means all of the businesses, operations and
assets of Seller, including all of the businesses, operations and assets that
were previously conducted, owned or used by any business or operation of the
Seller (or any predecessor to such business or operation), including, without
limitation, (x) all of the businesses, assets and operations (or any
predecessor to such business or operation) transferred by Seller (or any of its
subsidiaries) to U.S. Industries, Inc. (or any of its subsidiaries) and (y) all
of the businesses and operations previously conducted by Crane Holdings, Inc.
other than those presently or previously conducted by National Crane,
notwithstanding the fact that prior to the Closing (i) any such business or
operation was closed, wound up or otherwise terminated, (ii) such asset ceased
to be used in connection with such business or operation, or (iii) any such
business, operation or asset was sold or otherwise disposed of to any person
or entity other than the Chemicals Subsidiaries. Seller Businesses do not
include (i) the Company Businesses, and (ii) any other business, operations or
assets transferred to Purchaser or its
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subsidiaries (other than the Chemicals Subsidiaries) as part of or in connection
with the Demerger. For the purpose of the definition of "Seller Businesses", the
term "Seller" includes all direct and indirect subsidiaries of Seller and any
partnerships in which it or any of its subsidiaries owns or at any time in the
past owned an interest.
"Seller Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Purchaser
Liabilities, any and all of the obligations, liabilities and expenses incurred
by Seller, Purchaser or any of their respective affiliates or subsidiaries or
affiliates of such subsidiaries arising out of or associated with, or any
Litigation and Claims alleged to arise out of or be associated with, the Seller
Businesses, whether or not in the ordinary course of business, in each case
whether matured or unmatured, liquidated or unliquidated, fixed or contingent,
known or unknown, and whether arising out of circumstances existing prior to, on
or subsequent to the Closing and regardless of where or against whom such
obligations, liabilities and expenses are asserted or determined or whether
asserted or determined prior to, on or subsequent to the Closing, and regardless
of whether arising from or alleged to arise from negligence, recklessness,
violation of law, fraud, or misrepresentation by any of the Purchaser Parties,
and including, without limitation, the following items:
(i) all obligations, liabilities and expenses incurred by or
associated with any business, operation or asset that (A) was conducted,
owned or used by any of the Company Businesses prior to the Closing but
which was sold or otherwise disposed of to any of the Chemicals
Subsidiaries, and (B) is not transferred to Purchaser or its
subsidiaries (other than the Chemicals Subsidiaries) as part of or in
connection with the Demerger;
(ii) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual breach
or violation of any obligation or requirement arising out of, or
associated with, the Seller Businesses, including, without limitation,
(A) all product warranty obligations with respect to products developed,
produced, manufactured, marketed, used or distributed by the Seller
Businesses ("Seller Products"), whether shipped prior to, on
5
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or subsequent to the Closing, and (B) all liabilities resulting from
claims for real or alleged personal injury or consequential damage which
is caused or alleged to have been or to be caused by any defect in or
breach of warranty related to any Seller Products or other assets of the
Seller Businesses;
(iii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Seller
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries after the
Closing ("New Seller Litigation"), in each case if and solely to the
extent that such Litigation and Claims (in whole or in part) arise out
of or are associated with or are alleged (regardless of the party named
in the allegation or complaint) to arise out of or to be associated with
the Seller Businesses;
(iv) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorneys' or consultants' fees
or remediation costs) of Seller, Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to,
the Seller Businesses;
(v) any Litigation and Claims brought after the Closing against
Purchaser or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to,
the Closing, arising or alleged to arise from the Seller Businesses;
(vi) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under ERISA) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of
Section 3(37) of ERISA), maintained by, contributed to, or obligated to
6
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contribute to, at any time, by the Seller or any of its subsidiaries
other than (x) the Companies or any of their subsidiaries, and (y) any
other company or business transferred to Purchaser or its subsidiaries
(other than the Chemicals Subsidiaries) as part of or in connection with
the Demerger, including but not limited to any liability with respect
to: (A) the Pension Benefit Guaranty Corporation under Title IV of
ERISA; (B) a multiemployer plan (within the meaning of Section 3(37) of
ERISA); (C) any non-compliance with the notice and benefit continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; (D) any non-compliance with ERISA or any other
applicable laws; and (E) any suit, proceeding or claim which is brought
against the Companies or any of their subsidiaries, any such plan, and
any fiduciary or former fiduciary of any such plan; and
(vii) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of the Seller or any of its subsidiaries) by (A) the Seller or
any of Seller Businesses, or (B) any officer, director, employee or
agent of the Seller or any of the Seller Businesses attributable to any
actions or inactions by the Seller or any of the Seller Businesses.
"Seller Parties" means Seller and any direct or indirect
subsidiary of Seller that is not transferred to Purchaser or its subsidiaries
(other than the Chemicals Subsidiaries) as part of or in connection with the
Demerger, and any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees.
"Taxes" has the meaning ascribed to such term in the Tax Sharing
Agreement.
Words and expressions defined in the SPA shall have the same
meaning herein, save that, to the extent that such definitions are inconsistent
with any definitions in this Agreement, the definitions herein shall take
precedence.
ARTICLE II.
EXCULPATION AND INDEMNIFICATION BY SELLER
Section 2.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Seller shall, without any further
responsibility or liability of, or recourse to, any of the Purchaser Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Seller Liabilities.
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None of the Purchaser Parties shall be liable to any of the Seller Parties for
any reason whatsoever on account of any Seller Liabilities.
Seller shall indemnify, defend, save and hold harmless each of
the Purchaser Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Seller
Liabilities and (ii) the breach by any of the Seller Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Purchaser Damages").
Purchaser Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Purchaser or by any of its
affiliates or subsidiaries or affiliates of such subsidiaries, from any third
party insurance policy (and are non-reimbursable by Purchaser or any of its
subsidiaries or affiliates under any self insurance policy), shall not be the
subject of indemnification under this Agreement.
ARTICLE III.
EXCULPATION AND GENERAL INDEMNIFICATION BY PURCHASER
Section 3.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Purchaser shall, without any further
responsibility or liability of, or recourse to, any of the Seller Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Purchaser Liabilities. None of the Seller Parties shall be liable to any of the
Purchaser Parties for any reason whatsoever on account of any Purchaser
Liabilities.
Purchaser shall indemnify, defend, save and hold harmless each of
the Seller Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Purchaser
Liabilities and (ii) the breach by any of the Purchaser Parties of any of their
obligations under this Agreement and the SPA (all of which
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are hereinafter collectively referred to as the "Seller Damages").
Seller Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Seller or by any of its
subsidiaries or affiliates, from any third party insurance policy (and are
non-reimbursable by Seller or any of its subsidiaries or affiliates under any
self insurance policy), shall not be the subject of indemnification under this
Agreement.
ARTICLE IV.
SPECIFIC INDEMNIFICATION ISSUES
Section 4.1. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Seller and
Purchaser is determined after trial in any judgment, award or decree to be joint
or concurrent or in which the entitlement to indemnification hereunder is not
readily determinable, the parties shall negotiate in good faith in an effort to
agree, as between Seller and Purchaser, on the proper allocation of liability or
entitlement to indemnification, as well as the proper allocation of the costs of
any joint defense or settlement pursuant to Section 6.4, all in accordance with
the provisions of, and the principles set forth in, this Agreement. In the
absence of any such agreement, such allocation of liability, entitlement to
indemnification and allocation of costs shall be subject to ultimate resolution
between Seller and Purchaser pursuant to Section 8.8.
Section 4.2. It is acknowledged that after the Closing the
parties will have arms length negotiated business relationships, which
relationships will be described in contracts, agreements and other documents
entered into in the normal course of business. Such documents may include
agreements by the parties and their affiliates and subsidiaries to supply, after
the Closing, materials, products, services and leases. Such business
relationships shall not be subject to the indemnity provisions hereof, unless
the parties expressly agree to the contrary in the agreements governing such
relationships.
ARTICLE V.
NOTICE AND PAYMENT OF CLAIMS
Section 5.1. If any person entitled to a defense and/or
indemnification under this Agreement (the "Indemnified
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Party") determines that it is or may be entitled to a defense or indemnification
by Purchaser or Seller, as the case may be (the "Indemnifying Party"), under
this Agreement:
(i) The Indemnified Party shall deliver promptly to the
Indemnifying Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense and/or
indemnification, the nature of the claim, and if known, the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Nothing in this subparagraph shall be interpreted to
invalidate any claim by the Indemnified Party to be entitled to
indemnification, unless the Indemnifying Party can show that the failure
of the Indemnified Party to deliver such notice was intentional.
(ii) The Indemnifying Party shall have 30 days from receipt of
the notice requesting indemnification within which to either: (A) assume
the defense of such litigation or claim; (B) pay the claim in
immediately available funds; (C) reserve its rights pending negotiations
under Section 6.4; or (D) object in accordance with Section 5.2. This 30
day period may be extended by agreement of the parties. Nothing in this
subparagraph shall be interpreted to abrogate or delay a party's
obligation to provide the other with a defense under this Agreement.
Section 5.2. The Indemnifying Party may object to the claim for
defense and/or indemnification set forth in any notice; provided, however, that
if the Indemnifying Party does not give the Indemnified Party written notice
setting forth its objection to such claim (or the amount thereof) and the
grounds therefor within the same 30 day period (or any extended period) referred
to in Section 5.1 above, the Indemnifying Party shall be deemed to have
acknowledged its liability to provide a defense or for the amount of such claim
and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such amount or obtain such defense. Any objection to a
claim for a defense or indemnification shall be resolved in accordance with
Section 8.8.
Section 5.3. The right to a defense or indemnification under this
Agreement applies only insofar as defense and indemnification are not provided
for by insurance from any third party insurance policy (and are non-reimbursable
by Purchaser or any of its affiliates or subsidiaries or affiliates of such
subsidiaries under any self insurance policy). Nevertheless, the potential
availability of insurance coverage to Seller or Purchaser shall not relieve the
other party of its obligations for defense or indemnification hereunder, or
delay either party's
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obligation to the other to assume a defense or pay any sums due hereunder.
Section 5.4. Payments due to be made under this Agreement shall
carry interest from the date on which the Indemnified Party became entitled to
indemnification until the date of actual payment (whether before or after
judgment) at the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
Section 5.5. Payments due to be made under this Agreement shall
be free and clear of all deductions, withholdings, set-offs or counterclaims
whatsoever, except as may be required by law. If any deductions or withholdings
are required by law the Indemnifying Party shall be obliged to pay such sum as
will, after such deduction, withholding, set-off or counter-claim has been made,
leave the Indemnified Party with the same amount as it would have been entitled
to receive in the absence of any such requirement to make a deduction or
withholding.
Section 5.6. Payments due to be made under this Agreement shall
be reduced by the amount by which any Taxes for which the Indemnified Party
would have been accountable or liable to be assessed is either (i) actually
reduced prior to payment falling due hereunder or (ii) is likely to be reduced
subsequent to payment falling due hereunder in the reasonable opinion of the
Indemnified Party acting in good faith in the light of the circumstances
prevailing at the time of delivery of written notice in accordance with Section
5.1. The reduction of any payments to be made in accordance with this Section
5.6 for Tax benefits which will likely be recognized within one year after the
date on which the Indemnified Party receives indemnification under this
Agreement shall be made without regard to the time value of money. The reduction
of any payments to be made in accordance with this Section 5.6 for Tax benefits
which will not likely be recognized within one year after the date on which the
Indemnified Party receives indemnification under this Agreement shall take into
account the time value of money from the time the applicable payment is received
until the date such Tax benefits are likely to be recognized, using as the
discount rate the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers at the time the payment is received.
Section 5.7. The parties to this Agreement may enter into
agreements or other arrangements providing for the set-off of payments due to be
made by way of indemnification to both Seller and Purchaser.
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ARTICLE VI.
DEFENSE OF THIRD-PARTY CLAIMS
Section 6.1. If the Indemnified Party's claim for indemnification
is based, under this Agreement, on a claim, demand, investigation, action or
proceeding, judicial or otherwise, brought by a third party, and the
Indemnifying Party does not object under Section 5.2 hereof, the Indemnifying
Party shall, within the 30-day period (or any extended period) referred to in
Section 5.1 above, assume the defense of such third-party claim at its sole cost
and expense and shall thereafter be designated as the "Case Handler." Any such
defense shall be conducted by attorneys employed by the Indemnifying Party. The
Indemnified Party may retain attorneys of its own choosing to participate in
such defense at the Indemnified Party's sole cost and expense.
Section 6.2. If the Indemnifying Party assumes the defense of any
such third-party claim, the Indemnifying Party may settle or compromise the
claim without the prior consent of the Indemnified Party so long as all present
and future claims relating to the compromised claim against the Indemnified
Party are irrevocably and unconditionally released in full.
Section 6.3. The Indemnifying Party shall pay to the Indemnified
Party in immediately available funds the amount for which the Indemnified Party
is entitled to be indemnified within 30 days after the settlement or compromise
of such third-party claim or the judgment of a court of competent jurisdiction
(or within such longer period as agreed to by the parties). If the Indemnifying
Party does not assume the defense of any such third-party claim, the
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party, except that the Indemnifying Party has the right to
contest that it is obligated to the Indemnified Party under the terms of this
Agreement, provided the Indemnifying Party shall have raised its objection in a
timely manner under Section 5.2.
Section 6.4. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Purchaser and
Seller is alleged to be joint or in which the entitlement to indemnification
hereunder is not readily determinable, the parties shall cooperate in a joint
defense. Such joint defense shall be under the general management and
supervision of the party which is expected to bear the greater share of the
liability, and which will be considered the Case Handler, unless otherwise
agreed; provided, however, that neither party shall settle or compromise any
such joint defense matter without the consent of the other. The costs of such
joint
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defense, any settlement and any award or judgment (unless the award or judgment
specifies otherwise) shall be borne as the parties may agree; or in the absence
of such agreement, such costs shall be borne by the party incurring such costs,
subject to ultimate resolution between Purchaser and Seller pursuant to Section
8.8.
ARTICLE VII.
COOPERATION AND PRESERVATION OF RECORDS
Section 7.1. Purchaser Parties and Seller Parties shall cooperate
with one another fully and in a timely manner in connection with the defense of
any Pending Purchaser Litigation, New Purchaser Litigation, Pending Seller
Litigation, New Seller Litigation or any other actual or threatened claim.
Section 7.2. Such cooperation shall include, without limitation,
making available to the other party, during normal business hours and upon
reasonable notice, all books, records and information ("Litigation Records"),
officers and employees (without substantial interruption of employment)
necessary or useful in connection with any actual or threatened claim,
investigation, audit, action or proceeding.
Section 7.3. Each party shall continue in force, or at the
request of the other party, shall issue, notices exempting from destruction any
Litigation Records which the requesting party represents may be necessary to the
defense of, or required to be produced in discovery in connection with, any such
claim, investigation, audit, action or proceeding and shall refrain from
destroying any such Litigation Records until authorized by the requesting party.
The requesting party shall notify the other party promptly when the Litigation
Records are no longer required to be maintained.
Section 7.4. The party requesting access to Litigation Records or
officers and employees pursuant to Section 7.2 or preservation of Litigation
Records under Section 7.3 shall bear all reasonable out-of-pocket expenses
(except reimbursement of salaries, employee benefits and general overhead)
incurred by the other party in connection with providing such Litigation Records
or officers and employees.
Section 7.5. The party providing Litigation Records under this
Article VII may elect, upon a reasonable basis and within a reasonable time, to
designate all or a portion of the Litigation Records as confidential or
proprietary. If Litigation Records are so designated, the party receiving them
will treat
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them as it would its own confidential or proprietary information and will take
all reasonable steps to protect and safeguard the Litigation Records while in
its own custody and will attempt to shield such information from disclosure by
motions to quash, motions for a protective order, redaction or other appropriate
actions.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
Section 8.2. This Agreement may be amended, modified or
supplemented only by a written agreement of the parties.
Section 8.3. Except as provided in this Section 8.3, this
agreement shall be personal to the parties to it and neither party may assign or
transfer any of its rights and obligations under this Agreement without the
prior written consent of the other party. Notwithstanding the foregoing, Seller
and Purchaser acknowledge and agree that either party may assign its rights and
delegate its obligations under this Agreement, to one or more of its respective
subsidiaries or affiliates, provided that such an assignment shall have no
effect on, and shall not be deemed to constitute a release of either party from,
its obligations under this Agreement.
Section 8.4. This Agreement is solely for the benefit of the
Seller Parties and the Purchaser Parties and is not intended to confer upon any
other person except such parties any rights or remedies hereunder. There are no
third party beneficiaries to this Agreement other than the Seller Parties and
the Purchaser Parties.
Section 8.5. This Agreement may be entered into in any number of
counterparts and by the parties to it on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
Section 8.6. If any term or provision of this Agreement shall be
held to be illegal or unenforceable, in whole or in part, under any enactment or
rule of law, such term or provision or part shall to that extent be deemed not
to form part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected. Subject thereto, should any
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term or provision of this Agreement be or become ineffective, in whole or in
part, for reasons beyond the control of the parties hereto, the parties shall
use reasonable efforts to agree upon a new provision which shall as nearly as
possible have the same commercial effect as the ineffective term or provision or
part hereof.
Section 8.7. Any notice, claim or demand requiring to be served
under or in connection with this Agreement shall be in writing and shall be
sufficiently given or served if delivered addressed as follows:
If to Seller or any other Seller Party, to:
c/o Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III, Esq.
and
c/o Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire, DN40 2PR, England
Attention: George H. Hempstead, III, Esq.
If to Purchaser or any other Purchaser Party, to:
c/o Hanson PLC
1 Grosvenor Place
London SW1X 7JH, England
Attention: Graham Dransfield, Esq.
Any such notice shall be delivered by hand or sent by first class post or
overnight courier. Any such notice shall take effect, in the case of hand
delivery, at the time of delivery, or, in the case of first class post,
forty-eight hours after posting.
Section 8.8. Resolution of any and all disputes arising from or
in connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 8.8; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Seller or
Purchaser (each a "Party") may
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commence proceedings hereunder by delivering a written notice to the other Party
providing reasonable description of the Dispute to the other, and expressly
requesting arbitration hereunder. The Parties hereby agree to submit all
Disputes to arbitration under the terms hereof, which arbitration shall be
final, conclusive and binding upon the Parties, their successors and assigns.
The arbitration shall be conducted in New York City by three arbitrators acting
by majority vote (the "Panel") selected by agreement of the Parties not later
than ten (10) days after delivery of the demand or, failing such agreement,
appointed pursuant to the commercial arbitration rules of the American
Arbitration Association, as amended from time to time (the "AAA Rules"). If an
arbitrator so selected becomes unable to serve, his or her successors shall be
similarly selected or appointed. The arbitration shall be conducted pursuant to
the Federal Arbitration Act and such procedures as the Parties may agree, or, in
the absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing: (i) each Party shall have the right to audit the
books and records of the other Party that are reasonably related to the Dispute;
(ii) each Party shall provide to the other, reasonably in advance of any
hearing, copies of all documents which a Party intends to present in such
hearing; and (iii) each Party shall be allowed to conduct reasonable discovery
through written requests for information, document requests, requests for
stipulation of fact and depositions, the nature and extent of which discovery
shall be determined by the Panel, taking into account the needs of the Parties
and the desirability of making discovery expeditious and cost effective. All
hearings shall be conducted on an expedited schedule, and all proceedings shall
be confidential. Either Party may at its expense make a stenographic record
thereof. The Panel shall complete all hearings not later than ninety (90) days
after its selection or appointment, and shall make a final award not later than
thirty (30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages. Any arbitration award
shall be binding and enforceable against the Parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.
Section 8.9. Neither of the parties hereto shall impeach this
Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
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IN WITNESS WHEREOF, the parties hereto have caused their
respective officers thereunto duly authorized to execute and deliver this
Agreement as of the day and year first above written.
HM HOLDINGS, INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
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ANNEX A TO INDEMNIFICATION AGREEMENT
Details of Companies and Sale Shares
<TABLE>
<CAPTION>
Sale Shares
Company (and %)
------- -----------
<S> <C> <C>
1. Kaiser Cement Corporation (100%)
2. [Duke City Lumber Company, Inc. ( %)]
3. HM Industries, Inc. (100%)
4. Crane Holdings Inc. (100%)
</TABLE>
18
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ANNEX C
Form of Tax Sharing and Indemnification Agreement
<PAGE>
<PAGE>
FORM OF
TAX SHARING AND INDEMNIFICATION AGREEMENT
Tax Sharing and Indemnification Agreement (this "Agreement"), entered into
September __, 1996, among: (a) HM Anglo-American Ltd., a Delaware corporation
("Anglo"), and HM Holdings, Inc., a Delaware corporation ("HM Holdings")
(collectively, "Seller"); and (b) Hanson PLC, a public limited company
incorporated in England and Wales ("Buyer").
WHEREAS, HM Holdings and Buyer have entered into a Pre-Demerger Stock
Purchase Agreement, dated September __, 1996 (the "Stock Purchase Agreement"),
relating to all the outstanding capital stock of: (i) Kaiser Cement Corporation
("Kaiser"); (ii) [Duke City Lumber Company, Inc. ("Duke City")]; (iii) HM
Industries, Inc. ("HMI"); and (iv) Crane Holdings Inc. ("Crane") (individually,
a "Target" and collectively, the "Targets"); and
WHEREAS, Seller and Buyer wish to set forth their agreement with respect to
certain tax matters as set forth below.
NOW THEREFORE, it is hereby agreed as follows:
1. TAXES ALLOCATED TO SELLER. Seller will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless the Targets, Buyer, and
their Affiliates from and against any and all of the following Taxes:
i. all Federal Income Taxes imposed on [Duke City], HMI, and Crane with
respect to all taxable periods of such corporations that end on or
prior to the Closing Date;
ii. all Federal Income Taxes imposed on Kaiser with respect to all
taxable periods of Kaiser that end during the period in which Kaiser
was included in the Anglo Consolidated Return;
iii. all State Income Taxes imposed by any particular State on a Target
with respect to any taxable period of such Target that ends within
the period during which such Target was included with a Chemicals
Company in any combined, consolidated, or unitary State Income Tax
Return filed with such State;
iv. all Federal Income Taxes imposed on a Target arising out of the
inclusion of such Target in the Anglo Consolidated Return on or prior
to the Closing Date, and all State Income Taxes imposed on a Target
arising out of the inclusion of such Target in any consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company
on or prior to the Closing Date;
v. all Income Taxes allocated to Seller pursuant to Section 2 hereof;
and
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vi. all Taxes described in Section 9.4 of the Stock Purchase Agreement;
provided, however, that the Taxes set forth in i through v above will not
include any Taxes arising as a result of actions taken by the Targets, or by
Buyer or any of its Affiliates with respect to the Targets, on the Closing Date
but after the Closing that are not in the ordinary course of business of the
Targets.
Any reference in this Agreement to a Target will be deemed to include a
reference to any Subsidiaries of such Target immediately prior to the Closing.
2. STRADDLE PERIODS. With respect to any taxable period of a Target that
would (absent an election) include, but not end until after, the Closing Date (a
"Straddle Period"), Buyer and Seller will, to the extent permitted by applicable
law, elect with the relevant Tax authority to close such Straddle Period as of
the close of the Closing Date. In any case where applicable law does not permit
a Target to close a Straddle Period as of the close of the Closing Date, Seller
will be allocated (i) any Federal Income Taxes imposed on the Target for the
portion of the Straddle Period up to and including the Closing Date, and (ii)
with respect to a Target that is included in any combined, consolidated, or
unitary State Income Tax Return with a Chemicals Company on the Closing Date,
any State Income Taxes imposed by such State on such Target for the portion of
the Straddle Period up to and including the Closing Date. For purposes of this
Section 2, Federal Income Taxes and State Income Taxes for the portion of a
Straddle Period up to and including the Closing Date will be determined based
upon an interim closing of the books of the Targets as of the close of the
Closing Date; provided, however, that such Taxes will not include any Taxes
arising as a result of actions taken by the Targets, or by Buyer or any of its
Affiliates with respect to the Targets, on the Closing Date but after the
Closing that are not in the ordinary course of business of the Targets.
3. TAXES ALLOCATED TO BUYER. Buyer will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless Seller and its Affiliates
from and against any and all Taxes other than those for which Seller is
responsible pursuant to Section 1 hereof, including, without limitation, (i) all
Taxes attributable to periods ending after the Closing Date (other than any
Federal Income Taxes or State Income Taxes allocated to Seller pursuant to
Section 2 hereof), (ii) all Federal Income Taxes imposed on Kaiser with respect
to all taxable periods of Kaiser that end during the period prior to the date
Kaiser became included in the Anglo Consolidated Return, (iii) all State Income
Taxes imposed by a particular State with respect to any taxable period of a
Target that ends at a time when such Target was not included with a Chemicals
Company in any combined, consolidated, or unitary State Income Tax Return filed
with such State, and (iv) all Other Taxes imposed on the Targets for all taxable
periods, whether ending before, on, or after the Closing Date.
4. REFUNDS OF INDEMNIFIED TAXES. (a) Buyer will assign and promptly remit
(and will cause the Targets and their Affiliates to assign and promptly remit)
to Seller all refunds (including interest thereon and any amounts applied
against liability for other taxable periods) of any Taxes for which Buyer is
indemnified pursuant to this Agreement ("Seller's Refunds").
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-3-
In furtherance of the preceding sentence (and not in limitation thereof), Buyer
hereby transfers and absolutely assigns to Seller all right, title, and interest
of Buyer, the Targets, and their Affiliates in any Seller's Refunds and will
turn over to Seller any and all checks for such Seller's Refunds ("Seller's
Refund Checks") in the exact form received, but duly endorsed to Seller and,
until so turned over, will hold the same in trust for the benefit of Seller
segregated from all other funds of Buyer, the Targets, and their Affiliates.
Buyer hereby grants to Seller a power of attorney to endorse Seller's Refund
Checks and to take such other action reasonably necessary or appropriate to
implement the terms and provisions of the immediately preceding sentence; this
power of attorney, being coupled with an interest, is irrevocable.
Seller will assign and promptly remit (and will cause its Affiliates to
assign and promptly remit) to Buyer all refunds (including interest thereon and
any amounts applied against liability for other taxable periods) of any Taxes
for which Seller is indemnified pursuant to this Agreement ("Buyer's Refunds").
In furtherance of the preceding sentence (and not in limitation thereof), Seller
hereby transfers and absolutely assigns to Buyer all right, title, and interest
of Seller and its Affiliates in any Buyer's Refunds and will turn over to Buyer
any and all checks for such Buyer's Refunds ("Buyer's Refund Checks") in the
exact form received, but duly endorsed to Buyer and, until so turned over, will
hold the same in trust for the benefit of Buyer segregated from all other funds
of Seller and its Affiliates. Seller hereby grants to Buyer a power of attorney
to endorse Buyer's Refund Checks and to take such other action reasonably
necessary or appropriate to implement the terms and provisions of the
immediately preceding sentence; this power of attorney, being coupled with an
interest, is irrevocable.
(b) Upon the request of Seller, Buyer will file, or cause the Targets
or their Affiliates to file, claims for Seller's Refunds, in such form as Seller
may reasonably request. Seller will have the sole right to prosecute any claims
for Seller's Refunds (by suit or otherwise) at Seller's expense and with counsel
of Seller's choice. Buyer will cooperate, and cause the Targets and their
Affiliates to cooperate, fully with Seller and its counsel in connection
therewith.
Upon the request of Buyer, Seller will file, or cause its Affiliates to
file, claims for Buyer's Refunds, in such form as Buyer may reasonably request.
Buyer will have the sole right to prosecute any claims for Buyer's Refunds (by
suit or otherwise) at Buyer's expense and with counsel of Buyer's choice. Seller
will cooperate, and cause its Affiliates to cooperate, fully with Buyer and its
counsel in connection therewith.
(c) For the avoidance of doubt (and except as provided in Section 6(b)
hereof), any refunds of Taxes other than Seller's Refunds and Buyer's Refunds
will be the property of the payee of such refunds and no other party to this
Agreement or its Affiliates will have any right to such refunds.
5. TAX BENEFITS. Buyer will promptly remit to Seller the amount of any Tax
Benefit recognized by Buyer, the Targets, or any of their Affiliates resulting
from any Major Adjustment for which Buyer, the Targets, or any of their
Affiliates has been
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-4-
indemnified pursuant to this Agreement. Seller will promptly remit to Buyer the
amount of any Tax Benefit recognized by Seller or any of its Affiliates
resulting from any Major Adjustment for which Seller or any of its Affiliates
has been indemnified pursuant to this Agreement. For purposes of this Agreement:
i. "Tax Benefit" means a reduction in the amount of Taxes that would
otherwise be payable, whether resulting from a deduction, reduced
gain or increased loss from the disposition of an asset, or
otherwise.
ii. a person will be deemed to have "recognized" a Tax Benefit at the
time the amount of Taxes such person otherwise would pay is reduced.
iii. a "Major Adjustment" is any adjustment to (A) any individual item of
income, gain, loss, or deduction if such adjustment is in excess of
five million dollars ($5,000,000), or (B) any individual item of
credit if such adjustment (when grossed up) is in excess of five
million dollars ($5,000,000).
(b) If either Buyer or Seller (the "remittor") makes a remittance to
the other party (the "remittee") under Section 5(a) or Section 6(b) hereof of
any Tax Benefit and all or part of such Tax Benefit is subsequently disallowed,
the remittee will promptly pay to the remittor that portion of such remittance
equal to the portion of the Tax Benefit that is disallowed.
6. BUYER TO FOREGO CARRYBACKS. (a) Unless Seller consents otherwise (which
consent will not unreasonably be withheld), Buyer will cause the Targets to
forego any carryback for Income Tax purposes to any taxable period of the
Targets ending on or before the Closing Date of any net operating loss, net
capital loss, or other deduction or credit incurred by the Targets in any
taxable period ending after the Closing Date (a "Post-Closing Carryback").
(b) If Seller consents to a Post-Closing Carryback under Section 6(a)
hereof, (i) Seller will cooperate with Buyer and the relevant Target in filing
an appropriate refund claim or amended Tax Return, and (ii) Seller will assign
and promptly remit to Buyer the amount of any refund of Tax received by, or Tax
Benefit recognized by, Seller or any of its Affiliates as a result of such
Post-Closing Carryback.
7. NO OBLIGATION TO FILE AMENDED TAX RETURNS. Except as otherwise
specifically provided in this Agreement, neither Seller nor Buyer, nor any of
their respective Affiliates, will be obligated to file any amended Tax Return or
other Tax refund claim.
8. PREPARATION OF TAX RETURNS. (a) Seller will prepare or cause to be
prepared, and file or cause to be filed, (i) all consolidated, combined, or
unitary Tax Returns of Seller or any of its Affiliates that include any of the
Targets, and (ii) all other Tax Returns required to be filed by or on behalf of
the Targets on or prior to the Closing Date.
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(b) Buyer will prepare or cause to be prepared, and file or cause to be
filed, all Tax Returns of the Targets other than those set forth in Section 8(a)
hereof. Buyer will prepare the following Tax Returns in a manner consistent with
past practice: (i) all Income Tax Returns of the Targets for taxable periods
ending (including as a result of an election referred to in Section 2 hereof) on
or prior to the Closing Date; and (ii) all Income Tax Returns of the Targets for
taxable periods including, but ending after, the Closing Date ("Straddle Period
Returns").
(c) With respect to each Straddle Period Return that involves Taxes
subject to allocation pursuant to Section 2 hereof, Buyer will, at least sixty
(60) days prior to the final due date (including extensions) of such Straddle
Period Return, provide to Seller (i) a copy of such Straddle Period Return
(including supporting schedules and workpapers) and (ii) a statement (including
supporting schedules and workpapers) certifying the amount of Tax shown on such
Straddle Period Return that is allocable to Seller pursuant to Section 2 hereof
(the "Statement"). Seller and its authorized representatives will have the right
to review the Statement for thirty (30) days following Seller's receipt of the
Statement (the "30-Day Review Period"). If Seller disagrees with the allocation
in the Statement, Seller will notify Buyer in writing of such disagreement prior
to close of the 30-Day Review Period, and Seller and Buyer will consult and
attempt to resolve in good faith the disagreement. In the event Seller and Buyer
are unable to resolve the disagreement within fifteen (15) days following the
end of the 30-Day Review Period, Seller and Buyer will, in accordance with
Section 14 hereof, jointly request the Accounting Firm to resolve the
disagreement as promptly as possible. Not later than five (5) days after the
later of (i) the end of the 30-Day Review Period, or (ii) if there is a
disagreement, the date notice is provided to Buyer and Seller regarding the
resolution of the disagreement by the Accounting Firm, Seller will pay to Buyer
or Buyer will pay to Seller, as the case may be, an amount equal to the
difference between (i) the Taxes shown on the Statement or in such notice (as
the case may be) as being allocable to Seller pursuant to Section 2 hereof, and
(ii) any payments made by the Targets on or prior to the Closing Date, and by
Seller and its Affiliates at any time, in respect of such Taxes (whether as
estimated Taxes or otherwise).
9. COOPERATION; ACCESS TO INFORMATION. (a) Buyer and Seller will cooperate
fully with each other with respect to, and will make available to each other
such Tax data and other information relating to the Targets as may be reasonably
required for, the preparation by Buyer or Seller of any Tax Returns required to
be prepared by Buyer or Seller under this Agreement.
(b) After the Closing Date, Buyer will, and will cause the Targets and
their Affiliates to, (i) permit Seller to have full access, at any reasonable
time and from time to time, at the business location at which the books and
records are maintained, to such Tax data relating to the Targets as Seller may
from time to time reasonably request, and (ii) furnish, and cause the
independent accountants and legal counsel of Buyer and the Targets to furnish,
to Seller such additional Tax and other information and documents relating to
the Targets in the possession of such persons as Seller may from time to time
reasonably request in
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connection with its Tax reporting obligations. After the Closing Date, Seller
will (i) permit Buyer to have full access, at any reasonable time and from time
to time, at the business location at which the books and records are maintained,
to such Tax data relating to the Targets in the possession of Seller and its
Affiliates as Buyer may from time to time reasonably request, and (ii) furnish,
and cause the independent accountants and legal counsel of Seller to furnish, to
Buyer such additional Tax and other information and documents relating to the
Targets in the possession of such persons as Buyer may from time to time
reasonably request in connection with its Tax reporting obligations. The
foregoing information will be retained until thirty (30) days following the
expiration of the applicable Tax statute of limitations (including any extension
thereof) or such other date as Seller or Buyer may reasonably request; provided,
however, that in the event a proceeding has been instituted prior to the
expiration of the applicable Tax statute of limitations for which the
information may be requested, the information will be retained until there is a
final determination with respect to such proceeding.
10. AUDITS. (a) Buyer will promptly notify Seller in writing upon the
receipt by Buyer, the Targets, or their Affiliates of notice of any pending or
threatened Tax audits of or assessments against the Targets, Buyer, or their
Affiliates (i) relating to any taxable period of a Target during which such
Target was included in the Anglo Consolidated Return or a consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company, or (ii)
that may affect the determination of Taxes for which Seller is or may be
obligated to indemnify the Targets, Buyer, or their Affiliates pursuant to this
Agreement. The notice required under this Section 10(a) is referred to in this
Agreement as the "Audit Notification."
(b) Subject to Section 10(c) hereof, Seller will have the sole right,
at its election, (i) to represent the Targets' interest with respect to any Tax
audit or assessment referred to in Section 10(a) hereof, including in any
administrative or court proceeding relating thereto, and (ii) to employ counsel
of its choice at its expense and to control the conduct of such audit,
assessment, or proceeding, including settlement or other disposition thereof
(the rights under (i) and (ii) are referred to in this Agreement collectively as
the "Representation Right"); provided, however, that the Representation Right
will apply only to any issues or items (x) relating to any taxable period of a
Target during which such Target was included in the Anglo Consolidated Return or
a consolidated, combined, or unitary State Income Tax Return with a Chemicals
Company, or (y) that may affect the determination of Taxes for which Seller is
or may be obligated to indemnify the Targets, Buyer, or their Affiliates
pursuant to this Agreement. Buyer will cooperate, and will cause the Targets and
their Affiliates to cooperate, fully with Seller and its counsel in the defense
against or compromise of any claim in any said audit, assessment, or proceeding.
(c) To exercise the Representation Right, Seller must first, within a
reasonable period following the receipt of the Audit Notification, (i) notify
Buyer in writing that Seller intends to exercise the Representation Right, and
(ii) deliver to Buyer a written statement acknowledging Seller's obligation to
indemnify the Targets, Buyer, or their Affiliates in
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accordance with the terms of this Agreement with respect to the Taxes as to
which Seller exercises the Representation Right.
11. TREATMENT OF INDEMNIFICATION. On their Tax Returns, Seller and Buyer
will (and will cause their Affiliates to) treat any payment made or received
under this Agreement, the Stock Purchase Agreement, or the Indemnification
Agreement (referenced in the Stock Purchase Agreement) as an adjustment to the
Purchase Price (as defined in the Stock Purchase Agreement) or as a contribution
to capital, as the case may be, and not as an item subject to tax or as a
reduction to a deductible item.
12. INDEMNIFICATION PROCEDURES. (a) If either Buyer or Seller (the
"Indemnified Party") determines that it or any of its Affiliates is or may be
entitled to indemnification by the other party (the "Indemnifying Party") under
this Agreement, the Indemnified Party will promptly deliver to the Indemnifying
Party a written notice and demand therefor (the "Notice") specifying the basis
for its claim for indemnification, the nature of the claim, and, if known, the
amount for which the Indemnified Party reasonably believes it or any of its
Affiliates is entitled to be indemnified. The Notice must be received by the
Indemnifying Party no later than thirty (30) days before the expiration of the
applicable Tax statute of limitations; provided, however, that if the
Indemnified Party does not receive notice from the applicable governmental
taxing authority ("Government Notice") that an item exists that could give rise
to a claim for indemnification hereunder more than thirty (30) days before the
expiration of the applicable Tax statute of limitations, then the Notice must be
received by the Indemnifying Party immediately after the Indemnified Party
receives the Government Notice. Unless the Indemnifying Party objects to the
claim for indemnification (in the manner set forth in Section 12(b) hereof), the
Indemnifying Party will pay the Indemnified Party the amount set forth in the
Notice, in cash or other immediately available funds, within thirty (30) days
after receipt of the Notice; provided, however, that if the amount for which the
Indemnified Party reasonably believes it is entitled to be indemnified is not
known at the time of the Notice, the Indemnified Party will deliver to the
Indemnifying Party a further notice specifying such amount as soon as reasonably
practicable after such amount is known and payment will then be made as set
forth above.
(b) The Indemnifying Party may object to the claim for indemnification
(or the amount thereof) set forth in any Notice by giving the Indemnified Party,
within thirty (30) days following receipt of such Notice, written notice setting
forth the Indemnifying Party's grounds for so objecting (the "Objection
Notice"). If the Indemnifying Party does not give the Indemnified Party the
Objection Notice within such thirty (30)-day period, the Indemnifying Party will
be deemed to have acknowledged its liability for the amount of such claim and
the Indemnified Party may exercise any and all of its rights under applicable
law to collect such amount.
(c) If Buyer and Seller are unable to settle any dispute regarding a
claim for indemnification within thirty (30) days after receipt of the Objection
Notice, Buyer and Seller
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will, in accordance with Section 14 hereof, jointly request the Accounting Firm
to resolve the dispute as promptly as possible.
(d) Failure by the Indemnified Party to promptly deliver to the
Indemnifying Party a Notice in accordance with Section 12(a) hereof will not
relieve the Indemnifying Party of any of its obligations under this Agreement
except to the extent the Indemnifying Party is prejudiced by such failure.
13. TERMINATION OF EXISTING TAX SHARING AGREEMENTS. As of the close of the
Closing Date, any Tax sharing agreement or arrangement that exists or may exist
between any Target and Seller or an Affiliate of Seller will terminate, and any
obligations to make payments under any such agreement or arrangement will be
canceled.
14. RESOLUTIONS OF DISPUTES. Any dispute between Buyer and Seller as to any
matter covered in this Agreement will be resolved by the Accounting Firm;
provided, however, that in resolving any such dispute the Accounting Firm will
be bound by the terms of this Agreement. Any fees or expenses of the Accounting
Firm will be borne equally by Buyer and Seller.
15. DEFINITIONS. For purposes of this Agreement, the following terms have
the following meanings:
(a) "Accounting Firm" means Deloitte & Touche.
(b) "Affiliate" means, with respect to any person, any other person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such person; provided, however, that for the purposes of this
Agreement, Affiliates of Seller will not include the Targets.
(c) "Anglo Consolidated Return" means any consolidated income tax
return for United States federal income tax purposes that includes Anglo as the
common parent.
(d) "Chemicals Company" means any corporation that has been included
(or that was required to be included) in the Anglo Consolidated Return at any
time on or before the Closing Date other than (i) the Targets, (ii) Peabody
Holding Company, Inc. and its Subsidiaries, (iii) Cornerstone-Spectrum, Inc. and
its Subsidiaries, (iv) Kidde Industries Inc. and its Subsidiaries, and (v)
Axelson, Inc., Axelson Canada, Inc., and their Subsidiaries.
(e) "Closing" has the meaning ascribed to that term in the Stock
Purchase Agreement.
(f) "Closing Date" has the meaning ascribed to that term in the Stock
Purchase Agreement.
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(g) "Federal Income Taxes" means all United States federal income
taxes, and includes any interest, penalties, and additions imposed with respect
to such taxes.
(h) "Income Taxes" means all Federal Income Taxes and all State Income
Taxes.
(i) "Income Tax Return" means any Tax Return with respect to Federal
Income Taxes or State Income Taxes.
(j) "Other Taxes" means any Taxes other than Federal Income Taxes and
State Income Taxes, and includes any interest, penalties, and additions imposed
with respect to such Taxes.
(k) "person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
association, a governmental entity (or any department, agency, or political
subdivision thereof), or any other entity.
(l) "State" means any State of the United States (including any
political subdivision thereof) and the District of Columbia.
(m) "State Income Taxes" means all income taxes (and other taxes
measured by net income or net gain) imposed by any State, and includes any
interest, penalties, and additions imposed with respect to such taxes.
(n) "State Income Tax Return" means any Tax Return with respect to
State Income Taxes.
(o) "Subsidiary" means any corporation in which the person being
referred to owns, directly or through one or more other Subsidiaries, stock
possessing at least fifty percent (50%) of the voting power of the outstanding
stock in such corporation.
(p) "Tax" or "Taxes" means any federal, state, local, foreign, or other
tax of any kind whatsoever (together with any interest, penalties, or additions
imposed with respect thereto), including, without limitation, income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
service, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
rental, lease, ad valorem, or other tax.
(q) "Tax Returns" means all returns, declarations, reports, claims for
refunds, information returns, statements, and other forms required to be filed
with respect to any Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
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16. FAILURE TO MAKE PAYMENT IN A TIMELY MANNER. If either Buyer or Seller
(the "Payor") fails to make a payment due and owing under this Agreement to the
other party or any of its Affiliates (the "Payee") reasonably promptly after the
parties hereto agree (or there is a binding determination) that such payment is
due and owing, the Payor will pay to the Payee interest on such payment from and
including the date the parties reach such agreement (or such binding
determination is made) to but excluding the date the Payor makes such payment,
at a rate equal to the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
17. POST-CLOSING ELECTIONS. After the Closing Date, at Seller's request,
Buyer will cause any of the Targets to make or join with Seller in making, and
will take and cause the Targets to take any and all action necessary to effect,
any election that pertains to any taxable period beginning prior to the Closing
Date (an "Election"); provided, however, that if making an Election would have a
material adverse impact on Buyer, the Targets, or any of their Affiliates for
any taxable period ending after the Closing Date, Buyer will be required to
comply with this Section 17 only if Seller indemnifies Buyer for the amount of
such material adverse impact. Seller will be responsible for the preparation of
all forms and schedules necessary to effect any Election. Buyer will, and will
cause the Targets to, cooperate fully with Seller with respect to any Election.
18. AMENDMENTS; WAIVERS. No provision of this Agreement may be amended,
waived, or otherwise modified without the prior written consent of Buyer and
Seller.
19. ASSIGNMENTS. No party to this Agreement may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of the other parties; provided, however, that any party to this Agreement may
assign its rights and delegate its obligations under this Agreement to one or
more of its Subsidiaries or corporate Affiliates, provided that such an
assignment and delegation will have no effect on, and will not be deemed to
constitute a release of, such party from its obligations under this Agreement.
20. NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any rights
or remedies upon any person other than the parties to this Agreement and their
respective successors and permitted assigns.
21. GOVERNING LAW. Except to the extent federal, state, local, or foreign
Tax laws, rules, or regulations govern the filing of Tax Returns or the
positions taken with respect to Taxes in Tax Returns, this Agreement will be
governed by and construed in accordance with the internal laws of the State of
New York.
22. NOTICES. Any notices, requests, demands, claims, and other
communications under this Agreement will be in writing and will be delivered at
the following addresses (or such other address as may be specified by notice
given to the other party pursuant to this Section 22):
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If to a Seller:
HM Holdings, Inc.
HM Anglo-American Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
If to Buyer:
Hanson PLC
1 Grosvenor Place
London
SW1X 7JH England
Attention: Legal Director
23. ENTIRE AGREEMENT. This Agreement (including the agreements and
documents referred to herein) constitutes the entire agreement among the parties
hereto with respect to the subject matter of this Agreement and supersedes any
prior understandings, agreements, outlines, or representations by or among the
parties hereto, written or oral, to the extent they relate in any way to the
subject matter of this Agreement.
24. HEADINGS. The section headings contained in this Agreement are inserted
for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
25. COUNTERPARTS. This Agreement may be executed in more than one
counterpart and by different parties of each counterpart and all such
counterparts when executed will form one and the same agreement.
(signature page follows)
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AS WITNESS this Agreement has been signed by or on behalf of each of the
parties hereto.
SELLER:
HM ANGLO-AMERICAN LTD.
By: _____________________________
Name:
Title:
HM HOLDINGS, INC.
By: _____________________________
Name:
Title:
BUYER:
HANSON PLC
By: _____________________________
Name:
Title:
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Exhibit 10.2
FORM OF PRE-DEMERGER
STOCK PURCHASE AGREEMENT
THIS PRE-DEMERGER STOCK PURCHASE AGREEMENT (the "Agreement") is made the ____
day of September, 1996
BETWEEN:
(1) HM HOLDINGS, INC., a Delaware corporation ("Seller");
and
(2) HANSON PLC, a public limited company incorporated in
England ("Purchaser").
WHEREAS:
(A) Seller is the registered and beneficial owner of all of the outstanding
shares (the "Sale Shares") of Peabody Holding Company, Inc., a Delaware
corporation (the "Company").
(B) Seller wishes to sell and Purchaser wishes to purchase the Sale Shares
on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sale and Purchase of Sale Shares.
Subject to the terms and conditions of this Agreement, Seller shall
sell and transfer to Purchaser, and Purchaser shall purchase from Seller, the
Sale Shares free from any lien, option, charge and encumbrance, right of
pre-emption or any other third party right and together with all benefits and
rights attached thereto.
2. Purchase Price.
The total consideration for the sale of all of the Sale Shares
shall be _______________________________ United States Dollars (US$___________)
(the "Purchase Price"), payable in cash at the Closing (as defined below),
subject to post-Closing adjustment as provided herein.
3. Closing.
3.1 Date of Closing. Subject to the satisfaction
of each of the conditions set forth in Section 5, the
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closing of the sale and purchase of the Sale Shares hereunder (the "Closing")
shall take place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York, 10153 (or at such other place as the parties may agree in
writing) at 10:00 a.m., New York City time, on September 30, 1996 (the "Closing
Date").
3.2 Title to Sale Shares Prior to Closing. Until the Closing,
Seller shall continue to have full right, title and interest in and to the Sale
Shares, including the right to receive any dividends, distributions or payments
made with respect to the Sale Shares, and the right to vote the Sale Shares.
4. Actions Prior to Closing.
4.1 Best Efforts. Each of the parties shall use its reasonable
best efforts (without undue expense) to cause the fulfillment, at or prior to
the Closing Date, of all of the conditions to their respective obligations to
consummate the sale and purchase of the Sale Shares under this Agreement.
4.2 Conduct of the Company's Business Prior to Closing. Seller
agrees to use its reasonable best efforts to cause the Company and its
subsidiaries to conduct its business in the ordinary and usual course consistent
with past practices during the period from the date of this Agreement through
the Closing.
5. Conditions of Closing.
The obligations of Seller to sell, and Purchaser to purchase,
all of the Sale Shares are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
(a) Seller and Purchaser shall have executed an
Indemnification Agreement in the form attached as Annex A (the
"Indemnification Agreement");
(b) Seller, Purchaser and HM Anglo American Ltd. ("Anglo")
shall have executed a Tax Sharing and Indemnification Agreement in the
form attached as Annex B (the "Tax Sharing Agreement");
(c) There shall not be in effect any injunction or restraining
order issued by a court of competent
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jurisdiction barring the consummation of the sale and purchase of the
Sale Shares pursuant to this Agreement;
(d) Millennium Chemicals Inc. ("Millennium"), Purchaser and
Hanson Overseas Holdings Limited ("HOH") shall have executed a Demerger
Agreement pursuant to which Millennium will issue shares representing
all of its then outstanding Common Stock to Purchaser's shareholders on
a pro rata basis on the basis of one share of Common Stock for every 70
Ordinary Shares of Purchaser (other than those represented by American
Depositary Shares) and every 14 American Depositary Shares of Purchaser
in consideration for the transfer by Purchaser to Millennium of all of
the outstanding stock in HOH; and
(e) All representations and warranties of Seller to Purchaser
set forth in Section 8 shall be true and correct in all material
respects at and as of the time of the Closing with the same effect as
though made again at and as of that time.
In addition to the foregoing and subject to the provisions of Section 7, the
obligation of Purchaser to purchase the Sale Shares is subject to the additional
condition that there shall not have occurred a material adverse change in the
assets, business, operations or financial condition of the Company and its
subsidiaries, taken as a whole, during the period from the date of this
Agreement through the Closing (a "Material Adverse Change").
6. Deliveries at Closing.
At the Closing, the parties shall make the following
deliveries and take the following actions:
(a) Seller and Purchaser shall deliver the
Indemnification Agreement;
(b) Seller, Purchaser and Anglo shall deliver the
Tax Sharing Agreement;
(c) Seller shall deliver to Purchaser share certificates
representing the Sale Shares, accompanied by stock powers or other appropriate
transfer forms duly endorsed by Seller;
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(d) Purchaser shall transfer to Seller (to such account as
shall be designated by Seller) the Purchase Price in immediately available
funds; and
(e) Seller shall deliver to Purchaser a certificate dated the
Closing Date and executed by a duly authorized officer of Seller to the effect
that all of the conditions of Closing specified in Section 5 have been fulfilled
or waived.
7. Material Adverse Change.
Seller shall promptly notify Purchaser if, during the period
from the date of this Agreement to the Closing, a Material Adverse Change
occurs. Furthermore, during the period from the date of this Agreement to the
Closing, Purchaser will have full opportunity to confirm whether a Material
Adverse Change has occurred, and at any time prior to the Closing, Purchaser may
deliver to Seller a notification that, in Purchaser's reasonable judgment, a
Material Adverse Change has occurred and setting forth, in reasonable detail,
the basis therefore (a "MAC Notice"). Following Seller's receipt of such MAC
Notice, Seller and Purchaser shall attempt to reach an agreement on (i) whether,
in fact, a Material Adverse Change has occurred, and (ii) if a Material Adverse
Change has occurred, an appropriate adjustment to the Purchase Price for the
Sale Shares to reflect the change in the fair market value of the Sale Shares
resulting from such Material Adverse Change. If the parties reach agreement on
the foregoing prior to the Closing, and if all other conditions to the Closing
have been satisfied, the Closing shall take place as provided herein except that
the Purchase Price for the Sale Shares shall be adjusted in accordance with such
agreement. If the parties are unable to reach agreement on the foregoing prior
to the Closing, and if all other conditions to the Closing have been satisfied,
then notwithstanding the provisions of the last sentence of Section 5, the
Closing of the purchase and sale of the Sale Shares shall be held as scheduled
on the Closing Date, the Sale Shares shall be purchased by the Purchaser at the
original, unadjusted Purchase Price, and the parties' dispute concerning the
alleged Material Adverse Change shall be resolved (and the adjustment to the
Purchase Price for the Sale Shares, if any, shall be made), after the Closing.
If the parties are unable to reach agreement on the existence and/or effect of
an alleged Material Adverse Change within 30 days after delivery of the MAC
Notice, the
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matter shall be resolved by arbitration pursuant to Section 11.
If Purchaser does not deliver a MAC Notice to Seller prior to
the Closing, Purchaser (and its permitted successors and assigns) shall waive
any right it might otherwise have to assert after the Closing that a Material
Adverse Change with respect to the Company had occurred whether or not Purchaser
knew or should have known of such Material Adverse Change.
8. Representations and Warranties of Seller.
Seller hereby represents and warrants to Purchaser that with
respect to Seller and the Company and its subsidiaries, as the case may be:
8.1 Organization, Standing and Authority of Seller. Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
enter into and perform this Agreement.
8.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by Seller have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes the valid
and binding obligation of Seller enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
8.3 Organization, Standing and Qualification of the Companies
and each of their Respective Subsidiaries. The Company and each of its
subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of their jurisdiction of incorporation and have full
corporate power and authority to carry on their respective business as now
conducted and to own, lease and operate their respective properties as now done.
The Company and each of its subsidiaries are qualified to do business and are in
good standing in each jurisdiction in which the nature of their respective
businesses or the properties owned or leased by them requires qualification,
except where the failure to be so qualified or in good
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standing would not have a material adverse effect upon the business properties
or financial condition of the Company and its subsidiaries taken as a whole.
8.4 Consents of Third Parties. The execution, delivery and
performance of this Agreement by Seller will not (i) violate or conflict with
the certificate of incorporation or by-laws (or comparable organizational
documents) of Seller or the Company and any of its subsidiaries; or (ii)
constitute a violation of any law, regulation, order, writ, judgment, injunction
or decree applicable to Seller or the Company and any of its subsidiaries. No
material consent, approval or authorization of any governmental authority is
required on the part of Seller in connection with the execution, delivery and
performance of this Agreement other than those which have been or will be
obtained prior to the Closing.
8.5 Ownership of Sale Shares. Seller is, and at the Closing
will be, the record and beneficial owner of the Sale Shares free and clear of
any claim, lien, security interest or other encumbrance ("Lien"). At the
Closing, Seller will transfer and deliver to Purchaser valid title to all the
Sale Shares, free and clear of any Lien. The Company is the record and
beneficial owner of all of the outstanding capital stock of each of its
subsidiaries, free and clear of any Lien.
8.6 Financial Statements.
(a) The consolidated balance sheet of the Company and
its subsidiaries as of June 30, 1996 (the "Balance Sheet"), a copy of which is
attached hereto as Annex C, has been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP") and presents fairly
the consolidated financial position of the Company and its subsidiaries as at
such date.
(b) Except to the extent reflected or reserved for in
the Balance Sheet, there are no liabilities or obligations material to the
Company's and its subsidiaries' businesses that would normally be shown on a
balance sheet prepared in accordance with GAAP, except liabilities or
obligations incurred in the ordinary course of business since June 30, 1996.
8.7 Absence of Certain Liabilities and Changes. Since June 30,
1996, the Company and its subsidiaries have
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operated their respective businesses in the ordinary course and there has not
been:
(a) any declaration, setting aside or payment of any
dividend on, or any other distribution with respect to, any capital stock of the
Company, or any repurchase redemption or other acquisition of any capital stock
of the Company; or
(b) any incurrence, assumption or guarantee by the
Company or any subsidiary of the Company of any indebtedness or liability for or
in respect of borrowed money or any commitment to do the same other than
borrowings in the ordinary course of business consistent with past practice.
9. Further Agreements of the Parties.
9.1 Certain Employee Benefit Matters. Following the completion
of the purchase and sale of the Sale Shares, Purchaser shall cause the Company
and its subsidiaries to continue in effect any "employee benefit plans" (within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained or sponsored by the Company and its
subsidiaries which cover the employees of the Company and its subsidiaries
immediately prior to the date of this agreement (the "Plans") for a period at
least until the completion of the transfer of all of the assets attributable to
such Plans which are "pension plans" (within the meaning of Section 3(2) of
ERISA) as set forth herein. As soon as practicable after the Closing, the Seller
shall cause assets to be transferred from (A) any trust or trusts maintained by
Seller or one of its subsidiaries or affiliates which is tax-exempt under
Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and which is associated with one or more defined contribution plans maintained
by Seller or one of its subsidiaries or affiliates (the "Seller DC Trust") to a
mirror trust or trusts established by Purchaser (the "Purchaser DC Trust") in an
amount determined as of the most recent valuation date of the Seller DC Trust
equal to the assets attributable to the account balances for each Plan which is
a defined contribution plan, and (B) the Master Trust Agreement, between,
between HM Holdings, Inc. and The Bank of New York, dated as of January 1, 1988,
as amended (the "HMH Master Trust") to a mirror trust established by Hanson
North America Inc. (the "HNA Master Trust"), in an amount determined as of the
most recent valuation date of the HMH Master Trust in accordance with
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ERISA for each Plan which is a defined benefit plan, in each case together with
an allocable share of earnings and/or losses of the respective distributing
trusts from such respective valuation dates to the actual dates of transfer of
assets; provided, however that in no event shall such transfer take place until
the Purchaser has furnished to Seller either: (A) a favorable determination
letter from the Internal Revenue Service with respect to the qualification of
the Plans that are intended to be qualified plans under Section 401(a) of the
Code and the tax-exempt status of the Purchaser DC Trust and the HNA Master
Trust under Section 501(a) of the Code or (B) an opinion of counsel of Purchaser
that such plans and trusts are qualified under the Code. Following the Closing,
the Purchaser shall continue in effect any Plan which is a "pension plan"
(within the meaning of Section 3(2) of ERISA) for a period at least until the
completion of the transfer of all of the assets attributable to such Plans from
the Seller DC Trust and the HMH Master Trust to the Purchaser DC Trust and the
HNA Master Trust, respectively. Following the transfer of assets as contemplated
hereunder, neither Seller nor any of its subsidiaries or affiliates shall have
any further obligation or responsibility with respect to such benefit
liabilities under any Plan, which shall be considered for all purposes as having
been satisfied as a result of such transfer.
9.2 Further Assurance. The parties hereto undertake to
co-operate in good faith to ensure that they do such acts and things as may
reasonably be necessary to complete the sale and purchase of the Sale Shares. At
all times after the date of this Agreement and after the completion of the sale
and purchase of the Sale Shares, the parties shall use their reasonable best
efforts to procure that any necessary third party shall execute such documents
and do such acts and things as may reasonably be required for the purpose of
giving to Seller and Purchaser, respectively, the full benefit of all the
provisions of this Agreement. Seller and Purchaser will use their reasonable
best efforts to obtain any consent, substitution, approval or amendment required
to novate or assign all agreements, leases, licenses and other rights of any
nature whatsoever relating to the assets, rights and other things of the Company
and its subsidiaries of value to Purchaser, including without limitation the
release of Seller and its subsidiaries and affiliates from any guarantees,
surety bonds, letters of credit or similar items previously entered into or made
for the benefit of the Company or its subsidiaries; provided, however, that
neither Seller nor
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Purchaser shall be obligated to pay any consideration therefor (except for
filing fees and other similar charges) to the third party from whom such
consents, approvals, substitutions and amendments are requested. If Seller or
Purchaser is unable to obtain any such required consent, approval, substitution
or amendment, Seller (or its subsidiaries or affiliates) shall continue to be
bound by such agreements, leases, licenses and other rights and, unless not
permitted by law or the terms thereof, Purchaser (or its subsidiaries or
affiliates) shall, as agent for Seller (or its subsidiaries or affiliates) or as
subcontractor, pay, perform and discharge fully all the obligations of Seller
(or its subsidiaries or affiliates) thereunder from and after the Closing and
indemnify and hold harmless Seller and its subsidiaries from and against, all
losses, claims, damages, taxes, liabilities and expenses whatsoever arising out
of or in connection with Purchaser's (or its subsidiaries' or affiliates')
performance of or omission to perform its obligations thereunder and hereunder.
Seller (or its subsidiaries or affiliates) shall, without further consideration,
pay and remit to Purchaser (or its subsidiaries or affiliates) promptly all
money, rights and other consideration received in respect of such performance
after payment of any taxes due from Seller (or its subsidiaries or affiliates)
with respect to such receipt. Seller (or its subsidiaries or affiliates) shall
exercise their rights and options under all such agreements, leases, licenses
and other rights and commitments referred to in this Section 9.2 only as
reasonably directed by Purchaser and at Purchaser's expense. If and when any
such consent shall be obtained or such agreement, lease, license or other rights
shall otherwise become assignable or able to be novated, Seller (or its
subsidiaries or affiliates) shall promptly assign all its rights and obligations
thereunder to Purchaser (or its subsidiaries or affiliates) without payment of
further consideration and Purchaser (or its subsidiaries or affiliates) shall,
without the payment of any further consideration, assume such rights and
obligations. To the extent that the assignment of any contract or agreement or
the proceeds thereof pursuant to this Section 9.2 is prohibited by law, the
assignment provisions of this paragraph shall operate to create a subcontract
with the Purchaser to perform each relevant, unassignable contract or agreement,
and the Seller to pay the Purchaser the subcontract price which shall be equal
to the money, rights and other consideration (after tax) received by Seller (or
its subsidiaries or affiliates) with respect to the relevant, unassignable
contract or agreement, performed by Purchaser under such subcontract.
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9.3 Access to Information. Prior to the Closing, Purchaser may
make such investigation of the business and properties of the Company and its
subsidiaries as Purchaser may desire, and, upon reasonable notice, Seller shall
give to Purchaser and its counsel, accountants and other representatives
reasonable access, during normal business hours throughout the period prior to
the Closing, to the property, books, commitments, agreements, records, files and
personnel of the Company and its subsidiaries and Seller shall furnish to
Purchaser during that period all copies of documents and information concerning
the Company and its subsidiaries as Purchaser may reasonably request subject to
applicable law.
9.4 Transfer Taxes. Any and all transfer taxes, stamp duties
and similar charges relating to the purchase and sale of the Sale Shares shall
be paid by . Except as provided in the preceding sentence, all matters
under this Agreement relating to Taxes and Tax Returns (both as defined in
the Tax Sharing Agreement) shall be governed by the Tax Sharing Agreement.
10. Survival of Representations and Warranties and
Related Matters.
10.1 Survival of Representations of Warranties and Notice of
Claims. It is understood and acknowledged that the representations and
warranties set forth in this Agreement shall not survive the Closing, provided,
however, that the representations and warranties set forth in Section 8.5 shall
survive the Closing indefinitely, and the representations and warranties set
forth in Section 8.7 shall survive the Closing but only until the close of
business on December 31, 1996 and Seller shall be liable for damages under
Section 8.7 hereof only to the extent that notice of a claim therefor
is asserted by the Purchaser in writing and delivered on or prior to the close
of business on December 31, 1996. Any notice of a claim by any reason of an
alleged breach of any of the representations and warranties contained in this
Agreement shall state specifically the representations or warranties with
respect to which the claim is made, the facts giving rise to the alleged basis
for the claim and the amount of liability asserted against the other party by
reason of the claim.
10.2 Determination of Damages and Related Matters.
In calculating any amounts payable to Purchaser pursuant to Section 10.1, no
amount shall be included for Purchaser's consequential damages. Other than as
explicitly provided in
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this Agreement (i) Seller does not, in this Agreement or any other agreement,
instrument or document contemplated by this Agreement, make any representation
as to, warranty of or covenant (whether express or implied) with respect to, the
value of the Sale Shares. Purchaser acknowledges and agrees that Purchaser and
its representatives have the experience and knowledge to evaluate the business,
financial condition, assets and liabilities of the Company's businesses; that
Purchaser and its representatives have had access to such of the information and
documents referred to in Section 9.3 and to such of the real property, fixtures
and tangible personal property of the Company's businesses as Purchaser and its
representatives shall have requested to see and/or review; that Purchaser and
its representatives have had a full opportunity to meet with appropriate
management and employees of Seller and the Company and its subsidiaries to
discuss the businesses and assets of the Company and its subsidiaries; and that,
in determining to acquire the Sale Shares and, therefore, the underlying assets
of the Company and its subsidiaries (including the real property, fixtures and
the tangible personal property), Purchaser has made its own investigation into,
and based thereon Purchaser has formed an independent judgment concerning, the
Sale Shares and the underlying assets of the Company and its subsidiaries
(including the real property, fixtures and the tangible personal property).
Other than as explicitly provided herein, the Sale Shares, as well as all assets
of the Company, to be acquired, directly or indirectly, by the Purchaser
hereunder are transferred on an "AS IS, WHERE IS" basis. The parties acknowledge
and agree that the Purchase Price for the Sale Shares of the Company represents
the mutually agreed upon fair market value of such Sale Shares, and neither
party (or their respective permitted successors and assigns) shall have the
right at any time in the future to make any claim or raise any dispute with
respect to the adequacy or fairness of the consideration paid for the Sale
Shares.
11. Arbitration.
Resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 11; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
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equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Seller or
Purchaser (each a "Party") may commence proceedings hereunder by delivering a
written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days after its selection or appointment, and shall make a final
award not later than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees and
expenses and fees and expenses of experts, between the prevailing and
non-prevailing Party as the Panel deems fair and reasonable. Notwithstanding the
foregoing, in no event may the Panel award multiple, punitive or exemplary
damages. Any arbitration award shall be binding and enforceable
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against the Parties hereto and judgment may be entered thereon in any court of
competent jurisdiction.
12. Miscellaneous.
12.1 No Impeachment. Neither of the parties hereto shall
impeach this Agreement on the grounds that any of the Directors of Seller stand
in any fiduciary position to Purchaser or that any of the Directors of Purchaser
stand in any fiduciary position to Seller or that the Directors of either party
do not constitute an independent Board.
12.2 Assignments. Except as provided in this Section 12.2,
neither party may assign or transfer any of its rights and obligations under
this Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Seller and Purchaser acknowledge and agree that
either party may assign its rights and delegate its obligations under this
Agreement, including without limitation its rights and obligations under the
Indemnification Agreement and the Tax Sharing Agreement annexed hereto, to one
or more of its respective subsidiaries or affiliates, provided that such an
assignment shall have no effect on, and shall not be deemed to constitute a
release of either party from, its obligations under this Agreement; provided,
however, that Seller further acknowledges and agrees that Purchaser may assign
its rights and delegate its obligations under this Agreement, including without
limitation its rights and obligations under the Indemnification Agreement and
the Tax Sharing Agreement annexed hereto, to a corporation to which the
Purchaser transfers the energy businesses currently held and/or operated by
it pursuant to the contemplated demerger of such energy businesses (the "Energy
Company"), and the Energy Company may assume such obligations, which assignment
and assumption shall act as a novation whereupon Purchaser shall be released
from all of its obligations under such agreements (and whereupon the Energy
Company shall become responsible for all of Purchaser's obligations under this
Agreement), and that the Energy Company may assign such rights and obligations
to one or more of its subsidiaries, provided that such an assignment shall have
no effect on, and shall not be deemed to constitute a release of the Energy
Company from, its obligations under this Agreement.
12.3 Governing Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York and may be executed in more than one counterpart and by different
parties of each counterpart and all such counterparts when executed shall form
one and the same agreements.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
HM HOLDINGS, INC.
By:___________________________________
Name:
Title:
HANSON PLC
By:___________________________________
Name:
Title:
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ANNEX A
Form of Indemnification Agreement
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FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as
of September __, 1996, between HM Holdings, Inc., a Delaware corporation
("Seller"), and Hanson PLC, a public limited company incorporated in England
("Purchaser").
RECITALS
A. The parties have entered into a Pre-Demerger Stock Purchase
Agreement, dated as of September __, 1996 (the "SPA"), pursuant to which Seller
will sell to Purchaser all of the outstanding shares of Peabody Holding Company,
Inc., a Delaware corporation (the "Company").
B. The parties acknowledge that it is their intention that,
effective upon the Closing (as defined in the SPA) (i) Purchaser shall assume
and accept responsibility for the Purchaser Liabilities (as hereinafter
defined), and (ii) Seller shall retain responsibility for the Seller Liabilities
(as hereinafter defined), in each case except as otherwise provided in the SPA
or the Tax Sharing and Indemnification Agreement (the "Tax Sharing Agreement")
contemplated by the SPA.
C. It is a condition to the consummation of the
transactions contemplated by the SPA that the parties enter into this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, Seller and Purchaser agree as
follows:
ARTICLE I.
DEFINITIONS
"Chemicals Subsidiaries" means all of the direct and indirect
subsidiaries of Purchaser that are transferred to Millennium Chemicals Inc.
("Millennium") or its subsidiaries, including without limitation the Seller, as
part of or in connection with the contemplated demerger of Purchaser's chemicals
business (the "Demerger"), but excluding the Discontinued Businesses.
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"Company Businesses" means all of the businesses, operations
and assets of the Company, including all of the businesses, operations and
assets that were previously conducted, owned or used by any business or
operation of the Company (or any predecessor to such business or operation),
notwithstanding the fact that prior to the Closing (i) any such business or
operation was closed, wound up or otherwise terminated, (ii) such asset ceased
to be used in connection with such business or operation, or (iii) any such
business, operation or asset was sold or otherwise disposed of to any person or
entity other than the Chemicals Subsidiaries. Company Businesses do not include
the Seller Businesses. For the purpose of the definition of "Company
Businesses", the term the "Company" includes all direct and indirect
subsidiaries of the Company and any partnerships in which it or any of its
subsidiaries owns or at any time in the past owned an interest.
"Discontinued Businesses" has the meaning ascribed to such
term in the Information Statement dated August ___, 1996 delivered to
Purchaser's shareholders in connection with the Demerger.
"Litigation and Claims" means litigation pending or threatened
or claims alleged against Seller and/or Purchaser Parties, including, without
limitation, civil and criminal actions, workers' compensation proceedings,
administrative and regulatory proceedings, investigations, audits, inquiries,
demands, claims (including any title claims relating to real properties) and
threatened actions.
"Purchaser Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Seller Liabilities,
any and all of the obligations, liabilities and expenses incurred by Seller,
Purchaser or any of their respective affiliates or subsidiaries or affiliates
of such subsidiaries arising out of or associated with, or any Litigation and
Claims alleged to arise out of or be associated with, the Company Businesses,
whether or not in the ordinary course of business, in each case whether matured
or unmatured, liquidated or unliquidated, fixed or contingent, known or unknown,
and whether arising out of circumstances existing prior to, on or subsequent
to the Closing, and regardless of where or against whom such obligations,
liabilities and expenses are asserted or determined or whether asserted or
determined prior to, on or subsequent to the Closing, and regardless of whether
arising from or alleged to arise from negligence, recklessness, violation of
law, fraud or misrepresentation by any of the Seller Parties, and including,
without limitation, the following items:
(i) all obligations, liabilities and expenses with respect
to health, safety, personal injury, property damage, employment,
benefits, compensation, pension rights, claims arising out of
contracts, intellectual property rights, product liability, warranty,
merchantability or fitness for
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any particular purpose of goods, conformity of goods to contractual
requirements, deceptive trade practice, misrepresentation, fraud or any
other alleged or actual breach or violation of any obligation or
requirement arising out of or associated with the Company Businesses,
including, without limitation, (A) all product warranty obligations
with respect to products developed, produced, manufactured, marketed,
used or distributed by the Company Businesses ("Company Products"),
whether shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury
or consequential damage which is caused or alleged to have been or to
be caused by any defect in or breach of warranty related to any Company
Product or other asset of the Company Businesses;
(ii) all Litigation and Claims pending as of the Closing
against Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Purchaser
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller, Purchaser or any of their respective affiliates
or subsidiaries or affiliates of such subsidiaries after the Closing
("New Purchaser Litigation"), in each case if and solely to the extent
that such Litigation and Claims (in whole or in part) arise out of or
are associated with, or are alleged (regardless of the party named in
the allegation or complaint) to arise out of or be associated with the
Company Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorney or consultant fees or
remediation costs) of Seller, or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to
the Company Businesses;
(iv) any Litigation and Claims brought after the Closing
against Seller or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of
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any kind, whether prior to, on or subsequent to the Closing, arising
out of, or alleged to arise out of, the Company Businesses;
(v) all obligations, liabilities and expenses (other than
those arising solely due to joint and several liability under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
with respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA), including any multiemployer plan (within the
meaning of Section 3(37) of ERISA), maintained by, contributed to, or
obligated to contribute to, at any time, by the Company or any of its
subsidiaries, including but not limited to any liability with respect
to: (A) the Pension Benefit Guaranty Corporation under Title IV of
ERISA; (B) a multiemployer plan (within the meaning of Section 3(37) of
ERISA); (C) any non-compliance with the notice and benefit continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; (D) any non-compliance with ERISA or any other
applicable laws; and (E) any suit, proceeding or claim which is brought
against the Seller or any of its affiliates, any such plan, and any
fiduciary or former fiduciary of any such plan; and
(vi) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of the Company or any of its subsidiaries) by (A) the Company
or any of the Company Businesses or (B) any officer, director, employee
or agent of the Company or any of the Company Businesses attributable
to any actions or inactions by the Company or any of the Company
Businesses.
"Purchaser Parties" means Purchaser and any direct or indirect
subsidiary or affiliate of Purchaser other than the Chemicals Subsidiaries, and
any of their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees.
"Seller Businesses" means all of the businesses, operations
and assets of Seller and its subsidiaries, including all of the businesses,
operations and assets that were previously conducted, owned or used by any
business or operation of the Seller (or any predecessor to such business or
operation), notwithstanding the fact that prior to the Closing (i) any such
business or operation was closed, wound up or otherwise terminated, (ii) such
asset ceased to be used in connection with such business or operation, or (iii)
any such business, operation
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or asset was sold or otherwise disposed of to any person or entity other than
the Chemicals Subsidiaries. Seller Businesses do not include (i) the Company
Businesses, and (ii) any other business, operations or assets transferred to
Purchaser or its subsidiaries (other than the Chemicals Subsidiaries) as part of
or in connection with the Demerger. For purposes of the definition of "Seller
Businesses", the term "Seller" includes all direct and indirect subsidiaries of
Seller and any partnerships in which it or any of its subsidiaries owns or at
any time in the past owned an interest.
"Seller Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Purchaser
Liabilities, any and all of the obligations, liabilities and expenses incurred
by Seller, Purchaser or any of their respective affiliates or subsidiaries or
affiliates of such subsidiaries arising out of or associated with, or any
Litigation and Claims alleged to arise out of or be associated with, the Seller
Businesses, whether or not in the ordinary course of business, in each case
whether matured or unmatured, liquidated or unliquidated, fixed or contingent,
known or unknown, and whether arising out of circumstances existing
prior to, on or subsequent to the Closing and regardless of where or against
whom such obligations, liabilities and expenses are asserted or determined or
whether asserted or determined prior to, on or subsequent to the Closing, and
regardless of whether arising from or alleged to arise from negligence,
recklessness, violation of law, fraud, or misrepresentation by any of the
Purchaser Parties, and including, without limitation, the following items:
(i) all obligations, liabilities and expenses incurred by or
associated with any business, operation or asset that (A) was
conducted, owned or used by any of the Company Businesses prior to the
Closing but which was sold or otherwise disposed of to any of the
Chemicals Subsidiaries, and (B) is not transferred to Purchaser or its
subsidiaries (other than the Chemicals Subsidiaries) as part of or in
connection with the Demerger;
(ii) all obligations, liabilities and expenses with respect
to health, safety, personal injury, property damage, employment,
benefits, compensation, pension rights, claims arising out of
contracts, intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual
breach or violation of any obligation or requirement arising
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out of, or associated with, the Seller Businesses, including, without
limitation, (A) all product warranty obligations with respect to
products developed, produced, manufactured, marketed, used or
distributed by the Seller Businesses ("Seller Products"), whether
shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury
or consequential damage which is caused or alleged to have been or to
be caused by any defect in or breach of warranty related to any Seller
Products or other assets of the Seller Businesses;
(iii) all Litigation and Claims pending as of the Closing
against Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Seller
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries after the
Closing ("New Seller Litigation"), in each case if and solely to the
extent that such Litigation and Claims (in whole or in part) arise out
of or are associated with or are alleged (regardless of the party named
in the allegation or complaint) to arise out of or to be associated
with the Seller Businesses;
(iv) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorneys' or consultants' fees
or remediation costs) of Seller, Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to,
the Seller Businesses;
(v) any Litigation and Claims brought after the Closing
against Purchaser or its affiliates or subsidiaries or affiliates of
such subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to,
the Closing, arising or alleged to arise from the Seller Businesses;
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(vi) all obligations, liabilities and expenses (other than
those arising solely due to joint and several liability under ERISA)
with respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA), including any multiemployer plan (within the
meaning of Section 3(37) of ERISA), maintained by, contributed to, or
obligated to contribute to, at any time, by the Seller or any of its
subsidiaries other than (x) the Company or any of its subsidiaries, and
(y) any other company or business transferred to Purchaser or its
subsidiaries (other than the Chemicals Subsidiaries) as part of or in
connection with the Demerger, including but not limited to any
liability with respect to: (A) the Pension Benefit Guaranty Corporation
under Title IV of ERISA; (B) a multiemployer plan (within the meaning
of Section 3(37) of ERISA); (C) any non-compliance with the notice and
benefit continuation requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended; (D) any non-compliance with
ERISA or any other applicable laws; and (E) any suit, proceeding or
claim which is brought against the Company or any of its subsidiaries,
any such plan, and any fiduciary or former fiduciary of any such plan;
and
(vii) all obligations, liabilities and expenses with respect
to the employment or termination of employment, including a
constructive termination, of any individual (including, but not limited
to, any employee of the Seller or any of its subsidiaries) by (A) the
Seller or any of the Seller Businesses or (B) any officer, director,
employee or agent of the Seller or any of the Seller Businesses
attributable to any actions or inactions by the Seller or any of the
Seller Businesses.
"Seller Parties" means Seller and any direct or indirect
subsidiary of Seller that is not transferred to Purchaser or its subsidiaries
(other than the Chemicals Subsidiaries) as part of or in connection with the
Demerger, and any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees.
"Taxes" has the meaning ascribed to such term in the Tax
Sharing Agreement.
Words and expressions defined in the SPA shall have the same
meaning herein, save that, to the extent that such definitions are inconsistent
with any definitions in this Agreement, the definitions herein shall take
precedence.
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ARTICLE II.
EXCULPATION AND INDEMNIFICATION BY SELLER
Section 2.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Seller shall, without any further
responsibility or liability of, or recourse to, any of the Purchaser Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Seller Liabilities. None of the Purchaser Parties shall be liable to any of the
Seller Parties for any reason whatsoever on account of any Seller Liabilities.
Seller shall indemnify, defend, save and hold harmless each of
the Purchaser Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Seller
Liabilities and (ii) the breach by any of the Seller Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Purchaser Damages").
Purchaser Damages with respect to which, but only to the
extent that, any proceeds are received by, or on behalf of, Purchaser or by any
of its affiliates or subsidiaries or affiliates of such subsidiaries, from any
third party insurance policy (and are non-reimbursable by Purchaser or any of
its subsidiaries or affiliates under any self insurance policy), shall not be
the subject of indemnification under this Agreement.
ARTICLE III.
EXCULPATION AND GENERAL INDEMNIFICATION BY PURCHASER
Section 3.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Purchaser shall, without any further
responsibility or liability of, or recourse to, any of the Seller Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Purchaser Liabilities. None of the Seller Parties shall be liable to any of the
Purchaser Parties for any reason whatsoever on account of any Purchaser
Liabilities.
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Purchaser shall indemnify, defend, save and hold harmless each
of the Seller Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Purchaser
Liabilities and (ii) the breach by any of the Purchaser Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Seller Damages").
Seller Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Seller or by any of its
subsidiaries or affiliates, from any third party insurance policy (and are
non-reimbursable by Seller or any of its subsidiaries or affiliates under any
self insurance policy), shall not be the subject of indemnification under this
Agreement.
ARTICLE IV.
SPECIFIC INDEMNIFICATION ISSUES
Section 4.1. In the event a claim, demand, action or
proceeding is brought by a third party in which the liability as between Seller
and Purchaser is determined after trial in any judgment, award or decree to be
joint or concurrent or in which the entitlement to indemnification hereunder is
not readily determinable, the parties shall negotiate in good faith in an effort
to agree, as between Seller and Purchaser, on the proper allocation of liability
or entitlement to indemnification, as well as the proper allocation of the costs
of any joint defense or settlement pursuant to Section 6.4, all in accordance
with the provisions of, and the principles set forth in, this Agreement. In the
absence of any such agreement, such allocation of liability, entitlement to
indemnification and allocation of costs shall be subject to ultimate resolution
between Seller and Purchaser pursuant to Section 8.8.
Section 4.2. It is acknowledged that after the Closing the
parties will have arms length negotiated business relationships, which
relationships will be described in contracts, agreements and other documents
entered into in the normal course of business. Such documents may include
agreements by the parties and their affiliates and subsidiaries to supply
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after the Closing, materials, products, services and leases. Such business
relationships shall not be subject to the indemnity provisions hereof, unless
the parties expressly agree to the contrary in the agreements governing such
relationships.
ARTICLE V.
NOTICE AND PAYMENT OF CLAIMS
Section 5.1. If any person entitled to a defense and/or
indemnification under this Agreement (the "Indemnified Party") determines that
it is or may be entitled to a defense or indemnification by Purchaser or Seller,
as the case may be (the "Indemnifying Party"), under this Agreement:
(i) The Indemnified Party shall deliver promptly to the
Indemnifying Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense and/or
indemnification, the nature of the claim, and if known, the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Nothing in this subparagraph shall be interpreted to
invalidate any claim by the Indemnified Party to be entitled to
indemnification, unless the Indemnifying Party can show that the
failure of the Indemnified Party to deliver such notice was
intentional.
(ii) The Indemnifying Party shall have 30 days from receipt
of the notice requesting indemnification within which to either: (A)
assume the defense of such litigation or claim; (B) pay the claim in
immediately available funds; (C) reserve its rights pending
negotiations under Section 6.4; or (D) object in accordance with
Section 5.2. This 30 day period may be extended by agreement of the
parties. Nothing in this subparagraph shall be interpreted to abrogate
or delay a party's obligation to provide the other with a defense under
this Agreement.
Section 5.2. The Indemnifying Party may object to the claim
for defense and/or indemnification set forth in any notice; provided, however,
that if the Indemnifying Party does not give the Indemnified Party written
notice setting forth its objection to such claim (or the amount thereof) and the
grounds therefor within the same 30 day period (or any extended period) referred
to in Section 5.1 above, the Indemnifying Party shall be deemed to have
acknowledged its liability to provide a defense or for the amount of such claim
and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such
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amount or obtain such defense. Any objection to a claim for a defense or
indemnification shall be resolved in accordance with Section 8.8.
Section 5.3. The right to a defense or indemnification under
this Agreement applies only insofar as defense and indemnification are not
provided for by insurance from any third party insurance policy (and are
non-reimbursable by Purchaser or any of its affiliates or subsidiaries or
affiliates of such subsidiaries under any self insurance policy). Nevertheless,
the potential availability of insurance coverage to Seller or Purchaser shall
not relieve the other party of its obligations for defense or indemnification
hereunder, or delay either party's obligation to the other to assume a defense
or pay any sums due hereunder.
Section 5.4. Payments due to be made under this Agreement
shall carry interest from the date on which the Indemnified Party became
entitled to indemnification until the date of actual payment (whether before or
after judgment) at the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
Section 5.5. Payments due to be made under this Agreement
shall be free and clear of all deductions, withholdings, set-offs or
counterclaims whatsoever, except as may be required by law. If any deductions or
withholdings are required by law the Indemnifying Party shall be obliged to pay
such sum as will, after such deduction, withholding, set-off or counter-claim
has been made, leave the Indemnified Party with the same amount as it would have
been entitled to receive in the absence of any such requirement to make a
deduction or withholding.
Section 5.6. Payments due to be made under this Agreement
shall be reduced by the amount by which any Taxes for which the Indemnified
Party would have been accountable or liable to be assessed is either (i)
actually reduced prior to payment falling due hereunder or (ii) is likely to be
reduced subsequent to payment falling due hereunder in the reasonable opinion of
the Indemnified Party acting in good faith in the light of the circumstances
prevailing at the time of delivery of written notice in accordance with Section
5.1. The reduction of any payments to be made in accordance with this Section
5.6 for Tax benefits which will likely be recognized within one year after the
date on which the Indemnified Party receives indemnification under this
Agreement shall be made without regard to the time value of money. The reduction
of any payments to be made in accordance with this Section 5.6 for Tax benefits
which will not
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likely be recognized within one year after the date on which the Indemnified
Party receives indemnification under this Agreement shall take into account the
time value of money from the time the applicable payment is received until the
date such Tax benefits are likely to be recognized, using as the discount rate
the prime rate charged by Chase Manhattan Bank, N.A. to its corporate customers
at the time the payment is received.
Section 5.7. The parties to this Agreement may enter into
agreements or other arrangements providing for the set-off of payments due to be
made by way of indemnification to both Seller and Purchaser.
ARTICLE VI.
DEFENSE OF THIRD-PARTY CLAIMS
Section 6.1. If the Indemnified Party's claim for
indemnification is based, under this Agreement, on a claim, demand,
investigation, action or proceeding, judicial or otherwise, brought by a third
party, and the Indemnifying Party does not object under Section 5.2 hereof, the
Indemnifying Party shall, within the 30-day period (or any extended period)
referred to in Section 5.1 above, assume the defense of such third-party claim
at its sole cost and expense and shall thereafter be designated as the "Case
Handler." Any such defense shall be conducted by attorneys employed by the
Indemnifying Party. The Indemnified Party may retain attorneys of its own
choosing to participate in such defense at the Indemnified Party's sole cost and
expense.
Section 6.2. If the Indemnifying Party assumes the defense of
any such third-party claim, the Indemnifying Party may settle or compromise the
claim without the prior consent of the Indemnified Party so long as all present
and future claims relating to the compromised claim against the Indemnified
Party are irrevocably and unconditionally released in full.
Section 6.3. The Indemnifying Party shall pay to the
Indemnified Party in immediately available funds the amount for which the
Indemnified Party is entitled to be indemnified within 30 days after the
settlement or compromise of such third-party claim or the judgment of a court of
competent jurisdiction (or within such longer period as agreed to by the
parties). If the Indemnifying Party does not assume the defense of any such
third-party claim, the Indemnifying Party shall be bound by the result obtained
with respect thereto by the Indemnified Party, except that the Indemnifying
Party has the right to contest that it is
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obligated to the Indemnified Party under the terms of this Agreement, provided
the Indemnifying Party shall have raised its objection in a timely manner under
Section 5.2.
Section 6.4. In the event a claim, demand, action or
proceeding is brought by a third party in which the liability as between
Purchaser and Seller is alleged to be joint or in which the entitlement to
indemnification hereunder is not readily determinable, the parties shall
cooperate in a joint defense. Such joint defense shall be under the general
management and supervision of the party which is expected to bear the greater
share of the liability, and which will be considered the Case Handler, unless
otherwise agreed; provided, however, that neither party shall settle or
compromise any such joint defense matter without the consent of the other. The
costs of such joint defense, any settlement and any award or judgment (unless
the award or judgment specifies otherwise) shall be borne as the parties may
agree; or in the absence of such agreement, such costs shall be borne by the
party incurring such costs, subject to ultimate resolution between Purchaser and
Seller pursuant to Section 8.8.
ARTICLE VII.
COOPERATION AND PRESERVATION OF RECORDS
Section 7.1. Purchaser Parties and Seller Parties shall
cooperate with one another fully and in a timely manner in connection with the
defense of any Pending Purchaser Litigation, New Purchaser Litigation, Pending
Seller Litigation, New Seller Litigation or any other actual or threatened
claim.
Section 7.2. Such cooperation shall include, without
limitation, making available to the other party, during normal business hours
and upon reasonable notice, all books, records and information ("Litigation
Records"), officers and employees (without substantial interruption of
employment) necessary or useful in connection with any actual or threatened
claim, investigation, audit, action or proceeding.
Section 7.3. Each party shall continue in force, or at the
request of the other party, shall issue, notices exempting from destruction any
Litigation Records which the requesting party represents may be necessary to the
defense of, or required to be produced in discovery in connection with, any such
claim, investigation, audit, action or proceeding and shall refrain from
destroying any such Litigation Records until authorized by the requesting party.
The requesting party shall notify the other
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party promptly when the Litigation Records are no longer required to be
maintained.
Section 7.4. The party requesting access to Litigation Records
or officers and employees pursuant to Section 7.2 or preservation of Litigation
Records under Section 7.3 shall bear all reasonable out-of-pocket expenses
(except reimbursement of salaries, employee benefits and general overhead)
incurred by the other party in connection with providing such Litigation Records
or officers and employees.
Section 7.5. The party providing Litigation Records under this
Article VII may elect, upon a reasonable basis and within a reasonable time, to
designate all or a portion of the Litigation Records as confidential or
proprietary. If Litigation Records are so designated, the party receiving them
will treat them as it would its own confidential or proprietary information and
will take all reasonable steps to protect and safeguard the Litigation Records
while in its own custody and will attempt to shield such information from
disclosure by motions to quash, motions for a protective order, redaction or
other appropriate actions.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
Section 8.2. This Agreement may be amended, modified or
supplemented only by a written agreement of the parties.
Section 8.3. Except as provided in the SPA, this agreement
shall be personal to the parties to it and neither party may assign or
transfer any of its rights and obligations under this Agreement without the
prior written consent of the other party.
Section 8.4. This Agreement is solely for the benefit
of the Seller Parties and the Purchaser Parties and is not
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intended to confer upon any other person except such parties any rights or
remedies hereunder. There are no third party beneficiaries to this Agreement
other than the Seller Parties and the Purchaser Parties.
Section 8.5. This Agreement may be entered into in any number
of counterparts and by the parties to it on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
Section 8.6. If any term or provision of this Agreement shall
be held to be illegal or unenforceable, in whole or in part, under any enactment
or rule of law, such term or provision or part shall to that extent be deemed
not to form part of this Agreement but the enforceability of the remainder of
this Agreement shall not be affected. Subject thereto, should any term or
provision of this Agreement be or become ineffective, in whole or in part, for
reasons beyond the control of the parties hereto, the parties shall use
reasonable efforts to agree upon a new provision which shall as nearly as
possible have the same commercial effect as the ineffective term or provision or
part hereof.
Section 8.7. Any notice, claim or demand requiring to be
served under or in connection with this Agreement shall be in writing and shall
be sufficiently given or served if delivered addressed as follows:
If to Seller or any other Seller Party, to:
c/o Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III, Esq.
and
c/o Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire, DN40 2PR, England
Attention: George H. Hempstead, III, Esq.
If to Purchaser or any other Purchaser Party, to:
c/o Hanson PLC
1 Grosvenor Place
London SW1X 7JH, England
Attention: Graham Dransfield, Esq.
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Any such notice shall be delivered by hand or sent by first class post or
overnight courier. Any such notice shall take effect, in the case of hand
delivery, at the time of delivery, or, in the case of first class post,
forty-eight hours after posting.
Section 8.8. Resolution of any and all disputes arising from
or in connection with this Agreement, whether based on contract, tort, statute
or otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 8.8; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Seller or
Purchaser (each a "Party") may commence proceedings hereunder by delivering a
written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days
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after its selection or appointment, and shall make a final award not later than
thirty (30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages. Any arbitration award
shall be binding and enforceable against the Parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.
Section 8.9. Neither of the parties hereto shall impeach this
Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
HM HOLDINGS, INC.
By:___________________________________
Name:
Title:
HANSON PLC
By:___________________________________
Name:
Title:
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ANNEX B
Form of Tax Sharing and Indemnification Agreement
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FORM OF
TAX SHARING AND INDEMNIFICATION AGREEMENT
Tax Sharing and Indemnification Agreement (this "Agreement"), entered into
September __, 1996, among: (a) HM Anglo-American Ltd., a Delaware corporation
("Anglo"), and HM Holdings, Inc., a Delaware corporation ("HM Holdings")
(collectively, "Seller"); and (b) Hanson PLC, a public limited company
incorporated in England and Wales ("Buyer").
WHEREAS, HM Holdings and Buyer have entered into a Pre-Demerger Stock
Purchase Agreement, dated September __, 1996 (the "Stock Purchase Agreement"),
relating to all the outstanding capital stock of Peabody Holding Company, Inc.
(the "Target"); and
WHEREAS, Seller and Buyer wish to set forth their agreement with respect to
certain tax matters as set forth below.
NOW THEREFORE, it is hereby agreed as follows:
1. TAXES ALLOCATED TO SELLER. Seller will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless the Target, Buyer, and
their Affiliates from and against any and all of the following Taxes:
i. all Federal Income Taxes imposed on the Target with respect to all
taxable periods of the Target that end during the period in which the
Target was included in the Anglo Consolidated Return;
ii. all State Income Taxes imposed by any particular State on the Target
with respect to any taxable period of the Target that ends within the
period during which the Target was included with a Chemicals Company
in any combined, consolidated, or unitary State Income Tax Return
filed with such State;
iii. all Federal Income Taxes imposed on the Target arising out of the
inclusion of the Target in the Anglo Consolidated Return on or prior
to the Closing Date, and all State Income Taxes imposed on the Target
arising out of the inclusion of the Target in any consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company
on or prior to the Closing Date;
iv. all Income Taxes allocated to Seller pursuant to Section 2 hereof; and
v. all Taxes described in Section 9.4 of the Stock Purchase Agreement;
provided, however, that the Taxes set forth in i through iv above will not
include any Taxes arising as a result of actions taken by the Target, or by
Buyer or any of its Affiliates with
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respect to the Target, on the Closing Date but after the Closing that are not
in the ordinary course of business of the Target.
Any reference in this Agreement to the Target will be deemed to include a
reference to any Subsidiaries of the Target immediately prior to the Closing.
2. STRADDLE PERIODS. With respect to any taxable period of the Target that
would (absent an election) include, but not end until after, the Closing Date (a
"Straddle Period"), Buyer and Seller will, to the extent permitted by applicable
law, elect with the relevant Tax authority to close such Straddle Period as of
the close of the Closing Date. In any case where applicable law does not permit
the Target to close a Straddle Period as of the close of the Closing Date,
Seller will be allocated (i) any Federal Income Taxes imposed on the Target for
the portion of the Straddle Period up to and including the Closing Date, and
(ii) if Target is included in any combined, consolidated, or unitary State
Income Tax Return with a Chemicals Company on the Closing Date, any State Income
Taxes imposed by such State on the Target for the portion of the Straddle Period
up to and including the Closing Date. For purposes of this Section 2, Federal
Income Taxes and State Income Taxes for the portion of a Straddle Period up to
and including the Closing Date will be determined based upon an interim closing
of the books of the Target as of the close of the Closing Date; provided,
however, that such Taxes will not include any Taxes arising as a result of
actions taken by the Target, or by Buyer or any of its Affiliates with respect
to the Target, on the Closing Date but after the Closing that are not in the
ordinary course of business of the Target.
3. TAXES ALLOCATED TO BUYER. Buyer will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless Seller and its Affiliates
from and against any and all Taxes other than those for which Seller is
responsible pursuant to Section 1 hereof, including, without limitation, (i) all
Taxes attributable to periods ending after the Closing Date (other than any
Federal Income Taxes or State Income Taxes allocated to Seller pursuant to
Section 2 hereof), (ii) all Federal Income Taxes imposed on the Target with
respect to all taxable periods of the Target that end during the period prior to
the date the Target became included in the Anglo Consolidated Return, (iii) all
State Income Taxes imposed by a particular State with respect to any taxable
period of the Target that ends at a time when the Target was not included with a
Chemicals Company in any combined, consolidated, or unitary State Income Tax
Return filed with such State, and (iv) all Other Taxes imposed on the Target for
all taxable periods, whether ending before, on, or after the Closing Date.
4. REFUNDS OF INDEMNIFIED TAXES. (a) Buyer will assign and promptly remit
(and will cause the Target and its Affiliates to assign and promptly remit) to
Seller all refunds (including interest thereon and any amounts applied against
liability for other taxable periods) of any Taxes for which Buyer is indemnified
pursuant to this Agreement ("Seller's Refunds"). In furtherance of the preceding
sentence (and not in limitation thereof), Buyer hereby transfers and absolutely
assigns to Seller all right, title, and interest of Buyer, the Target, and their
Affiliates in any Seller's Refunds and will turn over to Seller any and all
checks for such Seller's Refunds ("Seller's Refund Checks") in the exact form
received, but duly endorsed to
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Seller and, until so turned over, will hold the same in trust for the benefit of
Seller segregated from all other funds of Buyer, the Target, and their
Affiliates. Buyer hereby grants to Seller a power of attorney to endorse
Seller's Refund Checks and to take such other action reasonably necessary or
appropriate to implement the terms and provisions of the immediately preceding
sentence; this power of attorney, being coupled with an interest, is
irrevocable.
Seller will assign and promptly remit (and will cause its Affiliates to
assign and promptly remit) to Buyer all refunds (including interest thereon and
any amounts applied against liability for other taxable periods) of any Taxes
for which Seller is indemnified pursuant to this Agreement ("Buyer's Refunds").
In furtherance of the preceding sentence (and not in limitation thereof), Seller
hereby transfers and absolutely assigns to Buyer all right, title, and interest
of Seller and its Affiliates in any Buyer's Refunds and will turn over to Buyer
any and all checks for such Buyer's Refunds ("Buyer's Refund Checks") in the
exact form received, but duly endorsed to Buyer and, until so turned over, will
hold the same in trust for the benefit of Buyer segregated from all other funds
of Seller and its Affiliates. Seller hereby grants to Buyer a power of attorney
to endorse Buyer's Refund Checks and to take such other action reasonably
necessary or appropriate to implement the terms and provisions of the
immediately preceding sentence; this power of attorney, being coupled with an
interest, is irrevocable.
(b) Upon the request of Seller, Buyer will file, or cause the Target or
its Affiliates to file, claims for Seller's Refunds, in such form as Seller may
reasonably request. Seller will have the sole right to prosecute any claims for
Seller's Refunds (by suit or otherwise) at Seller's expense and with counsel of
Seller's choice. Buyer will cooperate, and cause the Target and its Affiliates
to cooperate, fully with Seller and its counsel in connection therewith.
Upon the request of Buyer, Seller will file, or cause its Affiliates to
file, claims for Buyer's Refunds, in such form as Buyer may reasonably request.
Buyer will have the sole right to prosecute any claims for Buyer's Refunds (by
suit or otherwise) at Buyer's expense and with counsel of Buyer's choice. Seller
will cooperate, and cause its Affiliates to cooperate, fully with Buyer and its
counsel in connection therewith.
(c) For the avoidance of doubt (and except as provided in Section 6(b)
hereof), any refunds of Taxes other than Seller's Refunds and Buyer's Refunds
will be the property of the payee of such refunds and no other party to this
Agreement or its Affiliates will have any right to such refunds.
5. TAX BENEFITS. Buyer will promptly remit to Seller the amount of any Tax
Benefit recognized by Buyer, the Target, or any of their Affiliates resulting
from any Major Adjustment for which Buyer, the Target, or any of their
Affiliates has been indemnified pursuant to this Agreement. Seller will promptly
remit to Buyer the amount of any Tax Benefit recognized by Seller or any of its
Affiliates resulting from any Major Adjustment for which Seller or any of its
Affiliates has been indemnified pursuant to this Agreement. For purposes of this
Agreement:
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i. "Tax Benefit" means a reduction in the amount of Taxes that would
otherwise be payable, whether resulting from a deduction, reduced gain
or increased loss from the disposition of an asset, or otherwise.
ii. a person will be deemed to have "recognized" a Tax Benefit at the time
the amount of Taxes such person otherwise would pay is reduced.
iii. a "Major Adjustment" is any adjustment to (A) any individual item of
income, gain, loss, or deduction if such adjustment is in excess of
five million dollars ($5,000,000), or (B) any individual item of
credit if such adjustment (when grossed up) is in excess of five
million dollars ($5,000,000).
(b) If either Buyer or Seller (the "remittor") makes a remittance to
the other party (the "remittee") under Section 5(a) or Section 6(b) hereof of
any Tax Benefit and all or part of such Tax Benefit is subsequently disallowed,
the remittee will promptly pay to the remittor that portion of such remittance
equal to the portion of the Tax Benefit that is disallowed.
6. BUYER TO FOREGO CARRYBACKS. (a) Unless Seller consents otherwise (which
consent will not unreasonably be withheld), Buyer will cause the Target to
forego any carryback for Income Tax purposes to any taxable period of the Target
ending on or before the Closing Date of any net operating loss, net capital
loss, or other deduction or credit incurred by the Target in any taxable period
ending after the Closing Date (a "Post-Closing Carryback").
(b) If Seller consents to a Post-Closing Carryback under Section 6(a)
hereof, (i) Seller will cooperate with Buyer and the Target in filing an
appropriate refund claim or amended Tax Return, and (ii) Seller will assign and
promptly remit to Buyer the amount of any refund of Tax received by, or Tax
Benefit recognized by, Seller or any of its Affiliates as a result of such
Post-Closing Carryback.
7. NO OBLIGATION TO FILE AMENDED TAX RETURNS. Except as otherwise
specifically provided in this Agreement, neither Seller nor Buyer, nor any of
their respective Affiliates, will be obligated to file any amended Tax Return or
other Tax refund claim.
8. PREPARATION OF TAX RETURNS. (a) Seller will prepare or cause to be
prepared, and file or cause to be filed, (i) all consolidated, combined, or
unitary Tax Returns of Seller or any of its Affiliates that include the Target,
and (ii) all other Tax Returns required to be filed by or on behalf of the
Target on or prior to the Closing Date.
(b) Buyer will prepare or cause to be prepared, and file or cause to
be filed, all Tax Returns of the Target other than those set forth in Section
8(a) hereof. Buyer will prepare the following Tax Returns in a manner consistent
with past practice: (i) all Income Tax Returns of the Target for taxable periods
ending (including as a result of an election referred to in Section 2 hereof) on
or prior to the Closing Date; and (ii) all Income Tax Returns of the Target for
taxable periods including, but ending after, the Closing Date ("Straddle Period
Returns").
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(c) With respect to each Straddle Period Return that involves Taxes
subject to allocation pursuant to Section 2 hereof, Buyer will, at least sixty
(60) days prior to the final due date (including extensions) of such Straddle
Period Return, provide to Seller (i) a copy of such Straddle Period Return
(including supporting schedules and workpapers) and (ii) a statement (including
supporting schedules and workpapers) certifying the amount of Tax shown on such
Straddle Period Return that is allocable to Seller pursuant to Section 2 hereof
(the "Statement"). Seller and its authorized representatives will have the right
to review the Statement for thirty (30) days following Seller's receipt of the
Statement (the "30-Day Review Period"). If Seller disagrees with the allocation
in the Statement, Seller will notify Buyer in writing of such disagreement prior
to close of the 30-Day Review Period, and Seller and Buyer will consult and
attempt to resolve in good faith the disagreement. In the event Seller and Buyer
are unable to resolve the disagreement within fifteen (15) days following the
end of the 30-Day Review Period, Seller and Buyer will, in accordance with
Section 14 hereof, jointly request the Accounting Firm to resolve the
disagreement as promptly as possible. Not later than five (5) days after the
later of (i) the end of the 30-Day Review Period, or (ii) if there is a
disagreement, the date notice is provided to Buyer and Seller regarding the
resolution of the disagreement by the Accounting Firm, Seller will pay to Buyer
or Buyer will pay to Seller, as the case may be, an amount equal to the
difference between (i) the Taxes shown on the Statement or in such notice (as
the case may be) as being allocable to Seller pursuant to Section 2 hereof, and
(ii) any payments made by the Target on or prior to the Closing Date, and by
Seller and its Affiliates at any time, in respect of such Taxes (whether as
estimated Taxes or otherwise).
9. COOPERATION; ACCESS TO INFORMATION. (a) Buyer and Seller will cooperate
fully with each other with respect to, and will make available to each other
such Tax data and other information relating to the Target as may be reasonably
required for, the preparation by Buyer or Seller of any Tax Returns required to
be prepared by Buyer or Seller under this Agreement.
(b) After the Closing Date, Buyer will, and will cause the Target and
its Affiliates to, (i) permit Seller to have full access, at any reasonable time
and from time to time, at the business location at which the books and records
are maintained, to such Tax data relating to the Target as Seller may from time
to time reasonably request, and (ii) furnish, and cause the independent
accountants and legal counsel of Buyer and the Target to furnish, to Seller such
additional Tax and other information and documents relating to the Target in the
possession of such persons as Seller may from time to time reasonably request in
connection with its Tax reporting obligations. After the Closing Date, Seller
will (i) permit Buyer to have full access, at any reasonable time and from time
to time, at the business location at which the books and records are maintained,
to such Tax data relating to the Target in the possession of Seller and its
Affiliates as Buyer may from time to time reasonably request, and (ii) furnish,
and cause the independent accountants and legal counsel of Seller to furnish, to
Buyer such additional Tax and other information and documents relating to the
Target in the possession of such persons as Buyer may from time to time
reasonably request in connection with its Tax reporting obligations. The
foregoing information will be retained until thirty (30) days following the
expiration of the applicable Tax statute of limitations (including any extension
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thereof) or such other date as Seller or Buyer may reasonably request; provided,
however, that in the event a proceeding has been instituted prior to the
expiration of the applicable Tax statute of limitations for which the
information may be requested, the information will be retained until there is a
final determination with respect to such proceeding.
10. AUDITS. (a) Buyer will promptly notify Seller in writing upon the
receipt by Buyer, the Target, or their Affiliates of notice of any pending or
threatened Tax audits of or assessments against the Target, Buyer, or their
Affiliates (i) relating to any taxable period of the Target during which the
Target was included in the Anglo Consolidated Return or a consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company, or (ii)
that may affect the determination of Taxes for which Seller is or may be
obligated to indemnify the Target, Buyer, or their Affiliates pursuant to this
Agreement. The notice required under this Section 10(a) is referred to in this
Agreement as the "Audit Notification."
(b) Subject to Section 10(c) hereof, Seller will have the sole right,
at its election, (i) to represent the Target's interest with respect to any Tax
audit or assessment referred to in Section 10(a) hereof, including in any
administrative or court proceeding relating thereto, and (ii) to employ counsel
of its choice at its expense and to control the conduct of such audit,
assessment, or proceeding, including settlement or other disposition thereof
(the rights under (i) and (ii) are referred to in this Agreement collectively as
the "Representation Right"); provided, however, that the Representation Right
will apply only to any issues or items (x) relating to any taxable period of the
Target during which the Target was included in the Anglo Consolidated Return or
a consolidated, combined, or unitary State Income Tax Return with a Chemicals
Company, or (y) that may affect the determination of Taxes for which Seller is
or may be obligated to indemnify the Target, Buyer, or their Affiliates pursuant
to this Agreement. Buyer will cooperate, and will cause the Target and its
Affiliates to cooperate, fully with Seller and its counsel in the defense
against or compromise of any claim in any said audit, assessment, or proceeding.
(c) To exercise the Representation Right, Seller must first, within a
reasonable period following the receipt of the Audit Notification, (i) notify
Buyer in writing that Seller intends to exercise the Representation Right, and
(ii) deliver to Buyer a written statement acknowledging Seller's obligation to
indemnify the Target, Buyer, or their Affiliates in accordance with the terms of
this Agreement with respect to the Taxes as to which Seller exercises the
Representation Right.
11. TREATMENT OF INDEMNIFICATION. On their Tax Returns, Seller and Buyer
will (and will cause their Affiliates to) treat any payment made or received
under this Agreement, the Stock Purchase Agreement, or the Indemnification
Agreement (referenced in the Stock Purchase Agreement) as an adjustment to the
Purchase Price (as defined in the Stock Purchase Agreement) or as a contribution
to capital, as the case may be, and not as an item subject to tax or as a
reduction to a deductible item.
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12. INDEMNIFICATION PROCEDURES. (a) If either Buyer or Seller (the
"Indemnified Party") determines that it or any of its Affiliates is or may be
entitled to indemnification by the other party (the "Indemnifying Party") under
this Agreement, the Indemnified Party will promptly deliver to the Indemnifying
Party a written notice and demand therefor (the "Notice") specifying the basis
for its claim for indemnification, the nature of the claim, and, if known, the
amount for which the Indemnified Party reasonably believes it or any of its
Affiliates is entitled to be indemnified. The Notice must be received by the
Indemnifying Party no later than thirty (30) days before the expiration of the
applicable Tax statute of limitations; provided, however, that if the
Indemnified Party does not receive notice from the applicable governmental
taxing authority ("Government Notice") that an item exists that could give rise
to a claim for indemnification hereunder more than thirty (30) days before the
expiration of the applicable Tax statute of limitations, then the Notice must be
received by the Indemnifying Party immediately after the Indemnified Party
receives the Government Notice. Unless the Indemnifying Party objects to the
claim for indemnification (in the manner set forth in Section 12(b) hereof), the
Indemnifying Party will pay the Indemnified Party the amount set forth in the
Notice, in cash or other immediately available funds, within thirty (30) days
after receipt of the Notice; provided, however, that if the amount for which the
Indemnified Party reasonably believes it is entitled to be indemnified is not
known at the time of the Notice, the Indemnified Party will deliver to the
Indemnifying Party a further notice specifying such amount as soon as reasonably
practicable after such amount is known and payment will then be made as set
forth above.
(b) The Indemnifying Party may object to the claim for indemnification
(or the amount thereof) set forth in any Notice by giving the Indemnified Party,
within thirty (30) days following receipt of such Notice, written notice setting
forth the Indemnifying Party's grounds for so objecting (the "Objection
Notice"). If the Indemnifying Party does not give the Indemnified Party the
Objection Notice within such thirty (30)-day period, the Indemnifying Party will
be deemed to have acknowledged its liability for the amount of such claim and
the Indemnified Party may exercise any and all of its rights under applicable
law to collect such amount.
(c) If Buyer and Seller are unable to settle any dispute regarding a
claim for indemnification within thirty (30) days after receipt of the Objection
Notice, Buyer and Seller will, in accordance with Section 14 hereof, jointly
request the Accounting Firm to resolve the dispute as promptly as possible.
(d) Failure by the Indemnified Party to promptly deliver to the
Indemnifying Party a Notice in accordance with Section 12(a) hereof will not
relieve the Indemnifying Party of any of its obligations under this Agreement
except to the extent the Indemnifying Party is prejudiced by such failure.
13. TERMINATION OF EXISTING TAX SHARING AGREEMENTS. As of the close of the
Closing Date, any Tax sharing agreement or arrangement that exists or may exist
between the Target and Seller or an Affiliate of Seller will terminate, and any
obligations to make payments under any such agreement or arrangement will be
canceled.
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14. RESOLUTIONS OF DISPUTES. Any dispute between Buyer and Seller as to any
matter covered in this Agreement will be resolved by the Accounting Firm;
provided, however, that in resolving any such dispute the Accounting Firm will
be bound by the terms of this Agreement. Any fees or expenses of the Accounting
Firm will be borne equally by Buyer and Seller.
15. DEFINITIONS. For purposes of this Agreement, the following terms have
the following meanings:
(a) "Accounting Firm" means Deloitte & Touche.
(b) "Affiliate" means, with respect to any person, any other person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such person; provided, however, that for the purposes of this
Agreement, Affiliates of Seller will not include the Target.
(c) "Anglo Consolidated Return" means any consolidated income tax
return for United States federal income tax purposes that includes Anglo as the
common parent.
(d) "Chemicals Company" means any corporation that has been included
(or that was required to be included) in the Anglo Consolidated Return at any
time on or before the Closing Date other than (i) the Target, (ii) Kaiser Cement
Corporation, (iii) [Duke City Lumber Company, Inc.], (iv) HM Industries, Inc.,
(v) Crane Holdings Inc., (vi) Cornerstone-Spectrum, Inc., (vii) Kidde Industries
Inc., (viii) Axelson, Inc., and Axelson Canada, Inc., and (ix) the Subsidiaries
of the corporations in (ii) through (viii).
(e) "Closing" has the meaning ascribed to that term in the Stock
Purchase Agreement.
(f) "Closing Date" has the meaning ascribed to that term in the Stock
Purchase Agreement.
(g) "Federal Income Taxes" means all United States federal income
taxes, and includes any interest, penalties, and additions imposed with respect
to such taxes.
(h) "Income Taxes" means all Federal Income Taxes and all State Income
Taxes.
(i) "Income Tax Return" means any Tax Return with respect to Federal
Income Taxes or State Income Taxes.
(j) "Other Taxes" means any Taxes other than Federal Income Taxes and
State Income Taxes, and includes any interest, penalties, and additions imposed
with respect to such Taxes.
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(k) "person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
association, a governmental entity (or any department, agency, or political
subdivision thereof), or any other entity.
(l) "State" means any State of the United States (including any
political subdivision thereof) and the District of Columbia.
(m) "State Income Taxes" means all income taxes (and other taxes
measured by net income or net gain) imposed by any State, and includes any
interest, penalties, and additions imposed with respect to such taxes.
(n) "State Income Tax Return" means any Tax Return with respect to
State Income Taxes.
(o) "Subsidiary" means any corporation in which the person being
referred to owns, directly or through one or more other Subsidiaries, stock
possessing at least fifty percent (50%) of the voting power of the outstanding
stock in such corporation.
(p) "Tax" or "Taxes" means any federal, state, local, foreign, or
other tax of any kind whatsoever (together with any interest, penalties, or
additions imposed with respect thereto), including, without limitation, income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, service, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
rental, lease, ad valorem, or other tax.
(q) "Tax Returns" means all returns, declarations, reports, claims for
refunds, information returns, statements, and other forms required to be filed
with respect to any Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
16. FAILURE TO MAKE PAYMENT IN A TIMELY MANNER. If either Buyer or Seller
(the "Payor") fails to make a payment due and owing under this Agreement to the
other party or any of its Affiliates (the "Payee") reasonably promptly after the
parties hereto agree (or there is a binding determination) that such payment is
due and owing, the Payor will pay to the Payee interest on such payment from and
including the date the parties reach such agreement (or such binding
determination is made) to but excluding the date the Payor makes such payment,
at a rate equal to the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
17. POST-CLOSING ELECTIONS. After the Closing Date, at Seller's request,
Buyer will cause the Target to make or join with Seller in making, and will take
and cause the Target to take any and all action necessary to effect, any
election that pertains to any taxable period beginning prior to the Closing Date
(an "Election"); provided, however, that if making an Election would have a
material adverse impact on Buyer, the Target, or any of their Affiliates for any
taxable period ending after the Closing Date, Buyer will be required to comply
with
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this Section 17 only if Seller indemnifies Buyer for the amount of such material
adverse impact. Seller will be responsible for the preparation of all forms and
schedules necessary to effect any Election. Buyer will, and will cause the
Target to, cooperate fully with Seller with respect to any Election.
18. AMENDMENTS; WAIVERS. No provision of this Agreement may be amended,
waived, or otherwise modified without the prior written consent of Buyer and
Seller.
19. ASSIGNMENTS. No party to this Agreement may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of the other parties; provided, however, that any party to this Agreement may
assign its rights and delegate its obligations under this Agreement to one or
more of its Subsidiaries or corporate Affiliates, provided that such an
assignment and delegation will have no effect on, and will not be deemed to
constitute a release of, such party from its obligations under this Agreement.
20. NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any rights
or remedies upon any person other than the parties to this Agreement and their
respective successors and permitted assigns.
21. GOVERNING LAW. Except to the extent federal, state, local, or foreign
Tax laws, rules, or regulations govern the filing of Tax Returns or the
positions taken with respect to Taxes in Tax Returns, this Agreement will be
governed by and construed in accordance with the internal laws of the State of
New York.
22. NOTICES. Any notices, requests, demands, claims, and other
communications under this Agreement will be in writing and will be delivered at
the following addresses (or such other address as may be specified by notice
given to the other party pursuant to this Section 22):
If to a Seller:
HM Holdings, Inc.
HM Anglo-American Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
If to Buyer:
Hanson PLC
1 Grosvenor Place
London
SW1X 7JH England
Attention: Legal Director
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23. ENTIRE AGREEMENT. This Agreement (including the agreements and
documents referred to herein) constitutes the entire agreement among the parties
hereto with respect to the subject matter of this Agreement and supersedes any
prior understandings, agreements, outlines, or representations by or among the
parties hereto, written or oral, to the extent they relate in any way to the
subject matter of this Agreement.
24. HEADINGS. The section headings contained in this Agreement are inserted
for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
25. COUNTERPARTS. This Agreement may be executed in more than one
counterpart and by different parties of each counterpart and all such
counterparts when executed will form one and the same agreement.
(signature page follows)
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AS WITNESS this Agreement has been signed by or on behalf of each of the
parties hereto.
SELLER:
HM ANGLO-AMERICAN LTD.
By: _____________________________
Name:
Title:
HM HOLDINGS, INC.
By: _____________________________
Name:
Title:
BUYER:
HANSON PLC
By: _____________________________
Name:
Title:
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EXHIBIT 10.3
FORM OF PRE-DEMERGER
STOCK PURCHASE AGREEMENT
THIS PRE-DEMERGER STOCK PURCHASE AGREEMENT (the "Agreement") is made the ____
day of September, 1996
BETWEEN:
(1) HM HOLDINGS, INC., a Delaware corporation ("Seller");
and
(2) HANSON PLC, a public limited company incorporated in
England ("Purchaser").
WHEREAS:
(A) Seller is the registered and beneficial owner of the shares
(collectively, the "Sale Shares") of the companies (each, a "Company"
and collectively, the "Companies"), details of which are set out on
Annex A hereto.
(B) Seller wishes to sell and Purchaser wishes to purchase the Sale Shares
on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sale and Purchase of Sale Shares.
Subject to the terms and conditions of this Agreement, Seller
shall sell and transfer to Purchaser, and Purchaser shall purchase from Seller,
the Sale Shares free from any lien, option, charge and encumbrance, right of
preemption or any other third party right and together with all benefits and
rights attached thereto.
2. Purchase Price.
The total consideration for the sale of all of the Sale Shares
shall be Twenty Six Million and Three Hundred Thousand United States Dollars
(US$26,300,000) (the "Purchase Price"), payable in cash at the Closing (as
defined below), subject to post-Closing adjustment as provided herein. The
Purchase Price shall be allocated among the Sale Shares of each Company in
the manner mutually agreed upon by the parties.
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3. Closing.
3.1 Date of Closing. Subject to the satisfaction of each of the
conditions set forth in Section 5, the closing of the sale and purchase of the
Sale Shares hereunder (the "Closing") shall take place at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, 10153 (or at such
other place as the parties may agree in writing) at 10:00 a.m., New York City
time, on September 30, 1996 (the "Closing Date").
3.2 Title to Sale Shares Prior to Closing. Until the Closing,
Seller shall continue to have full right, title and interest in and to the Sale
Shares, including the right to receive any dividends, distributions or payments
made with respect to the Sale Shares, and the right to vote the Sale Shares.
4. Actions Prior to Closing.
4.1 Best Efforts. Each of the parties shall use its reasonable
best efforts (without undue expense) to cause the fulfillment, at or prior to
the Closing Date, of all of the conditions to their respective obligations to
consummate the sale and purchase of the Sale Shares under this Agreement.
4.2 Conduct of the Company's Business Prior to Closing. Seller
agrees to use its reasonable best efforts to cause each of the Companies and
their subsidiaries to conduct their respective businesses in the ordinary and
usual course consistent with past practices during the period from the date of
this Agreement through the Closing.
5. Conditions of Closing.
The obligations of Seller to sell, and Purchaser to purchase, all
of the Sale Shares are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
(a) Seller and Purchaser shall have executed an Indemnification
Agreement in the form attached as Annex B (the "Indemnification
Agreement");
(b) There shall not be in effect any injunction or restraining
order issued by a court of competent jurisdiction barring the
consummation of the sale and purchase of the Sale Shares pursuant to
this Agreement;
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(c) Millennium Chemicals Inc. ("Millennium"), Purchaser and
Hanson Overseas Holdings Limited ("HOH") shall have executed a Demerger
Agreement pursuant to which Millennium will issue shares representing
all of its then outstanding Common Stock to Purchaser's shareholders on
a pro rata basis on the basis of one share of Common Stock for every 70
Ordinary Shares of Purchaser (other than those represented by American
Depositary Shares) and every 14 American Depositary Shares of Purchaser
in consideration for the transfer by Purchaser to Millennium of all of
the outstanding stock in HOH; and
(d) All representations and warranties of Seller to Purchaser set
forth in Section 8 shall be true and correct in all material respects at
and as of the time of the Closing with the same effect as though made
again at and as of that time.
In addition to the foregoing and subject to the provisions of Section 7, the
obligation of Purchaser to purchase the Sale Shares is subject to the additional
condition that there shall not have occurred a material adverse change in the
assets, business, operations or financial condition of any Company and its
subsidiaries, taken as a whole, during the period from the date of this
Agreement through the Closing (a "Material Adverse Change"); provided, however,
that the failure to satisfy this condition insofar as it relates to any Company
shall not affect the parties' obligations with respect to the purchase and sale
of the Sale Shares of all other Companies.
6. Deliveries at Closing.
At the Closing, the parties shall make the following deliveries
and take the following actions:
(a) Seller and Purchaser shall deliver the Indemnification
Agreement;
(b) Seller shall deliver to Purchaser share certificates
representing the Sale Shares, accompanied by stock powers or other appropriate
transfer forms duly endorsed by Seller;
(c) Purchaser shall transfer to Seller (to such account as shall
be designated by Seller) the Purchase Price in immediately available funds; and
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(d) Seller shall deliver to Purchaser a certificate dated the
Closing Date and executed by a duly authorized officer of Seller to the effect
that all of the conditions of Closing specified in Section 5 have been fulfilled
or waived.
7. Material Adverse Change.
Seller shall promptly notify Purchaser if, during the period from
the date of this Agreement to the Closing, a Material Adverse Change occurs.
Furthermore, during the period from the date of this Agreement to the Closing,
Purchaser will have full opportunity to confirm whether a Material Adverse
Change has occurred, and at any time prior to the Closing, Purchaser may deliver
to Seller a notification that, in Purchaser's reasonable judgment, a Material
Adverse Change has occurred and setting forth, in reasonable detail, the basis
therefore (a "MAC Notice"). Following Seller's receipt of such MAC Notice,
Seller and Purchaser shall attempt to reach an agreement on (i) whether, in
fact, a Material Adverse Change has occurred, and (ii) if a Material Adverse
Change has occurred, an appropriate adjustment to the Purchase Price for the
Sale Shares of the affected Company to reflect the change in the fair market
value of such Sale Shares resulting from such Material Adverse Change. If the
parties reach agreement on the foregoing prior to the Closing, and if all other
conditions to the Closing have been satisfied, the Closing shall take place as
provided herein except that the Purchase Price for the Sale Shares of the
affected Company shall be adjusted in accordance with such agreement. If the
parties are unable to reach agreement on the foregoing prior to the Closing, and
if all other conditions to the Closing have been satisfied, then notwithstanding
the provisions of the last sentence of Section 5, the Closing of the purchase
and sale of the Sale Shares of the affected Company shall be held as scheduled
on the Closing Date, the Sale Shares of such Company shall be purchased by the
Purchaser at the original, unadjusted Purchase Price, and the parties' dispute
concerning the alleged Material Adverse Change shall be resolved (and the
adjustment to the Purchase Price for such Sale Shares, if any, shall be made),
after the Closing. If the parties are unable to reach agreement on the existence
and/or effect of an alleged Material Adverse Change within 30 days after
delivery of the MAC Notice, the matter shall be resolved by arbitration pursuant
to Section 11.
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If Purchaser does not deliver a MAC Notice to Seller prior to the
Closing, Purchaser (and its permitted successors and assigns) shall waive any
right it might otherwise have to assert after the Closing that a Material
Adverse Change with respect to any Company had occurred whether or not Purchaser
knew or should have known of such Material Adverse Change.
8. Representations and Warranties of Seller.
Seller hereby represents and warrants to Purchaser that with
respect to Seller and each Company and its subsidiaries, as the case may be:
8.1 Organization, Standing and Authority of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to enter
into and perform this Agreement.
8.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by Seller have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes the valid
and binding obligation of Seller enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
8.3 Organization, Standing and Qualification of the Companies and
each of their Respective Subsidiaries. The Company and each of its subsidiaries
are corporations duly organized, validly existing and in good standing under the
laws of their jurisdiction of incorporation and have full corporate power and
authority to carry on their respective business as now conducted and to own,
lease and operate their respective properties as now done. The Company and each
of its subsidiaries are qualified to do business and are in good standing in
each jurisdiction in which the nature of their respective businesses or the
properties owned or leased by them requires qualification, except where the
failure to be so qualified or in good standing would not have a material adverse
effect upon the business properties or financial condition of the Company and
its subsidiaries taken as a whole.
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8.4 Consents of Third Parties. The execution, delivery and
performance of this Agreement by Seller will not (i) violate or conflict with
the certificate of incorporation or by-laws (or comparable organizational
documents) of Seller or the Company and any of its subsidiaries; or (ii)
constitute a violation of any law, regulation, order, writ, judgment, injunction
or decree applicable to Seller or the Company and any of its subsidiaries. No
material consent, approval or authorization of any governmental authority is
required on the part of Seller in connection with the execution, delivery and
performance of this Agreement other than those which have been or will be
obtained prior to the Closing.
8.5 Ownership of Sale Shares. Seller is, and at the Closing will
be, the record and beneficial owner of the Sale Shares free and clear of any
claim, lien, security interest or other encumbrance ("Lien"). At the Closing,
Seller will transfer and deliver to Purchaser valid title to all the Sale
Shares, free and clear of any Lien. The Company is the record and beneficial
owner of all of the outstanding capital stock of each of its subsidiaries, free
and clear of any Lien.
8.6 Financial Statements.
(a) The consolidated balance sheet of the Company and its
subsidiaries as of June 30, 1996 (the "Balance Sheet"), a copy of which is
attached hereto as Annex C, has been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP") and presents fairly
the consolidated financial position of the Company and its subsidiaries as at
such date.
(b) Except to the extent reflected or reserved for in the
Balance Sheet, there are no liabilities or obligations material to the Company's
and its subsidiaries' businesses that would normally be shown on a balance sheet
prepared in accordance with GAAP, except liabilities or obligations incurred in
the ordinary course of business since June 30, 1996.
8.7 Absence of Certain Liabilities and Changes. Since June 30,
1996, the Company and its subsidiaries have operated their respective businesses
in the ordinary course and there has not been:
(a) any declaration, setting aside or payment of any
dividend on, or any other distribution with
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respect to, any capital stock of the Company, or any repurchase redemption or
other acquisition of any capital stock of the Company; or
(b) any incurrence, assumption or guarantee by the Company
or any subsidiary of the Company of any indebtedness or liability for or in
respect of borrowed money or any commitment to do the same other than borrowings
in the ordinary course of business consistent with past practice.
9. Further Agreements of the Parties.
9.1 Further Assurance. The parties hereto undertake to co-operate
in good faith to ensure that they do such acts and things as may reasonably be
necessary to complete the sale and purchase of the Sale Shares. At all times
after the date of this Agreement and after the completion of the sale and
purchase of the Sale Shares, the parties shall use their reasonable best efforts
to procure that any necessary third party shall execute such documents and do
such acts and things as may reasonably be required for the purpose of giving to
Seller and Purchaser, respectively, the full benefit of all the provisions of
this Agreement. Seller and Purchaser will use their reasonable best efforts to
obtain any consent, substitution, approval or amendment required to novate or
assign all agreements, leases, licenses and other rights of any nature
whatsoever relating to the assets, rights and other things of the Companies and
their subsidiaries of value to Purchaser, including without limitation the
release of Seller and its subsidiaries and affiliates from any guarantees,
surety bonds, letters of credit or similar items previously entered into or made
for the benefit of the Companies or their subsidiaries; provided, however, that
neither Seller nor Purchaser shall be obligated to pay any consideration
therefor (except for filing fees and other similar charges) to the third party
from whom such consents, approvals, substitutions and amendments are requested.
If Seller or Purchaser is unable to obtain any such required consent, approval,
substitution or amendment, Seller (or its subsidiaries or affiliates) shall
continue to be bound by such agreements, leases, licenses and other rights and,
unless not permitted by law or the terms thereof, Purchaser (or its subsidiaries
or affiliates) shall, as agent for Seller (or its subsidiaries or affiliates) or
as subcontractor, pay, perform and discharge fully all the obligations of Seller
(or its subsidiaries or affiliates) thereunder from and after the Closing and
indemnify and hold
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harmless Seller and its subsidiaries from and against, all losses, claims,
damages, taxes, liabilities and expenses whatsoever arising out of or in
connection with Purchaser's (or its subsidiaries' or affiliates') performance of
or omission to perform its obligations thereunder and hereunder. Seller (or its
subsidiaries or affiliates) shall, without further consideration, pay and remit
to Purchaser (or its subsidiaries or affiliates) promptly all money, rights and
other consideration received in respect of such performance after payment of any
taxes due from Seller (or its subsidiaries or affiliates) with respect to such
receipt. Seller (or its subsidiaries or affiliates) shall exercise their rights
and options under all such agreements, leases, licenses and other rights and
commitments referred to in this Section 9.1 only as reasonably directed by
Purchaser and at Purchaser's expense. If and when any such consent shall be
obtained or such agreement, lease, license or other rights shall otherwise
become assignable or able to be novated, Seller (or its subsidiaries or
affiliates) shall promptly assign all its rights and obligations thereunder to
Purchaser (or its subsidiaries or affiliates) without payment of further
consideration and Purchaser (or its subsidiaries or affiliates) shall, without
the payment of any further consideration, assume such rights and obligations. To
the extent that the assignment of any contract or agreement or the proceeds
thereof pursuant to this Section 9.1 is prohibited by law, the assignment
provisions of this paragraph shall operate to create a subcontract with the
Purchaser to perform each relevant, unassignable contract or agreement, and the
Seller to pay the Purchaser the subcontract price which shall be equal to the
money, rights and other consideration (after tax) received by Seller (or its
subsidiaries or affiliates) with respect to the relevant, unassignable contract
or agreement, performed by Purchaser under such subcontract.
9.2 Access to Information. Prior to the Closing, Purchaser may
make such investigation of the business and properties of the Companies and
their respective subsidiaries as Purchaser may desire, and, upon reasonable
notice, Seller shall give to Purchaser and its counsel, accountants and other
representatives reasonable access, during normal business hours throughout the
period prior to the Closing, to the property, books, commitments, agreements,
records, files and personnel of the Companies and their respective subsidiaries
and Seller shall furnish to Purchaser during that period all copies of documents
and information concerning the Companies and their respective
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subsidiaries as Purchaser may reasonably request subject to applicable law.
9.3 Taxes. Any and all transfer taxes, stamp duties and similar
charges relating to the purchase and sale of the Sale Shares shall be paid by
. Except as provided in the preceding sentence, Seller shall not be
responsible for, and Buyer shall indemnify and hold harmless Seller from and
against, any and all taxes imposed on the Companies.
9.4 Investment Canada Act. The parties to this Agreement agree
that the transaction herein provided for shall be subject to compliance with the
Investment Canada Act.
10. Survival of Representations and Warranties and Related Matters.
10.1 Survival of Representations of Warranties and Notice of
Claims. It is understood and acknowledged that the representations and
warranties set forth in this Agreement shall not survive the Closing, provided,
however, that the representations and warranties set forth in Section 8.5
shall survive the Closing indefinitely, and the representations and warranties
set forth in Section 8.7 shall survive the Closing but only until the close
of business on December 31, 1996 and Seller shall be liable for damages under
Section 8.7 hereof only to the extent that notice of a claim therefor is
asserted by the Purchaser in writing and delivered on or prior to the close of
business on December 31, 1996. Any notice of a claim by any reason of an
alleged breach of any of the representations and warranties contained in this
Agreement shall state specifically the representations or warranties with
respect to which the claim is made, the facts giving rise to the alleged basis
for the claim and the amount of liability asserted against the other party by
reason of the claim.
10.2 Determination of Damages and Related Matters. In calculating
any amounts payable to Purchaser pursuant to Section 10.1, no amount shall be
included for Purchaser's consequential damages. Other than as explicitly
provided in this Agreement (i) Seller does not, in this Agreement or any other
agreement, instrument or document contemplated by this Agreement, make any
representation as to, warranty of or covenant (whether express or implied) with
respect to, the value of the Sale Shares. Purchaser acknowledges and agrees that
Purchaser and its representatives have the experience and knowledge to evaluate
the business, financial condition,
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assets and liabilities of each of the Companies' businesses; that Purchaser and
its representatives have had access to such of the information and documents
referred to in Section 9.2 and to such of the real property, fixtures and
tangible personal property of the Companies' businesses as Purchaser and its
representatives shall have requested to see and/or review; that Purchaser and
its representatives have had a full opportunity to meet with appropriate
management and employees of Seller and each of the Companies and their
respective subsidiaries to discuss the businesses and assets of the Companies
and their respective subsidiaries; and that, in determining to acquire the Sale
Shares and, therefore, the underlying assets of the Companies and their
respective subsidiaries (including the real property, fixtures and the tangible
personal property), Purchaser has made its own investigation into, and based
thereon Purchaser has formed an independent judgment concerning, the Sale Shares
and the underlying assets of each of the Companies and their respective
subsidiaries (including the real property, fixtures and the tangible personal
property). Other than as explicitly provided herein, the Sale Shares, as well as
all assets of the Companies, to be acquired, directly or indirectly, by the
Purchaser hereunder are transferred on an "AS IS, WHERE IS" basis. The parties
acknowledge and agree that the Purchase Price for the Sale Shares of each of the
Companies represents the mutually agreed upon fair market value of such Sale
Shares, and neither party (or their respective permitted successors and assigns)
shall have the right at any time in the future to make any claim or raise any
dispute with respect to the adequacy or fairness of the consideration paid for
the Sale Shares.
11. Arbitration.
Resolution of any and all disputes arising from or in connection
with this Agreement, whether based on contract, tort, statute or otherwise,
including, but not limited to, disputes over arbitrability and disputes in
connection with claims by third parties (collectively, "Disputes") shall be
exclusively governed by and settled in accordance with the provisions of this
Section 11; provided, however, that nothing contained herein shall preclude
either party from seeking or obtaining (a) injunctive relief or (b) equitable or
other judicial relief to enforce the provisions hereof or, pending resolution of
Disputes hereunder, to preserve the status quo. Seller or Purchaser (each a
"Party") may commence proceedings hereunder by delivering a written notice to
the other Party providing reasonable
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description of the Dispute to the other, and expressly requesting arbitration
hereunder. The Parties hereby agree to submit all Disputes to arbitration under
the terms hereof, which arbitration shall be final, conclusive and binding upon
the Parties, their successors and assigns. The arbitration shall be conducted in
New York City by three arbitrators acting by majority vote (the "Panel")
selected by agreement of the Parties not later than ten (10) days after delivery
of the demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days after its selection or appointment, and shall make a final
award not later than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees and
expenses and fees and expenses of experts, between the prevailing and
non-prevailing Party as the Panel deems fair and reasonable. Notwithstanding the
foregoing, in no event may the Panel award multiple, punitive or exemplary
damages. Any arbitration award shall be binding and enforceable against the
Parties hereto and judgment may be entered thereon in any court of competent
jurisdiction.
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12. Miscellaneous.
12.1 No Impeachment. Neither of the parties hereto shall impeach
this Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
12.2 Assignments. Except as provided in this Section 12.2,
neither party may assign or transfer any of its rights and obligations under
this Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Seller and Purchaser acknowledge and agree that
either party may assign its rights and delegate its obligations under this
Agreement, including without limitation its rights and obligations under the
Indemnification Agreement annexed hereto, to one or more of its respective
subsidiaries or affiliates, provided that such an assignment shall have no
effect on, and shall not be deemed to constitute a release of either party from,
its obligations under this Agreement.
12.3 Governing Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York and may be executed in more than one counterpart and by different
parties of each counterpart and all such counterparts when executed shall form
one and the same agreements.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
HM HOLDINGS, INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
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<PAGE>
ANNEX A
Details of Companies and Sale Shares
<TABLE>
<CAPTION>
Company Sale Shares
------- (and %)
------------
<C> <S> <C>
1. Hanson (Canada) Inc. (100%)
2. Canadian Fiberform Ltd. (100%)
</TABLE>
<PAGE>
<PAGE>
ANNEX B
Form of Indemnification Agreement
<PAGE>
<PAGE>
FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as of
September __, 1996, between HM Holdings, Inc., a Delaware corporation
("Seller"), and Hanson PLC, a public limited company incorporated in England
("Purchaser").
RECITALS
A. The parties have entered into a Pre-Demerger Stock Purchase
Agreement, dated as of September __, 1996 (the "SPA"), pursuant to which Seller
will sell to Purchaser capital stock of the companies listed on Annex A hereto
(each, a "Company" and collectively, the "Companies").
B. The parties acknowledge that it is their intention that,
effective upon the Closing (as defined in the SPA), (i) Purchaser shall assume
and accept responsibility for the Purchaser Liabilities (as hereinafter
defined), and (ii) Seller shall retain responsibility for the Seller Liabilities
(as hereinafter defined), in each case except as otherwise provided in the SPA.
C. It is a condition to the consummation of the transactions
contemplated by the SPA that the parties enter into this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, Seller and Purchaser agree as
follows:
ARTICLE I.
DEFINITIONS
"Chemicals Subsidiaries" means all of the direct and indirect
subsidiaries of Purchaser that are transferred to Millennium Chemicals Inc.
("Millennium") or its subsidiaries, including without limitation the Seller, as
part of or in connection with the contemplated demerger of Purchaser's chemicals
business (the "Demerger"), but excluding the Discontinued Businesses.
"Company Businesses" means all of the businesses, operations and
assets of each of the Companies, including all of the businesses, operations and
assets that were previously conducted, owned or used by any business or
operation of any
<PAGE>
<PAGE>
Company (or any predecessor to such business or operation), notwithstanding the
fact that prior to the Closing (i) any such business or operation was closed,
wound up or otherwise terminated, (ii) such asset ceased to be used in
connection with such business or operation, or (iii) any such business,
operation or asset was sold or otherwise disposed of to any person or entity
other than the Chemicals Subsidiaries. Company Businesses do not include the
Seller Businesses. For the purpose of the definition of "Company Businesses",
the term the "Company" includes all direct and indirect subsidiaries of such
Company and any partnerships in which it or any of its subsidiaries owns or at
any time in the past owned an interest.
"Discontinued Businesses" has the meaning ascribed to such term
in the Information Statement dated August ___, 1996 delivered to Purchaser's
shareholders in connection with the Demerger.
"Litigation and Claims" means litigation pending or threatened or
claims alleged against Seller and/or Purchaser Parties, including, without
limitation, civil and criminal actions, workers' compensation proceedings,
administrative and regulatory proceedings, investigations, audits, inquiries,
demands, claims (including any title claims relating to real properties) and
threatened actions.
"Purchaser Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for taxes (which are
addressed in the SPA), and except for the Seller Liabilities, any and all of
the obligations, liabilities and expenses incurred by Seller, Purchaser or any
of their respective affiliates or subsidiaries or affiliates of such
subsidiaries arising out of or associated with, or any Litigation and Claims
alleged to arise out of or be associated with, the Company Businesses, whether
or not in the ordinary course of business, in each case whether matured or
unmatured, liquidated or unliquidated, fixed or contingent, known or unknown,
and whether arising out of circumstances existing prior to, on or subsequent to
the Closing, and regardless of where or against whom such obligations,
liabilities and expenses are asserted or determined or whether asserted or
determined prior to, on or subsequent to the Closing, and regardless
of whether arising from or alleged to arise from negligence, recklessness,
violation of law, fraud or misrepresentation by any of the Seller Parties, and
including, without limitation, the following items:
(i) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual breach
or violation of any obligation or requirement arising out of or
associated with the Company Businesses, including,
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without limitation, (A) all product warranty obligations with respect to
products developed, produced, manufactured, marketed, used or
distributed by the Company Businesses ("Company Products"), whether
shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury or
consequential damage which is caused or alleged to have been or to be
caused by any defect in or breach of warranty related to any Company
Product or other asset of the Company Businesses;
(ii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Purchaser
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller, Purchaser or any of their respective affiliates
or subsidiaries or affiliates of such subsidiaries after the Closing
("New Purchaser Litigation"), in each case if and solely to the extent
that such Litigation and Claims (in whole or in part) arise out of or
are associated with, or are alleged (regardless of the party named in
the allegation or complaint) to arise out of or be associated with the
Company Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorney or consultant fees or
remediation costs) of Seller, or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to
the Company Businesses;
(iv) any Litigation and Claims brought after the Closing against
Seller or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to the
Closing, arising out of, or alleged to arise out of, the Company
Businesses;
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(v) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of
Section 3(37) of ERISA), maintained by, contributed to, or obligated to
contribute to, at any time, by any of the Companies or any of their
subsidiaries, including but not limited to any liability with respect
to: (A) the Pension Benefit Guaranty Corporation under Title IV of
ERISA; (B) a multiemployer plan (within the meaning of Section 3(37) of
ERISA); (C) any non-compliance with the notice and benefit continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; (D) any non-compliance with ERISA or any other
applicable laws; and (E) any suit, proceeding or claim which is brought
against the Seller or any of its affiliates, any such plan, and any
fiduciary or former fiduciary of any such plan; and
(vi) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of any of the Companies or any of their subsidiaries) by (A)
any of the Companies or any of the Company Businesses, or (B) any
officer, director, employee or agent of any of the Companies or any of
the Company Businesses attributable to any actions or inactions by any
of the Companies or any of the Company Businesses.
"Purchaser Parties" means Purchaser and any direct or indirect
subsidiary or affiliate of Purchaser other than the Chemicals Subsidiaries, and
any of their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees.
"Seller Businesses" means all of the businesses, operations and
assets of Seller and its subsidiaries, including all of the businesses,
operations and assets that were previously conducted, owned or used by any
business or operation of the Seller (or any predecessor to such business or
operation), notwithstanding the fact that prior to the Closing (i) any such
business or operation was closed, wound up or otherwise terminated, (ii) such
asset ceased to be used in connection with such business or operation, or (iii)
any such business, operation or asset was sold or otherwise disposed of to any
person or entity other than the Chemicals Subsidiaries. Seller Businesses do not
include (i) the Company Businesses, and (ii) any other
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business, operations or assets transferred to Purchaser or its subsidiaries
(other than the Chemicals Subsidiaries) as part of or in connection with the
Demerger. For the purpose of the definition of "Seller Businesses", the term
"Seller" includes all direct and indirect subsidiaries of Seller and any
partnerships in which it or any of its subsidiaries owns or at any time in the
past owned an interest.
"Seller Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for taxes (which are
addressed in the SPA), and except for the Purchaser
Liabilities, any and all of the obligations, liabilities and expenses incurred
by Seller, Purchaser or any of their respective affiliates or subsidiaries or
affiliates of such subsidiaries arising out of or associated with, or any
Litigation and Claims alleged to arise out of or be associated with, the Seller
Businesses, whether or not in the ordinary course of business, in each case
whether matured or unmatured, liquidated or unliquidated, fixed or contingent,
known or unknown, and whether arising out of circumstances existing prior to, on
or subsequent to the Closing and regardless of where or against whom such
obligations, liabilities and expenses are asserted or determined or whether
asserted or determined prior to, on or subsequent to the Closing, and regardless
of whether arising from or alleged to arise from negligence, recklessness,
violation of law, fraud, or misrepresentation by any of the Purchaser Parties,
and including, without limitation, the following items:
(i) all obligations, liabilities and expenses incurred by or
associated with any business, operation or asset that (A) was conducted,
owned or used by any of the Company Businesses prior to the Closing but
which was sold or otherwise disposed of to any of the Chemicals
Subsidiaries, and (B) is not transferred to Purchaser or its
subsidiaries (other than the Chemicals Subsidiaries) as part of or in
connection with the Demerger;
(ii) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual breach
or violation of any obligation or requirement arising out of, or
associated with, the Seller Businesses, including, without limitation,
(A) all product warranty obligations with respect to products developed,
produced, manufactured, marketed, used or distributed by the Seller
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Businesses ("Seller Products"), whether shipped prior to, on or
subsequent to the Closing, and (B) all liabilities resulting from claims
for real or alleged personal injury or consequential damage which is
caused or alleged to have been or to be caused by any defect in or
breach of warranty related to any Seller Products or other assets of the
Seller Businesses;
(iii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Seller
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries after the
Closing ("New Seller Litigation"), in each case if and solely to the
extent that such Litigation and Claims (in whole or in part) arise out
of or are associated with or are alleged (regardless of the party named
in the allegation or complaint) to arise out of or to be associated with
the Seller Businesses;
(iv) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorneys' or consultants' fees
or remediation costs) of Seller, Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to,
the Seller Businesses;
(v) any Litigation and Claims brought after the Closing against
Purchaser or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to,
the Closing, arising or alleged to arise from the Seller Businesses;
(vi) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under ERISA) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any
6
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<PAGE>
multiemployer plan (within the meaning of Section 3(37) of ERISA),
maintained by, contributed to, or obligated to contribute to, at any
time, by the Seller or any of its subsidiaries other than (x) the
Companies or any of their subsidiaries, and (y) any other company or
business transferred to Purchaser or its subsidiaries (other than the
Chemicals Subsidiaries) as part of or in connection with the Demerger,
including but not limited to any liability with respect to: (A) the
Pension Benefit Guaranty Corporation under Title IV of ERISA; (B) a
multiemployer plan (within the meaning of Section 3(37) of ERISA); (C)
any non-compliance with the notice and benefit continuation requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended; (D) any non-compliance with ERISA or any other applicable laws;
and (E) any suit, proceeding or claim which is brought against the
Companies or any of their subsidiaries, any such plan, and any fiduciary
or former fiduciary of any such plan; and
(vii) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of the Seller or any of its subsidiaries) by (A) the Seller or
any of Seller Businesses, or (B) any officer, director, employee or
agent of the Seller or any of the Seller Businesses attributable to any
actions or inactions by the Seller or any of the Seller Businesses.
"Seller Parties" means Seller and any direct or indirect
subsidiary of Seller that is not transferred to Purchaser or its subsidiaries
(other than the Chemicals Subsidiaries) as part of or in connection with the
Demerger, and any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees.
Words and expressions defined in the SPA shall have the same
meaning herein, save that, to the extent that such definitions are inconsistent
with any definitions in this Agreement, the definitions herein shall take
precedence.
ARTICLE II.
EXCULPATION AND INDEMNIFICATION BY SELLER
Section 2.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Seller shall, without
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<PAGE>
any further responsibility or liability of, or recourse to, any of the Purchaser
Parties, absolutely and irrevocably assume and be solely liable and responsible
for the Seller Liabilities. None of the Purchaser Parties shall be liable to any
of the Seller Parties for any reason whatsoever on account of any Seller
Liabilities.
Seller shall indemnify, defend, save and hold harmless each of
the Purchaser Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Seller
Liabilities and (ii) the breach by any of the Seller Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Purchaser Damages").
Purchaser Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Purchaser or by any of its
affiliates or subsidiaries or affiliates of such subsidiaries, from any third
party insurance policy (and are non-reimbursable by Purchaser or any of its
subsidiaries or affiliates under any self insurance policy), shall not be the
subject of indemnification under this Agreement.
ARTICLE III.
EXCULPATION AND GENERAL INDEMNIFICATION BY PURCHASER
Section 3.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Purchaser shall, without any further
responsibility or liability of, or recourse to, any of the Seller Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Purchaser Liabilities. None of the Seller Parties shall be liable to any of the
Purchaser Parties for any reason whatsoever on account of any Purchaser
Liabilities.
Purchaser shall indemnify, defend, save and hold harmless each of
the Seller Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known
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or unknown), settlements, awards or judgments of any kind or nature whatsoever,
arising out of (i) the Purchaser Liabilities and (ii) the breach by any of the
Purchaser Parties of any of their obligations under this Agreement and the SPA
(all of which are hereinafter collectively referred to as the "Seller Damages").
Seller Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Seller or by any of its
subsidiaries or affiliates, from any third party insurance policy (and are
non-reimbursable by Seller or any of its subsidiaries or affiliates under any
self insurance policy), shall not be the subject of indemnification under this
Agreement.
ARTICLE IV.
SPECIFIC INDEMNIFICATION ISSUES
Section 4.1. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Seller and
Purchaser is determined after trial in any judgment, award or decree to be joint
or concurrent or in which the entitlement to indemnification hereunder is not
readily determinable, the parties shall negotiate in good faith in an effort to
agree, as between Seller and Purchaser, on the proper allocation of liability or
entitlement to indemnification, as well as the proper allocation of the costs of
any joint defense or settlement pursuant to Section 6.4, all in accordance with
the provisions of, and the principles set forth in, this Agreement. In the
absence of any such agreement, such allocation of liability, entitlement to
indemnification and allocation of costs shall be subject to ultimate resolution
between Seller and Purchaser pursuant to Section 8.8.
Section 4.2. It is acknowledged that after the Closing the
parties will have arms length negotiated business relationships, which
relationships will be described in contracts, agreements and other documents
entered into in the normal course of business. Such documents may include
agreements by the parties and their affiliates and subsidiaries to supply, after
the Closing, materials, products, services and leases. Such business
relationships shall not be subject to the indemnity provisions hereof, unless
the parties expressly agree to the contrary in the agreements governing such
relationships.
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ARTICLE V.
NOTICE AND PAYMENT OF CLAIMS
Section 5.1. If any person entitled to a defense and/or
indemnification under this Agreement (the "Indemnified Party") determines that
it is or may be entitled to a defense or indemnification by Purchaser or Seller,
as the case may be (the "Indemnifying Party"), under this Agreement:
(i) The Indemnified Party shall deliver promptly to the
Indemnifying Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense and/or
indemnification, the nature of the claim, and if known, the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Nothing in this subparagraph shall be interpreted to
invalidate any claim by the Indemnified Party to be entitled to
indemnification, unless the Indemnifying Party can show that the failure
of the Indemnified Party to deliver such notice was intentional.
(ii) The Indemnifying Party shall have 30 days from receipt of
the notice requesting indemnification within which to either: (A) assume
the defense of such litigation or claim; (B) pay the claim in
immediately available funds; (C) reserve its rights pending negotiations
under Section 6.4; or (D) object in accordance with Section 5.2. This 30
day period may be extended by agreement of the parties. Nothing in this
subparagraph shall be interpreted to abrogate or delay a party's
obligation to provide the other with a defense under this Agreement.
Section 5.2. The Indemnifying Party may object to the claim for
defense and/or indemnification set forth in any notice; provided, however, that
if the Indemnifying Party does not give the Indemnified Party written notice
setting forth its objection to such claim (or the amount thereof) and the
grounds therefor within the same 30 day period (or any extended period) referred
to in Section 5.1 above, the Indemnifying Party shall be deemed to have
acknowledged its liability to provide a defense or for the amount of such claim
and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such amount or obtain such defense. Any objection to a
claim for a defense or indemnification shall be resolved in accordance with
Section 8.8.
Section 5.3. The right to a defense or indemnification
under this Agreement applies only insofar as defense and
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indemnification are not provided for by insurance from any third party insurance
policy (and are non-reimbursable by Purchaser or any of its affiliates or
subsidiaries or affiliates of such subsidiaries under any self insurance
policy). Nevertheless, the potential availability of insurance coverage to
Seller or Purchaser shall not relieve the other party of its obligations for
defense or indemnification hereunder, or delay either party's obligation to the
other to assume a defense or pay any sums due hereunder.
Section 5.4. Payments due to be made under this Agreement shall
carry interest from the date on which the Indemnified Party became entitled to
indemnification until the date of actual payment (whether before or after
judgment) at the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
Section 5.5. Payments due to be made under this Agreement shall
be free and clear of all deductions, withholdings, set-offs or counterclaims
whatsoever, except as may be required by law. If any deductions or withholdings
are required by law the Indemnifying Party shall be obliged to pay such sum as
will, after such deduction, withholding, set-off or counter-claim has been made,
leave the Indemnified Party with the same amount as it would have been entitled
to receive in the absence of any such requirement to make a deduction or
withholding.
Section 5.6. Payments due to be made under this Agreement shall
be reduced by the amount by which any taxes for which the Indemnified Party
would have been accountable or liable to be assessed is either (i) actually
reduced prior to payment falling due hereunder or (ii) is likely to be reduced
subsequent to payment falling due hereunder in the reasonable opinion of the
Indemnified Party acting in good faith in the light of the circumstances
prevailing at the time of delivery of written notice in accordance with Section
5.1. The reduction of any payments to be made in accordance with this Section
5.6 for tax benefits which will likely be recognized within one year after the
date on which the Indemnified Party receives indemnification under this
Agreement shall be made without regard to the time value of money. The reduction
of any payments to be made in accordance with this Section 5.6 for tax benefits
which will not likely be recognized within one year after the date on which the
Indemnified Party receives indemnification under this Agreement shall take into
account the time value of money from the time the applicable payment is received
until the date such tax benefits are likely to be recognized, using as the
discount rate the prime
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rate charged by Chase Manhattan Bank, N.A. to its corporate customers at the
time the payment is received.
Section 5.7. The parties to this Agreement may enter into
agreements or other arrangements providing for the set-off of payments due to be
made by way of indemnification to both Seller and Purchaser.
ARTICLE VI.
DEFENSE OF THIRD-PARTY CLAIMS
Section 6.1. If the Indemnified Party's claim for indemnification
is based, under this Agreement, on a claim, demand, investigation, action or
proceeding, judicial or otherwise, brought by a third party, and the
Indemnifying Party does not object under Section 5.2 hereof, the Indemnifying
Party shall, within the 30-day period (or any extended period) referred to in
Section 5.1 above, assume the defense of such third-party claim at its sole cost
and expense and shall thereafter be designated as the "Case Handler." Any such
defense shall be conducted by attorneys employed by the Indemnifying Party. The
Indemnified Party may retain attorneys of its own choosing to participate in
such defense at the Indemnified Party's sole cost and expense.
Section 6.2. If the Indemnifying Party assumes the defense of any
such third-party claim, the Indemnifying Party may settle or compromise the
claim without the prior consent of the Indemnified Party so long as all present
and future claims relating to the compromised claim against the Indemnified
Party are irrevocably and unconditionally released in full.
Section 6.3. The Indemnifying Party shall pay to the Indemnified
Party in immediately available funds the amount for which the Indemnified Party
is entitled to be indemnified within 30 days after the settlement or compromise
of such third-party claim or the judgment of a court of competent jurisdiction
(or within such longer period as agreed to by the parties). If the Indemnifying
Party does not assume the defense of any such third-party claim, the
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party, except that the Indemnifying Party has the right to
contest that it is obligated to the Indemnified Party under the terms of this
Agreement, provided the Indemnifying Party shall have raised its objection in a
timely manner under Section 5.2.
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Section 6.4. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Purchaser and
Seller is alleged to be joint or in which the entitlement to indemnification
hereunder is not readily determinable, the parties shall cooperate in a joint
defense. Such joint defense shall be under the general management and
supervision of the party which is expected to bear the greater share of the
liability, and which will be considered the Case Handler, unless otherwise
agreed; provided, however, that neither party shall settle or compromise any
such joint defense matter without the consent of the other. The costs of such
joint defense, any settlement and any award or judgment (unless the award or
judgment specifies otherwise) shall be borne as the parties may agree; or in the
absence of such agreement, such costs shall be borne by the party incurring such
costs, subject to ultimate resolution between Purchaser and Seller pursuant to
Section 8.8.
ARTICLE VII.
COOPERATION AND PRESERVATION OF RECORDS
Section 7.1. Purchaser Parties and Seller Parties shall cooperate
with one another fully and in a timely manner in connection with the defense of
any Pending Purchaser Litigation, New Purchaser Litigation, Pending Seller
Litigation, New Seller Litigation or any other actual or threatened claim.
Section 7.2. Such cooperation shall include, without limitation,
making available to the other party, during normal business hours and upon
reasonable notice, all books, records and information ("Litigation Records"),
officers and employees (without substantial interruption of employment)
necessary or useful in connection with any actual or threatened claim,
investigation, audit, action or proceeding.
Section 7.3. Each party shall continue in force, or at the
request of the other party, shall issue, notices exempting from destruction any
Litigation Records which the requesting party represents may be necessary to the
defense of, or required to be produced in discovery in connection with, any such
claim, investigation, audit, action or proceeding and shall refrain from
destroying any such Litigation Records until authorized by the requesting party.
The requesting party shall notify the other party promptly when the Litigation
Records are no longer required to be maintained.
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Section 7.4. The party requesting access to Litigation Records or
officers and employees pursuant to Section 7.2 or preservation of Litigation
Records under Section 7.3 shall bear all reasonable out-of-pocket expenses
(except reimbursement of salaries, employee benefits and general overhead)
incurred by the other party in connection with providing such Litigation Records
or officers and employees.
Section 7.5. The party providing Litigation Records under this
Article VII may elect, upon a reasonable basis and within a reasonable time, to
designate all or a portion of the Litigation Records as confidential or
proprietary. If Litigation Records are so designated, the party receiving them
will treat them as it would its own confidential or proprietary information and
will take all reasonable steps to protect and safeguard the Litigation Records
while in its own custody and will attempt to shield such information from
disclosure by motions to quash, motions for a protective order, redaction or
other appropriate actions.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
Section 8.2. This Agreement may be amended, modified or
supplemented only by a written agreement of the parties.
Section 8.3. Except as provided in this Section 8.3, this
agreement shall be personal to the parties to it and neither party may assign or
transfer any of its rights and obligations under this Agreement without the
prior written consent of the other party. Notwithstanding the foregoing, Seller
and Purchaser acknowledge and agree that either party may assign its rights and
delegate its obligations under this Agreement, to one or more of its respective
subsidiaries or affiliates, provided that such an assignment shall have no
effect on, and shall not be deemed to constitute a release of either party from,
its obligations under this Agreement.
Section 8.4. This Agreement is solely for the benefit of the
Seller Parties and the Purchaser Parties and is not intended to confer upon any
other person except such parties any rights or remedies hereunder. There are no
third party
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beneficiaries to this Agreement other than the Seller Parties and the Purchaser
Parties.
Section 8.5. This Agreement may be entered into in any number of
counterparts and by the parties to it on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
Section 8.6. If any term or provision of this Agreement shall be
held to be illegal or unenforceable, in whole or in part, under any enactment or
rule of law, such term or provision or part shall to that extent be deemed not
to form part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected. Subject thereto, should any term or provision
of this Agreement be or become ineffective, in whole or in part, for reasons
beyond the control of the parties hereto, the parties shall use reasonable
efforts to agree upon a new provision which shall as nearly as possible have the
same commercial effect as the ineffective term or provision or part hereof.
Section 8.7. Any notice, claim or demand requiring to be served
under or in connection with this Agreement shall be in writing and shall be
sufficiently given or served if delivered addressed as follows:
If to Seller or any other Seller Party, to:
c/o Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III, Esq.
and
c/o Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire, DN40 2PR, England
Attention: George H. Hempstead, III, Esq.
If to Purchaser or any other Purchaser Party, to:
c/o Hanson PLC
1 Grosvenor Place
London SW1X 7JH, England
Attention: Graham Dransfield, Esq.
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Any such notice shall be delivered by hand or sent by first class post or
overnight courier. Any such notice shall take effect, in the case of hand
delivery, at the time of delivery, or, in the case of first class post,
forty-eight hours after posting.
Section 8.8. Resolution of any and all disputes arising from or
in connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 8.8; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Seller or
Purchaser (each a "Party") may commence proceedings hereunder by delivering a
written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days
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after its selection or appointment, and shall make a final award not later than
thirty (30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages. Any arbitration award
shall be binding and enforceable against the Parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.
Section 8.9. Neither of the parties hereto shall impeach this
Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
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IN WITNESS WHEREOF, the parties hereto have caused their
respective officers thereunto duly authorized to execute and deliver this
Agreement as of the day and year first above written.
HM HOLDINGS, INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
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ANNEX A TO INDEMNIFICATION AGREEMENT
Details of Companies and Sale Shares
<TABLE>
<CAPTION>
Sale Shares
Company (and %)
------- -----------
<S> <C> <C>
1. Hanson (Canada) Inc. (100%)
2. Canadian Fiberform Ltd. (100%)
</TABLE>
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Exhibit 10.4
FORM OF PRE-DEMERGER
STOCK PURCHASE AGREEMENT
THIS PRE-DEMERGER STOCK PURCHASE AGREEMENT (the "Agreement") is made the 30th
day of September, 1996
BETWEEN:
(1) HM HOLDINGS, INC., a Delaware corporation ("Seller"); and
(2) HANSON PLC, a public limited company incorporated in England
("Purchaser").
WHEREAS:
(A) Seller is the registered and beneficial owner of __________ shares (the
"Sale Shares") of Lynton Group, Inc. (the "Company") and the Credit
Agreement between Lynton Group, Inc., Lynton Jet Centre, Inc. and
Seller, dated as of August 14, 1990, as amended as of July 26, 1991,
January 3, 1992, December 22, 1992 and June 22, 1994 (the "Lynton
Credit Agreement") and the Jet Centre Term Loan (as such term is
defined in the Lynton Credit Agreement and, together with the Lynton
Credit Agreement, the "Lynton Loans").
(B) Seller wishes to sell and Purchaser wishes to purchase the Sale Shares
and the Lynton Loans on the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Seller as the record and beneficial owner shall sell, and Purchaser
shall purchase, with effect from the date hereof, the Sale Shares and
all of the Seller's interest in the Lynton Loans, including interest
accrued thereon, free from any lien, option, charge and encumbrance,
right of pre-emption or any other third party right and together with
all benefits and rights attached thereto.
2. The total consideration for the sale of all of the Sale Shares and the
Lynton Loans shall be __________________ United States Dollars
(US$___________) (the "Purchase Price"), payable in cash upon execution
of this Agreement. The Purchase Price shall be allocated among
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the Sale Shares and the Lynton Loans in the manner mutually agreed
upon by the parties.
3. Completion of the sale and purchase of the Sale Shares and the Lynton
Loans hereunder shall take place upon the execution hereof (the
"Closing"). Contemporaneous with the execution of this Agreement,
Seller shall deliver to Purchaser certificates representing the Sale
Shares and notes representing the Lynton Loans together with
appropriate stock powers executed in blank.
4. Seller hereby represents and warrants to Purchaser that Seller is the
record and beneficial owner of the Sale Shares free and clear of any
claim, lien, security interest or other encumbrance ("Lien") and at the
Closing, Seller will transfer and deliver to Purchaser valid title to
all the Sale Shares, free and clear of any Lien. The undertaking set
forth in this Section 4 shall survive the Closing indefinitely.
5. Other than as explicitly provided in this Agreement (i) Seller does
not, in this Agreement or any other agreement, instrument or document
contemplated by this Agreement, make any representation as to, warranty
of or covenant (whether express or implied) with respect to the value
of the Sale Shares and the Lynton Loans and (ii) the Sale Shares and
the Lynton Loans to be acquired, directly or indirectly, by Purchaser
hereunder are transferred on an "AS IS, WHERE IS" basis. The parties
acknowledge and agree that the Purchase Price for the Sale Shares and
the Lynton Loans represents the mutually agreed upon fair market value
of such Sale Shares and the Lynton Loans, and neither party (or their
respective permitted successors and assigns) shall have the right at
any time in the future to make any claim or raise any dispute with
respect to the adequacy or fairness of the consideration paid for any
of the Sale Shares and the Lynton Loans.
6. At all times after the date of this Agreement and completion of the
sale and purchase of the Sale Shares and the Lynton Loans, the parties
shall use their reasonable best efforts to procure that any necessary
third party shall execute such documents and do such acts and things as
may reasonably be required for the purpose of giving to Seller and
Purchaser, respectively, the full benefit of all the provisions of this
Agreement.
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7. Any and all transfer taxes, stamp duties and similar charges relating
to the purchase and sale of the Sale Shares and the Lynton Loans shall
be paid by Seller.
8. Resolution of any and all disputes arising from or in connection with
this Agreement, whether based on contract, tort, statute or otherwise,
including, but not limited to, disputes over arbitrability and disputes
in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the
provisions of this Section 8; provided, however, that nothing
contained herein shall preclude either party from seeking or obtaining
(a) injunctive relief or (b) equitable or other judicial relief to
enforce the provisions hereof or, pending resolution of Disputes
hereunder, to preserve the status quo. Seller or Purchaser (each a
"Party") may commence proceedings hereunder by delivering a written
notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder.
The Parties hereby agree to submit all Disputes to arbitration under
the terms hereof, which arbitration shall be final, conclusive and
binding upon the Parties, their successors and assigns. The arbitration
shall be conducted in New York City by three arbitrators acting by
majority vote (the "Panel") selected by agreement of the Parties not
later than ten (10) days after delivery of the demand or, failing such
agreement, appointed pursuant to the commercial arbitration rules of
the American Arbitration Association, as amended from time to time (the
"AAA Rules"). If an arbitrator so selected becomes unable to serve, his
or her successors shall be similarly selected or appointed. The
arbitration shall be conducted pursuant to the Federal Arbitration Act
and such procedures as the Parties may agree, or, in the absence of or
failing such agreement, pursuant to the AAA Rules. Notwithstanding the
foregoing: (i) each Party shall have the right to audit the books and
records of the other Party that are reasonably related to the Dispute;
(ii) each Party shall provide to the other, reasonably in advance of
any hearing, copies of all documents which a Party intends to present
in such hearing; and (iii) each Party shall be allowed to conduct
reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature
and extent of which discovery shall be determined by the
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Panel, taking into account the needs of the Parties and the
desirability of making discovery expeditious and cost effective. All
hearings shall be conducted on an expedited schedule, and all
proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings
not later than ninety (90) days after its selection or appointment, and
shall make a final award not later than thirty (30) days thereafter.
The award shall be in writing and shall specify the factual and legal
basis for the award. The Panel shall apportion all costs and expenses
of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as
the Panel deems fair and reasonable. Notwithstanding the foregoing, in
no event may the Panel award multiple, punitive or exemplary damages.
Any arbitration award shall be binding and enforceable against the
Parties hereto and judgment may be entered thereon in any court of
competent jurisdiction.
9. Neither of the parties hereto shall impeach this Agreement on the
grounds that any of the Directors of Seller stand in any fiduciary
position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either
party do not constitute an independent Board.
10. Except as provided in this Section 10, neither party may assign or
transfer any of its rights and obligations under this Agreement
without the prior written consent of the other party. Notwithstanding
the foregoing, Seller and Purchaser acknowledge and agree that either
party may assign its rights and delegate its obligations under this
Agreement to one or more of its respective subsidiaries or affiliates,
provided that such an assignment shall have no effect on, and shall not
be deemed to constitute a release of either party from, its obligations
under this Agreement.
11. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York and may be executed in more
than one counterpart and by different parties of each counterpart and
all such counterparts when executed shall form one and the same
agreement.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized all as of the date first written above.
HM HOLDINGS, INC.
By:__________________________________
Name:
Title:
HANSON PLC
By:__________________________________
Name:
Title:
5
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Exhibit 10.5
FORM OF POST-DEMERGER
STOCK PURCHASE AGREEMENT
THIS POST-DEMERGER STOCK PURCHASE AGREEMENT (the "Agreement") is made the 30th
day of September, 1996
BETWEEN:
(1) HMB HOLDINGS INC., a Delaware corporation ("Seller");
and
(2) HANSON PLC, a public limited company incorporated in
England ("Purchaser").
WHEREAS:
(A) Seller is the registered and beneficial owner of all of the outstanding
shares (the "Sale Shares") of Cornerstone-Spectrum, Inc., a Delaware
corporation (the "Company").
(B) Seller wishes to sell and Purchaser wishes to purchase the Sale Shares
on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sale and Purchase of Sale Shares.
Subject to the terms and conditions of this Agreement, Seller shall sell
and transfer to Purchaser, and Purchaser shall purchase from Seller, the Sale
Shares free from any lien, option, charge and encumbrance, right of pre-emption
or any other third party right and together with all benefits and rights
attached thereto.
2. Purchase Price.
The total consideration for the sale of all of the Sale Shares
shall be _______________________________ United States Dollars (US$___________)
(the "Purchase Price"), payable in cash at the Payment Time (as defined below),
subject to post-Closing adjustment as provided herein.
3. Closing.
3.1 Date of Closing. Subject to the satisfaction
of each of the conditions set forth in Section 5, the
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closing of the sale and purchase of the Sale Shares hereunder (the "Closing")
shall take place at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York, 10153 (or at such other place as the parties may agree in
writing) at 10:00 a.m., New York City time, on October 6, 1996 (the "Closing
Date").
3.2 Title to Sale Shares Prior to Closing. Until the Closing,
Seller shall continue to have full right, title and interest in and to the Sale
Shares, including the right to receive any dividends, distributions or payments
made with respect to the Sale Shares, and the right to vote the Sale Shares.
4. Actions Prior to Closing.
4.1 Best Efforts. Each of the parties shall use its reasonable
best efforts (without undue expense) to cause the fulfillment, at or prior to
the Closing Date, of all of the conditions to their respective obligations to
consummate the sale and purchase of the Sale Shares under this Agreement.
4.2 Conduct of the Company's Business Prior to Closing. Seller
agrees to use its reasonable best efforts to cause the Company and its
subsidiaries to conduct its business in the ordinary and usual course consistent
with past practices during the period from the date of this Agreement through
the Closing.
5. Conditions of Closing.
The obligations of Seller to sell, and Purchaser to purchase, all
of the Sale Shares are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
(a) Seller and Purchaser shall have executed an Indemnification
Agreement in the form attached as Annex A (the "Indemnification
Agreement");
(b) Seller, Purchaser and HM Anglo American Ltd. ("Anglo") shall
have executed a Tax Sharing and Indemnification Agreement in the form
attached as Annex B (the "Tax Sharing Agreement");
(c) There shall not be in effect any injunction or restraining
order issued by a court of competent
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jurisdiction barring the consummation of the sale and purchase of the
Sale Shares pursuant to this Agreement;
(d) Millennium Chemicals Inc. ("Millennium") shall have issued
shares representing all of its then outstanding Common Stock to
Purchaser's shareholders on a pro rata basis on the basis of one share
of Common Stock for every 70 Ordinary Shares of Purchaser (other than
those represented by American Depositary Shares) and every 14 American
Depositary Shares of Purchaser in consideration for the transfer by
Purchaser to Millennium of all of the outstanding stock in Hanson
Overseas Holdings Limited; and
(e) All representations and warranties of Seller to Purchaser set
forth in Section 8 shall be true and correct in all material respects at
and as of the time of the Closing with the same effect as though made
again at and as of that time.
In addition to the foregoing and subject to the provisions of Section 7, the
obligation of Purchaser to purchase the Sale Shares is subject to the additional
condition that there shall not have occurred a material adverse change in the
assets, business, operations or financial condition of the Company and its
subsidiaries, taken as a whole, during the period from the date of this
Agreement through the Closing (a "Material Adverse Change").
6. Deliveries At and Subsequent to Closing.
6.1 Deliveries At Closing. At the Closing, the parties shall make
the following deliveries and take the following actions:
(a) Seller and Purchaser shall deliver the Indemnification
Agreement;
(b) Seller, Purchaser and Anglo shall deliver the Tax
Sharing Agreement;
(c) Seller shall deliver to Purchaser share certificates
representing the Sale Shares, accompanied by stock powers or other appropriate
transfer forms duly endorsed by Seller; and
(d) Seller shall deliver to Purchaser a certificate dated
the Closing Date and executed by a duly authorized officer of Seller to the
effect that all of the
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conditions of Closing specified in Section 5 have been fulfilled or waived.
6.2 Deliveries Subsequent to Closing. Purchaser shall transfer to
Seller (to such account as shall be designated by Seller) the Purchase Price in
immediately available funds at 10:00 a.m., New York City time, on October 7,
1996 (the "Payment Time"). If Seller does not receive the Purchase Price on the
Payment Time, Purchaser agrees to return the Sale Shares to the Seller.
7. Material Adverse Change.
Seller shall promptly notify Purchaser if, during the period from
the date of this Agreement to the Closing, a Material Adverse Change occurs.
Furthermore, during the period from the date of this Agreement to the Closing,
Purchaser will have full opportunity to confirm whether a Material Adverse
Change has occurred, and at any time prior to the Closing, Purchaser may deliver
to Seller a notification that, in Purchaser's reasonable judgment, a Material
Adverse Change has occurred and setting forth, in reasonable detail, the basis
therefore (a "MAC Notice"). Following Seller's receipt of such MAC Notice,
Seller and Purchaser shall attempt to reach an agreement on (i) whether, in
fact, a Material Adverse Change has occurred, and (ii) if a Material Adverse
Change has occurred, an appropriate adjustment to the Purchase Price for the
Sale Shares to reflect the change in the fair market value of the Sale Shares
resulting from such Material Adverse Change. If the parties reach agreement on
the foregoing prior to the Closing, and if all other conditions to the Closing
have been satisfied, the Closing shall take place as provided herein except that
the Purchase Price for the Sale Shares shall be adjusted in accordance with such
agreement. If the parties are unable to reach agreement on the foregoing prior
to the Closing, and if all other conditions to the Closing have been satisfied,
then notwithstanding the provisions of the last sentence of Section 5, the
Closing of the purchase and sale of the Sale Shares shall be held as scheduled
on the Closing Date, the Sale Shares shall be purchased by the Purchaser at the
original, unadjusted Purchase Price, and the parties' dispute concerning the
alleged Material Adverse Change shall be resolved (and the adjustment to the
Purchase Price for the Sale Shares, if any, shall be made), after the Closing.
If the parties are unable to reach agreement on the existence and/or effect of
an alleged Material Adverse Change within 30 days after delivery of the MAC
Notice, the
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matter shall be resolved by arbitration pursuant to Section 11.
If Purchaser does not deliver a MAC Notice to Seller prior to the
Closing, Purchaser (and its permitted successors and assigns) shall waive any
right it might otherwise have to assert after the Closing that a Material
Adverse Change with respect to the Company had occurred whether or not Purchaser
knew or should have known of such Material Adverse Change.
8. Representations and Warranties of Seller.
Seller hereby represents and warrants to Purchaser that with
respect to Seller and the Company and its subsidiaries, as the case may be:
8.1 Organization, Standing and Authority of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to enter
into and perform this Agreement.
8.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by Seller have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes the valid
and binding obligation of Seller enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
8.3 Organization, Standing and Qualification of the Companies and
each of their Respective Subsidiaries. The Company and each of its subsidiaries
are corporations duly organized, validly existing and in good standing under the
laws of their jurisdiction of incorporation and have full corporate power and
authority to carry on their respective business as now conducted and to own,
lease and operate their respective properties as now done. The Company and each
of its subsidiaries are qualified to do business and are in good standing in
each jurisdiction in which the nature of their respective businesses or the
properties owned or leased by them requires qualification, except where the
failure to be so qualified or in good
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standing would not have a material adverse effect upon the business properties
or financial condition of the Company and its subsidiaries taken as a whole.
8.4 Consents of Third Parties. The execution, delivery and
performance of this Agreement by Seller will not (i) violate or conflict with
the certificate of incorporation or by-laws (or comparable organizational
documents) of Seller or the Company and any of its subsidiaries; or (ii)
constitute a violation of any law, regulation, order, writ, judgment, injunction
or decree applicable to Seller or the Company and any of its subsidiaries. No
material consent, approval or authorization of any governmental authority is
required on the part of Seller in connection with the execution, delivery and
performance of this Agreement other than those which have been or will be
obtained prior to the Closing.
8.5 Ownership of Sale Shares. Seller is, and at the Closing will
be, the record and beneficial owner of the Sale Shares free and clear of any
claim, lien, security interest or other encumbrance ("Lien"). At the Closing,
Seller will transfer and deliver to Purchaser valid title to all the Sale
Shares, free and clear of any Lien. The Company is the record and beneficial
owner of all of the outstanding capital stock of each of its subsidiaries, free
and clear of any Lien.
8.6 Financial Statements.
(a) The consolidated balance sheet of the Company and its
subsidiaries as of June 30, 1996 (the "Balance Sheet"), a copy of which is
attached hereto as Annex C, has been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP") and presents fairly
the consolidated financial position of the Company and its subsidiaries as at
such date.
(b) Except to the extent reflected or reserved for in the
Balance Sheet, there are no liabilities or obligations material to the Company's
and its subsidiaries' businesses that would normally be shown on a balance sheet
prepared in accordance with GAAP, except liabilities or obligations incurred in
the ordinary course of business since June 30, 1996.
8.7 Absence of Certain Liabilities and Changes. Since June
30, 1996, the Company and its subsidiaries have
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operated their respective businesses in the ordinary course and there has not
been:
(a) any declaration, setting aside or payment of any
dividend on, or any other distribution with respect to, any capital stock of the
Company, or any repurchase redemption or other acquisition of any capital stock
of the Company, except for the US$_________ dividend paid on __________________,
1996; or
(b) any incurrence, assumption or guarantee by the Company
or any subsidiary of the Company of any indebtedness or liability for or in
respect of borrowed money or any commitment to do the same other than borrowings
in the ordinary course of business consistent with past practice; provided,
however, that the Company may incur up to US$______ million of unsecured
indebtedness.
9. Further Agreements of the Parties.
9.1 Certain Employee Benefit Matters. Following the completion of
the purchase and sale of the Sale Shares, Purchaser shall cause the Company and
its subsidiaries to continue in effect any "employee benefit plans" (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained or sponsored by the Company and its
subsidiaries which cover the employees of the Company and its subsidiaries
immediately prior to the date of this agreement (the "Plans") for a period at
least until the completion of the transfer of all of the assets attributable to
such Plans which are "pension plans" (within the meaning of Section 3(2) of
ERISA) as set forth herein. As soon as practicable after the Closing, the Seller
shall cause assets to be transferred from (A) any trust or trusts maintained by
Seller or one of its subsidiaries or affiliates which is tax-exempt under
Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and which is associated with one or more defined contribution plans maintained
by Seller or one of its subsidiaries or affiliates (the "Seller DC Trust") to a
mirror trust or trusts established by Purchaser (the "Purchaser DC Trust") in an
amount determined as of the most recent valuation date of the Seller DC Trust
equal to the assets attributable to the account balances for each Plan which is
a defined contribution plan, and (B) the Master Trust Agreement, between,
between HM Holdings, Inc. and The Bank of New York, dated as of January 1, 1988,
as amended (the "HMH Master Trust") to a mirror trust established by Hanson
North America Inc. (the "HNA Master Trust"), in an amount determined as of the
most recent valuation date of the HMH Master Trust in accordance with
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ERISA for each Plan which is a defined benefit plan, in each case together with
an allocable share of earnings and/or losses of the respective distributing
trusts from such respective valuation dates to the actual dates of transfer of
assets; provided, however that in no event shall such transfer take place until
the Purchaser has furnished to Seller either: (A) a favorable determination
letter from the Internal Revenue Service with respect to the qualification of
the Plans that are intended to be qualified plans under Section 401(a) of the
Code and the tax-exempt status of the Purchaser DC Trust and the HNA Master
Trust under Section 501(a) of the Code or (B) an opinion of counsel of Purchaser
that such plans and trusts are qualified under the Code. Following the Closing,
the Purchaser shall continue in effect any Plan which is a "pension plan"
(within the meaning of Section 3(2) of ERISA) for a period at least until the
completion of the transfer of all of the assets attributable to such Plans from
the Seller DC Trust and the HMH Master Trust to the Purchaser DC Trust and the
HNA Master Trust, respectively. Following the transfer of assets as contemplated
hereunder, neither Seller nor any of its subsidiaries or affiliates shall have
any further obligation or responsibility with respect to such benefit
liabilities under any Plan, which shall be considered for all purposes as having
been satisfied as a result of such transfer.
9.2 Further Assurance. The parties hereto undertake to co-operate
in good faith to ensure that they do such acts and things as may reasonably be
necessary to complete the sale and purchase of the Sale Shares. At all times
after the date of this Agreement and after the completion of the sale and
purchase of the Sale Shares, the parties shall use their reasonable best efforts
to procure that any necessary third party shall execute such documents and do
such acts and things as may reasonably be required for the purpose of giving to
Seller and Purchaser, respectively, the full benefit of all the provisions of
this Agreement. Seller and Purchaser will use their reasonable best efforts to
obtain any consent, substitution, approval or amendment required to novate or
assign all agreements, leases, licenses and other rights of any nature
whatsoever relating to the assets, rights and other things of the Company and
its subsidiaries of value to Purchaser, including without limitation the release
of Seller and its subsidiaries and affiliates from any guarantees, surety bonds,
letters of credit or similar items previously entered into or made for the
benefit of the Company or its subsidiaries; provided, however, that neither
Seller nor
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Purchaser shall be obligated to pay any consideration therefor (except for
filing fees and other similar charges) to the third party from whom such
consents, approvals, substitutions and amendments are requested. If Seller or
Purchaser is unable to obtain any such required consent, approval, substitution
or amendment, Seller (or its subsidiaries or affiliates) shall continue to be
bound by such agreements, leases, licenses and other rights and, unless not
permitted by law or the terms thereof, Purchaser (or its subsidiaries or
affiliates) shall, as agent for Seller (or its subsidiaries or affiliates) or as
subcontractor, pay, perform and discharge fully all the obligations of Seller
(or its subsidiaries or affiliates) thereunder from and after the Closing and
indemnify and hold harmless Seller and its subsidiaries from and against, all
losses, claims, damages, taxes, liabilities and expenses whatsoever arising out
of or in connection with Purchaser's (or its subsidiaries' or affiliates')
performance of or omission to perform its obligations thereunder and hereunder.
Seller (or its subsidiaries or affiliates) shall, without further consideration,
pay and remit to Purchaser (or its subsidiaries or affiliates) promptly all
money, rights and other consideration received in respect of such performance
after payment of any taxes due from Seller (or its subsidiaries or affiliates)
with respect to such receipt. Seller (or its subsidiaries or affiliates) shall
exercise their rights and options under all such agreements, leases, licenses
and other rights and commitments referred to in this Section 9.2 only as
reasonably directed by Purchaser and at Purchaser's expense. If and when any
such consent shall be obtained or such agreement, lease, license or other rights
shall otherwise become assignable or able to be novated, Seller (or its
subsidiaries or affiliates) shall promptly assign all its rights and obligations
thereunder to Purchaser (or its subsidiaries or affiliates) without payment of
further consideration and Purchaser (or its subsidiaries or affiliates) shall,
without the payment of any further consideration, assume such rights and
obligations. To the extent that the assignment of any contract or agreement or
the proceeds thereof pursuant to this Section 9.2 is prohibited by law, the
assignment provisions of this paragraph shall operate to create a subcontract
with the Purchaser to perform each relevant, unassignable contract or agreement,
and the Seller to pay the Purchaser the subcontract price which shall be equal
to the money, rights and other consideration (after tax) received by Seller (or
its subsidiaries or affiliates) with respect to the relevant, unassignable
contract or agreement, performed by Purchaser under such subcontract.
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9.3 Access to Information. Prior to the Closing, Purchaser may
make such investigation of the business and properties of the Company and its
subsidiaries as Purchaser may desire, and, upon reasonable notice, Seller shall
give to Purchaser and its counsel, accountants and other representatives
reasonable access, during normal business hours throughout the period prior to
the Closing, to the property, books, commitments, agreements, records, files and
personnel of the Company and its subsidiaries and Seller shall furnish to
Purchaser during that period all copies of documents and information concerning
the Company and its subsidiaries as Purchaser may reasonably request subject to
applicable law.
9.4 Transfer Taxes. Any and all transfer taxes, stamp duties and
similar charges relating to the purchase and sale of the Sale Shares shall be
paid by . Except as provided in the preceding sentence, all matters under
this Agreement relating to Taxes and Tax Returns (both as defined in the Tax
Sharing Agreement) shall be governed by the Tax Sharing Agreement.
10. Survival of Representations and Warranties and Related Matters.
10.1 Survival of Representations of Warranties and Notice of
Claims. It is understood and acknowledged that the representations and
warranties set forth in this Agreement shall not survive the Closing, provided,
however, that the representations and warranties set forth in Section 8.5 shall
survive the Closing indefinitely, and the representations and warranties set
forth in Section 8.7 shall survive the Closing but only until the close of
business on December 31, 1996 and Seller shall be liable for damages under
Section 8.7 hereof only to the extent that notice of a claim therefor is
asserted by the Purchaser in writing and delivered on or prior to the close of
business on December 31, 1996. Any notice of a claim by any reason of an alleged
breach of any of the representations and warranties contained in this Agreement
shall state specifically the representations or warranties with respect to
which the claim is made, the facts giving rise to the alleged basis for the
claim and the amount of liability asserted against the other party by reason
of the claim.
10.2 Determination of Damages and Related Matters. In calculating
any amounts payable to Purchaser pursuant to Section 10.1, no amount shall be
included for Purchaser's consequential damages. Other than as explicitly
provided in
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this Agreement (i) Seller does not, in this Agreement or any other agreement,
instrument or document contemplated by this Agreement, make any representation
as to, warranty of or covenant (whether express or implied) with respect to, the
value of the Sale Shares. Purchaser acknowledges and agrees that Purchaser and
its representatives have the experience and knowledge to evaluate the business,
financial condition, assets and liabilities of the Company's businesses; that
Purchaser and its representatives have had access to such of the information and
documents referred to in Section 9.3 and to such of the real property, fixtures
and tangible personal property of the Company's businesses as Purchaser and its
representatives shall have requested to see and/or review; that Purchaser and
its representatives have had a full opportunity to meet with appropriate
management and employees of Seller and the Company and its subsidiaries to
discuss the businesses and assets of the Company and its subsidiaries; and that,
in determining to acquire the Sale Shares and, therefore, the underlying assets
of the Company and its subsidiaries (including the real property, fixtures and
the tangible personal property), Purchaser has made its own investigation into,
and based thereon Purchaser has formed an independent judgment concerning, the
Sale Shares and the underlying assets of the Company and its subsidiaries
(including the real property, fixtures and the tangible personal property).
Other than as explicitly provided herein, the Sale Shares, as well as all assets
of the Company, to be acquired, directly or indirectly, by the Purchaser
hereunder are transferred on an "AS IS, WHERE IS" basis. The parties acknowledge
and agree that the Purchase Price for the Sale Shares of the Company represents
the mutually agreed upon fair market value of such Sale Shares, and neither
party (or their respective permitted successors and assigns) shall have the
right at any time in the future to make any claim or raise any dispute with
respect to the adequacy or fairness of the consideration paid for the Sale
Shares.
11. Arbitration.
Resolution of any and all disputes arising from or in connection
with this Agreement, whether based on contract, tort, statute or otherwise,
including, but not limited to, disputes over arbitrability and disputes in
connection with claims by third parties (collectively, "Disputes") shall be
exclusively governed by and settled in accordance with the provisions of this
Section 11; provided, however, that nothing contained herein shall preclude
either party from seeking or obtaining (a) injunctive relief or (b)
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equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Seller or
Purchaser (each a "Party") may commence proceedings hereunder by delivering a
written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days after its selection or appointment, and shall make a final
award not later than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees and
expenses and fees and expenses of experts, between the prevailing and
non-prevailing Party as the Panel deems fair and reasonable. Notwithstanding the
foregoing, in no event may the Panel award multiple, punitive or exemplary
damages. Any arbitration award shall be binding and enforceable
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against the Parties hereto and judgment may be entered thereon in any court of
competent jurisdiction.
12. Miscellaneous.
12.1 No Impeachment. Neither of the parties hereto shall impeach
this Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
12.2 Assignments. Except as provided in this Section 12.2,
neither party may assign or transfer any of its rights and obligations under
this Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Seller and Purchaser acknowledge and agree that
either party may assign its rights and delegate its obligations under this
Agreement, including without limitation its rights and obligations under the
Indemnification Agreement and the Tax Sharing Agreement annexed hereto, to one
or more of its respective subsidiaries or affiliates, provided that such an
assignment shall have no effect on, and shall not be deemed to constitute a
release of either party from, its obligations under this Agreement.
12.3 Governing Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York and may be executed in more than one counterpart and by different
parties of each counterpart and all such counterparts when executed shall form
one and the same agreements.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
HMB HOLDINGS INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
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ANNEX A
Form of Indemnification Agreement
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FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as of
September 30, 1996, between HMB Holdings Inc., a Delaware corporation
("Seller"), and Hanson PLC, a public limited company incorporated in England
("Purchaser").
RECITALS
A. The parties have entered into a Post-Demerger Stock Purchase
Agreement, dated as of September 30, 1996 (the "SPA"), pursuant to which Seller
will sell to Purchaser all of the outstanding shares of Cornerstone-Spectrum,
Inc., a Delaware corporation (the "Company").
B. The parties acknowledge that it is their intention that,
effective upon the Closing (as defined in the SPA) (i) Purchaser shall assume
and accept responsibility for the Purchaser Liabilities (as hereinafter
defined), and (ii) Seller shall retain responsibility for the Seller Liabilities
(as hereinafter defined), in each case except as otherwise provided in the SPA
or the Tax Sharing and Indemnification Agreement (the "Tax Sharing Agreement")
contemplated by the SPA.
C. It is a condition to the consummation of the transactions
contemplated by the SPA that the parties enter into this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, Seller and Purchaser agree as
follows:
ARTICLE I.
DEFINITIONS
"Chemicals Subsidiaries" means all of the direct and indirect
subsidiaries of Purchaser that are transferred to Millennium Chemicals Inc.
("Millennium") or its subsidiaries, including without limitation the Seller, as
part of or in connection with the contemplated demerger of Purchaser's chemicals
business (the "Demerger"), but excluding the Discontinued Businesses.
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"Company Businesses" means all of the businesses, operations and
assets of the Company, including all of the businesses, operations and assets
that were previously conducted, owned or used by any business or operation of
the Company (or any predecessor to such business or operation), notwithstanding
the fact that prior to the Closing (i) any such business or operation was
closed, wound up or otherwise terminated, (ii) such asset ceased to be used in
connection with such business or operation, or (iii) any such business,
operation or asset was sold or otherwise disposed of to any person or entity
other than the Chemicals Subsidiaries. Company Businesses do not include the
Seller Businesses. For the purpose of the definition of "Company Businesses",
the term the "Company" includes all direct and indirect subsidiaries of the
Company and any partnerships in which it or any of its subsidiaries owns or at
any time in the past owned an interest.
"Discontinued Businesses" has the meaning ascribed to such term
in the Information Statement dated August ___, 1996 delivered to Purchaser's
shareholders in connection with the Demerger.
"Litigation and Claims" means litigation pending or threatened or
claims alleged against Seller and/or Purchaser Parties, including, without
limitation, civil and criminal actions, workers' compensation proceedings,
administrative and regulatory proceedings, investigations, audits, inquiries,
demands, claims (including any title claims relating to real properties) and
threatened actions.
"Purchaser Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Seller Liabilities,
any and all of the obligations, liabilities and expenses incurred by Seller,
Purchaser or any of their respective affiliates or subsidiaries or affiliates
of such subsidiaries arising out of or associated with, or any Litigation and
Claims alleged to arise out of or be associated with, the Company Businesses,
whether or not in the ordinary course of business, in each case whether matured
or unmatured, liquidated or unliquidated, fixed or contingent, known or unknown,
and whether arising out of circumstances existing prior to, on or subsequent
to the Closing, and regardless of where or against whom such obligations,
liabilities and expenses are asserted or determined or whether asserted or
determined prior to, on or subsequent to the Closing, and regardless of whether
arising from or alleged to arise from negligence, recklessness, violation of
law, fraud or misrepresentation by any of the Seller Parties, and including,
without limitation, the following items:
(i) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for
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any particular purpose of goods, conformity of goods to contractual
requirements, deceptive trade practice, misrepresentation, fraud or any
other alleged or actual breach or violation of any obligation or
requirement arising out of or associated with the Company Businesses,
including, without limitation, (A) all product warranty obligations with
respect to products developed, produced, manufactured, marketed, used or
distributed by the Company Businesses ("Company Products"), whether
shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury or
consequential damage which is caused or alleged to have been or to be
caused by any defect in or breach of warranty related to any Company
Product or other asset of the Company Businesses;
(ii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Purchaser
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller, Purchaser or any of their respective affiliates
or subsidiaries or affiliates of such subsidiaries after the Closing
("New Purchaser Litigation"), in each case if and solely to the extent
that such Litigation and Claims (in whole or in part) arise out of or
are associated with, or are alleged (regardless of the party named in
the allegation or complaint) to arise out of or be associated with the
Company Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorney or consultant fees or
remediation costs) of Seller, or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to
the Company Businesses;
(iv) any Litigation and Claims brought after the Closing against
Seller or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of
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any kind, whether prior to, on or subsequent to the Closing, arising out
of, or alleged to arise out of, the Company Businesses;
(v) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of
Section 3(37) of ERISA), maintained by, contributed to, or obligated to
contribute to, at any time, by the Company or any of its subsidiaries,
including but not limited to any liability with respect to: (A) the
Pension Benefit Guaranty Corporation under Title IV of ERISA; (B) a
multiemployer plan (within the meaning of Section 3(37) of ERISA); (C)
any non-compliance with the notice and benefit continuation requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended; (D) any non-compliance with ERISA or any other applicable laws;
and (E) any suit, proceeding or claim which is brought against the
Seller or any of its affiliates, any such plan, and any fiduciary or
former fiduciary of any such plan; and
(vi) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of the Company or any of its subsidiaries) by (A) the Company
or any of the Company Businesses or (B) any officer, director, employee
or agent of the Company or any of the Company Businesses attributable to
any actions or inactions by the Company or any of the Company
Businesses.
"Purchaser Parties" means Purchaser and any direct or indirect
subsidiary or affiliate of Purchaser other than the Chemicals Subsidiaries, and
any of their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees.
"Seller Businesses" means all of the businesses, operations and
assets of Seller and its subsidiaries, including all of the businesses,
operations and assets that were previously conducted, owned or used by any
business or operation of the Seller (or any predecessor to such business or
operation), notwithstanding the fact that prior to the Closing (i) any such
business or operation was closed, wound up or otherwise terminated, (ii) such
asset ceased to be used in connection with such business or operation, or (iii)
any such business, operation
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or asset was sold or otherwise disposed of to any person or entity other than
the Chemicals Subsidiaries. Seller Businesses do not include (i) the Company
Businesses, and (ii) any other business, operations or assets transferred to
Purchaser or its subsidiaries (other than the Chemicals Subsidiaries) as part of
or in connection with the Demerger. For purposes of the definition of "Seller
Businesses", the term "Seller" includes all direct and indirect subsidiaries of
Seller and any partnerships in which it or any of its subsidiaries owns or at
any time in the past owned an interest.
"Seller Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Purchaser
Liabilities, any and all of the obligations, liabilities and expenses incurred
by Seller, Purchaser or any of their respective affiliates or subsidiaries
or affiliates of such subsidiaries arising out of or associated with, or any
Litigation or Claims alleged to arise out of or be associated with,
the Seller Businesses, whether or not in the ordinary course of business, in
each case whether matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown, and whether arising out of circumstances existing
prior to, on or subsequent to the Closing and regardless of where or against
whom such obligations, liabilities and expenses are asserted or determined or
whether asserted or determined prior to, on or subsequent to the Closing, and
regardless of whether arising from or alleged to arise from negligence,
recklessness, violation of law, fraud, or misrepresentation by any of the
Purchaser Parties, and including, without limitation, the following items:
(i) all obligations, liabilities and expenses incurred by or
associated with any business, operation or asset that (A) was conducted,
owned or used by any of the Company Businesses prior to the Closing but
which was sold or otherwise disposed of to any of the Chemicals
Subsidiaries, and (B) is not transferred to Purchaser or its
subsidiaries (other than the Chemicals Subsidiaries) as part of or in
connection with the Demerger;
(ii) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual breach
or violation of any obligation or requirement arising
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out of, or associated with, the Seller Businesses, including, without
limitation, (A) all product warranty obligations with respect to
products developed, produced, manufactured, marketed, used or
distributed by the Seller Businesses ("Seller Products"), whether
shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury or
consequential damage which is caused or alleged to have been or to be
caused by any defect in or breach of warranty related to any Seller
Products or other assets of the Seller Businesses;
(iii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Seller
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries after the
Closing ("New Seller Litigation"), in each case if and solely to the
extent that such Litigation and Claims (in whole or in part) arise out
of or are associated with or are alleged (regardless of the party named
in the allegation or complaint) to arise out of or to be associated with
the Seller Businesses;
(iv) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorneys' or consultants' fees
or remediation costs) of Seller, Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to,
the Seller Businesses;
(v) any Litigation and Claims brought after the Closing against
Purchaser or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to,
the Closing, arising or alleged to arise from the Seller Businesses;
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(vi) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under ERISA) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of
Section 3(37) of ERISA), maintained by, contributed to, or obligated to
contribute to, at any time, by the Seller or any of its subsidiaries
other than (x) the Company or any of its subsidiaries, and (y) any other
company or business transferred to Purchaser or its subsidiaries (other
than the Chemicals Subsidiaries) as part of or in connection with the
Demerger, including but not limited to any liability with respect to:
(A) the Pension Benefit Guaranty Corporation under Title IV of ERISA;
(B) a multiemployer plan (within the meaning of Section 3(37) of ERISA);
(C) any non-compliance with the notice and benefit continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; (D) any non-compliance with ERISA or any other
applicable laws; and (E) any suit, proceeding or claim which is brought
against the Company or any of its subsidiaries, any such plan, and any
fiduciary or former fiduciary of any such plan; and
(vii) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of the Seller or any of its subsidiaries) by (A) the Seller or
any of the Seller Businesses or (B) any officer, director, employee or
agent of the Seller or any of the Seller Businesses attributable to any
actions or inactions by the Seller or any of the Seller Businesses.
"Seller Parties" means Seller and any direct or indirect
subsidiary of Seller that is not transferred to Purchaser or its subsidiaries
(other than the Chemicals Subsidiaries) as part of or in connection with the
Demerger, and any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees.
"Taxes" has the meaning ascribed to such term in the Tax Sharing
Agreement.
Words and expressions defined in the SPA shall have the same
meaning herein, save that, to the extent that such definitions are inconsistent
with any definitions in this Agreement, the definitions herein shall take
precedence.
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ARTICLE II.
EXCULPATION AND INDEMNIFICATION BY SELLER
Section 2.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Seller shall, without any further
responsibility or liability of, or recourse to, any of the Purchaser Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Seller Liabilities. None of the Purchaser Parties shall be liable to any of the
Seller Parties for any reason whatsoever on account of any Seller Liabilities.
Seller shall indemnify, defend, save and hold harmless each of
the Purchaser Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Seller
Liabilities and (ii) the breach by any of the Seller Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Purchaser Damages").
Purchaser Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Purchaser or by any of its
affiliates or subsidiaries or affiliates of such subsidiaries, from any third
party insurance policy (and are non-reimbursable by Purchaser or any of its
subsidiaries or affiliates under any self insurance policy), shall not be the
subject of indemnification under this Agreement.
ARTICLE III.
EXCULPATION AND GENERAL INDEMNIFICATION BY PURCHASER
Section 3.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Purchaser shall, without any further
responsibility or liability of, or recourse to, any of the Seller Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Purchaser Liabilities. None of the Seller Parties shall be liable to any of the
Purchaser Parties for any reason whatsoever on account of any Purchaser
Liabilities.
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Purchaser shall indemnify, defend, save and hold harmless each of
the Seller Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Purchaser
Liabilities and (ii) the breach by any of the Purchaser Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Seller Damages").
Seller Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Seller or by any of its
subsidiaries or affiliates, from any third party insurance policy (and are
non-reimbursable by Seller or any of its subsidiaries or affiliates under any
self insurance policy), shall not be the subject of indemnification under this
Agreement.
ARTICLE IV.
SPECIFIC INDEMNIFICATION ISSUES
Section 4.1. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Seller and
Purchaser is determined after trial in any judgment, award or decree to be joint
or concurrent or in which the entitlement to indemnification hereunder is not
readily determinable, the parties shall negotiate in good faith in an effort to
agree, as between Seller and Purchaser, on the proper allocation of liability or
entitlement to indemnification, as well as the proper allocation of the costs of
any joint defense or settlement pursuant to Section 6.4, all in accordance with
the provisions of, and the principles set forth in, this Agreement. In the
absence of any such agreement, such allocation of liability, entitlement to
indemnification and allocation of costs shall be subject to ultimate resolution
between Seller and Purchaser pursuant to Section 8.8.
Section 4.2. It is acknowledged that after the Closing the
parties will have arms length negotiated business relationships, which
relationships will be described in contracts, agreements and other documents
entered into in the normal course of business. Such documents may include
agreements by the parties and their affiliates and subsidiaries to supply
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after the Closing, materials, products, services and leases. Such business
relationships shall not be subject to the indemnity provisions hereof, unless
the parties expressly agree to the contrary in the agreements governing such
relationships.
ARTICLE V.
NOTICE AND PAYMENT OF CLAIMS
Section 5.1. If any person entitled to a defense and/or
indemnification under this Agreement (the "Indemnified Party") determines that
it is or may be entitled to a defense or indemnification by Purchaser or Seller,
as the case may be (the "Indemnifying Party"), under this Agreement:
(i) The Indemnified Party shall deliver promptly to the
Indemnifying Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense and/or
indemnification, the nature of the claim, and if known, the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Nothing in this subparagraph shall be interpreted to
invalidate any claim by the Indemnified Party to be entitled to
indemnification, unless the Indemnifying Party can show that the failure
of the Indemnified Party to deliver such notice was intentional.
(ii) The Indemnifying Party shall have 30 days from receipt of
the notice requesting indemnification within which to either: (A) assume
the defense of such litigation or claim; (B) pay the claim in
immediately available funds; (C) reserve its rights pending negotiations
under Section 6.4; or (D) object in accordance with Section 5.2. This 30
day period may be extended by agreement of the parties. Nothing in this
subparagraph shall be interpreted to abrogate or delay a party's
obligation to provide the other with a defense under this Agreement.
Section 5.2. The Indemnifying Party may object to the claim for
defense and/or indemnification set forth in any notice; provided, however, that
if the Indemnifying Party does not give the Indemnified Party written notice
setting forth its objection to such claim (or the amount thereof) and the
grounds therefor within the same 30 day period (or any extended period) referred
to in Section 5.1 above, the Indemnifying Party shall be deemed to have
acknowledged its liability to provide a defense or for the amount of such claim
and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such
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amount or obtain such defense. Any objection to a claim for a defense or
indemnification shall be resolved in accordance with Section 8.8
Section 5.3. The right to a defense or indemnification under this
Agreement applies only insofar as defense and indemnification are not provided
for by insurance from any third party insurance policy (and are non-reimbursable
by Purchaser or any of its affiliates or subsidiaries or affiliates of such
subsidiaries under any self insurance policy). Nevertheless, the potential
availability of insurance coverage to Seller or Purchaser shall not relieve the
other party of its obligations for defense or indemnification hereunder, or
delay either party's obligation to the other to assume a defense or pay any sums
due hereunder.
Section 5.4. Payments due to be made under this Agreement shall
carry interest from the date on which the Indemnified Party became entitled to
indemnification until the date of actual payment (whether before or after
judgment) at the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
Section 5.5. Payments due to be made under this Agreement shall
be free and clear of all deductions, withholdings, set-offs or counterclaims
whatsoever, except as may be required by law. If any deductions or withholdings
are required by law the Indemnifying Party shall be obliged to pay such sum as
will, after such deduction, withholding, set-off or counter-claim has been made,
leave the Indemnified Party with the same amount as it would have been entitled
to receive in the absence of any such requirement to make a deduction or
withholding.
Section 5.6. Payments due to be made under this Agreement shall
be reduced by the amount by which any Taxes for which the Indemnified Party
would have been accountable or liable to be assessed is either (i) actually
reduced prior to payment falling due hereunder or (ii) is likely to be reduced
subsequent to payment falling due hereunder in the reasonable opinion of the
Indemnified Party acting in good faith in the light of the circumstances
prevailing at the time of delivery of written notice in accordance with Section
5.1. The reduction of any payments to be made in accordance with this Section
5.6 for Tax benefits which will likely be recognized within one year after the
date on which the Indemnified Party receives indemnification under this
Agreement shall be made without regard to the time value of money. The reduction
of any payments to be made in accordance with this Section 5.6 for Tax benefits
which will not
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likely be recognized within one year after the date on which the Indemnified
Party receives indemnification under this Agreement shall take into account the
time value of money from the time the applicable payment is received until the
date such Tax benefits are likely to be recognized, using as the discount rate
the prime rate charged by Chase Manhattan Bank, N.A. to its corporate customers
at the time the payment is received.
Section 5.7. The parties to this Agreement may enter into
agreements or other arrangements providing for the set-off of payments due to be
made by way of indemnification to both Seller and Purchaser.
ARTICLE VI.
DEFENSE OF THIRD-PARTY CLAIMS
Section 6.1. If the Indemnified Party's claim for indemnification
is based, under this Agreement, on a claim, demand, investigation, action or
proceeding, judicial or otherwise, brought by a third party, and the
Indemnifying Party does not object under Section 5.2 hereof, the Indemnifying
Party shall, within the 30-day period (or any extended period) referred to in
Section 5.1 above, assume the defense of such third-party claim at its sole cost
and expense and shall thereafter be designated as the "Case Handler." Any such
defense shall be conducted by attorneys employed by the Indemnifying Party. The
Indemnified Party may retain attorneys of its own choosing to participate in
such defense at the Indemnified Party's sole cost and expense.
Section 6.2. If the Indemnifying Party assumes the defense of any
such third-party claim, the Indemnifying Party may settle or compromise the
claim without the prior consent of the Indemnified Party so long as all present
and future claims relating to the compromised claim against the Indemnified
Party are irrevocably and unconditionally released in full.
Section 6.3. The Indemnifying Party shall pay to the Indemnified
Party in immediately available funds the amount for which the Indemnified Party
is entitled to be indemnified within 30 days after the settlement or compromise
of such third-party claim or the judgment of a court of competent jurisdiction
(or within such longer period as agreed to by the parties). If the Indemnifying
Party does not assume the defense of any such third-party claim, the
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party, except that the Indemnifying Party has the right to
contest that it is
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obligated to the Indemnified Party under the terms of this Agreement, provided
the Indemnifying Party shall have raised its objection in a timely manner under
Section 5.2.
Section 6.4. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Purchaser and
Seller is alleged to be joint or in which the entitlement to indemnification
hereunder is not readily determinable, the parties shall cooperate in a joint
defense. Such joint defense shall be under the general management and
supervision of the party which is expected to bear the greater share of the
liability, and which will be considered the Case Handler, unless otherwise
agreed; provided, however, that neither party shall settle or compromise any
such joint defense matter without the consent of the other. The costs of such
joint defense, any settlement and any award or judgment (unless the award or
judgment specifies otherwise) shall be borne as the parties may agree; or in the
absence of such agreement, such costs shall be borne by the party incurring such
costs, subject to ultimate resolution between Purchaser and Seller pursuant to
Section 8.8.
ARTICLE VII.
COOPERATION AND PRESERVATION OF RECORDS
Section 7.1. Purchaser Parties and Seller Parties shall cooperate
with one another fully and in a timely manner in connection with the defense of
any Pending Purchaser Litigation, New Purchaser Litigation, Pending Seller
Litigation, New Seller Litigation or any other actual or threatened claim.
Section 7.2. Such cooperation shall include, without limitation,
making available to the other party, during normal business hours and upon
reasonable notice, all books, records and information ("Litigation Records"),
officers and employees (without substantial interruption of employment)
necessary or useful in connection with any actual or threatened claim,
investigation, audit, action or proceeding.
Section 7.3. Each party shall continue in force, or at the
request of the other party, shall issue, notices exempting from destruction any
Litigation Records which the requesting party represents may be necessary to the
defense of, or required to be produced in discovery in connection with, any such
claim, investigation, audit, action or proceeding and shall refrain from
destroying any such Litigation Records until authorized by the requesting party.
The requesting party shall notify the other
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party promptly when the Litigation Records are no longer required to be
maintained.
Section 7.4. The party requesting access to Litigation Records or
officers and employees pursuant to Section 7.2 or preservation of Litigation
Records under Section 7.3 shall bear all reasonable out-of-pocket expenses
(except reimbursement of salaries, employee benefits and general overhead)
incurred by the other party in connection with providing such Litigation Records
or officers and employees.
Section 7.5. The party providing Litigation Records under this
Article VII may elect, upon a reasonable basis and within a reasonable time, to
designate all or a portion of the Litigation Records as confidential or
proprietary. If Litigation Records are so designated, the party receiving them
will treat them as it would its own confidential or proprietary information and
will take all reasonable steps to protect and safeguard the Litigation Records
while in its own custody and will attempt to shield such information from
disclosure by motions to quash, motions for a protective order, redaction or
other appropriate actions.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
Section 8.2. This Agreement may be amended, modified or
supplemented only by a written agreement of the parties.
Section 8.3. Except as provided in this Section 8.3, this
agreement shall be personal to the parties to it and neither party may assign or
transfer any of its rights and obligations under this Agreement without the
prior written consent of the other party. Notwithstanding the foregoing, Seller
and Purchaser acknowledge and agree that either party may assign its rights and
delegate its obligations under this Agreement, to one or more of its respective
subsidiaries or affiliates, provided that such an assignment shall have no
effect on, and shall not be deemed to constitute a release of either party from,
its obligations under this Agreement.
Section 8.4. This Agreement is solely for the benefit
of the Seller Parties and the Purchaser Parties and is not
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intended to confer upon any other person except such parties any rights or
remedies hereunder. There are no third party beneficiaries to this Agreement
other than the Seller Parties and the Purchaser Parties.
Section 8.5. This Agreement may be entered into in any number of
counterparts and by the parties to it on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
Section 8.6. If any term or provision of this Agreement shall be
held to be illegal or unenforceable, in whole or in part, under any enactment or
rule of law, such term or provision or part shall to that extent be deemed not
to form part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected. Subject thereto, should any term or provision
of this Agreement be or become ineffective, in whole or in part, for reasons
beyond the control of the parties hereto, the parties shall use reasonable
efforts to agree upon a new provision which shall as nearly as possible have the
same commercial effect as the ineffective term or provision or part hereof.
Section 8.7. Any notice, claim or demand requiring to be served
under or in connection with this Agreement shall be in writing and shall be
sufficiently given or served if delivered addressed as follows:
If to Seller or any other Seller Party, to:
c/o Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III, Esq.
and
c/o Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire, DN40 2PR, England
Attention: George H. Hempstead, III, Esq.
If to Purchaser or any other Purchaser Party, to:
c/o Hanson PLC
1 Grosvenor Place
London SW1X 7JH, England
Attention: Graham Dransfield, Esq.
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Any such notice shall be delivered by hand or sent by first class post or
overnight courier. Any such notice shall take effect, in the case of hand
delivery, at the time of delivery, or, in the case of first class post,
forty-eight hours after posting.
Section 8.8. Resolution of any and all disputes arising from or
in connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 8.8; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Seller or
Purchaser (each a "Party") may commence proceedings hereunder by delivering a
written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days
16
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after its selection or appointment, and shall make a final award not later than
thirty (30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages. Any arbitration award
shall be binding and enforceable against the Parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.
Section 8.9. Neither of the parties hereto shall impeach this
Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
17
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
HMB HOLDINGS INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
18
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ANNEX B
Form of Tax Sharing and Indemnification Agreement
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FORM OF
TAX SHARING AND INDEMNIFICATION AGREEMENT
Tax Sharing and Indemnification Agreement (this "Agreement"), entered into
September 30, 1996, among: (a) HM Anglo-American Ltd., a Delaware corporation
("Anglo"), and HMB Holdings Inc., a Delaware corporation ("HMB Holdings")
(collectively, "Seller"); and (b) Hanson PLC, a public limited company
incorporated in England and Wales ("Buyer").
WHEREAS, HMB Holdings and Buyer have entered into a Post-Demerger Stock
Purchase Agreement, dated September 30, 1996 (the "Stock Purchase Agreement"),
relating to all the outstanding capital stock of Cornerstone-Spectrum, Inc. (the
"Target"); and
WHEREAS, Seller and Buyer wish to set forth their agreement with respect to
certain tax matters as set forth below.
NOW THEREFORE, it is hereby agreed as follows:
1. TAXES ALLOCATED TO SELLER. Seller will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless the Target, Buyer, and
their Affiliates from and against any and all of the following Taxes:
i. all Federal Income Taxes imposed on the Target with respect to all
taxable periods of the Target that end during the period in which the
Target was included in the Anglo Consolidated Return;
ii. all State Income Taxes imposed by any particular State on the Target
with respect to any taxable period of the Target that ends within the
period during which the Target was included with a Chemicals Company
in any combined, consolidated, or unitary State Income Tax Return
filed with such State;
iii. all Federal Income Taxes imposed on the Target arising out of the
inclusion of the Target in the Anglo Consolidated Return on or prior
to the Closing Date, and all State Income Taxes imposed on the Target
arising out of the inclusion of the Target in any consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company
on or prior to the Closing Date;
iv. all Income Taxes allocated to Seller pursuant to Section 2 hereof;
and
v. all Taxes described in Section 9.4 of the Stock Purchase Agreement;
provided, however, that the Taxes set forth in i through iv above will not
include any Taxes arising as a result of actions taken by the Target, or by
Buyer or any of its Affiliates with
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respect to the Target, on the Closing Date but after the Closing that are not in
the ordinary course of business of the Target.
Any reference in this Agreement to the Target will be deemed to include a
reference to any Subsidiaries of the Target immediately prior to the Closing.
2. STRADDLE PERIODS. With respect to any taxable period of the Target that
would (absent an election) include, but not end until after, the Closing Date (a
"Straddle Period), Buyer and Seller will, to the extent permitted by applicable
law, elect with the relevant Tax authority to close such Straddle Period as of
the close of the Closing Date. In any case where applicable law does not permit
the Target to close a Straddle Period as of the close of the Closing Date,
Seller will be allocated (i) any Federal Income Taxes imposed on the Target for
the portion of the Straddle Period up to and including the Closing Date, and
(ii) if Target is included in any combined, consolidated, or unitary State
Income Tax Return with a Chemicals Company on the Closing Date, any State Income
Taxes imposed by such State on the Target for the portion of the Straddle Period
up to and including the Closing Date. For purposes of this Section 2, Federal
Income Taxes and State Income Taxes for the portion of a Straddle Period up to
and including the Closing Date will be determined based upon an interim closing
of the books of the Target as of the close of the Closing Date; provided,
however, that such Taxes will not include any Taxes arising as a result of
actions taken by the Target, or by Buyer or any of its Affiliates with respect
to the Target, on the Closing Date but after the Closing that are not in the
ordinary course of business of the Target.
3. TAXES ALLOCATED TO BUYER. Buyer will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless Seller and its Affiliates
from and against any and all Taxes other than those for which Seller is
responsible pursuant to Section 1 hereof, including, without limitation, (i) all
Taxes attributable to periods ending after the Closing Date (other than any
Federal Income Taxes or State Income Taxes allocated to Seller pursuant to
Section 2 hereof), (ii) all Federal Income Taxes imposed on the Target with
respect to all taxable periods of the Target that end during the period prior to
the date the Target became included in the Anglo Consolidated Return, (iii) all
State Income Taxes imposed by a particular State with respect to any taxable
period of the Target that ends at a time when the Target was not included with a
Chemicals Company in any combined, consolidated, or unitary State Income Tax
Return filed with such State, and (iv) all Other Taxes imposed on the Target for
all taxable periods, whether ending before, on, or after the Closing Date.
4. REFUNDS OF INDEMNIFIED TAXES. (a) Buyer will assign and promptly remit
(and will cause the Target and its Affiliates to assign and promptly remit) to
Seller all refunds (including interest thereon and any amounts applied against
liability for other taxable periods) of any Taxes for which Buyer is indemnified
pursuant to this Agreement ("Seller's Refunds"). In furtherance of the preceding
sentence (and not in limitation thereof), Buyer hereby transfers and absolutely
assigns to Seller all right, title, and interest of Buyer, the Target, and their
Affiliates in any Seller's Refunds and will turn over to Seller any and all
checks for such Seller's Refunds ("Seller's Refund Checks") in the exact form
received, but duly endorsed to
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Seller and, until so turned over, will hold the same in trust for the benefit of
Seller segregated from all other funds of Buyer, the Target, and their
Affiliates. Buyer hereby grants to Seller a power of attorney to endorse
Seller's Refund Checks and to take such other action reasonably necessary or
appropriate to implement the terms and provisions of the immediately preceding
sentence; this power of attorney, being coupled with an interest, is
irrevocable.
Seller will assign and promptly remit (and will cause its Affiliates to
assign and promptly remit) to Buyer all refunds (including interest thereon and
any amounts applied against liability for other taxable periods) of any Taxes
for which Seller is indemnified pursuant to this Agreement ("Buyer's Refunds").
In furtherance of the preceding sentence (and not in limitation thereof), Seller
hereby transfers and absolutely assigns to Buyer all right, title, and interest
of Seller and its Affiliates in any Buyer's Refunds and will turn over to Buyer
any and all checks for such Buyer's Refunds ("Buyer's Refund Checks") in the
exact form received, but duly endorsed to Buyer and, until so turned over, will
hold the same in trust for the benefit of Buyer segregated from all other funds
of Seller and its Affiliates. Seller hereby grants to Buyer a power of attorney
to endorse Buyer's Refund Checks and to take such other action reasonably
necessary or appropriate to implement the terms and provisions of the
immediately preceding sentence; this power of attorney, being coupled with an
interest, is irrevocable.
(b) Upon the request of Seller, Buyer will file, or cause the Target or
its Affiliates to file, claims for Seller's Refunds, in such form as Seller may
reasonably request. Seller will have the sole right to prosecute any claims for
Seller's Refunds (by suit or otherwise) at Seller's expense and with counsel of
Seller's choice. Buyer will cooperate, and cause the Target and its Affiliates
to cooperate, fully with Seller and its counsel in connection therewith.
Upon the request of Buyer, Seller will file, or cause its Affiliates to
file, claims for Buyer's Refunds, in such form as Buyer may reasonably request.
Buyer will have the sole right to prosecute any claims for Buyer's Refunds (by
suit or otherwise) at Buyer's expense and with counsel of Buyer's choice. Seller
will cooperate, and cause its Affiliates to cooperate, fully with Buyer and its
counsel in connection therewith.
(c) For the avoidance of doubt (and except as provided in Section 6(b)
hereof), any refunds of Taxes other than Seller's Refunds and Buyer's Refunds
will be the property of the payee of such refunds and no other party to this
Agreement or its Affiliates will have any right to such refunds.
5. TAX BENEFITS. Buyer will promptly remit to Seller the amount of any Tax
Benefit recognized by Buyer, the Target, or any of their Affiliates resulting
from any Major Adjustment for which Buyer, the Target, or any of their
Affiliates has been indemnified pursuant to this Agreement. Seller will promptly
remit to Buyer the amount of any Tax Benefit recognized by Seller or any of its
Affiliates resulting from any Major Adjustment for which Seller or any of its
Affiliates has been indemnified pursuant to this Agreement. For purposes of this
Agreement:
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i. "Tax Benefit" means a reduction in the amount of Taxes that would
otherwise be payable, whether resulting from a deduction, reduced
gain or increased loss from the disposition of an asset, or
otherwise.
ii. a person will be deemed to have "recognized" a Tax Benefit at the
time the amount of Taxes such person otherwise would pay is reduced.
iii. a "Major Adjustment" is any adjustment to (A) any individual item of
income, gain, loss, or deduction if such adjustment is in excess of
five million dollars ($5,000,000), or (B) any individual item of
credit if such adjustment (when grossed up) is in excess of five
million dollars ($5,000,000).
(b) If either Buyer or Seller (the "remittor") makes a remittance to
the other party (the "remittee") under Section 5(a) or Section 6(b) hereof of
any Tax Benefit and all or part of such Tax Benefit is subsequently disallowed,
the remittee will promptly pay to the remittor that portion of such remittance
equal to the portion of the Tax Benefit that is disallowed.
6. BUYER TO FOREGO CARRYBACKS. (a) Unless Seller consents otherwise (which
consent will not unreasonably be withheld), Buyer will cause the Target to
forego any carryback for Income Tax purposes to any taxable period of the Target
ending on or before the Closing Date of any net operating loss, net capital
loss, or other deduction or credit incurred by the Target in any taxable period
ending after the Closing Date (a "Post-Closing Carryback").
(b) If Seller consents to a Post-Closing Carryback under Section 6(a)
hereof, (i) Seller will cooperate with Buyer and the Target in filing an
appropriate refund claim or amended Tax Return, and (ii) Seller will assign and
promptly remit to Buyer the amount of any refund of Tax received by, or Tax
Benefit recognized by, Seller or any of its Affiliates as a result of such
Post-Closing Carryback.
7. NO OBLIGATION TO FILE AMENDED TAX RETURNS. Except as otherwise
specifically provided in this Agreement, neither Seller nor Buyer, nor any of
their respective Affiliates, will be obligated to file any amended Tax Return or
other Tax refund claim.
8. PREPARATION OF TAX RETURNS. (a) Seller will prepare or cause to be
prepared, and file or cause to be filed, (i) all consolidated, combined, or
unitary Tax Returns of Seller or any of its Affiliates that include the Target,
and (ii) all other Tax Returns required to be filed by or on behalf of the
Target on or prior to the Closing Date.
(b) Buyer will prepare or cause to be prepared, and file or cause to be
filed, all Tax Returns of the Target other than those set forth in Section 8(a)
hereof. Buyer will prepare the following Tax Returns in a manner consistent with
past practice: (i) all Income Tax Returns of the Target for taxable periods
ending (including as a result of an election referred to in Section 2 hereof) on
or prior to the Closing Date; and (ii) all Income Tax Returns of the Target for
taxable periods including, but ending after, the Closing Date ("Straddle Period
Returns").
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(c) With respect to each Straddle Period Return that involves Taxes
subject to allocation pursuant to Section 2 hereof, Buyer will, at least sixty
(60) days prior to the final due date (including extensions) of such Straddle
Period Return, provide to Seller (i) a copy of such Straddle Period Return
(including supporting schedules and workpapers) and (ii) a statement (including
supporting schedules and workpapers) certifying the amount of Tax shown on such
Straddle Period Return that is allocable to Seller pursuant to Section 2 hereof
(the "Statement"). Seller and its authorized representatives will have the right
to review the Statement for thirty (30) days following Seller's receipt of the
Statement (the "30-Day Review Period"). If Seller disagrees with the allocation
in the Statement, Seller will notify Buyer in writing of such disagreement prior
to close of the 30-Day Review Period, and Seller and Buyer will consult and
attempt to resolve in good faith the disagreement. In the event Seller and Buyer
are unable to resolve the disagreement within fifteen (15) days following the
end of the 30-Day Review Period, Seller and Buyer will, in accordance with
Section 14 hereof, jointly request the Accounting Firm to resolve the
disagreement as promptly as possible. Not later than five (5) days after the
later of (i) the end of the 30-Day Review Period, or (ii) if there is a
disagreement, the date notice is provided to Buyer and Seller regarding the
resolution of the disagreement by the Accounting Firm, Seller will pay to Buyer
or Buyer will pay to Seller, as the case may be, an amount equal to the
difference between (i) the Taxes shown on the Statement or in such notice (as
the case may be) as being allocable to Seller pursuant to Section 2 hereof, and
(ii) any payments made by the Target on or prior to the Closing Date, and by
Seller and its Affiliates at any time, in respect of such Taxes (whether as
estimated Taxes or otherwise).
9. COOPERATION; ACCESS TO INFORMATION. (a) Buyer and Seller will cooperate
fully with each other with respect to, and will make available to each other
such Tax data and other information relating to the Target as may be reasonably
required for, the preparation by Buyer or Seller of any Tax Returns required to
be prepared by Buyer or Seller under this Agreement.
(b) After the Closing Date, Buyer will, and will cause the Target and
its Affiliates to, (i) permit Seller to have full access, at any reasonable time
and from time to time, at the business location at which the books and records
are maintained, to such Tax data relating to the Target as Seller may from time
to time reasonably request, and (ii) furnish, and cause the independent
accountants and legal counsel of Buyer and the Target to furnish, to Seller such
additional Tax and other information and documents relating to the Target in the
possession of such persons as Seller may from time to time reasonably request in
connection with its Tax reporting obligations. After the Closing Date, Seller
will (i) permit Buyer to have full access, at any reasonable time and from time
to time, at the business location at which the books and records are maintained,
to such Tax data relating to the Target in the possession of Seller and its
Affiliates as Buyer may from time to time reasonably request, and (ii) furnish,
and cause the independent accountants and legal counsel of Seller to furnish, to
Buyer such additional Tax and other information and documents relating to the
Target in the possession of such persons as Buyer may from time to time
reasonably request in connection with its Tax reporting obligations. The
foregoing information will be retained until thirty (30) days following the
expiration of the applicable Tax statute of limitations (including any extension
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thereof) or such other date as Seller or Buyer may reasonably request; provided,
however, that in the event a proceeding has been instituted prior to the
expiration of the applicable Tax statute of limitations for which the
information may be requested, the information will be retained until there is a
final determination with respect to such proceeding.
10. AUDITS. (a) Buyer will promptly notify Seller in writing upon the
receipt by Buyer, the Target, or their Affiliates of notice of any pending or
threatened Tax audits of or assessments against the Target, Buyer, or their
Affiliates (i) relating to any taxable period of the Target during which the
Target was included in the Anglo Consolidated Return or a consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company, or (ii)
that may affect the determination of Taxes for which Seller is or may be
obligated to indemnify the Target, Buyer, or their Affiliates pursuant to this
Agreement. The notice required under this Section 10(a) is referred to in this
Agreement as the "Audit Notification."
(b) Subject to Section 10(c) hereof, Seller will have the sole right,
at its election, (i) to represent the Target's interest with respect to any Tax
audit or assessment referred to in Section 10(a) hereof, including in any
administrative or court proceeding relating thereto, and (ii) to employ counsel
of its choice at its expense and to control the conduct of such audit,
assessment, or proceeding, including settlement or other disposition thereof
(the rights under (i) and (ii) are referred to in this Agreement collectively as
the "Representation Right"); provided, however, that the Representation Right
will apply only to any issues or items (x) relating to any taxable period of the
Target during which the Target was included in the Anglo Consolidated Return or
a consolidated, combined, or unitary State Income Tax Return with a Chemicals
Company, or (y) that may affect the determination of Taxes for which Seller is
or may be obligated to indemnify the Target, Buyer, or their Affiliates pursuant
to this Agreement. Buyer will cooperate, and will cause the Target and its
Affiliates to cooperate, fully with Seller and its counsel in the defense
against or compromise of any claim in any said audit, assessment, or proceeding.
(c) To exercise the Representation Right, Seller must first, within a
reasonable period following the receipt of the Audit Notification, (i) notify
Buyer in writing that Seller intends to exercise the Representation Right, and
(ii) deliver to Buyer a written statement acknowledging Seller's obligation to
indemnify the Target, Buyer, or their Affiliates in accordance with the terms of
this Agreement with respect to the Taxes as to which Seller exercises the
Representation Right.
11. TREATMENT OF INDEMNIFICATION. On their Tax Returns, Seller and Buyer
will (and will cause their Affiliates to) treat any payment made or received
under this Agreement, the Stock Purchase Agreement, or the Indemnification
Agreement (referenced in the Stock Purchase Agreement) as an adjustment to the
Purchase Price (as defined in the Stock Purchase Agreement) or as a contribution
to capital, as the case may be, and not as an item subject to tax or as a
reduction to a deductible item.
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12. INDEMNIFICATION PROCEDURES. (a) If either Buyer or Seller (the
"Indemnified Party") determines that it or any of its Affiliates is or may be
entitled to indemnification by the other party (the "Indemnifying Party") under
this Agreement, the Indemnified Party will promptly deliver to the Indemnifying
Party a written notice and demand therefor (the "Notice") specifying the basis
for its claim for indemnification, the nature of the claim, and, if known, the
amount for which the Indemnified Party reasonably believes it or any of its
Affiliates is entitled to be indemnified. The Notice must be received by the
Indemnifying Party no later than thirty (30) days before the expiration of the
applicable Tax statute of limitations; provided, however, that if the
Indemnified Party does not receive notice from the applicable governmental
taxing authority ("Government Notice") that an item exists that could give rise
to a claim for indemnification hereunder more than thirty (30) days before the
expiration of the applicable Tax statute of limitations, then the Notice must be
received by the Indemnifying Party immediately after the Indemnified Party
receives the Government Notice. Unless the Indemnifying Party objects to the
claim for indemnification (in the manner set forth in Section 12(b) hereof), the
Indemnifying Party will pay the Indemnified Party the amount set forth in the
Notice, in cash or other immediately available funds, within thirty (30) days
after receipt of the Notice; provided, however, that if the amount for which the
Indemnified Party reasonably believes it is entitled to be indemnified is not
known at the time of the Notice, the Indemnified Party will deliver to the
Indemnifying Party a further notice specifying such amount as soon as reasonably
practicable after such amount is known and payment will then be made as set
forth above.
(b) The Indemnifying Party may object to the claim for indemnification
(or the amount thereof) set forth in any Notice by giving the Indemnified Party,
within thirty (30) days following receipt of such Notice, written notice setting
forth the Indemnifying Party's grounds for so objecting (the "Objection
Notice"). If the Indemnifying Party does not give the Indemnified Party the
Objection Notice within such thirty (30)-day period, the Indemnifying Party will
be deemed to have acknowledged its liability for the amount of such claim and
the Indemnified Party may exercise any and all of its rights under applicable
law to collect such amount.
(c) If Buyer and Seller are unable to settle any dispute regarding a
claim for indemnification within thirty (30) days after receipt of the Objection
Notice, Buyer and Seller will, in accordance with Section 14 hereof, jointly
request the Accounting Firm to resolve the dispute as promptly as possible.
(d) Failure by the Indemnified Party to promptly deliver to the
Indemnifying Party a Notice in accordance with Section 12(a) hereof will not
relieve the Indemnifying Party of any of its obligations under this Agreement
except to the extent the Indemnifying Party is prejudiced by such failure.
13. TERMINATION OF EXISTING TAX SHARING AGREEMENTS. As of the close of the
Closing Date, any Tax sharing agreement or arrangement that exists or may exist
between the Target and Seller or an Affiliate of Seller will terminate, and any
obligations to make payments under any such agreement or arrangement will be
canceled.
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14. RESOLUTIONS OF DISPUTES. Any dispute between Buyer and Seller as to any
matter covered in this Agreement will be resolved by the Accounting Firm;
provided, however, that in resolving any such dispute the Accounting Firm will
be bound by the terms of this Agreement. Any fees or expenses of the Accounting
Firm will be borne equally by Buyer and Seller.
15. DEFINITIONS. For purposes of this Agreement, the following terms have
the following meanings:
(a) "Accounting Firm" means Deloitte & Touche.
(b) "Affiliate" means, with respect to any person, any other person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such person; provided, however, that for the purposes of this
Agreement, Affiliates of Seller will not include the Target.
(c) "Anglo Consolidated Return" means any consolidated income tax
return for United States federal income tax purposes that includes Anglo as the
common parent.
(d) "Chemicals Company" means any corporation that has been included
(or that was required to be included) in the Anglo Consolidated Return at any
time on or before the Closing Date other than (i) the Target, (ii) Kaiser Cement
Corporation, (iii) [Duke City Lumber Company, Inc.], (iv) HM Industries, Inc.,
(v) Crane Holdings Inc., (vi) Peabody Holding Company, Inc., (vii) Kidde
Industries Inc., (viii) Axelson, Inc. and Axelson Canada, Inc., and (ix) the
Subsidiaries of the corporations in (ii) through (viii).
(e) "Closing" has the meaning ascribed to that term in the Stock
Purchase Agreement.
(f) "Closing Date" has the meaning ascribed to that term in the Stock
Purchase Agreement.
(g) "Federal Income Taxes" means all United States federal income
taxes, and includes any interest, penalties, and additions imposed with respect
to such taxes.
(h) "Income Taxes" means all Federal Income Taxes and all State Income
Taxes.
(i) "Income Tax Return" means any Tax Return with respect to Federal
Income Taxes or State Income Taxes.
(j) "Other Taxes" means any Taxes other than Federal Income Taxes and
State Income Taxes, and includes any interest, penalties, and additions imposed
with respect to such Taxes.
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(k) "person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
association, a governmental entity (or any department, agency, or political
subdivision thereof), or any other entity.
(l) "State" means any State of the United States (including any
political subdivision thereof) and the District of Columbia.
(m) "State Income Taxes" means all income taxes (and other taxes
measured by net income or net gain) imposed by any State, and includes any
interest, penalties, and additions imposed with respect to such taxes.
(n) "State Income Tax Return" means any Tax Return with respect to
State Income Taxes.
(o) "Subsidiary" means any corporation in which the person being
referred to owns, directly or through one or more other Subsidiaries, stock
possessing at least fifty percent (50%) of the voting power of the outstanding
stock in such corporation.
(p) "Tax" or "Taxes" means any federal, state, local, foreign, or other
tax of any kind whatsoever (together with any interest, penalties, or additions
imposed with respect thereto), including, without limitation, income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
service, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
rental, lease, ad valorem, or other tax.
(q) "Tax Returns" means all returns, declarations, reports, claims for
refunds, information returns, statements, and other forms required to be filed
with respect to any Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
16. FAILURE TO MAKE PAYMENT IN A TIMELY MANNER. If either Buyer or Seller
(the "Payor") fails to make a payment due and owing under this Agreement to the
other party or any of its Affiliates (the "Payee") reasonably promptly after the
parties hereto agree (or there is a binding determination) that such payment is
due and owing, the Payor will pay to the Payee interest on such payment from and
including the date the parties reach such agreement (or such binding
determination is made) to but excluding the date the Payor makes such payment,
at a rate equal to the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
17. POST-CLOSING ELECTIONS. After the Closing Date: (i) Buyer and Seller
will make (and Buyer will cause the Target to make), and will take (and Buyer
will cause the Target to take) any and all action necessary to effect, timely,
irrevocable elections under Treasury Regulations ss. 1.1502-20(g) and ss.
1.1502-32(b)(4) (the "NOL Elections") with respect to an amount of the Target's
loss carryovers equal to [$___________]; (ii) at Seller's request, Buyer will
cause the Target to make or join with Seller in making, and will take and cause
the Target
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to take any and all action necessary to effect, any other election that pertains
to any taxable period beginning prior to the Closing Date (an "Other Election");
provided, however, that if making an Other Election would have a material
adverse impact on Buyer, the Target, or any of their Affiliates for any taxable
period ending after the Closing Date, Buyer will be required to comply with (ii)
only if Seller indemnifies Buyer for the amount of such material adverse impact.
Seller will be responsible for the preparation of all forms and schedules
necessary to effect any NOL Election or Other Election. Buyer will, and will
cause the Target to, cooperate fully with Seller with respect to any Other
Election.
18. AMENDMENTS; WAIVERS. No provision of this Agreement may be amended,
waived, or otherwise modified without the prior written consent of Buyer and
Seller.
19. ASSIGNMENTS. No party to this Agreement may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of the other parties; provided, however, that any party to this Agreement may
assign its rights and delegate its obligations under this Agreement to one or
more of its Subsidiaries or corporate Affiliates, provided that such an
assignment and delegation will have no effect on, and will not be deemed to
constitute a release of, such party from its obligations under this Agreement.
20. NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any rights
or remedies upon any person other than the parties to this Agreement and their
respective successors and permitted assigns.
21. GOVERNING LAW. Except to the extent federal, state, local, or foreign
Tax laws, rules, or regulations govern the filing of Tax Returns or the
positions taken with respect to Taxes in Tax Returns, this Agreement will be
governed by and construed in accordance with the internal laws of the State of
New York.
22. NOTICES. Any notices, requests, demands, claims, and other
communications under this Agreement will be in writing and will be delivered at
the following addresses (or such other address as may be specified by notice
given to the other party pursuant to this Section 22):
If to a Seller:
HMB Holdings Inc.
HM Anglo-American Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
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If to Buyer:
Hanson PLC
1 Grosvenor Place
London
SW1X 7JH England
Attention: Legal Director
23. ENTIRE AGREEMENT. This Agreement (including the agreements and
documents referred to herein) constitutes the entire agreement among the parties
hereto with respect to the subject matter of this Agreement and supersedes any
prior understandings, agreements, outlines, or representations by or among the
parties hereto, written or oral, to the extent they relate in any way to the
subject matter of this Agreement.
24. HEADINGS. The section headings contained in this Agreement are inserted
for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
25. COUNTERPARTS. This Agreement may be executed in more than one
counterpart and by different parties of each counterpart and all such
counterparts when executed will form one and the same agreement.
(signature page follows)
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AS WITNESS this Agreement has been signed by or on behalf of each of the
parties hereto.
SELLER:
HM ANGLO-AMERICAN LTD.
By: _____________________________
Name:
Title:
HMB HOLDINGS INC.
By: _____________________________
Name:
Title:
BUYER:
HANSON PLC
By: _____________________________
Name:
Title:
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Exhibit 10.6
FORM OF POST-DEMERGER
STOCK PURCHASE AGREEMENT
THIS POST-DEMERGER STOCK PURCHASE AGREEMENT (the "Agreement") is made the 30th
day of September, 1996
BETWEEN:
(1) MHC INC., a Delaware corporation ("Seller"); and
(2) HANSON PLC, a public limited company incorporated in
England ("Purchaser").
WHEREAS:
(A) Seller is the registered and beneficial owner of all of the outstanding
shares (the "Sale Shares") of Kidde Industries Inc., a Delaware
corporation (the "Company").
(B) Seller wishes to sell and Purchaser wishes to purchase the Sale Shares
on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sale and Purchase of Sale Shares.
Subject to the terms and conditions of this Agreement, Seller shall sell
and transfer to Purchaser, and Purchaser shall purchase from Seller, the Sale
Shares free from any lien, option, charge and encumbrance, right of pre-emption
or any other third party right and together with all benefits and rights
attached thereto.
2. Purchase Price.
The total consideration for the sale of all of the Sale Shares
shall be _______________________________ United States Dollars (US$___________)
(the "Purchase Price"), payable in cash at the Payment Time (as defined below),
subject to post-Closing adjustment as provided herein.
3. Closing.
3.1 Date of Closing. Subject to the satisfaction
of each of the conditions set forth in Section 5, the
closing of the sale and purchase of the Sale Shares
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hereunder (the "Closing") shall take place at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York, 10153 (or at such other place
as the parties may agree in writing) at 10:00 a.m., New York City time, on
October 6, 1996 (the "Closing Date").
3.2 Title to Sale Shares Prior to Closing. Until the Closing,
Seller shall continue to have full right, title and interest in and to the Sale
Shares, including the right to receive any dividends, distributions or payments
made with respect to the Sale Shares, and the right to vote the Sale Shares.
4. Actions Prior to Closing.
4.1 Best Efforts. Each of the parties shall use its reasonable
best efforts (without undue expense) to cause the fulfillment, at or prior to
the Closing Date, of all of the conditions to their respective obligations to
consummate the sale and purchase of the Sale Shares under this Agreement.
4.2 Conduct of the Company's Business Prior to Closing. Seller
agrees to use its reasonable best efforts to cause the Company and its
subsidiaries to conduct its business in the ordinary and usual course consistent
with past practices during the period from the date of this Agreement through
the Closing.
5. Conditions of Closing.
The obligations of Seller to sell, and Purchaser to purchase, all
of the Sale Shares are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
(a) Seller and Purchaser shall have executed an Indemnification
Agreement in the form attached as Annex A (the "Indemnification
Agreement");
(b) Seller, Purchaser and HM Anglo American Ltd. ("Anglo") shall
have executed a Tax Sharing and Indemnification Agreement in the form
attached as Annex B (the "Tax Sharing Agreement");
(c) There shall not be in effect any injunction or restraining
order issued by a court of competent jurisdiction barring the
consummation of the sale and purchase of the Sale Shares pursuant to
this Agreement;
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(d) Millennium Chemicals Inc. ("Millennium") shall have issued
shares representing all of its then outstanding Common Stock to
Purchaser's shareholders on a pro rata basis on the basis of one share
of Common Stock for every 70 Ordinary Shares of Purchaser (other than
those represented by American Depositary Shares) and every 14 American
Depositary Shares of Purchaser in consideration for the transfer by
Purchaser to Millennium of all of the outstanding stock in Hanson
Overseas Holdings Limited; and
(e) All representations and warranties of Seller to Purchaser set
forth in Section 8 shall be true and correct in all material respects at
and as of the time of the Closing with the same effect as though made
again at and as of that time.
In addition to the foregoing and subject to the provisions of Section 7, the
obligation of Purchaser to purchase the Sale Shares is subject to the additional
condition that there shall not have occurred a material adverse change in the
assets, business, operations or financial condition of the Company and its
subsidiaries, taken as a whole, during the period from the date of this
Agreement through the Closing (a "Material Adverse Change").
6. Deliveries At and Subsequent to Closing.
6.1 Deliveries At Closing. At the Closing, the parties shall
make the following deliveries and take the following actions:
(a) Seller and Purchaser shall deliver the Indemnification
Agreement;
(b) Seller, Purchaser and Anglo shall deliver the Tax
Sharing Agreement;
(c) Seller shall deliver to Purchaser share certificates
representing the Sale Shares, accompanied by stock powers or other appropriate
transfer forms duly endorsed by Seller; and
(d) Seller shall deliver to Purchaser a certificate
dated the Closing Date and executed by a duly authorized officer of Seller to
the effect that all of the conditions of Closing specified in Section 5 have
been fulfilled or waived.
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6.2 Deliveries Subsequent to Closing. Purchaser shall transfer to
Seller (to such account as shall be designated by Seller) the Purchase Price in
immediately available funds at 10:00 a.m., New York City time, on October 7,
1996 (the "Payment Time"). If Seller does not receive the Purchase Price on the
Payment Time, Purchaser agrees to return the Sale Shares to the Seller.
7. Material Adverse Change.
Seller shall promptly notify Purchaser if, during the period from
the date of this Agreement to the Closing, a Material Adverse Change occurs.
Furthermore, during the period from the date of this Agreement to the Closing,
Purchaser will have full opportunity to confirm whether a Material Adverse
Change has occurred, and at any time prior to the Closing, Purchaser may deliver
to Seller a notification that, in Purchaser's reasonable judgment, a Material
Adverse Change has occurred and setting forth, in reasonable detail, the basis
therefore (a "MAC Notice"). Following Seller's receipt of such MAC Notice,
Seller and Purchaser shall attempt to reach an agreement on (i) whether, in
fact, a Material Adverse Change has occurred, and (ii) if a Material Adverse
Change has occurred, an appropriate adjustment to the Purchase Price for the
Sale Shares to reflect the change in the fair market value of the Sale Shares
resulting from such Material Adverse Change. If the parties reach agreement on
the foregoing prior to the Closing, and if all other conditions to the Closing
have been satisfied, the Closing shall take place as provided herein except that
the Purchase Price for the Sale Shares shall be adjusted in accordance with such
agreement. If the parties are unable to reach agreement on the foregoing prior
to the Closing, and if all other conditions to the Closing have been satisfied,
then notwithstanding the provisions of the last sentence of Section 5, the
Closing of the purchase and sale of the Sale Shares shall be held as scheduled
on the Closing Date, the Sale Shares shall be purchased by the Purchaser at the
original, unadjusted Purchase Price, and the parties' dispute concerning the
alleged Material Adverse Change shall be resolved (and the adjustment to the
Purchase Price for the Sale Shares, if any, shall be made), after the Closing.
If the parties are unable to reach agreement on the existence and/or effect of
an alleged Material Adverse Change within 30 days after delivery of the MAC
Notice, the matter shall be resolved by arbitration pursuant to Section 11.
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If Purchaser does not deliver a MAC Notice to Seller prior to the
Closing, Purchaser (and its permitted successors and assigns) shall waive any
right it might otherwise have to assert after the Closing that a Material
Adverse Change with respect to the Company had occurred whether or not Purchaser
knew or should have known of such Material Adverse Change.
8. Representations and Warranties of Seller.
Seller hereby represents and warrants to Purchaser that with
respect to Seller and the Company and its subsidiaries, as the case may be:
8.1 Organization, Standing and Authority of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to enter
into and perform this Agreement.
8.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by Seller have been duly authorized by all
necessary corporate action of Seller and this Agreement constitutes the valid
and binding obligation of Seller enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
8.3 Organization, Standing and Qualification of the Companies and
each of their Respective Subsidiaries. The Company and each of its subsidiaries
are corporations duly organized, validly existing and in good standing under the
laws of their jurisdiction of incorporation and have full corporate power and
authority to carry on their respective business as now conducted and to own,
lease and operate their respective properties as now done. The Company and each
of its subsidiaries are qualified to do business and are in good standing in
each jurisdiction in which the nature of their respective businesses or the
properties owned or leased by them requires qualification, except where the
failure to be so qualified or in good standing would not have a material adverse
effect upon the business properties or financial condition of the Company and
its subsidiaries taken as a whole.
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8.4 Consents of Third Parties. The execution, delivery and
performance of this Agreement by Seller will not (i) violate or conflict with
the certificate of incorporation or by-laws (or comparable organizational
documents) of Seller or the Company and any of its subsidiaries; or (ii)
constitute a violation of any law, regulation, order, writ, judgment, injunction
or decree applicable to Seller or the Company and any of its subsidiaries. No
material consent, approval or authorization of any governmental authority is
required on the part of Seller in connection with the execution, delivery and
performance of this Agreement other than those which have been or will be
obtained prior to the Closing.
8.5 Ownership of Sale Shares. Seller is, and at the Closing will
be, the record and beneficial owner of the Sale Shares free and clear of any
claim, lien, security interest or other encumbrance ("Lien"). At the Closing,
Seller will transfer and deliver to Purchaser valid title to all the Sale
Shares, free and clear of any Lien. The Company is the record and beneficial
owner of all of the outstanding capital stock of each of its subsidiaries, free
and clear of any Lien.
8.6 Financial Statements.
(a) The consolidated balance sheet of the
Company and its subsidiaries as of June 30, 1996 (the "Balance Sheet"), a copy
of which is attached hereto as Annex C, has been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP") and
presents fairly the consolidated financial position of the Company and its
subsidiaries as at such date.
(b) Except to the extent reflected or
reserved for in the Balance Sheet, there are no liabilities or obligations
material to the Company's and its subsidiaries' businesses that would normally
be shown on a balance sheet prepared in accordance with GAAP, except liabilities
or obligations incurred in the ordinary course of business since June 30, 1996.
8.7 Absence of Certain Liabilities and Changes. Since June 30,
1996, the Company and its subsidiaries have operated their respective businesses
in the ordinary course and there has not been:
(a) any declaration, setting aside or payment of any
dividend on, or any other distribution with
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respect to, any capital stock of the Company, or any repurchase redemption or
other acquisition of any capital stock of the Company, except for the
US$__________ dividend paid on _____________________, 1996; or
(b) any incurrence, assumption or guarantee by the Company
or any subsidiary of the Company of any indebtedness or liability for or in
respect of borrowed money or any commitment to do the same other than borrowings
in the ordinary course of business consistent with past practice; provided,
however, that the Company may incur up to US$_____ million of unsecured
indebtedness.
9. Further Agreements of the Parties.
9.1 Certain Employee Benefit Matters. Following the completion of
the purchase and sale of the Sale Shares, Purchaser shall cause the Company and
its subsidiaries to continue in effect any "employee benefit plans" (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained or sponsored by the Company and its
subsidiaries which cover the employees of the Company and its subsidiaries
immediately prior to the date of this agreement (the "Plans") for a period at
least until the completion of the transfer of all of the assets attributable to
such Plans which are "pension plans" (within the meaning of Section 3(2) of
ERISA) as set forth herein. As soon as practicable after the Closing, the Seller
shall cause assets to be transferred from (A) any trust or trusts maintained by
Seller or one of its subsidiaries or affiliates which is tax-exempt under
Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and which is associated with one or more defined contribution plans maintained
by Seller or one of its subsidiaries or affiliates (the "Seller DC Trust") to a
mirror trust or trusts established by Purchaser (the "Purchaser DC Trust") in an
amount determined as of the most recent valuation date of the Seller DC Trust
equal to the assets attributable to the account balances for each Plan which is
a defined contribution plan, and (B) the Master Trust Agreement, between,
between HM Holdings, Inc. and The Bank of New York, dated as of January 1, 1988,
as amended (the "HMH Master Trust") to a mirror trust established by Hanson
North America Inc. (the "HNA Master Trust"), in an amount determined as of the
most recent valuation date of the HMH Master Trust in accordance with ERISA for
each Plan which is a defined benefit plan, in each case together with an
allocable share of earnings and/or losses of the respective distributing trusts
from such respective valuation dates to the actual dates of transfer of assets;
provided, however that in no event shall such
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transfer take place until the Purchaser has furnished to Seller either: (A) a
favorable determination letter from the Internal Revenue Service with respect to
the qualification of the Plans that are intended to be qualified plans under
Section 401(a) of the Code and the tax-exempt status of the Purchaser DC Trust
and the HNA Master Trust under Section 501(a) of the Code or (B) an opinion of
counsel of Purchaser that such plans and trusts are qualified under the Code.
Following the Closing, the Purchaser shall continue in effect any Plan which is
a "pension plan" (within the meaning of Section 3(2) of ERISA) for a period at
least until the completion of the transfer of all of the assets attributable to
such Plans from the Seller DC Trust and the HMH Master Trust to the Purchaser DC
Trust and the HNA Master Trust, respectively. Following the transfer of assets
as contemplated hereunder, neither Seller nor any of its subsidiaries or
affiliates shall have any further obligation or responsibility with respect to
such benefit liabilities under any Plan, which shall be considered for all
purposes as having been satisfied as a result of such transfer.
9.2 Further Assurance. The parties hereto undertake to co-operate
in good faith to ensure that they do such acts and things as may reasonably be
necessary to complete the sale and purchase of the Sale Shares. At all times
after the date of this Agreement and after the completion of the sale and
purchase of the Sale Shares, the parties shall use their reasonable best efforts
to procure that any necessary third party shall execute such documents and do
such acts and things as may reasonably be required for the purpose of giving to
Seller and Purchaser, respectively, the full benefit of all the provisions of
this Agreement. Seller and Purchaser will use their reasonable best efforts to
obtain any consent, substitution, approval or amendment required to novate or
assign all agreements, leases, licenses and other rights of any nature
whatsoever relating to the assets, rights and other things of the Company and
its subsidiaries of value to Purchaser, including without limitation the release
of Seller and its subsidiaries and affiliates from any guarantees, surety bonds,
letters of credit or similar items previously entered into or made for the
benefit of the Company or its subsidiaries; provided, however, that neither
Seller nor Purchaser shall be obligated to pay any consideration therefor
(except for filing fees and other similar charges) to the third party from whom
such consents, approvals, substitutions and amendments are requested. If Seller
or Purchaser is unable to obtain any such required consent,
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approval, substitution or amendment, Seller (or its subsidiaries or affiliates)
shall continue to be bound by such agreements, leases, licenses and other rights
and, unless not permitted by law or the terms thereof, Purchaser (or its
subsidiaries or affiliates) shall, as agent for Seller (or its subsidiaries or
affiliates) or as subcontractor, pay, perform and discharge fully all the
obligations of Seller (or its subsidiaries or affiliates) thereunder from and
after the Closing and indemnify and hold harmless Seller and its subsidiaries
from and against, all losses, claims, damages, taxes, liabilities and expenses
whatsoever arising out of or in connection with Purchaser's (or its
subsidiaries' or affiliates') performance of or omission to perform its
obligations thereunder and hereunder. Seller (or its subsidiaries or affiliates)
shall, without further consideration, pay and remit to Purchaser (or its
subsidiaries or affiliates) promptly all money, rights and other consideration
received in respect of such performance after payment of any taxes due from
Seller (or its subsidiaries or affiliates) with respect to such receipt. Seller
(or its subsidiaries or affiliates) shall exercise their rights and options
under all such agreements, leases, licenses and other rights and commitments
referred to in this Section 9.2 only as reasonably directed by Purchaser and at
Purchaser's expense. If and when any such consent shall be obtained or such
agreement, lease, license or other rights shall otherwise become assignable or
able to be novated, Seller (or its subsidiaries or affiliates) shall promptly
assign all its rights and obligations thereunder to Purchaser (or its
subsidiaries or affiliates) without payment of further consideration and
Purchaser (or its subsidiaries or affiliates) shall, without the payment of any
further consideration, assume such rights and obligations. To the extent that
the assignment of any contract or agreement or the proceeds thereof pursuant to
this Section 9.2 is prohibited by law, the assignment provisions of this
paragraph shall operate to create a subcontract with the Purchaser to perform
each relevant, unassignable contract or agreement, and the Seller to pay the
Purchaser the subcontract price which shall be equal to the money, rights and
other consideration (after tax) received by Seller (or its subsidiaries or
affiliates) with respect to the relevant, unassignable contract or agreement,
performed by Purchaser under such subcontract.
9.3 Access to Information. Prior to the Closing, Purchaser may
make such investigation of the business and properties of the Company and its
subsidiaries as Purchaser may desire, and, upon reasonable notice, Seller shall
give
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to Purchaser and its counsel, accountants and other representatives reasonable
access, during normal business hours throughout the period prior to the Closing,
to the property, books, commitments, agreements, records, files and personnel of
the Company and its subsidiaries and Seller shall furnish to Purchaser during
that period all copies of documents and information concerning the Company and
its subsidiaries as Purchaser may reasonably request subject to applicable law.
9.4 Transfer Taxes. Any and all transfer taxes, stamp duties and
similar charges relating to the purchase and sale of the Sale Shares shall be
paid by . Except as provided in the preceding sentence, all matters
under this Agreement relating to Taxes and Tax Returns (both as defined in the
Tax Sharing Agreement) shall be governed by the Tax Sharing Agreement.
10. Survival of Representations and Warranties and
Related Matters.
10.1 Survival of Representations of Warranties and Notice of
Claims. It is understood and acknowledged that the representations and
warranties set forth in this Agreement shall not survive the Closing, provided,
however, that the representations and warranties set forth in Section 8.5 shall
survive the Closing indefinitely, and the representations and warranties set
forth in Section 8.7 shall survive the Closing but only until the
close of business on December 31, 1996 and Seller shall be liable for damages
under Section 8.7 hereof only to the extent that notice of a claim therefor is
asserted by the Purchaser in writing and delivered on or prior to the close of
business on December 31, 1996. Any notice of a claim by any reason of an alleged
breach of any of the representations and warranties contained in this Agreement
shall state specifically the representations or warranties with respect to
which the claim is made, the facts giving rise to the alleged basis for the
claim and the amount of liability asserted against the other party by reason
of the claim.
10.2 Determination of Damages and Related Matters. In calculating
any amounts payable to Purchaser pursuant to Section 10.1, no amount shall be
included for Purchaser's consequential damages. Other than as explicitly
provided in this Agreement (i) Seller does not, in this Agreement or any other
agreement, instrument or document contemplated by this Agreement, make any
representation as to, warranty of or covenant (whether express or implied) with
respect to, the
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value of the Sale Shares. Purchaser acknowledges and agrees that Purchaser and
its representatives have the experience and knowledge to evaluate the business,
financial condition, assets and liabilities of the Company's businesses; that
Purchaser and its representatives have had access to such of the information and
documents referred to in Section 9.3 and to such of the real property, fixtures
and tangible personal property of the Company's businesses as Purchaser and its
representatives shall have requested to see and/or review; that Purchaser and
its representatives have had a full opportunity to meet with appropriate
management and employees of Seller and the Company and its subsidiaries to
discuss the businesses and assets of the Company and its subsidiaries; and that,
in determining to acquire the Sale Shares and, therefore, the underlying assets
of the Company and its subsidiaries (including the real property, fixtures and
the tangible personal property), Purchaser has made its own investigation into,
and based thereon Purchaser has formed an independent judgment concerning, the
Sale Shares and the underlying assets of the Company and its subsidiaries
(including the real property, fixtures and the tangible personal property).
Other than as explicitly provided herein, the Sale Shares, as well as all assets
of the Company, to be acquired, directly or indirectly, by the Purchaser
hereunder are transferred on an "AS IS, WHERE IS" basis. The parties acknowledge
and agree that the Purchase Price for the Sale Shares of the Company represents
the mutually agreed upon fair market value of such Sale Shares, and neither
party (or their respective permitted successors and assigns) shall have the
right at any time in the future to make any claim or raise any dispute with
respect to the adequacy or fairness of the consideration paid for the Sale
Shares.
11. Arbitration.
Resolution of any and all disputes arising from or in connection
with this Agreement, whether based on contract, tort, statute or otherwise,
including, but not limited to, disputes over arbitrability and disputes in
connection with claims by third parties (collectively, "Disputes") shall be
exclusively governed by and settled in accordance with the provisions of this
Section 11; provided, however, that nothing contained herein shall preclude
either party from seeking or obtaining (a) injunctive relief or (b) equitable or
other judicial relief to enforce the provisions hereof or, pending resolution of
Disputes hereunder, to preserve the status quo. Seller or Purchaser (each a
"Party") may commence proceedings hereunder by delivering a
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written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days after its selection or appointment, and shall make a final
award not later than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees and
expenses and fees and expenses of experts, between the prevailing and
non-prevailing Party as the Panel deems fair and reasonable. Notwithstanding the
foregoing, in no event may the Panel award multiple, punitive or exemplary
damages. Any arbitration award shall be binding and enforceable against the
Parties hereto and judgment may be entered thereon in any court of competent
jurisdiction.
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12. Miscellaneous.
12.1 No Impeachment. Neither of the parties hereto shall impeach
this Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
12.2 Assignments. Except as provided in this Section 12.2,
neither party may assign or transfer any of its rights and obligations under
this Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Seller and Purchaser acknowledge and agree that
either party may assign its rights and delegate its obligations under this
Agreement, including without limitation its rights and obligations under the
Indemnification Agreement and the Tax Sharing Agreement annexed hereto, to one
or more of its respective subsidiaries or affiliates, provided that such an
assignment shall have no effect on, and shall not be deemed to constitute a
release of either party from, its obligations under this Agreement.
12.3 Governing Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York and may be executed in more than one counterpart and by different
parties of each counterpart and all such counterparts when executed shall form
one and the same agreements.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
MHC INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
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ANNEX A
Form of Indemnification Agreement
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FORM OF
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as of
September 30, 1996, between MHC Inc., a Delaware corporation ("Seller"), and
Hanson PLC, a public limited company incorporated in England ("Purchaser").
RECITALS
A. The parties have entered into a Post-Demerger Stock Purchase
Agreement, dated as of September 30, 1996 (the "SPA"), pursuant to which Seller
will sell to Purchaser all of the outstanding shares of Kidde Industries Inc., a
Delaware corporation engaged in the business of manufacturing mobile hydraulic
lifting equipment, including cranes and aerial work platforms (the "Company").
B. The parties acknowledge that it is their intention that,
effective upon the Closing (as defined in the SPA) (i) Purchaser shall assume
and accept responsibility for the Purchaser Liabilities (as hereinafter
defined) which generally relate to the Company's mobile hydraulic lifting
equipment, including cranes and aerial work platforms, manufacturing operations,
and (ii) Seller shall retain responsibility for the Seller Liabilities (as
hereinafter defined) which include, among other things, liabilities relating
to past operations of the Company not relating to its mobile hydraulic lifting
equipment, including cranes and aerial work platforms, manufacturing operations,
in each case except as otherwise provided in the SPA or the Tax Sharing and
Indemnification Agreement (the "Tax Sharing Agreement") contemplated by the SPA.
C. It is a condition to the consummation of the transactions
contemplated by the SPA that the parties enter into this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, Seller and Purchaser agree as
follows:
ARTICLE I.
DEFINITIONS
"Chemicals Subsidiaries" means all of the direct and indirect
subsidiaries of Purchaser that are transferred to Millennium Chemicals Inc.
("Millennium") or its subsidiaries, including without limitation the Seller, as
part of or in connection with the contemplated demerger of Purchaser's chemicals
business (the "Demerger"), but excluding the Discontinued Businesses.
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"Company Businesses" means all of the businesses, operations and
assets of the Company relating to the Company's manufacturing of mobile
hydraulic lifting equipment including cranes and aerial work platforms
operations (the "Crane Operations"), including all of the businesses, operations
and assets that were previously conducted, owned or used by any business or
operation of the Company relating to the Crane Operations (or any predecessor to
such business or operation), notwithstanding the fact that prior to the Closing
(i) any such business or operation was closed, wound up or otherwise terminated,
(ii) such asset ceased to be used in connection with such business or operation,
or (iii) any such business, operation or asset was sold or otherwise disposed of
to any person or entity other than the Chemicals Subsidiaries. Company
Businesses do not include the Seller Businesses. For the purpose of the
definition of "Company Businesses", the term the "Company" includes all direct
and indirect subsidiaries of the Company and any partnerships in which it or any
of its subsidiaries owns or at any time in the past owned an interest.
"Discontinued Businesses" has the meaning ascribed to such term
in Information Statement dated August , 1996 delivered to the Purchaser's
shareholders in connection with the Demerger.
"Litigation and Claims" means litigation pending or threatened or
claims alleged against Seller and/or Purchaser Parties, including, without
limitation, civil and criminal actions, workers' compensation proceedings,
administrative and regulatory proceedings, investigations, audits, inquiries,
demands, claims (including any title claims relating to real properties) and
threatened actions.
"Purchaser Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Seller Liabilities,
any and all of the obligations, liabilities and expenses incurred by Seller,
Purchaser or any of their respective affiliates or subsidiaries or affiliates of
such subsidiaries arising out of or associated with, or any Litigation and
Claims alleged to arise out of or be associated with, the Company Businesses,
whether or not in the ordinary course of business, in each case whether matured
or unmatured, liquidated or unliquidated, fixed or contingent, known or unknown,
and whether arising out of circumstances existing prior to, on or subsequent to
the Closing, and regardless of where or against whom such obligations,
liabilities and expenses are asserted or determined or whether asserted or
determined prior to, on or subsequent to the Closing, and regardless of whether
arising from or alleged to arise from negligence, recklessness, violation of
law, fraud or misrepresentation by any of the Seller Parties, and including,
without limitation, the following items:
(i) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for
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any particular purpose of goods, conformity of goods to contractual
requirements, deceptive trade practice, misrepresentation, fraud or any
other alleged or actual breach or violation of any obligation or
requirement arising out of or associated with the Company Businesses,
including, without limitation, (A) all product warranty obligations with
respect to products developed, produced, manufactured, marketed, used or
distributed by the Company Businesses ("Company Products"), whether
shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury or
consequential damage which is caused or alleged to have been or to be
caused by any defect in or breach of warranty related to any Company
Product or other asset of the Company Businesses;
(ii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Purchaser
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller, Purchaser or any of their respective affiliates
or subsidiaries or affiliates of such subsidiaries after the Closing
("New Purchaser Litigation"), in each case if and solely to the extent
that such Litigation and Claims (in whole or in part) arise out of or
are associated with, or are alleged (regardless of the party named in
the allegation or complaint) to arise out of or be associated with the
Company Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorney or consultant fees or
remediation costs) of Seller, or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to
the Company Businesses;
(iv) any Litigation and Claims brought after the Closing against
Seller or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of
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any kind, whether prior to, on or subsequent to the Closing,
arising out of, or alleged to arise out of, the Company
Businesses;
(v) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of
Section 3(37) of ERISA), maintained by, contributed to, or obligated to
contribute to, at any time, by the Company or any of its subsidiaries,
including but not limited to any liability with respect to: (A) the
Pension Benefit Guaranty Corporation under Title IV of ERISA; (B) a
multiemployer plan (within the meaning of Section 3(37) of ERISA); (C)
any non-compliance with the notice and benefit continuation requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended; (D) any non-compliance with ERISA or any other applicable laws;
and (E) any suit, proceeding or claim which is brought against the
Seller or any of its affiliates, any such plan, and any fiduciary or
former fiduciary of any such plan; and
(vi) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of the Company or any of its subsidiaries) by (A) the Company
or any of the Company Businesses or (B) any officer, director, employee
or agent of the Company or any of the Company Businesses attributable to
any actions or inactions by the Company or any of the Company
Businesses.
"Purchaser Parties" means Purchaser and any direct or indirect
subsidiary or affiliate of Purchaser other than the Chemicals Subsidiaries, and
any of their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees.
"Seller Businesses" means all of the businesses, operations and
assets of Seller, including all of the businesses, operations and assets that
were previously conducted, owned or used by any business or operation of the
Seller (or any predecessor to such business or operation) and including any
business or operation of the Company and its subsidiaries (or any predecessor,
to such business or operation) not related to the Crane Operations,
notwithstanding the fact that prior to the Closing (i) any such business or
operation was closed, wound up or otherwise terminated, (ii) such asset ceased
to be used in connection with such business or operation, or (iii) any such
business, operation
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or asset was sold or otherwise disposed of to any person or entity other than
the Chemicals Subsidiaries. Seller Businesses do not include (i) the Company
Businesses, and (ii) any other business, operations or assets transferred to
Purchaser or its subsidiaries (other than the Chemicals Subsidiaries) as part of
or in connection with the Demerger. For purposes of the definition of "Seller
Businesses", the term "Seller" includes all direct and indirect subsidiaries of
Seller and any partnerships in which it or any of its subsidiaries owns or at
any time in the past owned an interest.
"Seller Liabilities" means, except as otherwise expressly
provided for in this Agreement or the SPA and except for Taxes (which are
addressed in the Tax Sharing Agreement), and except for the Purchaser
Liabilities, any and all of the obligations, liabilities and expenses incurred
by Seller, Purchaser or any of their respective affiliates or subsidiaries
or affiliates of such subsidiaries arising out of or associated with, or
any Litigation or Claims alleged to arise out of or be associated with,
the Seller Businesses, whether or not in the ordinary course of business, in
each case whether matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown, and whether arising out of circumstances existing
prior to, on or subsequent to the Closing and regardless of where or against
whom such obligations, liabilities and expenses are asserted or determined or
whether asserted or determined prior to, on or subsequent to the Closing, and
regardless of whether arising from or alleged to arise from negligence,
recklessness, violation of law, fraud, or misrepresentation by any of the
Purchaser Parties, and including, without limitation, the following items:
(i) all obligations, liabilities and expenses incurred by or
associated with any business, operation or asset that (A) was conducted,
owned or used by any of the Company Businesses prior to the Closing but
which was sold or otherwise disposed of to any of the Chemicals
Subsidiaries, and (B) is not transferred to Purchaser or its
subsidiaries (other than the Chemicals Subsidiaries) as part of or in
connection with the Demerger;
(ii) all obligations, liabilities and expenses with respect to
health, safety, personal injury, property damage, employment, benefits,
compensation, pension rights, claims arising out of contracts,
intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual breach
or violation of any obligation or requirement arising
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out of, or associated with, the Seller Businesses, including, without
limitation, (A) all product warranty obligations with respect to
products developed, produced, manufactured, marketed, used or
distributed by the Seller Businesses ("Seller Products"), whether
shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury or
consequential damage which is caused or alleged to have been or to be
caused by any defect in or breach of warranty related to any Seller
Products or other assets of the Seller Businesses;
(iii) all Litigation and Claims pending as of the Closing against
Seller, Purchaser and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Seller
Litigation") and all Litigation and Claims brought, threatened or
alleged against Seller or Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries after the
Closing ("New Seller Litigation"), in each case if and solely to the
extent that such Litigation and Claims (in whole or in part) arise out
of or are associated with or are alleged (regardless of the party named
in the allegation or complaint) to arise out of or to be associated with
the Seller Businesses;
(iv) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorneys' or consultants' fees
or remediation costs) of Seller, Purchaser or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to,
the Seller Businesses;
(v) any Litigation and Claims brought after the Closing against
Purchaser or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Seller or Purchaser or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to,
the Closing, arising or alleged to arise from the Seller Businesses;
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(vi) all obligations, liabilities and expenses (other than those
arising solely due to joint and several liability under ERISA) with
respect to any employee benefit plan (within the meaning of Section 3(3)
of ERISA), including any multiemployer plan (within the meaning of
Section 3(37) of ERISA), maintained by, contributed to, or obligated to
contribute to, at any time, by the Seller or any of its subsidiaries
other than (x) the Company or any of its subsidiaries, and (y) any other
company or business transferred to Purchaser or its subsidiaries (other
than the Chemicals Subsidiaries) as part of or in connection with the
Demerger, including but not limited to any liability with respect to:
(A) the Pension Benefit Guaranty Corporation under Title IV of ERISA;
(B) a multiemployer plan (within the meaning of Section 3(37) of ERISA);
(C) any non-compliance with the notice and benefit continuation
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; (D) any non-compliance with ERISA or any other
applicable laws; and (E) any suit, proceeding or claim which is brought
against the Company or any of its subsidiaries, any such plan, and any
fiduciary or former fiduciary of any such plan; and
(vii) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of the Seller or any of its subsidiaries) by (A) the Seller or
any of the Seller Businesses or (B) any officer, director, employee or
agent of the Seller or any of the Seller Businesses attributable to any
actions or inactions by the Seller or any of the Seller Businesses.
"Seller Parties" means Seller and any direct or indirect
subsidiary of Seller that is not transferred to Purchaser or its subsidiaries
(other than the Chemicals Subsidiaries) as part of or in connection with the
Demerger, and any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees.
"Taxes" has the meaning ascribed to such term in the Tax
Sharing Agreement.
Words and expressions defined in the SPA shall have the same
meaning herein, save that, to the extent that such definitions are inconsistent
with any definitions in this Agreement, the definitions herein shall take
precedence.
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ARTICLE II.
EXCULPATION AND INDEMNIFICATION BY SELLER
Section 2.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Seller shall, without any further
responsibility or liability of, or recourse to, any of the Purchaser Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Seller Liabilities. None of the Purchaser Parties shall be liable to any of the
Seller Parties for any reason whatsoever on account of any Seller Liabilities.
Seller shall indemnify, defend, save and hold harmless each of
the Purchaser Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Seller
Liabilities and (ii) the breach by any of the Seller Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Purchaser Damages").
Purchaser Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Purchaser or by any of its
affiliates or subsidiaries or affiliates of such subsidiaries, from any third
party insurance policy (and are non-reimbursable by Purchaser or any of its
subsidiaries or affiliates under any self insurance policy), shall not be the
subject of indemnification under this Agreement.
ARTICLE III.
EXCULPATION AND GENERAL INDEMNIFICATION BY PURCHASER
Section 3.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Purchaser shall, without any further
responsibility or liability of, or recourse to, any of the Seller Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Purchaser Liabilities. None of the Seller Parties shall be liable to any of the
Purchaser Parties for any reason whatsoever on account of any Purchaser
Liabilities.
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Purchaser shall indemnify, defend, save and hold harmless each of
the Seller Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, arising out of (i) the Purchaser
Liabilities and (ii) the breach by any of the Purchaser Parties of any of their
obligations under this Agreement and the SPA (all of which are hereinafter
collectively referred to as the "Seller Damages").
Seller Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Seller or by any of its
subsidiaries or affiliates, from any third party insurance policy (and are
non-reimbursable by Seller or any of its subsidiaries or affiliates under any
self insurance policy), shall not be the subject of indemnification under this
Agreement.
ARTICLE IV.
SPECIFIC INDEMNIFICATION ISSUES
Section 4.1. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Seller and
Purchaser is determined after trial in any judgment, award or decree to be joint
or concurrent or in which the entitlement to indemnification hereunder is not
readily determinable, the parties shall negotiate in good faith in an effort to
agree, as between Seller and Purchaser, on the proper allocation of liability or
entitlement to indemnification, as well as the proper allocation of the costs of
any joint defense or settlement pursuant to Section 6.4, all in accordance with
the provisions of, and the principles set forth in, this Agreement. In the
absence of any such agreement, such allocation of liability, entitlement to
indemnification and allocation of costs shall be subject to ultimate resolution
between Seller and Purchaser pursuant to Section 8.8.
Section 4.2. It is acknowledged that after the Closing the
parties will have arms length negotiated business relationships, which
relationships will be described in contracts, agreements and other documents
entered into in the normal course of business. Such documents may include
agreements by the parties and their affiliates and subsidiaries to supply
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after the Closing, materials, products, services and leases. Such business
relationships shall not be subject to the indemnity provisions hereof, unless
the parties expressly agree to the contrary in the agreements governing such
relationships.
ARTICLE V.
NOTICE AND PAYMENT OF CLAIMS
Section 5.1. If any person entitled to a defense and/or
indemnification under this Agreement (the "Indemnified Party") determines that
it is or may be entitled to a defense or indemnification by Purchaser or Seller,
as the case may be (the "Indemnifying Party"), under this Agreement:
(i) The Indemnified Party shall deliver promptly to the
Indemnifying Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense and/or
indemnification, the nature of the claim, and if known, the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Nothing in this subparagraph shall be interpreted to
invalidate any claim by the Indemnified Party to be entitled to
indemnification, unless the Indemnifying Party can show that the failure
of the Indemnified Party to deliver such notice was intentional.
(ii) The Indemnifying Party shall have 30 days from receipt of
the notice requesting indemnification within which to either: (A) assume
the defense of such litigation or claim; (B) pay the claim in
immediately available funds; (C) reserve its rights pending negotiations
under Section 6.4; or (D) object in accordance with Section 5.2. This 30
day period may be extended by agreement of the parties. Nothing in this
subparagraph shall be interpreted to abrogate or delay a party's
obligation to provide the other with a defense under this Agreement.
Section 5.2. The Indemnifying Party may object to the claim for
defense and/or indemnification set forth in any notice; provided, however, that
if the Indemnifying Party does not give the Indemnified Party written notice
setting forth its objection to such claim (or the amount thereof) and the
grounds therefor within the same 30 day period (or any extended period) referred
to in Section 5.1 above, the Indemnifying Party shall be deemed to have
acknowledged its liability to provide a defense or for the amount of such claim
and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such
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amount or obtain such defense. Any objection to a claim for a defense or
indemnification shall be resolved in accordance with Section 8.8
Section 5.3. The right to a defense or indemnification under this
Agreement applies only insofar as defense and indemnification are not provided
for by insurance from any third party insurance policy (and are non-reimbursable
by Purchaser or any of its affiliates or subsidiaries or affiliates of such
subsidiaries under any self insurance policy). Nevertheless, the potential
availability of insurance coverage to Seller or Purchaser shall not relieve the
other party of its obligations for defense or indemnification hereunder, or
delay either party's obligation to the other to assume a defense or pay any sums
due hereunder.
Section 5.4. Payments due to be made under this Agreement shall
carry interest from the date on which the Indemnified Party became entitled to
indemnification until the date of actual payment (whether before or after
judgment) at the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
Section 5.5. Payments due to be made under this Agreement shall
be free and clear of all deductions, withholdings, set-offs or counterclaims
whatsoever, except as may be required by law. If any deductions or withholdings
are required by law the Indemnifying Party shall be obliged to pay such sum as
will, after such deduction, withholding, set-off or counter-claim has been made,
leave the Indemnified Party with the same amount as it would have been entitled
to receive in the absence of any such requirement to make a deduction or
withholding.
Section 5.6. Payments due to be made under this Agreement shall
be reduced by the amount by which any Taxes for which the Indemnified Party
would have been accountable or liable to be assessed is either (i) actually
reduced prior to payment falling due hereunder or (ii) is likely to be reduced
subsequent to payment falling due hereunder in the reasonable opinion of the
Indemnified Party acting in good faith in the light of the circumstances
prevailing at the time of delivery of written notice in accordance with Section
5.1. The reduction of any payments to be made in accordance with this Section
5.6 for Tax benefits which will likely be recognized within one year after the
date on which the Indemnified Party receives indemnification under this
Agreement shall be made without regard to the time value of money. The reduction
of any payments to be made in accordance with this Section 5.6 for Tax benefits
which will not
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likely be recognized within one year after the date on which the Indemnified
Party receives indemnification under this Agreement shall take into account the
time value of money from the time the applicable payment is received until the
date such Tax benefits are likely to be recognized, using as the discount rate
the prime rate charged by Chase Manhattan Bank, N.A. to its corporate customers
at the time the payment is received.
Section 5.7. The parties to this Agreement may enter into
agreements or other arrangements providing for the set-off of payments due to be
made by way of indemnification to both Seller and Purchaser.
ARTICLE VI.
DEFENSE OF THIRD-PARTY CLAIMS
Section 6.1. If the Indemnified Party's claim for indemnification
is based, under this Agreement, on a claim, demand, investigation, action or
proceeding, judicial or otherwise, brought by a third party, and the
Indemnifying Party does not object under Section 5.2 hereof, the Indemnifying
Party shall, within the 30-day period (or any extended period) referred to in
Section 5.1 above, assume the defense of such third-party claim at its sole cost
and expense and shall thereafter be designated as the "Case Handler." Any such
defense shall be conducted by attorneys employed by the Indemnifying Party. The
Indemnified Party may retain attorneys of its own choosing to participate in
such defense at the Indemnified Party's sole cost and expense.
Section 6.2. If the Indemnifying Party assumes the defense of any
such third-party claim, the Indemnifying Party may settle or compromise the
claim without the prior consent of the Indemnified Party so long as all present
and future claims relating to the compromised claim against the Indemnified
Party are irrevocably and unconditionally released in full.
Section 6.3. The Indemnifying Party shall pay to the Indemnified
Party in immediately available funds the amount for which the Indemnified Party
is entitled to be indemnified within 30 days after the settlement or compromise
of such third-party claim or the judgment of a court of competent jurisdiction
(or within such longer period as agreed to by the parties). If the Indemnifying
Party does not assume the defense of any such third-party claim, the
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party, except that the Indemnifying Party has the right to
contest that it is
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obligated to the Indemnified Party under the terms of this Agreement, provided
the Indemnifying Party shall have raised its objection in a timely manner under
Section 5.2.
Section 6.4. In the event a claim, demand, action or proceeding
is brought by a third party in which the liability as between Purchaser and
Seller is alleged to be joint or in which the entitlement to indemnification
hereunder is not readily determinable, the parties shall cooperate in a joint
defense. Such joint defense shall be under the general management and
supervision of the party which is expected to bear the greater share of the
liability, and which will be considered the Case Handler, unless otherwise
agreed; provided, however, that neither party shall settle or compromise any
such joint defense matter without the consent of the other. The costs of such
joint defense, any settlement and any award or judgment (unless the award or
judgment specifies otherwise) shall be borne as the parties may agree; or in the
absence of such agreement, such costs shall be borne by the party incurring such
costs, subject to ultimate resolution between Purchaser and Seller pursuant to
Section 8.8.
ARTICLE VII.
COOPERATION AND PRESERVATION OF RECORDS
Section 7.1. Purchaser Parties and Seller Parties shall cooperate
with one another fully and in a timely manner in connection with the defense of
any Pending Purchaser Litigation, New Purchaser Litigation, Pending Seller
Litigation, New Seller Litigation or any other actual or threatened claim.
Section 7.2. Such cooperation shall include, without limitation,
making available to the other party, during normal business hours and upon
reasonable notice, all books, records and information ("Litigation Records"),
officers and employees (without substantial interruption of employment)
necessary or useful in connection with any actual or threatened claim,
investigation, audit, action or proceeding.
Section 7.3. Each party shall continue in force, or at the
request of the other party, shall issue, notices exempting from destruction any
Litigation Records which the requesting party represents may be necessary to the
defense of, or required to be produced in discovery in connection with, any such
claim, investigation, audit, action or proceeding and shall refrain from
destroying any such Litigation Records until authorized by the requesting party.
The requesting party shall notify the other
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party promptly when the Litigation Records are no longer required
to be maintained.
Section 7.4. The party requesting access to Litigation Records or
officers and employees pursuant to Section 7.2 or preservation of Litigation
Records under Section 7.3 shall bear all reasonable out-of-pocket expenses
(except reimbursement of salaries, employee benefits and general overhead)
incurred by the other party in connection with providing such Litigation Records
or officers and employees.
Section 7.5. The party providing Litigation Records under this
Article VII may elect, upon a reasonable basis and within a reasonable time, to
designate all or a portion of the Litigation Records as confidential or
proprietary. If Litigation Records are so designated, the party receiving them
will treat them as it would its own confidential or proprietary information and
will take all reasonable steps to protect and safeguard the Litigation Records
while in its own custody and will attempt to shield such information from
disclosure by motions to quash, motions for a protective order, redaction or
other appropriate actions.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
Section 8.2. This Agreement may be amended, modified or
supplemented only by a written agreement of the parties.
Section 8.3. Except as provided in this Section 8.3, this
agreement shall be personal to the parties to it and neither party may assign or
transfer any of its rights and obligations under this Agreement without the
prior written consent of the other party. Notwithstanding the foregoing, Seller
and Purchaser acknowledge and agree that either party may assign its rights and
delegate its obligations under this Agreement, to one or more of its respective
subsidiaries or affiliates, provided that such an assignment shall have no
effect on, and shall not be deemed to constitute a release of either party from,
its obligations under this Agreement.
Section 8.4. This Agreement is solely for the benefit
of the Seller Parties and the Purchaser Parties and is not
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intended to confer upon any other person except such parties any rights or
remedies hereunder. There are no third party beneficiaries to this Agreement
other than the Seller Parties and the Purchaser Parties.
Section 8.5. This Agreement may be entered into in any number of
counterparts and by the parties to it on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
Section 8.6. If any term or provision of this Agreement shall be
held to be illegal or unenforceable, in whole or in part, under any enactment or
rule of law, such term or provision or part shall to that extent be deemed not
to form part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected. Subject thereto, should any term or provision
of this Agreement be or become ineffective, in whole or in part, for reasons
beyond the control of the parties hereto, the parties shall use reasonable
efforts to agree upon a new provision which shall as nearly as possible have the
same commercial effect as the ineffective term or provision or part hereof.
Section 8.7. Any notice, claim or demand requiring to be served
under or in connection with this Agreement shall be in writing and shall be
sufficiently given or served if delivered addressed as follows:
If to Seller or any other Seller Party, to:
c/o Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III, Esq.
and
c/o Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire, DN40 2PR, England
Attention: George H. Hempstead, III, Esq.
If to Purchaser or any other Purchaser Party, to:
c/o Hanson PLC
1 Grosvenor Place
London SW1X 7JH, England
Attention: Graham Dransfield, Esq.
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Any such notice shall be delivered by hand or sent by first class post or
overnight courier. Any such notice shall take effect, in the case of hand
delivery, at the time of delivery, or, in the case of first class post,
forty-eight hours after posting.
Section 8.8. Resolution of any and all disputes arising from or
in connection with this Agreement, whether based on contract, tort, statute or
otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 8.8; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Seller or
Purchaser (each a "Party") may commence proceedings hereunder by delivering a
written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have the right to audit the books and records of the other Party that are
reasonably related to the Dispute; (ii) each Party shall provide to the other,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days
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after its selection or appointment, and shall make a final award not later than
thirty (30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party as the
Panel deems fair and reasonable. Notwithstanding the foregoing, in no event may
the Panel award multiple, punitive or exemplary damages. Any arbitration award
shall be binding and enforceable against the Parties hereto and judgment may be
entered thereon in any court of competent jurisdiction.
Section 8.9. Neither of the parties hereto shall impeach this
Agreement on the grounds that any of the Directors of Seller stand in any
fiduciary position to Purchaser or that any of the Directors of Purchaser stand
in any fiduciary position to Seller or that the Directors of either party do not
constitute an independent Board.
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IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
MHC INC.
By:_________________________________
Name:
Title:
HANSON PLC
By:_________________________________
Name:
Title:
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ANNEX B
Form of Tax Sharing and Indemnification Agreement
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FORM OF
TAX SHARING AND INDEMNIFICATION AGREEMENT
Tax Sharing and Indemnification Agreement (this "Agreement"), entered into
September 30, 1996, among: (a) HM Anglo-American Ltd., a Delaware corporation
("Anglo"), and MHC Inc., a Delaware corporation ("MHC") (collectively,
"Seller"); and (b) Hanson PLC, a public limited company incorporated in England
and Wales ("Buyer").
WHEREAS, MHC and Buyer have entered into a Post-Demerger Stock Purchase
Agreement, dated September 30, 1996 (the "Stock Purchase Agreement"), relating
to all the outstanding capital stock of Kidde Industries Inc. (the "Target");
and
WHEREAS, Seller and Buyer wish to set forth their agreement with respect to
certain tax matters as set forth below.
NOW THEREFORE, it is hereby agreed as follows:
1. TAXES ALLOCATED TO SELLER. Seller will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless the Target, Buyer, and
their Affiliates from and against any and all of the following Taxes:
i. all Federal Income Taxes imposed on the Target with respect to all
taxable periods of the Target that end on or prior to the Closing
Date;
ii. all State Income Taxes imposed by any particular State on the Target
with respect to any taxable period of the Target that ends within the
period during which the Target was included with a Chemicals Company
in any combined, consolidated, or unitary State Income Tax Return
filed with such State;
iii. all Federal Income Taxes imposed on the Target arising out of the
inclusion of the Target in the Anglo Consolidated Return on or prior
to the Closing Date, and all State Income Taxes imposed on the Target
arising out of the inclusion of the Target in any consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company
on or prior to the Closing Date;
iv. all Income Taxes allocated to Seller pursuant to Section 2 hereof;
v. all Taxes arising as a result of the Section 338(h)(10) Election made
pursuant to Section 18(a) hereof; and
vi. all Taxes described in Section 9.4 of the Stock Purchase Agreement;
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provided, however, that the Taxes set forth in i through v above will not
include any Taxes arising as a result of actions taken by the Target, or by
Buyer or any of its Affiliates with respect to the Target, on the Closing Date
but after the Closing that are not in the ordinary course of business of the
Target.
Any reference in this Agreement to the Target will be deemed to include a
reference to any Subsidiaries of the Target immediately prior to the Closing.
2. STRADDLE PERIODS. With respect to any taxable period of the Target that
would (absent an election) include, but not end until after, the Closing Date (a
"Straddle Period), Buyer and Seller will, to the extent permitted by applicable
law, elect with the relevant Tax authority to close such Straddle Period as of
the close of the Closing Date. In any case where applicable law does not permit
the Target to close a Straddle Period as of the close of the Closing Date,
Seller will be allocated (i) any Federal Income Taxes imposed on the Target for
the portion of the Straddle Period up to and including the Closing Date, and
(ii) if Target is included in any combined, consolidated, or unitary State
Income Tax Return with a Chemicals Company on the Closing Date, any State Income
Taxes imposed by such State on the Target for the portion of the Straddle Period
up to and including the Closing Date. For purposes of this Section 2, Federal
Income Taxes and State Income Taxes for the portion of a Straddle Period up to
and including the Closing Date will be determined based upon an interim closing
of the books of the Target as of the close of the Closing Date; provided,
however, that such Taxes will not include any Taxes arising as a result of
actions taken by the Target, or by Buyer or any of its Affiliates with respect
to the Target, on the Closing Date but after the Closing that are not in the
ordinary course of business of the Target.
3. TAXES ALLOCATED TO BUYER. Buyer will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless Seller and its Affiliates
from and against any and all Taxes other than those for which Seller is
responsible pursuant to Section 1 hereof, including, without limitation, (i) all
Taxes attributable to periods ending after the Closing Date (other than any
Federal Income Taxes or State Income Taxes allocated to Seller pursuant to
Section 2 hereof), (ii) all State Income Taxes imposed by a particular State
with respect to any taxable period of the Target that ends at a time when the
Target was not included with a Chemicals Company in any combined, consolidated,
or unitary State Income Tax Return filed with such State, and (iii) all Other
Taxes imposed on the Target for all taxable periods, whether ending before, on,
or after the Closing Date.
4. REFUNDS OF INDEMNIFIED TAXES. (a) Buyer will assign and promptly remit
(and will cause the Target and its Affiliates to assign and promptly remit) to
Seller all refunds (including interest thereon and any amounts applied against
liability for other taxable periods) of any Taxes for which Buyer is indemnified
pursuant to this Agreement ("Seller's Refunds"). In furtherance of the preceding
sentence (and not in limitation thereof), Buyer hereby transfers and absolutely
assigns to Seller all right, title, and interest of Buyer, the Target, and their
Affiliates in any Seller's Refunds and will turn over to Seller any and all
checks for such Seller's Refunds ("Seller's Refund Checks") in the exact form
received, but duly endorsed to Seller and, until so turned over, will hold the
same in trust for the benefit of Seller segregated
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from all other funds of Buyer, the Target, and their Affiliates. Buyer hereby
grants to Seller a power of attorney to endorse Seller's Refund Checks and to
take such other action reasonably necessary or appropriate to implement the
terms and provisions of the immediately preceding sentence; this power of
attorney, being coupled with an interest, is irrevocable.
Seller will assign and promptly remit (and will cause its Affiliates to
assign and promptly remit) to Buyer all refunds (including interest thereon and
any amounts applied against liability for other taxable periods) of any Taxes
for which Seller is indemnified pursuant to this Agreement ("Buyer's Refunds").
In furtherance of the preceding sentence (and not in limitation thereof), Seller
hereby transfers and absolutely assigns to Buyer all right, title, and interest
of Seller and its Affiliates in any Buyer's Refunds and will turn over to Buyer
any and all checks for such Buyer's Refunds ("Buyer's Refund Checks") in the
exact form received, but duly endorsed to Buyer and, until so turned over, will
hold the same in trust for the benefit of Buyer segregated from all other funds
of Seller and its Affiliates. Seller hereby grants to Buyer a power of attorney
to endorse Buyer's Refund Checks and to take such other action reasonably
necessary or appropriate to implement the terms and provisions of the
immediately preceding sentence; this power of attorney, being coupled with an
interest, is irrevocable.
(b) Upon the request of Seller, Buyer will file, or cause the Target or
its Affiliates to file, claims for Seller's Refunds, in such form as Seller may
reasonably request. Seller will have the sole right to prosecute any claims for
Seller's Refunds (by suit or otherwise) at Seller's expense and with counsel of
Seller's choice. Buyer will cooperate, and cause the Target and its Affiliates
to cooperate, fully with Seller and its counsel in connection therewith.
Upon the request of Buyer, Seller will file, or cause its Affiliates to
file, claims for Buyer's Refunds, in such form as Buyer may reasonably request.
Buyer will have the sole right to prosecute any claims for Buyer's Refunds (by
suit or otherwise) at Buyer's expense and with counsel of Buyer's choice. Seller
will cooperate, and cause its Affiliates to cooperate, fully with Buyer and its
counsel in connection therewith.
(c) For the avoidance of doubt (and except as provided in Section 6(b)
hereof), any refunds of Taxes other than Seller's Refunds and Buyer's Refunds
will be the property of the payee of such refunds and no other party to this
Agreement or its Affiliates will have any right to such refunds.
5. TAX BENEFITS. Buyer will promptly remit to Seller the amount of any Tax
Benefit recognized by Buyer, the Target, or any of their Affiliates resulting
from any Major Adjustment for which Buyer, the Target, or any of their
Affiliates has been indemnified pursuant to this Agreement. Seller will promptly
remit to Buyer the amount of any Tax Benefit recognized by Seller or any of its
Affiliates resulting from any Major Adjustment for which Seller or any of its
Affiliates has been indemnified pursuant to this Agreement. For purposes of this
Agreement:
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i. "Tax Benefit" means a reduction in the amount of Taxes that would
otherwise be payable, whether resulting from a deduction, reduced
gain or increased loss from the disposition of an asset, or
otherwise.
ii. a person will be deemed to have "recognized" a Tax Benefit at the
time the amount of Taxes such person otherwise would pay is reduced.
iii. a "Major Adjustment" is any adjustment to (A) any individual item of
income, gain, loss, or deduction if such adjustment is in excess of
five million dollars ($5,000,000), or (B) any individual item of
credit if such adjustment (when grossed up) is in excess of five
million dollars ($5,000,000).
(b) If either Buyer or Seller (the "remittor") makes a remittance to
the other party (the "remittee") under Section 5(a) or Section 6(b) hereof of
any Tax Benefit and all or part of such Tax Benefit is subsequently disallowed,
the remittee will promptly pay to the remittor that portion of such remittance
equal to the portion of the Tax Benefit that is disallowed.
6. BUYER TO FOREGO CARRYBACKS. (a) Unless Seller consents otherwise (which
consent will not unreasonably be withheld), Buyer will cause the Target to
forego any carryback for Income Tax purposes to any taxable period of the Target
ending on or before the Closing Date of any net operating loss, net capital
loss, or other deduction or credit incurred by the Target in any taxable period
ending after the Closing Date (a "Post-Closing Carryback").
(b) If Seller consents to a Post-Closing Carryback under Section 6(a)
hereof, (i) Seller will cooperate with Buyer and the Target in filing an
appropriate refund claim or amended Tax Return, and (ii) Seller will assign and
promptly remit to Buyer the amount of any refund of Tax received by, or Tax
Benefit recognized by, Seller or any of its Affiliates as a result of such
Post-Closing Carryback.
7. NO OBLIGATION TO FILE AMENDED TAX RETURNS. Except as otherwise
specifically provided in this Agreement, neither Seller nor Buyer, nor any of
their respective Affiliates, will be obligated to file any amended Tax Return or
other Tax refund claim.
8. PREPARATION OF TAX RETURNS. (a) Seller will prepare or cause to be
prepared, and file or cause to be filed, (i) all consolidated, combined, or
unitary Tax Returns of Seller or any of its Affiliates that include the Target,
and (ii) all other Tax Returns required to be filed by or on behalf of the
Target on or prior to the Closing Date.
(b) Buyer will prepare or cause to be prepared, and file or cause to be
filed, all Tax Returns of the Target other than those set forth in Section 8(a)
hereof. Buyer will prepare the following Tax Returns in a manner consistent with
past practice: (i) all Income Tax Returns of the Target for taxable periods
ending (including as a result of an election referred to in Section 2 hereof) on
or prior to the Closing Date; and (ii) all Income Tax Returns of the Target for
taxable periods including, but ending after, the Closing Date ("Straddle Period
Returns").
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(c) With respect to each Straddle Period Return that involves Taxes
subject to allocation pursuant to Section 2 hereof, Buyer will, at least sixty
(60) days prior to the final due date (including extensions) of such Straddle
Period Return, provide to Seller (i) a copy of such Straddle Period Return
(including supporting schedules and workpapers) and (ii) a statement (including
supporting schedules and workpapers) certifying the amount of Tax shown on such
Straddle Period Return that is allocable to Seller pursuant to Section 2 hereof
(the "Statement"). Seller and its authorized representatives will have the right
to review the Statement for thirty (30) days following Seller's receipt of the
Statement (the "30-Day Review Period"). If Seller disagrees with the allocation
in the Statement, Seller will notify Buyer in writing of such disagreement prior
to close of the 30-Day Review Period, and Seller and Buyer will consult and
attempt to resolve in good faith the disagreement. In the event Seller and Buyer
are unable to resolve the disagreement within fifteen (15) days following the
end of the 30-Day Review Period, Seller and Buyer will, in accordance with
Section 14 hereof, jointly request the Accounting Firm to resolve the
disagreement as promptly as possible. Not later than five (5) days after the
later of (i) the end of the 30-Day Review Period, or (ii) if there is a
disagreement, the date notice is provided to Buyer and Seller regarding the
resolution of the disagreement by the Accounting Firm, Seller will pay to Buyer
or Buyer will pay to Seller, as the case may be, an amount equal to the
difference between (i) the Taxes shown on the Statement or in such notice (as
the case may be) as being allocable to Seller pursuant to Section 2 hereof, and
(ii) any payments made by the Target on or prior to the Closing Date, and by
Seller and its Affiliates at any time, in respect of such Taxes (whether as
estimated Taxes or otherwise).
9. COOPERATION; ACCESS TO INFORMATION. (a) Buyer and Seller will cooperate
fully with each other with respect to, and will make available to each other
such Tax data and other information relating to the Target as may be reasonably
required for, the preparation by Buyer or Seller of any Tax Returns required to
be prepared by Buyer or Seller under this Agreement.
(b) After the Closing Date, Buyer will, and will cause the Target and
its Affiliates to, (i) permit Seller to have full access, at any reasonable time
and from time to time, at the business location at which the books and records
are maintained, to such Tax data relating to the Target as Seller may from time
to time reasonably request, and (ii) furnish, and cause the independent
accountants and legal counsel of Buyer and the Target to furnish, to Seller such
additional Tax and other information and documents relating to the Target in the
possession of such persons as Seller may from time to time reasonably request in
connection with its Tax reporting obligations. After the Closing Date, Seller
will (i) permit Buyer to have full access, at any reasonable time and from time
to time, at the business location at which the books and records are maintained,
to such Tax data relating to the Target in the possession of Seller and its
Affiliates as Buyer may from time to time reasonably request, and (ii) furnish,
and cause the independent accountants and legal counsel of Seller to furnish, to
Buyer such additional Tax and other information and documents relating to the
Target in the possession of such persons as Buyer may from time to time
reasonably request in connection with its Tax reporting obligations. The
foregoing information will be retained until thirty (30) days following the
expiration of the applicable Tax statute of limitations (including any extension
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thereof) or such other date as Seller or Buyer may reasonably request; provided,
however, that in the event a proceeding has been instituted prior to the
expiration of the applicable Tax statute of limitations for which the
information may be requested, the information will be retained until there is a
final determination with respect to such proceeding.
10. AUDITS. (a) Buyer will promptly notify Seller in writing upon the
receipt by Buyer, the Target, or their Affiliates of notice of any pending or
threatened Tax audits of or assessments against the Target, Buyer, or their
Affiliates (i) relating to any taxable period of the Target during which the
Target was included in the Anglo Consolidated Return or a consolidated,
combined, or unitary State Income Tax Return with a Chemicals Company, or (ii)
that may affect the determination of Taxes for which Seller is or may be
obligated to indemnify the Target, Buyer, or their Affiliates pursuant to this
Agreement. The notice required under this Section 10(a) is referred to in this
Agreement as the "Audit Notification."
(b) Subject to Section 10(c) hereof, Seller will have the sole right,
at its election, (i) to represent the Target's interest with respect to any Tax
audit or assessment referred to in Section 10(a) hereof, including in any
administrative or court proceeding relating thereto, and (ii) to employ counsel
of its choice at its expense and to control the conduct of such audit,
assessment, or proceeding, including settlement or other disposition thereof
(the rights under (i) and (ii) are referred to in this Agreement collectively as
the "Representation Right"); provided, however, that the Representation Right
will apply only to any issues or items (x) relating to any taxable period of the
Target during which the Target was included in the Anglo Consolidated Return or
a consolidated, combined, or unitary State Income Tax Return with a Chemicals
Company, or (y) that may affect the determination of Taxes for which Seller is
or may be obligated to indemnify the Target, Buyer, or their Affiliates pursuant
to this Agreement. Buyer will cooperate, and will cause the Target and its
Affiliates to cooperate, fully with Seller and its counsel in the defense
against or compromise of any claim in any said audit, assessment, or proceeding.
(c) To exercise the Representation Right, Seller must first, within a
reasonable period following the receipt of the Audit Notification, (i) notify
Buyer in writing that Seller intends to exercise the Representation Right, and
(ii) deliver to Buyer a written statement acknowledging Seller's obligation to
indemnify the Target, Buyer, or their Affiliates in accordance with the terms of
this Agreement with respect to the Taxes as to which Seller exercises the
Representation Right.
11. TREATMENT OF INDEMNIFICATION. On their Tax Returns, Seller and Buyer
will (and will cause their Affiliates to) treat any payment made or received
under this Agreement, the Stock Purchase Agreement, or the Indemnification
Agreement (referenced in the Stock Purchase Agreement) as an adjustment to the
Purchase Price (as defined in the Stock Purchase Agreement) or as a contribution
to capital, as the case may be, and not as an item subject to tax or as a
reduction to a deductible item.
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12. INDEMNIFICATION PROCEDURES. (a) If either Buyer or Seller (the
"Indemnified Party") determines that it or any of its Affiliates is or may be
entitled to indemnification by the other party (the "Indemnifying Party") under
this Agreement, the Indemnified Party will promptly deliver to the Indemnifying
Party a written notice and demand therefor (the "Notice") specifying the basis
for its claim for indemnification, the nature of the claim, and, if known, the
amount for which the Indemnified Party reasonably believes it or any of its
Affiliates is entitled to be indemnified. The Notice must be received by the
Indemnifying Party no later than thirty (30) days before the expiration of the
applicable Tax statute of limitations; provided, however, that if the
Indemnified Party does not receive notice from the applicable governmental
taxing authority ("Government Notice") that an item exists that could give rise
to a claim for indemnification hereunder more than thirty (30) days before the
expiration of the applicable Tax statute of limitations, then the Notice must be
received by the Indemnifying Party immediately after the Indemnified Party
receives the Government Notice. Unless the Indemnifying Party objects to the
claim for indemnification (in the manner set forth in Section 12(b) hereof), the
Indemnifying Party will pay the Indemnified Party the amount set forth in the
Notice, in cash or other immediately available funds, within thirty (30) days
after receipt of the Notice; provided, however, that if the amount for which the
Indemnified Party reasonably believes it is entitled to be indemnified is not
known at the time of the Notice, the Indemnified Party will deliver to the
Indemnifying Party a further notice specifying such amount as soon as reasonably
practicable after such amount is known and payment will then be made as set
forth above.
(b) The Indemnifying Party may object to the claim for indemnification
(or the amount thereof) set forth in any Notice by giving the Indemnified Party,
within thirty (30) days following receipt of such Notice, written notice setting
forth the Indemnifying Party's grounds for so objecting (the "Objection
Notice"). If the Indemnifying Party does not give the Indemnified Party the
Objection Notice within such thirty (30)-day period, the Indemnifying Party will
be deemed to have acknowledged its liability for the amount of such claim and
the Indemnified Party may exercise any and all of its rights under applicable
law to collect such amount.
(c) If Buyer and Seller are unable to settle any dispute regarding a
claim for indemnification within thirty (30) days after receipt of the Objection
Notice, Buyer and Seller will, in accordance with Section 14 hereof, jointly
request the Accounting Firm to resolve the dispute as promptly as possible.
(d) Failure by the Indemnified Party to promptly deliver to the
Indemnifying Party a Notice in accordance with Section 12(a) hereof will not
relieve the Indemnifying Party of any of its obligations under this Agreement
except to the extent the Indemnifying Party is prejudiced by such failure.
13. TERMINATION OF EXISTING TAX SHARING AGREEMENTS. As of the close of the
Closing Date, any Tax sharing agreement or arrangement that exists or may exist
between the Target and Seller or an Affiliate of Seller will terminate, and any
obligations to make payments under any such agreement or arrangement will be
canceled.
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14. RESOLUTIONS OF DISPUTES. Any dispute between Buyer and Seller as to any
matter covered in this Agreement will be resolved by the Accounting Firm;
provided, however, that in resolving any such dispute the Accounting Firm will
be bound by the terms of this Agreement. Any fees or expenses of the Accounting
Firm will be borne equally by Buyer and Seller.
15. DEFINITIONS. For purposes of this Agreement, the following terms have
the following meanings:
(a) "Accounting Firm" means Deloitte & Touche.
(b) "Affiliate" means, with respect to any person, any other person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such person; provided, however, that for the purposes of this
Agreement, Affiliates of Seller will not include the Target.
(c) "Anglo Consolidated Return" means any consolidated income tax
return for United States federal income tax purposes that includes Anglo as the
common parent.
(d) "Chemicals Company" means any corporation that has been included
(or that was required to be included) in the Anglo Consolidated Return at any
time on or before the Closing Date other than (i) the Target, (ii) Kaiser Cement
Corporation, (iii) [Duke City Lumber Company, Inc.], (iv) HM Industries, Inc.,
(v) Crane Holdings Inc., (vi) Cornerstone-Spectrum, Inc., (vii) Peabody Holding
Company, Inc., (viii) Axelson, Inc. and Axelson Canada, Inc., and (ix) the
Subsidiaries of the corporations in (ii) through (viii).
(e) "Closing" has the meaning ascribed to that term in the Stock
Purchase Agreement.
(f) "Closing Date" has the meaning ascribed to that term in the Stock
Purchase Agreement.
(g) "Federal Income Taxes" means all United States federal income
taxes, and includes any interest, penalties, and additions imposed with respect
to such taxes.
(h) "Income Taxes" means all Federal Income Taxes and all State Income
Taxes.
(i) "Income Tax Return" means any Tax Return with respect to Federal
Income Taxes or State Income Taxes.
(j) "Other Taxes" means any Taxes other than Federal Income Taxes and
State Income Taxes, and includes any interest, penalties, and additions imposed
with respect to such Taxes.
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(k) "person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
association, a governmental entity (or any department, agency, or political
subdivision thereof), or any other entity.
(l) "State" means any State of the United States (including any
political subdivision thereof) and the District of Columbia.
(m) "State Income Taxes" means all income taxes (and other taxes
measured by net income or net gain) imposed by any State, and includes any
interest, penalties, and additions imposed with respect to such taxes.
(n) "State Income Tax Return" means any Tax Return with respect to
State Income Taxes.
(o) "Subsidiary" means any corporation in which the person being
referred to owns, directly or through one or more other Subsidiaries, stock
possessing at least fifty percent (50%) of the voting power of the outstanding
stock in such corporation.
(p) "Tax" or "Taxes" means any federal, state, local, foreign, or other
tax of any kind whatsoever (together with any interest, penalties, or additions
imposed with respect thereto), including, without limitation, income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
service, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
rental, lease, ad valorem, or other tax.
(q) "Tax Returns" means all returns, declarations, reports, claims for
refunds, information returns, statements, and other forms required to be filed
with respect to any Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
16. FAILURE TO MAKE PAYMENT IN A TIMELY MANNER. If either Buyer or Seller
(the "Payor") fails to make a payment due and owing under this Agreement to the
other party or any of its Affiliates (the "Payee") reasonably promptly after the
parties hereto agree (or there is a binding determination) that such payment is
due and owing, the Payor will pay to the Payee interest on such payment from and
including the date the parties reach such agreement (or such binding
determination is made) to but excluding the date the Payor makes such payment,
at a rate equal to the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers during such period.
17. POST-CLOSING ELECTIONS. After the Closing Date, at Seller's request,
Buyer will cause the Target to make or join with Seller in making, and will take
and cause the Target to take any and all action necessary to effect, any
election that pertains to any taxable period beginning prior to the Closing Date
(an "Election"); provided, however, that if making an Election would have a
material adverse impact on Buyer, the Target, or any of their Affiliates for any
taxable period ending after the Closing Date, Buyer will be required to comply
with
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this Section 17 only if Seller indemnifies Buyer for the amount of such material
adverse impact. Seller will be responsible for the preparation of all forms and
schedules necessary to effect any Election. Buyer will, and will cause the
Target to, cooperate fully with Seller with respect to any Election. This
Section 17 will in no way apply to the Section 338(h)(10) Election made pursuant
to Section 18(a) hereof.
18. SECTION 338(h)(10) ELECTION. (a) Buyer (or one of its Affiliates) and
Seller will join in making, and will take (and will cause their respective
Affiliates to take) any and all action necessary to effect, a timely election
with respect to the Target under Section 338(h)(10) of Internal Revenue Code of
1986, as amended (and the Treasury Regulations and administrative pronouncements
thereunder) and any comparable provision of state, local, or foreign Tax law
(collectively a "Section 338(h)(10) Election"). Buyer and Seller will report
(and will cause their respective Affiliates to report) any transactions that
occur under the Stock Purchase Agreement or hereunder consistent with the
Section 338(h)(10) Election, and will take no position (nor allow their
respective Affiliates to take a position) contrary thereto.
(b) Seller will be responsible for the preparation of all forms
(including, without limitation, Internal Revenue Service Form 8023-A) and
schedules (collectively the "Forms") necessary to effect the Section 338(h)(10)
Election and will deliver a copy of any such Forms to Buyer for its review at
least sixty (60) days prior to the final due date (including extensions) for
filing such Forms or the Tax Return to which such Forms must be attached. Buyer
and its authorized representatives will have the right to review the Forms for
twenty (20) days following Buyer's receipt of such Forms (the "20-Day Review
Period"). If Buyer objects to any aspect of the Forms, Buyer will notify Seller
in writing of such objection prior to the close of the 20-Day Review Period
(setting forth the basis for such objection), and Seller and Buyer will consult
and attempt to resolve in good faith Buyer's objection. In the event Buyer and
Seller are unable to resolve Buyer's objection within ten (10) days following
the end of the 20-Day Review Period, Buyer and Seller will, in accordance with
Section 14 hereof, jointly request the Accounting Firm to resolve Buyer's
objection as promptly as possible. If the Accounting Firm is unable to make a
determination with respect to Buyer's objection prior to the final due date
(including extensions) for filing the Forms or the Tax Return to which the Forms
must be attached, Seller and Buyer will (i) properly execute and file such Forms
as prepared by Seller, and (ii) if necessary and if permissible under the
relevant Tax laws, file amended Forms promptly following the resolution of
Buyer's objection.
(c) Within ninety (90) days following the Closing Date (the "90-Day
Period"), Buyer and Seller will mutually agree regarding the following items
(the "Items"): (i) the "MADSP" as defined in Treasury Regulation ss.
1.338(h)(10)-1(f); (ii) the gross fair market value of each of the Target's
assets at the beginning of the day after the Closing Date; and (iii) the tax
basis at which the Target holds each of its assets at the beginning of the day
after the Closing Date. In the event Buyer and Seller are unable to agree
regarding any Item by the end of the 90-Day Period, Buyer and Seller will, in
accordance with Section 14 hereof, jointly request the Accounting Firm to
resolve any disagreement as promptly as possible. Buyer and
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Seller will (and will cause each of their respective Affiliates to) file all Tax
Returns (including, without limitation, any information reports or returns) in a
manner consistent with the Items as finally agreed upon by Buyer and Seller or
finally determined by the Accounting Firm.
(d) Buyer covenants that, during the period beginning immediately after
the Closing and ending at the close of the Closing Date, the Target will not
engage in any transaction that is not in the ordinary course of business of the
Target.
19. AMENDMENTS; WAIVERS. No provision of this Agreement may be amended,
waived, or otherwise modified without the prior written consent of Buyer and
Seller.
20. ASSIGNMENTS. No party to this Agreement may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of the other parties; provided, however, that any party to this Agreement may
assign its rights and delegate its obligations under this Agreement to one or
more of its Subsidiaries or corporate Affiliates, provided that such an
assignment and delegation will have no effect on, and will not be deemed to
constitute a release of, such party from its obligations under this Agreement.
21. NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any rights
or remedies upon any person other than the parties to this Agreement and their
respective successors and permitted assigns.
22. GOVERNING LAW. Except to the extent federal, state, local, or foreign
Tax laws, rules, or regulations govern the filing of Tax Returns or the
positions taken with respect to Taxes in Tax Returns, this Agreement will be
governed by and construed in accordance with the internal laws of the State of
New York.
23. NOTICES. Any notices, requests, demands, claims, and other
communications under this Agreement will be in writing and will be delivered at
the following addresses (or such other address as may be specified by notice
given to the other party pursuant to this Section 23):
If to a Seller:
MHC Inc.
HM Anglo-American Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
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If to Buyer:
Hanson PLC
1 Grosvenor Place
London
SW1X 7JH England
Attention: Legal Director
24. ENTIRE AGREEMENT. This Agreement (including the agreements and
documents referred to herein) constitutes the entire agreement among the parties
hereto with respect to the subject matter of this Agreement and supersedes any
prior understandings, agreements, outlines, or representations by or among the
parties hereto, written or oral, to the extent they relate in any way to the
subject matter of this Agreement.
25. HEADINGS. The section headings contained in this Agreement are inserted
for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in more than one
counterpart and by different parties of each counterpart and all such
counterparts when executed will form one and the same agreement.
(signature page follows)
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AS WITNESS this Agreement has been signed by or on behalf of each of the
parties hereto.
SELLER:
HM ANGLO-AMERICAN LTD.
By: _____________________________
Name:
Title:
MHC INC.
By: _____________________________
Name:
Title:
BUYER:
HANSON PLC
By: _____________________________
Name:
Title:
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EXHIBIT 10.7
FORM OF DEMERGER AGREEMENT
THIS DEMERGER AGREEMENT (the "Agreement") is made the 30th
day of September, 1996
BETWEEN:
(1) MILLENNIUM CHEMICALS INC., a Delaware corporation
("Millennium");
(2) HANSON PLC, a public limited company incorporated in
England ("Hanson"); and
(3) HANSON OVERSEAS HOLDINGS LIMITED, a United Kingdom
corporation ("HOH").
WHEREAS:
(A) Hanson is the beneficial owner of all of the
outstanding shares of HOH (the "HOH Shares");
(B) Hanson desires to demerge the Chemicals Business (as defined, and
described more fully, in the Information Statement of Millennium, dated
August __, 1996);
(C) Hanson desires to demerge the Chemicals Business (the "Demerger") by
transferring the HOH Shares to Millennium in consideration for
Millennium issuing shares representing all of its then outstanding
Common Stock to Hanson's shareholders;
(D) As part of its plan to effect the Demerger, on
September __, 1996, Hanson declared a stock dividend
(the "Stock Dividend") payable in the form of all the
outstanding shares of Common Stock, par value $.01 per
share, of Millennium (the "Common Stock") to holders of
Ordinary Shares of 25p each in the capital of Hanson
("Ordinary Shares"), including Ordinary Shares
represented by American Depositary Shares ("ADSs"); and
(E) The parties intend that, on October 1, 1996, subject to the terms and
conditions of this Agreement, Hanson and Millennium shall complete the
Demerger as follows: Hanson shall transfer all the HOH Shares to
Millennium and, in exchange, Millennium shall issue all its then
outstanding Common Stock to the holders of Ordinary
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Shares and ADSs entitled to receive the Stock Dividend (the "Hanson
Shareholders").
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Demerger of Chemicals Business.
Subject to the terms and conditions of this Agreement, at the
Closing (as defined below):
a. Hanson shall transfer and deliver to Millennium, and
Millennium shall acquire from Hanson, the HOH Shares free from any lien,
option, charge and encumbrance, right of preemption or any other third
party right and together with all benefits and rights attached thereto;
and
b. In consideration for Hanson transferring the HOH Shares to
Millennium, Millennium shall issue to the Hanson Shareholders such
number of shares of Common Stock as shall be equal to the quotient of
(x) the total number of Ordinary Shares issued and outstanding as at
7:30 a.m. London time on October 1, 1996, divided by (y) 70, such shares
representing all of Millennium's then outstanding Common Stock (the
"Millennium Shares"). Millennium shall issue the Millennium Shares to
Hanson Shareholders on a pro rata basis at the rate of one share of
Common Stock for every 70 Ordinary Shares (other than those represented
by ADSs) and every 14 ADSs. The Millennium Shares shall be fully paid
and non-assessable, and shall be free from any lien, option, charge and
encumbrance, right of pre-emption or any other third party right.
2. Closing.
2.1 Date of Closing. Subject to the satisfaction of each of the
conditions set forth in Section 4, the closing of the transactions in Section 1
(the "Closing") shall take place at the offices of Hanson PLC, 1 Grosvenor
Place, London SW1X 7JH, England (or at such other place as the parties may agree
in writing) at 10:00 a.m., London time, on October 1, 1996 (the "Closing Date").
2.2 Title to HOH Shares. Until the Closing, Hanson shall continue
to have full right, title and interest in and to the HOH Shares, including the
right to receive any dividends, distributions or payments made with respect to
the HOH Shares, and the right to vote the HOH Shares.
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Immediately upon the Closing, beneficial ownership in the HOH Shares shall
become vested in Millennium, and Hanson undertakes to Millennium that it shall
sign or procure to be signed any documents and shall do or procure to be done
any acts or things in connection with or relating to the HOH Shares which
Millennium may from time to time reasonably request in order to perfect the
right, title and interest of Millennium to and in the HOH Shares.
3. Actions At or Prior to Closing.
3.1 Best Efforts. Each of the parties shall use its reasonable
best efforts (without undue expense) to cause the fulfillment, at or prior to
the Closing Date, of all of the conditions to their respective obligations to
consummate the transfer and acquisition of the HOH Shares and the issuance of
the Millennium Shares under this Agreement.
3.2 Redemption of Certain Shares - Simultaneous with the Closing,
Millennium shall redeem for US$1.00 per share, the three shares of its Common
Stock issued to Derek C. Bonham, Andrew J.H. Dougal and Graham Dransfield as
part of Millennium's original incorporation.
4. Conditions of Closing.
The obligations of Hanson to transfer, and Millennium to acquire,
the HOH Shares and of Millennium to issue the Millennium Shares are subject to
the fulfillment, prior to or at the Closing, of each of the following
conditions:
a. The Board of Directors of Hanson does not
pass a resolution to terminate the arrangements for the Demerger
of Millennium;
b. Hanson and Millennium shall have executed an
Indemnification Agreement in the form attached as Annex
A hereto (the "Indemnification Agreement");
c. Hanson, Millennium and HOH shall have
executed a Deed of Tax Covenant in the form attached as
Annex B hereto (the "Deed of Tax Covenant");
d. Hanson, Millennium, HOH, HM Anglo American Ltd.
and Hanson North America, Inc. shall have executed a Tax Sharing
and Indemnification Agreement in the form attached as Annex C
hereto (the "Tax Sharing Agreement"); and
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e. Hanson and certain of its subsidiaries on the one hand, and
Millennium and certain of its subsidiaries on the other hand, shall have
executed a number of other agreements necessary to effect the Demerger
and certain related transactions, including without limitation, the
agreements listed on Annex D hereto (the "Demerger Agreements").
5. Deliveries at Closing.
At the Closing, the parties shall make the following deliveries
and take the following actions:
a. Hanson and Millennium shall deliver the
Indemnification Agreement;
b. Hanson, Millennium and HOH shall deliver the
Deed of Tax Covenant;
c. Hanson, Millennium, HOH and the other parties thereto
shall deliver the Tax Sharing Agreement;
d. Hanson and Millennium (and the other parties
thereto) shall deliver the Demerger Agreements;
e. Hanson shall deliver to Millennium share
certificates representing the HOH Shares, accompanied
where appropriate by stock powers or other appropriate
transfer forms duly endorsed by Hanson; and
f. Millennium shall deliver to Lloyds Bank
Registrars, as the U.K. dividend agent, and Citibank
N.A., as the U.S. dividend agent, duly endorsed and
authenticated certificates representing all of the
Millennium Shares.
6. Further Agreements of the Parties.
6.1 Covenant regarding Certain UK Tax Matters. Millennium hereby
covenants and agrees that it shall not take, or fail to take, any action that
would result in a breach of, or constitute non-compliance with, any of the
representations and undertakings made by Hanson in that certain letter of July
3, 1996 from Hanson to the United Kingdom Inland Revenue, attached as Annex E
hereto, at any time prior to the fifth anniversary of the date of this
Agreement.
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6.2 Repayment of Certain Indebtedness. Millennium undertakes to
cause HM Anglo-American Ltd., a Delaware corporation ("Anglo"), to repay all
indebtedness (including accrued and unpaid interest thereon) that Anglo owes to
Hanson Aruba NV, an Aruba corporation, on or prior to 10:00 a.m., New York City
time, on October 7, 1996. Upon receipt of such funds, Hanson shall deliver, or
cause to be delivered, any notes representing such indebtedness for
cancellation. In addition, Hanson and Millennium each undertake to cause each
of their respective subsidiaries to repay all other indebtedness that such
subsidiaries owe to the other's respective subsidiaries on or prior to 10:00
a.m., New York City time, on September 30, 1996.
Millennium further undertakes to cause Hanson America Inc.
("Hanson America") to call for redemption all of its outstanding 2.39% Senior
Exchangeable Discount Notes Due 2001 (the "Exchangeable Notes"), including the
ADS Rights appurtenant thereto issued by Hanson (Bermuda) Limited to acquire
American Depositary Shares representing Hanson ordinary shares (the "ADS Rights"
and collectively with the Exchangeable Notes, the "Exchangeable Securities") on
the date when the Exchangable Securities first become redeemable at the option
of Hanson America under the terms of the instruments governing the Exchangeable
Securities.
6.3 Net Debt Adjustment.
(a) On or before , 1996 (the "Settlement Date"),
Millennium and HOH, in consultation with Hanson, shall calculate the Pro Forma
Net Debt (as defined below) of Millennium and its subsidiaries on a combined
basis as of the Closing Date (the "Pro Forma Net Debt Calculation").
(b) Pro Forma Net Debt shall mean external indebtedness for
borrowed money and indebtedness of Millennium and its subsidiaries to Hanson and
its subsidiaries (other than those subsidiaries of Hanson which will become
subsidiaries of Millennium pursuant to the Demerger), net of cash and cash
equivalents, after giving pro forma effect to the transfer of Hanson's building
materials and materials handling businesses (the "Discontinued Businesses") from
subsidiaries of Millennium to Hanson, pursuant to the Post Demerger Stock
Purchase Agreement, dated September 30, 1996, between HMB Holdings Inc.
and Hanson, and the Post Demerger Stock Purchase Agreement, dated
September 30, 1996, between MCH Inc. and Hanson, both of which are
being executed concurrently with this Agreement and are listed among the
agreements shown in Exhibit D attached hereto (collectively, the "Post-Demerger
SPAs"). The Pro Forma Net Debt Calculation shall be prepared as follows and
reflect the following:
1. Pro Forma Net Debt shall be calculated consistently
with the net balance sheet accounts of the Company's Unaudited
Pro Forma Combined Balance Sheet, dated June 30, 1996, prepared
in accordance with accounting principles generally accepted in
the United States, as shown in the Information Statement.
2. The Pro Forma Net Debt Calculation shall
not reflect any cash and/or net debt associated
with the Discontinued Businesses, provided,
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however, that any cash received or paid by the Discontinued
Businesses from the Closing through the closing of the
transactions contemplated by the Post-Demerger SPAs shall be
deemed to be received or paid for the benefit or risk of
Millennium.
3. The Pro Forma Net Debt Calculation shall not reflect
any reduction in the purchase price of the Discontinued
Businesses pursuant to the Post- Demerger SPAs as a result of a
Material Adverse Change (as defined in the Post-Demerger SPAs).
4. The Pro Forma Net Debt Calculation shall be prepared
assuming that 100% of the Exchangeable Securities are purchased
by Hanson America on December 1, 1996 for cash at 101% of the
accreted value of the Exchangeable Notes plus accrued interest
thereon, pursuant to the exercise by the holders of the
Exchangeable Securities of their "Change-in-Control Rights"
(as defined in the indenture governing the Exchangeable Notes).
(c) Hanson shall cause its subsidiaries to provide Millennium and
HOH such assistance and access during normal business hours to the books and
records of such subsidiaries as may be reasonably requested in connection with
the preparation of the Pro Forma Net Debt Calculation. Hanson shall have
reasonable access during this time to Millennium and HOH and their independent
accountants to discuss the methodologies used, assumptions made, and other such
matters pertinent to the preparation of such calculation.
(d) On the Settlement Date, Millennium and HOH shall cause a
draft of the Pro Forma Net Debt Calculation (prepared in accordance with the
procedures and principles referred to in Section 6.3(b) above) to be delivered
to Hanson. It is the intention of the parties that the Pro Forma Net Debt of
Millennium and its subsidiaries on a combined basis as of the Closing Date,
after giving pro
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forma effect to the transfer of the Discontinued Businesses pursuant to the
Post-Demerger SPAs, but not reflecting any reduction in the purchase price of
the Discontinued Businesses pursuant to the Post-Demerger SPAs as a result of a
Material Adverse Change, should be equal to or less than $_____ billion.
(e) On the Settlement Date, Hanson hereby agrees to pay to HOH,
the amount, if any, by which Pro Forma Net Debt exceeds $_____ billion (the "Net
Debt Adjustment").
(f) If the parties are unable to agree on any items in the Pro
Forma Net Debt Calculation (the "Disputed Items"), Deloitte & Touche shall be
designated as the "Accounting Referee" which shall have the authority to review
and finally resolve the Disputed Items in accordance with the requirements of
this Section 6.3, and whose determination shall be final and binding on the
parties.
(g) The Accounting Referee shall have 30 days to review and
finally resolve the Disputed Items. In reaching such resolution, the Accounting
Referee shall consider only the Disputed Items, it being understood that the
Accounting Referee shall not be retained to conduct its own independent audit or
review of Pro Forma Net Debt, but rather shall be retained as an arbitrator to
resolve specific differences between the parties within the range of such
differences. The resolution by the Accounting Referee of the Disputed Items
shall be reflected in a final calculation of Pro Forma Net Debt (the "Final Pro
Forma Net Debt Calculation"). Within five days thereafter, the Pro Forma Net
Debt Calculation shall be delivered to Hanson, Millennium and HOH, and shall be
final and binding upon the parties hereto, and the Net Debt Adjustment shall be
paid in accordance with the Final Pro Forma Net Debt Calculation.
6.4 Treatment of ADS Rights Subsequent to
Closing.
Hanson and Millennium hereby agree that from
and after the Closing:
a. Hanson America shall surrender to Hanson
Bermuda any and all of the ADS Rights received by
it in the Required Tender Offer for no additional
consideration; and
b. If a holder of ADS Rights purchases
American Depositary Shares of Hanson for cash as
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provided in the ADS Rights and the ADS Rights Agreement, dated as
of March 1, 1994, among Hanson Bermuda, Hanson and Citibank,
N.A., as ADS Rights Agent, as the same may be amended from time
to time (the "ADS Rights Agreement"), Millennium shall cause
Hanson America to refund to Hanson an amount equal to such
portion of the Repurchase Price (defined in the ADS Rights
Agreement) as is specified in the form of ADS Right attached as
Annex A to the ADS Rights Agreement, which is attributable to
such purchase at the time of such purchase.
6.5 Further Assurance. The parties hereto undertake to co-operate
in good faith to ensure that they do such acts and things as may reasonably be
necessary to complete the Demerger and payment of the Stock Dividend. At all
times after the date of this Agreement and after the completion of the transfer
and acquisition of the HOH Shares and the issuance of the Millennium Shares, the
parties shall use their reasonable best efforts to procure that any necessary
third party shall execute such documents and do such acts and things as may
reasonably be required for the purpose of giving to Hanson and Millennium,
respectively, the full benefit of all the provisions of this Agreement. The
parties hereto shall use their reasonable best efforts to obtain any consent,
substitution, approval or amendment required to novate or assign all agreements,
leases, licenses and other rights of any nature whatsoever relating to the
assets, rights and other things of HOH and its subsidiaries of value to
Millennium, including without limitation the release of Hanson and its
subsidiaries and affiliates (other than HOH and its subsidiaries) from any
guarantees, surety bonds, letters of credit or similar items (collectively,
"Support Obligations") previously entered into or made for the benefit of HOH
and its subsidiaries (other than any such guarantees, surety bonds, letters of
credit or similar items issued or outstanding in respect of taxes, HOH's
reduction of capital or in favor of the U.K. Inland Revenue); provided, however,
that neither Hanson nor Millennium shall be obligated to pay any consideration
therefor (except for filing fees and other similar charges) to the third party
from whom such consents, approvals, substitutions and amendments are requested.
If the parties are unable to obtain any such required consent, approval,
substitution or amendment, Hanson (or its subsidiaries and affiliates) shall
continue to be bound by such agreements, leases, licenses and other rights and,
unless not permitted by law or the terms thereof, Millennium (or its
subsidiaries or affiliates) shall, as agent for
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Hanson (or its subsidiaries or affiliates) or as subcontractor, pay, perform and
discharge fully all the obligations of Hanson (or its subsidiaries or
affiliates) thereunder from and after the Closing and indemnify and hold
harmless Hanson and its subsidiaries and affiliates from and against, all
losses, claims, damages, taxes, liabilities and expenses whatsoever arising out
of or in connection with Millennium's (or its subsidiaries' or affiliates')
performance of or omission to perform its obligations thereunder and hereunder.
Hanson (or its subsidiaries or affiliates) shall, without further consideration,
pay and remit to Millennium (or its subsidiaries or affiliates) promptly all
money, rights and other consideration received in respect of such performance
after payment of any taxes due from Hanson (or its subsidiaries or affiliates)
with respect to such receipt. Hanson (or its subsidiaries or affiliates) shall
exercise their rights and options under all such agreements, leases, licenses
and other rights and commitments referred to in this Section 6.5 only as
reasonably directed by Millennium and at Millennium's expense. If and when any
such consent shall be obtained or such agreement, lease, license or other rights
shall otherwise become assignable or able to be novated, Hanson (or its
subsidiaries or affiliates) shall promptly assign all its rights and obligations
thereunder to Millennium (or its subsidiaries or affiliates) without payment of
further consideration and Millennium (or its subsidiaries or affiliates) shall,
without the payment of any further consideration, assume such rights and
obligations. To the extent that the assignment of any contract or agreement or
the proceeds thereof pursuant to this Section 6.5 is prohibited by law, the
assignment provisions of this paragraph shall operate to create a subcontract
with Millennium to perform each relevant, unassignable contract or agreement,
and Hanson to pay Millennium the subcontract price which shall be equal to the
money, rights and other consideration (after tax) received by Hanson (or its
subsidiaries or affiliates) with respect to the relevant, unassignable contract
or agreement, performed by Millennium under such subcontract.
In addition, the parties hereto shall use their reasonable best
efforts to obtain the release of subsidiaries of Millennium (including HOH and
its subsidiaries) from any Support Obligations previously entered into or made
for the benefit of Hanson and its subsidiaries and affiliates (other than
subsidiaries of Millennium, but including the Discontinued Businesses);
provided, however, that neither Millennium nor Hanson shall be obligated to pay
any consideration therefor (except for filing fees and other similar charges)
to the third party from whom such release is requested. The provisions of the
first paragraph of this Section 6.5 applicable to the undertaking of the parties
to obtain a release of Hanson and its subsidiaries from their Support
Obligations shall apply, mutatis mutundis, to the undertakings set forth in
this paragraph.
The parties further agree to cooperate with one another so as to
minimize their respective obligations with respect to all of the foregoing
matters.
6.6 No Warranties. Other than as explicitly provided herein and
except for the undertaking by Hanson to deliver the HOH Shares to Millennium at
the Closing free and clear of any lien, option, charge and encumbrance, right of
preemption or any other third party right (which undertaking shall survive the
Closing indefinitely), (i) Hanson does not, in this Agreement or any other
agreement, instrument or document contemplated by this Agreement, make any
representation as to, warranty of or covenant (whether express or implied) with
respect to the value of the HOH Shares, and (ii) the HOH Shares, as well as all
assets of HOH and its subsidiaries, to be acquired, directly or indirectly, by
Millennium hereunder are transferred on an "AS IS, WHERE IS" basis. The parties
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acknowledge and agree that the issuance of the Millennium Shares pursuant to
Section 1 represents the mutually agreed upon consideration for the HOH Shares,
and no party (or their respective permitted successors and assigns) shall have
the right at any time in the future to make any claim or raise any dispute with
respect to the adequacy or fairness of the consideration ascribed to the HOH
Shares.
6.7 Transfer Taxes. Any and all transfer taxes,
stamp duties and similar charges relating to the issuance of
the Millennium Shares and the transfer of the HOH Shares
shall be paid by ______.
6.8 Use of Corporate Names, Trade Names and Trademarks.
Millennium shall cause any of its subsidiaries who have the name "Hanson" in
their corporate name, to change such corporate name so as not to include the
name "Hanson" within 60 days of the Closing. Neither Millennium nor any
subsidiary of Millennium (including HOH and its subsidiaries) shall have any
right, title or interest in or to, nor shall Millennium or any subsidiary of
Millennium use, the name "Hanson", or any combination or derivation of such
name, logo or trade name currently employed by Hanson or any subsidiary of
Hanson, containing or using such name; provided, however, that HOH and its
subsidiaries may use such until December 31, 1996 only to the extent of any
stock stationery, packaging materials, purchase orders, or like forms. Hanson
shall not have any right, title or interest in or to, nor shall Hanson use, the
names "Millennium", "Quantum", "SCM" or "Glidco", or any combination or
derivation of such names, logos or trade names currently employed by Millennium,
any subsidiary of Millennium, or any company transferred to Millennium as part
of or in connection with the Demerger, containing or using such name (other than
the name "Hanson").
7. Undertaking with respect to Certain Agreements.
It is acknowledged that in order to effect the Stock Dividend and
certain related transactions, Hanson, certain of its subsidiaries and Millennium
have entered into the Demerger Agreements and that companies that are, or will
be, subsidiaries of Millennium will have, or will assume, obligations under such
Demerger Agreements. Hanson, Millennium and HOH each hereby agree to cause their
respective subsidiaries to perform, and Hanson, Millennium and HOH hereby
guarantee the performance of, such subsidiaries' obligations under the Demerger
Agreements.
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8. Arbitration.
Resolution of any and all disputes arising from or in connection with
this Agreement, whether based on contract, tort, statute or otherwise,
including, but not limited to, disputes over arbitrability and disputes in
connection with claims by third parties, but excluding disputes relating to the
Net Debt Adjustment in Section 6.3 hereof (which shall be resolved as provided
in such Section) or relating to the tax sharing agreements included in the
Demerger Agreements, (which shall be resolved in the manner provided in those
agreements) (collectively, "Disputes") shall be exclusively governed by and
settled in accordance with the provisions of this Section 8; provided, however,
that nothing contained herein shall preclude any party from seeking or obtaining
(a) injunctive relief or (b) equitable or other judicial relief to enforce the
provisions hereof or, pending resolution of Disputes hereunder, to preserve the
status quo. Hanson, Millennium or HOH (each a "Party") may commence proceedings
hereunder by delivering a written notice to the other Party or Parties providing
reasonable description of the Dispute to the other Party or Parties, and
expressly requesting arbitration hereunder. The Parties hereby agree to submit
all Disputes to arbitration under the terms hereof, which arbitration shall be
final, conclusive and binding upon the Parties, their successors and assigns.
The arbitration shall be conducted in New York City by three arbitrators acting
by majority vote (the "Panel") selected by agreement of the Parties not later
than ten (10) days after delivery of the demand or, failing such agreement,
appointed pursuant to the commercial arbitration rules of the American
Arbitration Association, as amended from time to time (the "AAA Rules"). If an
arbitrator so selected becomes unable to serve, his or her successors shall be
similarly selected or appointed. The arbitration shall be conducted pursuant to
the Federal Arbitration Act and such procedures as the Parties may agree, or, in
the absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing: (i) each Party shall have the right to audit the
books and records of the other Party or Parties that are reasonably related to
the Dispute; (ii) each Party shall provide to the other Party or Parties,
reasonably in advance of any hearing, copies of all documents which a Party
intends to present in such hearing; and (iii) each Party shall be allowed to
conduct reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties
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and the desirability of making discovery expeditious and cost effective. All
hearings shall be conducted on an expedited schedule, and all proceedings shall
be confidential. Any Party may at its expense make a stenographic record
thereof. The Panel shall complete all hearings not later than ninety (90) days
after its selection or appointment, and shall make a final award not later than
thirty (30) days thereafter. The award shall be in writing and shall specify the
factual and legal basis for the award. The Panel shall apportion all costs and
expenses of arbitration, including the Panel's fees and expenses and fees and
expenses of experts, between the prevailing and non-prevailing Party or Parties
as the Panel deems fair and reasonable. Notwithstanding the foregoing, in no
event may the Panel award multiple, punitive or exemplary damages. Any
arbitration award shall be binding and enforceable against the Parties hereto
and judgment may be entered thereon in any court of competent jurisdiction.
9. Miscellaneous.
9.1 No Impeachment. None of the parties hereto shall impeach this
Agreement on the grounds that any of the Directors of Hanson stand in any
fiduciary position to Millennium or that any of the Directors of Millennium
stand in any fiduciary position to Hanson or that the Directors of either party
do not constitute an independent Board.
9.2 Assignments. Except as provided in this Section 9.2, no party
may assign or transfer any of its rights and obligations under this Agreement
without the prior written consent of the other parties. Notwithstanding the
foregoing, Hanson, Millennium and HOH acknowledge and agree that any party may
assign its rights and delegate its obligations under this Agreement, including
without limitation its rights and obligations under the Indemnification
Agreement, the Deed of Tax Covenant and the Tax Sharing Agreement annexed
hereto, to one or more of its respective subsidiaries or affiliates, provided
that such an assignment shall have no effect on, and shall not be deemed to
constitute a release of such party from, its obligations under this Agreement.
9.3 Governing Law; Counterparts. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York
and may be executed in more than one counterpart and by different parties of
each counterpart and all such counterparts when executed shall form one and the
same agreements.
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IN WITNESS WHEREOF, Hanson, Millennium and HOH have caused this
Agreement to be signed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
HANSON PLC
By:_________________________________
Name:
Title:
MILLENNIUM CHEMICALS INC.
By:_________________________________
Name:
Title:
HANSON OVERSEAS HOLDINGS
LIMITED
By:_________________________________
Name:
Title:
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ANNEX A
Form of Indemnification Agreement
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ANNEX B
Form of Deed of Tax Covenant
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ANNEX C
Form of Tax Sharing and Indemnification Agreement
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ANNEX D
Demerger Agreements
1. Pre-Demerger Stock Purchase Agreement, dated as of
September __, 1996, between HM Holdings, Inc. and
Hanson PLC
2. Indemnification Agreement, dated as of September __,
1996, between HM Holdings, Inc. and Hanson PLC
3. Tax Sharing and Indemnification Agreement, dated
as of September __, 1996, among HM Holdings, Inc.,
Hanson PLC and HM Anglo American Ltd.
4. Pre-Demerger Stock Purchase Agreement, dated as of
September __, 1996, between HM Holdings, Inc. and
Hanson PLC, relating to Peabody Holding Company
5. Indemnification Agreement, dated as of September __,
1996, between HM Holdings, Inc. and Hanson PLC,
relating to Peabody Holding Company
6. Tax Sharing and Indemnification Agreement, dated
as of September __, 1996, among HM Holdings, Inc.,
Hanson PLC and HM Anglo American Ltd., relating to
Peabody Holding Company
7. Pre-Demerger Stock Purchase Agreement, dated as of
September __, 1996, between HM Holdings, Inc. and
Hanson PLC, relating to certain Canadian
subsidiaries
8. Indemnification Agreement, dated as of September __,
1996, between HM Holdings, Inc. and Hanson PLC,
relating to certain Canadian subsidiaries
9. Pre-Demerger Stock Purchase Agreement, dated as of
September 30, 1996, between HM Holdings, Inc. and
Hanson PLC, relating to Lynton Group, Inc.
10. Post-Demerger Stock Purchase Agreement, dated as
of September 30, 1996, between HMB Holdings Inc.
and Hanson PLC
11. Indemnification Agreement, dated as of September
30, 1996, between HMB Holdings Inc. and Hanson PLC
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12. Tax Sharing and Indemnification Agreement, dated
as of September 30, 1996, among HMB Holdings
Inc., Hanson PLC and HM Anglo American Ltd.
13. Post-Demerger Stock Purchase Agreement, dated as
of September 30, 1996, between MHC Inc. and Hanson
PLC
14. Indemnification Agreement, dated as of September
30, 1986, between MHC Inc. and Hanson PLC
15. Tax Sharing and Indemnification Agreement, dated
as of September 30, 1996, among MHC Inc., Hanson PLC
and HM Anglo American Ltd.
16. Corporate Transition Agreement, dated as of
July 1, 1996, between Hanson North America,
Inc. and HM Anglo American Ltd.
17. Joint Ownership Agreement, dated as of September
30, 1996, between Hanson North America Inc. and HM
Anglo American Ltd.
18. Management Agreement, dated as of September 30, 1996,
between Welbeck Management Limited and Diversity
Insurance Company Ltd.
19. Agreement, dated as of October 1, 1996, between
Hanson Pacific Limited and HM Holdings, Inc.
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ANNEX E
Letter from Hanson to the United Kingdom Inland Revenue
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Exhibit 10.8
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as
of September 30, 1996, among Millennium Chemicals Inc., a Delaware corporation
("Millennium"), Hanson PLC, a public limited company incorporated in England
("Hanson") and Hanson Overseas Holdings Limited, a United Kingdom corporation
("HOH").
RECITALS
A. The parties have entered into a Demerger Agreement, dated
as of September 30, 1996 (the "Demerger Agreement"), relating to the demerger
from Hanson (the "Demerger") of Hanson's chemicals business (the "Chemicals
Business") in the form of Millennium, pursuant to which (i) Hanson will, among
other things, transfer to Millennium, all of the outstanding shares (the "HOH
Shares") of HOH, which is the holder of the Chemicals Business and (ii) in
consideration therefor Millennium will issue shares representing all of its then
outstanding Common Stock, par value $.01 per share, and associated preferred
stock purchase rights (the "Common Stock"), to holders of Ordinary Shares of 25p
each in the capital of Hanson ("Ordinary Shares"), including Ordinary Shares
represented by American Depositary Shares ("ADSs").
B. In connection with the Demerger, Hanson, certain of its
subsidiaries and Millennium (and/or certain subsidiaries of Hanson that will
become subsidiaries of Millennium in connection with the Demerger) have entered
into a number of other agreements, including, without limitation, the agreements
listed on Annex A hereto (the "Demerger Agreements"), pursuant to which, among
other things, (i) companies that are, or will be, subsidiaries of Millennium
will transfer to Hanson and certain of its subsidiaries certain other
businesses, operations and assets, and (ii) companies that are, or will be,
subsidiaries of Millennium will have, or will assume, obligations under such
Demerger Agreements.
C. The parties acknowledge that it is their intention that,
effective upon the Closing (as defined in the Demerger Agreement), (i) Hanson
shall assume and accept or retain responsibility for the Hanson Liabilities (as
hereinafter defined), and (ii) Millennium shall assume and accept or retain
responsibility for the Millennium Liabilities (as hereinafter defined), in each
case except as otherwise provided in the Demerger Agreement or the Deed of Tax
Covenant and the Tax
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Sharing and Indemnification Agreement contemplated by the Demerger Agreement
and, in each case, subject to the intention of the parties that this Agreement
should not cover the indemnification of operations or businesses that are
independently addressed in other Demerger Agreements.
D. It is a condition to the consummation of the transactions
contemplated by the Demerger Agreement that the parties enter into this
Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, Millennium and Hanson agree as
follows:
ARTICLE I.
DEFINITIONS
"Covered Businesses" means the businesses, operations
or assets (or predecessors thereto) that were owned prior to the Demerger,
directly or indirectly, by subsidiaries of Hanson (including subsidiaries of
Hanson that will become subsidiaries of Millennium pursuant to the Demerger) and
which are covered by other indemnification agreements listed among the Demerger,
Agreements).
"Chemicals Subsidiaries" means all of the direct and indirect
subsidiaries of Hanson that are transferred to Millennium or its subsidiaries as
part of or in connection with Demerger other than the Discontinued Businesses.
"Discontinued Businesses" has the meaning ascribed to such
term in the Information Statement dated August ___, 1996 delivered to Hanson's
shareholders in connection with the Demerger.
"Hanson Businesses" means all of the businesses, operations
and assets of Hanson and its subsidiaries, including all of the businesses,
operations and assets that were previously conducted, owned or used by any
business or operation of Hanson (or any predecessor to such business or
operation), notwithstanding the fact that prior to the Closing (i) any such
business or operation was closed, wound up or otherwise terminated, (ii) such
asset ceased to be used in connection with such business or operation, or (iii)
any such business, operation or asset was sold or otherwise disposed of to any
person or entity other than the Chemicals Subsidiaries, including but not
limited to such companies as Hygrade Food Products Corporation, Interstate
United Corporation, Seacoast Products Inc. and 68.4% of Carisbrook Industries
Inc.; provided, however, that Hanson Businesses do not include (i) the
Millennium Businesses and (ii) the Covered Businesses. For the purpose of the
definition of "Hanson Businesses", the term "Hanson" includes all direct and
indirect subsidiaries of Hanson and any partnerships in which it or any of its
subsidiaries owns or at any time in the past owned an interest. As an
illustration of the principles set forth above, (x) Imperial Tobacco, which is
owned, indirectly, by Hanson and is neither being transferred to Millennium as
part of or in connection with the Demerger nor owned, directly or indirectly,
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by a subsidiary of Millennium which is a party to a Demerger Agreement, would be
included in "Hanson Businesses", and (y) the mobile hydraulic lifting equipment
manufacturing operations of Kidde Industries, Inc., which are the subject of an
Indemnification Agreement dated the date hereof between MHC Inc. and Hanson (the
"Kidde Indemnification Agreement"), are Covered Businesses and are not Hanson
Businesses.
"Hanson Liabilities" means, except as otherwise expressly
provided for in this Agreement or the Demerger Agreement and except for Taxes
(which are addressed in the Tax Sharing and Indemnification Agreement and the
Deed of Tax Covenant), any and all of the obligations, liabilities and expenses
incurred by Hanson, Millennium or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries arising out of or associated
with, or any Litigation and Claims alleged to arise out of or be associated
with, the Hanson Businesses, whether or not in the ordinary course of business,
in each case whether matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown, and whether arising out of circumstances existing
prior to, on or subsequent to the Closing and regardless of where or against
whom such obligations, liabilities and expenses are asserted or determined or
whether asserted or determined prior to, on or subsequent to the Closing, and
regardless of whether arising from or alleged to arise from negligence,
recklessness, violation of law, fraud, or misrepresentation by any of the
Millennium Parties, and including, without limitation, the following items:
(i) all obligations, liabilities and expenses with respect
to health, safety, personal injury, property damage, employment,
benefits, compensation, pension rights, claims arising out of
contracts, intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual
breach or violation of any obligation or requirement arising out of, or
associated with, the Hanson Businesses, including, without limitation,
(A) all product warranty obligations with respect to products
developed, produced, manufactured, marketed, used or distributed by the
Hanson Businesses ("Hanson Products"), whether shipped prior to, on or
subsequent to the Closing, and (B) all liabilities resulting from
claims for real or alleged personal injury or consequential damage
which is caused or alleged to have been or to be caused by any defect
in or breach of warranty related to any Hanson Products or other assets
of the Hanson Businesses;
(ii) all Litigation and Claims pending as of the Closing
against Millennium, Hanson and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Hanson
Litigation") and all
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Litigation and Claims brought, threatened or alleged against Millennium
or Hanson or any of their respective affiliates or subsidiaries or
affiliates of such subsidiaries after the Closing ("New Hanson
Litigation"), in each case if and solely to the extent that such
Litigation and Claims (in whole or in part) arise out of or are
associated with or are alleged (regardless of the party named in the
allegation or complaint) to arise out of or to be associated with the
Hanson Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorneys' or consultants' fees
or remediation costs) of Millennium, Hanson or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to,
the Hanson Businesses;
(iv) any Litigation and Claims brought after the Closing
against Millennium or its affiliates or subsidiaries or affiliates of
such subsidiaries by employees of Millennium or Hanson or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to,
the Closing, arising or alleged to arise from the Hanson Businesses;
(v) all obligations, liabilities and expenses (other than
those arising solely due to joint and several liability under ERISA)
with respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA), including any multiemployer plan (within the
meaning of Section 3(37) of ERISA), maintained by, contributed to, or
obligated to contribute to, at any time, by Hanson or any of its
subsidiaries other than the Chemicals Subsidiaries, including but not
limited to any liability with respect to: (A) the Pension Benefit
Guaranty Corporation under Title IV of ERISA; (B) a multiemployer plan
(within the meaning of Section 3(37) of ERISA); (C) any non-compliance
with the notice and benefit continuation requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended; (D)
any non-compliance with ERISA or any other applicable laws; and (E) any
suit, proceeding or claim which
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is brought against HOH or any of its subsidiaries, any such plan, and
any fiduciary or former fiduciary of any such plan; and
(vi) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of Hanson or any of its subsidiaries) by (A) Hanson or any
Hanson Business, or (B) any officer, director, employee or agent of
Hanson or any Hanson Business attributable to any actions or inactions
by Hanson or any Hanson Business.
"Hanson Parties" means Hanson and any direct or indirect
subsidiary or affiliate of Hanson (including the Discontinued Businesses),
other than the Chemicals Subsidiaries, and any of their respective directors,
shareholders, officers, employees, agents, consultants, customers,
representatives, successors, transferees or assignees.
"Litigation and Claims" means litigation pending or threatened
or claims alleged against Millennium and/or Hanson Parties, including, without
limitation, civil and criminal actions, workers' compensation proceedings,
administrative and regulatory proceedings, investigations, audits, inquiries,
demands, claims (including any title claims relating to real properties) and
threatened actions.
"Millennium Businesses" means the businesses, operations and
assets of Millennium and its subsidiaries, and any other business, operation or
asset transferred to Millennium or its subsidiaries as part of or in connection
with the Demerger other than the Discontinued Businesses, or any predecessor to
such business or operation, notwithstanding the fact that prior to the Closing
(i) any such business or operation was closed, wound up or otherwise terminated,
(ii) such asset ceased to be used in connection with such business or operation,
or (iii) any such business, operation or asset was sold or otherwise disposed of
to any person or entity except Hanson or its subsidiaries or affiliates (other
than the Chemicals Subsidiaries); provided, however, that Millennium Businesses
do not include (i) the Covered Businesses, and any business, operation or asset
(other than the Covered Businesses) which would otherwise be included in this
definition if such business, operation or asset was transferred to Hanson or its
subsidiaries or affiliates (other than the Chemicals Subsidiaries) prior to the
Demerger. For the purpose of the definition of "Millennium Businesses", the term
"Millennium" includes all direct and indirect subsidiaries of
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Millennium and any partnerships in which it or any of its subsidiaries owns or
at any time in the past owned an interest. As an illustration of the principles
set forth above, (i) the operations of Kidde Industries, Inc. (and its
predecessors) not relating to its mobile hydraulic lifting equipment
manufacturing operations, which are the subject of the Kidde Indeminification
Agreement, are Covered Businesses and are not Millennium Businesses, and (ii)
the operations of subsidiaries or divisions of McDonough Corporation, U.S.
Industries, Inc. (acquired in 1984), SCM Corporation and Kidde Inc. (which are
not Covered Businesses) are predecessor businesses of subsidiaries of Millennium
and, accordingly, are Millennium Businesses.
"Millennium Liabilities" means, except as otherwise expressly
provided for in this Agreement or the Demerger Agreement and except for Taxes
(which are addressed the Tax Sharing and Indemnification Agreement and the Deed
of Tax Covenant), any and all of the obligations, liabilities and expenses
incurred by Hanson, Millennium or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries arising out of or associated
with, or any Litigation and Claims alleged to arise out of or be associated with
the Millennium Businesses, whether or not in the ordinary course of business, in
each case whether matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown, and whether arising out of circumstances existing
prior to, on or subsequent to the Closing, and regardless of where or against
whom such obligations, liabilities and expenses are asserted or determined or
whether asserted or determined prior to, on or subsequent to the Closing, and
regardless of whether arising from or alleged to arise from negligence,
recklessness, violation of law, fraud or misrepresentation by any of the Hanson
Parties, and including, without limitation, the following items:
(i) all obligations, liabilities and expenses with respect
to health, safety, personal injury, property damage, employment,
benefits, compensation, pension rights, claims arising out of
contracts, intellectual property rights, product liability, warranty,
merchantability or fitness for any particular purpose of goods,
conformity of goods to contractual requirements, deceptive trade
practice, misrepresentation, fraud or any other alleged or actual
breach or violation of any obligation or requirement arising out of or
associated with the Millennium Businesses, including, without
limitation, (A) all product warranty obligations with respect to
products developed, produced, manufactured, marketed, used or
distributed by the Millennium Businesses ("Millennium Products"),
whether shipped prior to, on or subsequent to the Closing, and (B) all
liabilities resulting from claims for real or alleged personal injury
or consequential damage which is caused or alleged to have been or to
be caused by any defect in or breach of warranty related to any
Millennium Product or other asset of the Millennium Businesses;
(ii) all Litigation and Claims pending as of the Closing
against Millennium, Hanson and/or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries ("Pending Millennium
Litigation") and all
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Litigation and Claims brought, threatened or alleged against
Millennium, Hanson or any of their respective affiliates or
subsidiaries or affiliates of such subsidiaries after the Closing ("New
Millennium Litigation"), in each case if and solely to the extent that
such Litigation and Claims (in whole or in part) arise out of or are
associated with, or are alleged (regardless of the party named in the
allegation or complaint) to arise out of or be associated with the
Millennium Businesses;
(iii) all obligations, liabilities and expenses (including,
without limitation, all fines or penalties or costs of closure,
investigation and feasibility studies, attorney or consultant fees or
remediation costs) of Millennium, or Hanson or any of their respective
affiliates or subsidiaries or affiliates of such subsidiaries arising
under any federal, state, local or foreign statutes, laws (including
common law), codes, rules, regulations, policies or guidelines or any
administrative or judicial interpretations thereof relating to the
environment, natural resources and public or employee health and safety
arising out of or relating to, or alleged to arise out of or relate to
the Millennium Businesses;
(iv) any Litigation and Claims brought after the Closing
against Hanson or its affiliates or subsidiaries or affiliates of such
subsidiaries by employees of Hanson or Millennium or any of their
respective subsidiaries and affiliates claiming that they suffered
personal injuries of any kind, whether prior to, on or subsequent to
the Closing, arising out of, or alleged to arise out of, the Millennium
Businesses; and
(v) all obligations, liabilities and expenses (other than
those arising solely due to joint and several liability under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
with respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA), including any multiemployer plan (within the
meaning of Section 3(37) of ERISA), maintained by, contributed to, or
obligated to contribute to, at any time, by Millennium or any of its
subsidiaries (other than the Chemicals Subsidiaries and their
respective subsidiaries), including but not limited to any liability
with respect to: (A) the Pension Benefit Guaranty Corporation under
Title IV of ERISA; (B) a multiemployer plan (within the meaning of
Section 3(37) of ERISA); (C) any non-compliance with the notice and
benefit continuation requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as
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amended; (D) any non-compliance with ERISA or any other applicable
laws; and (E) any suit, proceeding or claim which is brought against
Hanson or any of its affiliates, any such plan, and any fiduciary or
former fiduciary of any such plan; and
(vi) all obligations, liabilities and expenses with respect to
the employment or termination of employment, including a constructive
termination, of any individual (including, but not limited to, any
employee of Millennium or any of its subsidiaries) by (A) Millennium or
any of the Millennium Businesses, or (B) any officer, director,
employee or agent of Millennium or any of the Millennium Businesses
attributable to any actions or inactions by Millennium or any of the
Millennium Businesses.
"Millennium Parties" means Millennium and any direct or
indirect subsidiary or affiliate of Millennium (other than Cornerstone-Spectrum,
Inc. and Kidde Industries Inc. and their respective subsidiaries as of the
Closing), and any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees.
Taxes has the meaning ascribed to such term in the Tax Sharing
and Indemnification Agreement and the Deed of Tax Covenant.
Words and expressions defined in the Demerger Agreement shall
have the same meaning herein, save that, to the extent that such definitions are
inconsistent with any definitions in this Agreement, the definitions herein
shall take precedence.
ARTICLE II.
EXCULPATION AND INDEMNIFICATION BY HANSON
Section 2.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Hanson shall, without any further
responsibility or liability of, or recourse to, any of the Millennium Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Hanson Liabilities. None of the Millennium Parties shall be liable to any of the
Hanson Parties for any reason whatsoever on account of any Hanson Liabilities.
Hanson shall indemnify, defend, save and hold harmless each of
the Millennium Parties from and against all claims, liabilities, obligations,
losses, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, charges, penalties,
allegations, demands, damages (including but not limited to
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actual, punitive or consequential, foreseen or unforeseen, known or unknown),
settlements, awards or judgments of any kind or nature whatsoever, arising out
of (i) the Hanson Liabilities, (ii) the breach by any of the Hanson Parties of
any of their obligations under this Agreement and the Demerger Agreement, and
(iii) any untrue statement or alleged untrue statement of a material fact
contained in Millennium's Registration Statement on Form 10 dated August __,
1996 (the "Form 10") or Millennium's Information Statement dated August __, 1996
(the "Information Statement"), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading except for those matters referred to in clause
(iii) of the second paragraph of Section 3.1 (all of which are hereinafter
collectively referred to as the "Millennium Damages").
Millennium Damages with respect to which, but only to the
extent that, any proceeds are received by, or on behalf of, Millennium or by any
of its subsidiaries or affiliates, from any third party insurance policy (and
are non-reimbursable by Millennium or any of its subsidiaries or affiliates
under any self insurance policy), shall not be the subject of indemnification
under this Agreement.
ARTICLE III.
GENERAL INDEMNIFICATION BY MILLENNIUM
Section 3.1. Subject to the provisions of Article IV hereof,
upon, from and after the Closing, Millennium shall, without any further
responsibility or liability of, or recourse to, any of the Hanson Parties,
absolutely and irrevocably assume and be solely liable and responsible for the
Millennium Liabilities. None of the Hanson Parties shall be liable to any of the
Millennium Parties for any reason whatsoever on account of any Millennium
Liabilities.
Millennium shall indemnify, defend, save and hold harmless
each of the Hanson Parties from and against all claims, liabilities,
obligations, losses, costs, costs of defense (as and when incurred, and
including reasonable outside attorneys' and consultants' fees), expenses, fines,
charges, penalties, allegations, demands, damages (including but not limited to
actual, punitive or consequential, foreseen or unforeseen, known or unknown),
settlements, awards or judgments of any kind or nature whatsoever, arising out
of (i) the Millennium Liabilities, (ii) the breach by any of the Millennium
Parties of any of their obligations under this Agreement and the Demerger
Agreement, and (iii) any untrue statement or alleged untrue statement of a
material fact contained in the Form 10 or the Information Statement or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
relating to the descriptions of the business, results of operations and
management of Millennium and its subsidiaries including the financial statements
contained in the Information Statement.
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(all of which are hereinafter collectively referred to as the "Hanson Damages").
Hanson Damages with respect to which, but only to the extent
that, any proceeds are received by, or on behalf of, Hanson or by any of its
subsidiaries or affiliates, from any third party insurance policy (and are
non-reimbursable by Hanson or any of its subsidiaries or affiliates under any
self insurance policy), shall not be the subject of indemnification under this
Agreement.
ARTICLE IV.
SPECIFIC INDEMNIFICATION ISSUES
Section 4.1. In the event a claim, demand, action or
proceeding is brought by a third party in which the liability as between Hanson
and Millennium is determined after trial in any judgment, award or decree to be
joint or concurrent or in which the entitlement to indemnification hereunder is
not readily determinable, the parties shall negotiate in good faith in an effort
to agree, as between Hanson and Millennium, on the proper allocation of
liability or entitlement to indemnification, as well as the proper allocation of
the costs of any joint defense or settlement pursuant to Section 6.4, all in
accordance with the provisions of, and the principles set forth in, this
Agreement. In the absence of any such agreement, such allocation of liability,
entitlement to indemnification and allocation of costs shall be subject to
ultimate resolution between Hanson and Millennium pursuant to Section 8.8.
Section 4.2. It is acknowledged that after the Closing the
parties will have arms length negotiated business relationships, which
relationships will be described in contracts, agreements and other documents
entered into in the normal course of business. Such documents may include
agreements by the parties and their affiliates and subsidiaries to supply after
the Closing, materials, products, services and leases. Such business
relationships shall not be subject to the indemnity provisions hereof, unless
the parties expressly agree to the contrary in the agreements governing such
relationships.
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ARTICLE V.
NOTICE AND PAYMENT OF CLAIMS
Section 5.1. If any person entitled to a defense and/or
indemnification under this Agreement (the "Indemnified Party") determines that
it is or may be entitled to a defense or indemnification by Millennium or
Hanson, as the case may be (the "Indemnifying Party"), under this Agreement:
(i) The Indemnified Party shall deliver promptly to the
Indemnifying Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense and/or
indemnification, the nature of the claim, and if known, the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. Nothing in this subparagraph shall be interpreted to
invalidate any claim by the Indemnified Party to be entitled to
indemnification, unless the Indemnifying Party can show that the
failure of the Indemnified Party to deliver such notice was
intentional.
(ii) The Indemnifying Party shall have 30 days from receipt
of the notice requesting indemnification within which to either: (A)
assume the defense of such litigation or claim; (B) pay the claim in
immediately available funds; (C) reserve its rights pending
negotiations under Section 6.4; or (D) object in accordance with
Section 5.2. This 30 day period may be extended by agreement of the
parties. Nothing in this subparagraph shall be interpreted to abrogate
or delay a party's obligation to provide the other with a defense under
this Agreement.
Section 5.2. The Indemnifying Party may object to the claim
for defense and/or indemnification set forth in any notice; provided, however,
that if the Indemnifying Party does not give the Indemnified Party written
notice setting forth its objection to such claim (or the amount thereof) and the
grounds therefor within the same 30 day period (or any extended period) referred
to in Section 5.1 above, the Indemnifying Party shall be deemed to have
acknowledged its liability to provide a defense or for the amount of such claim
and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such amount or obtain such defense. Any objection to a
claim for a defense or indemnification shall be resolved in accordance with
Section 8.8.
Section 5.3. The right to a defense or indemnification
under this Agreement applies only insofar as defense and
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indemnification are not provided for by insurance from any third party insurance
policy (and are non-reimbursable by Purchaser or any of its affiliates or
subsidiaries or affiliates of such subsidiaries under any self insurance
policy). Nevertheless, the potential availability of insurance coverage to
Hanson or Millennium shall not relieve the other party of its obligations for
defense or indemnification hereunder, or delay either party's obligation to the
other to assume a defense or pay any sums due hereunder.
Section 5.4. Payments due to be made under this Agreement
shall carry interest from the date on which the Indemnified Party became
entitled to indemnification until the date of actual payment (whether before or
after judgment) at the prime rate charged by Chase Manhattan Bank, N.A. to its
corporate customers in effect during such period.
Section 5.5. Payments due to be made under this Agreement
shall be free and clear of all deductions, withholdings, set-offs or
counterclaims whatsoever, except as may be required by law. If any deductions or
withholdings are required by law the Indemnifying Party shall be obliged to pay
such sum as will, after such deduction, withholding, set-off or counter-claim
has been made, leave the Indemnified Party with the same amount as it would have
been entitled to receive in the absence of any such requirement to make a
deduction or withholding.
Section 5.6. Payments due to be made under this Agreement
shall be reduced by the amount by which any Taxes for which the Indemnified
Party would have been accountable or liable to be assessed are either (i)
actually reduced prior to payment falling due hereunder or (ii) likely to be
reduced subsequent to payment falling due hereunder in the reasonable opinion of
the Indemnified Party acting in good faith in the light of the circumstances
prevailing at the time of delivery of written notice in accordance with Section
5.1. The reduction of any payments to be made in accordance with this Section
5.6 for Tax benefits which will likely be recognized within one year after the
date on which the Indemnified Party receives indemnification under this
Agreement shall be made without regard to the time value of money. The reduction
of any payments to be made in accordance with this Section 5.6 for Tax benefits
which will not likely be recognized within one year after the date on which the
Indemnified Party receives indemnification under this Agreement shall take into
account the time value of money from the time the applicable payment is received
until the date such Tax benefits are likely to be recognized, using as the
discount rate the prime
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rate charged by Chase Manhattan Bank, N.A. to its corporate customers at the
time the payment is received.
Section 5.7. The parties to this Agreement may enter into
agreements or other arrangements providing for the set-off of payments due to be
made by way of indemnification to both Hanson and Millennium.
ARTICLE VI.
DEFENSE OF THIRD-PARTY CLAIMS
Section 6.1. If the Indemnified Party's claim for
indemnification is based, under this Agreement, on a claim, demand,
investigation, action or proceeding, judicial or otherwise, brought by a third
party, and the Indemnifying Party does not object under Section 5.2 hereof, the
Indemnifying Party shall, within the 30-day period (or any extended period)
referred to in Section 5.1 above, assume the defense of such third-party claim
at its sole cost and expense and shall thereafter be designated as the "Case
Handler." Any such defense shall be conducted by attorneys employed by the
Indemnifying Party. The Indemnified Party may retain attorneys of its own
choosing to participate in such defense at the Indemnified Party's sole cost and
expense.
Section 6.2. If the Indemnifying Party assumes the defense of
any such third-party claim, the Indemnifying Party may settle or compromise the
claim without the prior consent of the Indemnified Party so long as all present
and future claims relating to the compromised claim against the Indemnified
Party are irrevocably and unconditionally released in full.
Section 6.3. The Indemnifying Party shall pay to the
Indemnified Party in immediately available funds the amount for which the
Indemnified Party is entitled to be indemnified within 30 days after the
settlement or compromise of such third-party claim or the judgment of a court of
competent jurisdiction (or within such longer period as agreed to by the
parties). If the Indemnifying Party does not assume the defense of any such
third-party claim, the Indemnifying Party shall be bound by the result obtained
with respect thereto by the Indemnified Party, except that the Indemnifying
Party has the right to contest that it is obligated to the Indemnified Party
under the terms of this Agreement, provided the Indemnifying Party shall have
raised its objection in a timely manner under Section 5.2.
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Section 6.4. In the event a claim, demand, action or
proceeding is brought by a third party in which the liability as between
Millennium and Hanson is alleged to be joint or in which the entitlement to
indemnification hereunder is not readily determinable, the parties shall
cooperate in a joint defense. Such joint defense shall be under the general
management and supervision of the party which is expected to bear the greater
share of the liability, and which will be considered the Case Handler, unless
otherwise agreed; provided, however, that neither party shall settle or
compromise any such joint defense matter without the consent of the other. The
costs of such joint defense, any settlement and any award or judgment (unless
the award or judgment specifies otherwise) shall be borne as the parties may
agree; or in the absence of such agreement, such costs shall be borne by the
party incurring such costs, subject to ultimate resolution between Millennium
and Hanson pursuant to Section 8.8.
Section 6.5. Notwithstanding anything to the contrary set
forth in this Agreement, in the event Millennium assumes the defense of any
claim, demand, investigation, action or proceeding relating to a breach, or
alleged breach, of Millennium's covenant set forth in Section 6.1 of the
Demerger Agreement (Covenant regarding Certain UK Tax Matters), Millennium
agrees that it shall not raise or assert as a defense against Hanson, the United
Kingdom Inland Revenue, or any other party, the argument that the agreement
between Hanson and United Kingdom Inland Revenue referred to in such Section is
unenforceable due to lack of authority, or contrary to law, or void against
public policy (and if Millennium does not assume the defense of any such claim,
demand, investigation, action or proceeding, the fact that Hanson does not raise
or assert such defenses shall in no way affect Millennium's obligations under
this Agreement).
ARTICLE VII.
COOPERATION AND PRESERVATION OF RECORDS
Section 7.1. Millennium Parties and Hanson Parties shall
cooperate with one another fully and in a timely manner in connection with the
defense of any Pending Millennium Litigation, New Millennium Litigation, Pending
Hanson Litigation, New Hanson Litigation or any other actual or threatened
claim.
Section 7.2. Such cooperation shall include, without
limitation, making available to the other party, during normal business hours
and upon reasonable notice, all books, records and information ("Litigation
Records"), officers and employees
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(without substantial interruption of employment) necessary or useful in
connection with any actual or threatened claim, investigation, audit, action or
proceeding.
Section 7.3. Each party shall continue in force, or at the
request of the other party, shall issue, notices exempting from destruction any
Litigation Records which the requesting party represents may be necessary to the
defense of, or required to be produced in discovery in connection with, any such
claim, investigation, audit, action or proceeding and shall refrain from
destroying any such Litigation Records until authorized by the requesting party.
The requesting party shall notify the other party promptly when the Litigation
Records are no longer required to be maintained.
Section 7.4. The party requesting access to Litigation Records
or officers and employees pursuant to Section 7.2 or preservation of Litigation
Records under Section 7.3 shall bear all reasonable out-of-pocket expenses
(except reimbursement of salaries, employee benefits and general overhead)
incurred by the other party in connection with providing such Litigation Records
or officers and employees.
Section 7.5. The party providing Litigation Records under this
Article VII may elect, upon a reasonable basis and within a reasonable time, to
designate all or a portion of the Litigation Records as confidential or
proprietary. If Litigation Records are so designated, the party receiving them
will treat them as it would its own confidential or proprietary information and
will take all reasonable steps to protect and safeguard the Litigation Records
while in its own custody and will attempt to shield such information from
disclosure by motions to quash, motions for a protective order, redaction or
other appropriate actions.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
Section 8.2. This Agreement may be amended, modified or
supplemented only by a written agreement of the parties.
Section 8.3. Except as provided in this Section 8.3,
this Agreement shall be personal to the parties to it and may not
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be assigned without the prior written consent of the other parties.
Notwithstanding the foregoing, Hanson, Millennium and HOH acknowledge and agree
that any party may assign its rights and delegate its obligations under this
Agreement, to one or more of its respective subsidiaries or affiliates, provided
that such an assignment shall have no effect on, and shall not be deemed to
constitute a release of such party from, its obligations under this Agreement.
Section 8.4. This Agreement is solely for the benefit of the
Hanson Parties and the Millennium Parties and is not intended to confer upon any
other person except such parties any rights or remedies hereunder. There are no
third party beneficiaries to this Agreement other than the Hanson Parties and
the Millennium Parties.
Section 8.5. This Agreement may be entered into in any number
of counterparts and by the parties to it on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
Section 8.6. If any term or provision of this Agreement shall
be held to be illegal or unenforceable, in whole or in part, under any enactment
or rule of law, such term or provision or part shall to that extent be deemed
not to form part of this Agreement but the enforceability of the remainder of
this Agreement shall not be affected. Subject thereto, should any term or
provision of this Agreement be or become ineffective, in whole or in part, for
reasons beyond the control of the parties hereto, the parties shall use
reasonable efforts to agree upon a new provision which shall as nearly as
possible have the same commercial effect as the ineffective term or provision or
part hereof.
Section 8.7. Any notice, claim or demand requiring to be
served under or in connection with this Agreement shall be in writing and shall
be sufficiently given or served if delivered addressed as follows:
If to Hanson or any other Hanson Party, to:
Hanson PLC
1 Grosvenor Place
London SWIX 7JH, England
Attention: Graham Dransfield, Esq.
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If to Millennium or any other Millennium Party, to:
Millennium Chemicals Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III, Esq.
and
Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire, DN40 2PR, England
Attention: George H. Hempstead, III, Esq.
Any such notice shall be delivered by hand or sent by first class post or
overnight courier. Any such notice shall take effect, in the case of hand
delivery, at the time of delivery, or, in the case of first class post,
forty-eight hours after posting.
Section 8.8. Resolution of any and all disputes arising from
or in connection with this Agreement, whether based on contract, tort, statute
or otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 8.8; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Hanson or
Millennium (each a "Party") may commence proceedings hereunder by delivering a
written notice to the other Party providing reasonable description of the
Dispute to the other, and expressly requesting arbitration hereunder. The
Parties hereby agree to submit all Disputes to arbitration under the terms
hereof, which arbitration shall be final, conclusive and binding upon the
Parties, their successors and assigns. The arbitration shall be conducted in New
York City by three arbitrators acting by majority vote (the "Panel") selected by
agreement of the Parties not later than ten (10) days after delivery of the
demand or, failing such agreement, appointed pursuant to the commercial
arbitration rules of the American Arbitration Association, as amended from time
to time (the "AAA Rules"). If an arbitrator so selected becomes unable to serve,
his or her successors shall be similarly selected or appointed. The arbitration
shall be conducted pursuant to the Federal Arbitration Act and such procedures
as the Parties may agree, or, in the absence of or failing such agreement,
pursuant to the AAA Rules. Notwithstanding the foregoing: (i) each Party shall
have
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the right to audit the books and records of the other Party that are reasonably
related to the Dispute; (ii) each Party shall provide to the other, reasonably
in advance of any hearing, copies of all documents which a Party intends to
present in such hearing; and (iii) each Party shall be allowed to conduct
reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days after its selection or appointment, and shall make a final
award not later than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees and
expenses and fees and expenses of experts, between the prevailing and
non-prevailing Party as the Panel deems fair and reasonable. Notwithstanding the
foregoing, in no event may the Panel award multiple, punitive or exemplary
damages. Any arbitration award shall be binding and enforceable against the
Parties hereto and judgment may be entered thereon in any court of competent
jurisdiction.
Section 8.9. Neither of the parties hereto shall impeach this
Agreement on the grounds that any of the Directors of Hanson stand in any
fiduciary position to Millennium or that any of the Directors of Millennium
stand in any fiduciary position to Hanson or that the Directors of either party
do not constitute an independent Board.
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IN WITNESS WHEREOF, Hanson, Millennium and HOH have caused
this Agreement to be signed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
HANSON PLC
By:__________________________________
Name:
Title:
MILLENNIUM CHEMICALS INC.
By:_________________________________
Name:
Title:
HANSON OVERSEAS HOLDINGS LIMITED
By:_________________________________
Name:
Title:
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ANNEX A
Demerger Agreements
1. Pre-Demerger Stock Purchase Agreement, dated as of September __, 1996,
between HM Holdings, Inc. and Hanson PLC
2. Indemnification Agreement, dated as of September __, 1996, between HM
Holdings, Inc. and Hanson PLC
3. Tax Sharing and Indemnification Agreement, dated as of September __,
1996, among HM Holdings, Inc., Hanson PLC and HM Anglo American Ltd.
4. Pre-Demerger Stock Purchase Agreement, dated as of September __, 1996,
between HM Holdings, Inc. and Hanson PLC, relating to Peabody Holding
Company
5. Indemnification Agreement, dated as of September __, 1996, between HM
Holdings, Inc. and Hanson PLC, relating to Peabody Holding Company
6. Tax Sharing and Indemnification Agreement, dated as of September __,
1996, among HM Holdings, Inc., Hanson PLC and HM Anglo American Ltd.,
relating to Peabody Holding Company
7. Pre-Demerger Stock Purchase Agreement, dated as of September __, 1996,
between HM Holdings, Inc. and Hanson PLC, relating to certain Canadian
subsidiaries
8. Indemnification Agreement, dated as of September __, 1996, between HM
Holdings, Inc. and Hanson PLC, relating to certain Canadian
subsidiaries
9. Pre-Demerger Stock Purchase Agreement, dated as of September 30, 1996,
between HM Holdings, Inc. and Hanson PLC, relating to Lynton Group,
Inc.
10. Post-Demerger Stock Purchase Agreement, dated as of September 30, 1996,
between HMB Holdings Inc. and Hanson PLC
11. Indemnification Agreement, dated as of September 30, 1996, between HMB
Holdings Inc. and Hanson PLC
12. Tax Sharing and Indemnification Agreement, dated as of September 30,
1996, among HMB Holdings Inc., Hanson PLC and HM Anglo American Ltd.
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13. Post-Demerger Stock Purchase Agreement, dated as of September 30, 1996,
between MHC Inc. and Hanson PLC
14. Indemnification Agreement, dated as of September 30, 1996, between MHC
Inc. and Hanson PLC
15. Tax Sharing and Indemnification Agreement, dated as of September 30,
1996, among MHC Inc., Hanson PLC and HM Anglo American Ltd.
16. Corporate Transition Agreement, dated as of July 1, 1996, between
Hanson North America, Inc. and HM Anglo American Ltd.
17. Joint Ownership Agreement, dated as of September 30, 1996, between
Hanson North America Inc. and HM Anglo American Ltd.
18. Management Agreement, dated as of September 30, 1996, between Welbeck
Management Limited and Diversity Insurance Company Ltd.
19. Agreement, dated as of October 1, 1996, between Hanson Pacific Limited
and HM Holdings, Inc.
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ANNEX B
Hanson Subsidiaries that are Parties to Other Indemnification
Agreements Listed Among the Demerger Agreements
1. Kaiser Cement Corporation
2. [Duke City Lumber Company, Inc.]
3. HM Industries, Inc.
4. Crane Holdings Inc.
5. Peabody Holding Company, Inc.
6. Hanson (Canada) Inc.
7. Canadian Fiberform Ltd.
8. Cornerstone-Spectrum, Inc.
9. Kidde Industries Inc.
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EXHIBIT 10.9(a)
FORM OF
TAX SHARING AND INDEMNIFICATION AGREEMENT
Tax Sharing and Indemnification Agreement (this "Agreement"), entered into
September 30, 1996, among: (a) Millennium Chemicals Inc., a Delaware corporation
("Millennium"), Hanson Overseas Holdings Limited, a United Kingdom corporation
("HOH"), and HM Anglo-American Ltd., a Delaware corporation ("Anglo")
(collectively, "Transferee"); and (b) Hanson PLC, a public limited company
incorporated in England and Wales ("Hanson"), and Hanson North America, Inc., a
Delaware corporation (collectively, "Transferor").
WHEREAS, Hanson, HOH, and Millennium have entered into a Demerger
Agreement, dated September 30, 1996 (the "Demerger Agreement"), relating to the
demerger by Hanson of Millennium (the "Demerger"); and
WHEREAS, in conjunction with the Demerger, Transferor and Transferee wish
to set forth their agreement with respect to certain tax matters as set forth
below.
NOW THEREFORE, it is hereby agreed as follows:
1. AXELSON TAXES ALLOCATED TO TRANSFEREE. (a) As between Transferor and
Transferee, Transferee will be responsible for, will pay or cause to be paid,
and will indemnify and hold harmless Transferor and its Affiliates from and
against any and all of the following Taxes with respect to Axelson, Inc. and
Axelson Canada, Inc. (collectively, "Axelson"):
i. all Federal Income Taxes imposed on Axelson with respect to taxable
events of Axelson that occurred at any time prior to the time HM
Holdings Inc. ("HM Holdings") transferred all the outstanding stock in
Axelson to Carisbrook Industries, Inc. ("Carisbrook") (the "Transfer
Time");
ii. all State Income Taxes imposed by any particular State on Axelson with
respect to taxable events of Axelson that occurred at any time within
the period during which Axelson was included with a Chemicals Company
in any combined, consolidated, or unitary State Income Tax Return
filed with such State; and
iii. all Federal Income Taxes imposed on Axelson arising out of the
inclusion of Axelson in the Anglo Consolidated Return, and all State
Income Taxes imposed on Axelson arising out of the inclusion of
Axelson in any consolidated, combined, or unitary State Income Tax
Return with a Chemicals Company.
Any reference in this Agreement to Axelson will be deemed to include a
reference to any Subsidiaries of Axelson immediately prior to the Transfer Time.
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(b) With respect to any Taxes for which Transferee is responsible
pursuant to Section 1(a) hereof (the "Section 1(a) Taxes"), the parties to this
Agreement will use their reasonable best efforts to place Transferee in the same
position as Carisbrook under that Tax Separation and Indemnification Agreement,
dated as of December 31, 1993, among Carisbrook, Axelson, and Wheatley TXT Corp.
(the "Axelson TSA"). For example, the parties to this Agreement will use their
reasonable best efforts to (i) allow Transferee to control any audits with
respect to Section 1(a) Taxes to the same extent that Carisbrook is entitled to
control such audits under Paragraph 9 of the Axelson TSA, and (ii) transfer to
Transferee any refunds of Section 1(a) Taxes that Carisbrook receives under
Paragraph 5 of the Axelson TSA.
(c) (i) Transferor will remit to Transferee the amount of any Tax
Benefit recognized by Transferor or any of its Affiliates resulting from any
Major Adjustment for which Transferor or any of its Affiliates has been
indemnified pursuant to this Agreement; provided, however, that if such Tax
Benefit is recognized by Carisbrook, Transferor will remit to Transferee 68.4%
of such Tax Benefit. For purposes of this Agreement:
i. "Tax Benefit" means a reduction in the amount of Taxes that would
otherwise be payable, whether resulting from a deduction, reduced gain
or increased loss from the disposition of an asset, or otherwise.
ii. a person will be deemed to have "recognized" a Tax Benefit at the time
the amount of Taxes such person otherwise would pay is reduced.
iii. a "Major Adjustment" is any adjustment to (A) any individual item of
income, gain, loss, or deduction if such adjustment is in excess of
five million dollars ($5,000,000), or (B) any individual item of
credit if such adjustment (when grossed up) is in excess of five
million dollars ($5,000,000).
(ii) If Transferor makes a remittance to Transferee under Section
1(c)(i) hereof of any Tax Benefit and all or part of such Tax Benefit is
subsequently disallowed, Transferee will promptly pay to Transferor that portion
of such remittance equal to the portion of the Tax Benefit that is disallowed.
2. CARISBROOK TAXES ALLOCATED TO TRANSFEREE. As between Transferor and
Transferee, Transferee will be responsible for, will pay or cause to be paid,
and will indemnify and hold harmless Transferor and its Affiliates from and
against 31.6% of any and all Taxes imposed on Carisbrook with respect to taxable
events of Carisbrook that occurred at any time during the Carisbrook Period. Any
reference in this Agreement to Carisbrook will be deemed to include a reference
to any Subsidiaries of Carisbrook (including Axelson during the period
Carisbrook owned all the outstanding stock in Axelson).
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3. AXELSON AND CARISBROOK TAXES ALLOCATED TO TRANSFEROR. (a) As between
Transferor and Transferee, Transferor will be responsible for, will pay or cause
to be paid, and will indemnify and hold harmless Transferee and its Affiliates
from and against any and all Taxes with respect to Axelson and Carisbrook other
than those for which Transferee is responsible pursuant to Sections 1(a) and 2
hereof.
(b) With respect to any Taxes of Carisbrook for which Transferor is
responsible pursuant to Section 3(a) hereof (the "Carisbrook Taxes"), the
parties to this Agreement will use their reasonable best efforts to place
Transferor in the same position as Anglo and HM Holdings under that Tax Sharing
and Indemnification Agreement, dated as of May 30, 1995, among Anglo, HM
Holdings, UDS LHA International B.V., and Hanson (the "Carisbrook TSA"). For
example, the parties to this Agreement will use their reasonable best efforts to
(i) allow Transferor to control any audits with respect to Carisbrook Taxes to
the same extent that Anglo and HM Holdings are entitled to control such audits
under Paragraph 7 of the Carisbrook TSA, and (ii) transfer to Transferor any
refunds of Carisbrook Taxes that HM Holdings or Anglo receives under Paragraph
4(a) of the Carisbrook TSA.
4. ALLOCATION OF UK TAXES DURING PERIOD OF DUAL RESIDENCE. Transferor will
be responsible for, will pay or cause to be paid, and will indemnify and hold
harmless Transferee and its Affiliates from and against any and all Taxes
imposed by the United Kingdom or any of its political subdivisions on any Anglo
Company during the period in which such Anglo Company was both (i) resident in
the United Kingdom for United Kingdom tax purposes, and (ii) a Subsidiary of
Hanson.
5. WITHHOLDING TAXES. (a) Transferor will be responsible for, will pay or
cause to be paid, and will indemnify and hold harmless Transferee and its
Affiliates from and against any and all Withholding Taxes that were required to
be (and were not) withheld by any Anglo Company with respect to any payment to
any Subsidiary of Hanson. This Section 5(a) will only apply to Withholding Taxes
arising out of events that occurred on or prior to the date of the Demerger.
(b) Transferor will be entitled to any refunds of any Withholding
Taxes for which Transferor is responsible pursuant to Section 5(a) hereof.
6. INDEMNIFICATION PROCEDURES. (a) If either Transferor or Transferee (the
"Indemnified Party") determines that it or any of its Affiliates is or may be
entitled to indemnification by the other party (the "Indemnifying Party") under
this Agreement, the Indemnified Party will promptly deliver to the Indemnifying
Party a written notice and demand therefor (the "Notice") specifying the basis
for its claim for indemnification, the nature of the claim, and, if known, the
amount for which the Indemnified Party reasonably believes it or any of its
Affiliates is entitled to be indemnified. The Notice must be received by the
Indemnifying Party no later than thirty (30) days before the expiration of the
applicable Tax statute of limitations; provided, however, that if the
Indemnified Party does not receive notice from the applicable governmental
taxing authority ("Government Notice") that an item
<PAGE>
<PAGE>
-4-
exists that could give rise to a claim for indemnification hereunder more than
thirty (30) days before the expiration of the applicable Tax statute of
limitations, then the Notice must be received by the Indemnifying Party
immediately after the Indemnified Party receives the Government Notice. Unless
the Indemnifying Party objects to the claim for indemnification (in the manner
set forth in Section 6(b) hereof), the Indemnifying Party will pay the
Indemnified Party the amount set forth in the Notice, in cash or other
immediately available funds, within thirty (30) days after receipt of the
Notice; provided, however, that if the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified is not known at the time of
the Notice, the Indemnified Party will deliver to the Indemnifying Party a
further notice specifying such amount as soon as reasonably practicable after
such amount is known and payment will then be made as set forth above.
(b) The Indemnifying Party may object to the claim for indemnification
(or the amount thereof) set forth in any Notice by giving the Indemnified Party,
within thirty (30) days following receipt of such Notice, written notice setting
forth the Indemnifying Party's grounds for so objecting (the "Objection
Notice"). If the Indemnifying Party does not give the Indemnified Party the
Objection Notice within such thirty (30)-day period, the Indemnifying Party will
be deemed to have acknowledged its liability for the amount of such claim and
the Indemnified Party may exercise any and all of its rights under applicable
law to collect such amount.
(c) If Transferor and Transferee are unable to settle any dispute
regarding a claim for indemnification within thirty (30) days after receipt of
the Objection Notice, Transferor and Transferee will, in accordance with Section
7 hereof, jointly request the Accounting Firm to resolve the dispute as promptly
as possible.
(d) Failure by the Indemnified Party to promptly deliver to the
Indemnifying Party a Notice in accordance with Section 6(a) hereof will not
relieve the Indemnifying Party of any of its obligations under this Agreement
except to the extent the Indemnifying Party is prejudiced by such failure.
7. RESOLUTIONS OF DISPUTES. Any dispute between Transferor and Transferee
as to any matter covered in this Agreement will be resolved by the Accounting
Firm; provided, however, that in resolving any such dispute the Accounting Firm
will be bound by the terms of this Agreement. Any fees or expenses of the
Accounting Firm will be borne equally by Transferor and Transferee.
8. DEFINITIONS. For purposes of this Agreement, the following terms have
the following meanings:
(a) "Accounting Firm" means Deloitte & Touche.
(b) "Affiliate" means, with respect to any person, any other person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such person.
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-5-
(c) "Anglo Company" means any corporation that was included (or
required to be included) in the Anglo Consolidated Return.
(d) "Anglo Consolidated Return" means any consolidated income tax
return for United States federal income tax purposes that includes Anglo as the
common parent.
(e) "Carisbrook Period" means the period during which HM Holdings Inc.
owned 31.6% of the outstanding common stock in Carisbrook.
(f) "Chemicals Company" means any corporation that has been included
(or that was required to be included) in the Anglo Consolidated Return at any
time on or prior to the date of the Demerger other than (i) Axelson, (ii)
Peabody Holding Company, Inc., (iii) Cornerstone-Spectrum, Inc., (iv) Kidde
Industries Inc., (v) Kaiser Cement Corporation, (vi) [Duke City Lumber Company,
Inc.], (vii) HM Industries, Inc., (viii) Crane Holdings Inc., and (ix) the
Subsidiaries of the corporations in (ii) through (viii).
(g) "Federal Income Taxes" means all United States federal income
taxes, and includes any interest, penalties, and additions imposed with respect
to such taxes.
(h) "Income Taxes" means all Federal Income Taxes and all State Income
Taxes.
(i) "Income Tax Return" means any Tax Return with respect to Federal
Income Taxes or State Income Taxes.
(j) "person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
association, a governmental entity (or any department, agency, or political
subdivision thereof), or any other entity.
(k) "State" means any State of the United States (including any
political subdivision thereof) and the District of Columbia.
(l) "State Income Taxes" means all income taxes (and other taxes
measured by net income or net gain) imposed by any State, and includes any
interest, penalties, and additions imposed with respect to such taxes.
(m) "State Income Tax Return" means any Tax Return with respect to
State Income Taxes.
(n) "Subsidiary" means any corporation in which the person being
referred to owns, directly or through one or more other Subsidiaries, stock
possessing at least fifty percent (50%) of the voting power of the outstanding
stock in such corporation.
<PAGE>
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(o) "Tax" or "Taxes" means any federal, state, local, foreign, or
other tax of any kind whatsoever (together with any interest, penalties, or
additions imposed with respect thereto), including, without limitation, income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, service, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
rental, lease, ad valorem, or other tax.
(p) "Tax Returns" means all returns, declarations, reports, claims for
refunds, information returns, statements, and other forms required to be filed
with respect to any Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
(q) "Withholding Taxes" means any Income Taxes that a person is
required to withhold and pay over to a Tax authority in connection with amounts
paid to any other person, including, without limitation, Income Taxes required
to be withheld and paid under Sections 1441 through 1446 of the Internal Revenue
Code of 1986, as amended; provided, however, that Withholding Taxes will not
include any Income Taxes required to be withheld and paid in connection with
amounts paid to any employee or independent contractor.
9. FAILURE TO MAKE PAYMENT IN A TIMELY MANNER. If either Transferor or
Transferee (the "Payor") fails to make a payment due and owing under this
Agreement to the other party or any of its Affiliates (the "Payee") reasonably
promptly after the parties hereto agree (or there is a binding determination)
that such payment is due and owing, the Payor will pay to the Payee interest on
such payment from and including the date the parties reach such agreement (or
such binding determination is made) to but excluding the date the Payor makes
such payment, at a rate equal to the prime rate charged by Chase Manhattan Bank,
N.A. to its corporate customers during such period.
10. COOPERATION. To the extent either Transferor or Transferee or any of
its Affiliates (the "Assistor") has in its possession information that is
reasonably required by the other party or any of its Affiliates (the "Assistee")
for the preparation by the Assistee of any Tax Returns required to be prepared
by the Assistee, the Assistor will make such information available to the
Assistee. This Section 10 will not be interpreted as requiring any party to this
Agreement or any of its Affiliates to generate any information not already in
the possession of such party or its Affiliates.
11. TAX RETURNS OF HANSON EXPORT. Transferee will prepare or cause to be
prepared, and will file or cause to be filed, all Tax Returns of Hanson Export
Limited for any taxable period that includes or ends prior to the date of the
Demerger.
12. AMENDMENTS; WAIVERS. No provision of this Agreement may be amended,
waived, or otherwise modified without the prior written consent of Transferor
and Transferee.
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13. ASSIGNMENTS. No party to this Agreement may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of the other parties; provided, however, that any party to this Agreement may
assign its rights and delegate its obligations under this Agreement to one or
more of its Subsidiaries or corporate Affiliates, provided that such an
assignment and delegation will have no effect on, and will not be deemed to
constitute a release of, such party from its obligations under this Agreement.
14. NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any rights
or remedies upon any person (including, without limitation, Axelson, Carisbrook,
Wheatley TXT Corp. and its Affiliates, and USI Industries, Inc. and its
Affiliates) other than the parties to this Agreement and their respective
successors and permitted assigns.
15. GOVERNING LAW. Except to the extent federal, state, local, or foreign
Tax laws, rules, or regulations govern the filing of Tax Returns or the
positions taken with respect to Taxes in Tax Returns, this Agreement will be
governed by and construed in accordance with the internal laws of the State of
New York.
16. NOTICES. Any notices, requests, demands, claims, and other
communications under this Agreement will be in writing and will be delivered at
the following addresses (or such other address as may be specified by notice
given to the other party pursuant to this Section 16):
If to a Transferee:
Millennium Chemicals Inc.
Hanson Overseas Holdings Limited
HM Anglo-American Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: General Counsel
and
Millennium Chemicals Inc.
La Porte Road, Stallingborough, Grimsby South
North East Lincolnshire
DN40 2PR England
Attention: General Counsel
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-8-
If to Transferor:
Hanson PLC
1 Grosvenor Place
London
SW1X 7JH England
Attention: General Counsel
and
Hanson North America, Inc.
[US address of Hanson North America]
17. ENTIRE AGREEMENT. This Agreement (including the agreements and
documents referred to herein) constitutes the entire agreement among the parties
hereto with respect to the subject matter of this Agreement and supersedes any
prior understandings, agreements, outlines, or representations by or among the
parties hereto, written or oral, to the extent they relate in any way to the
subject matter of this Agreement.
18. HEADINGS. The section headings contained in this Agreement are inserted
for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in more than one
counterpart and by different parties of each counterpart and all such
counterparts when executed will form one and the same agreement.
(signature page follows)
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AS WITNESS this Agreement has been signed by or on behalf of each of the
parties hereto.
MILLENNIUM CHEMICALS INC.
By: _____________________________
Name:
Title:
HANSON OVERSEAS HOLDINGS LIMITED
By: _____________________________
Name:
Title:
HM ANGLO-AMERICAN LTD.
By: _____________________________
Name:
Title:
HANSON PLC
By: _____________________________
Name:
Title:
HANSON NORTH AMERICA, INC.
By: _____________________________
Name:
Title:
<PAGE>
<PAGE>
DATED 1996
HANSON PLC
and
MILLENNIUM CHEMICALS INC
and
HANSON OVERSEAS HOLDINGS LIMITED
and
SCM CHEMICALS LIMITED
and
HANSON SCMC BV
and
SCM AUSTRALIA PTY
-----------------------------------------
DEED OF TAX COVENANT
-----------------------------------------
<PAGE>
<PAGE>
THIS DEED OF TAX COVENANT is made on 1996
BETWEEN:-
1. HANSON PLC of 1 Grosvenor Place, London, SW1X 7JH (the "Covenantor")
AND
2. MILLENNIUM CHEMICALS INC of [UK office address] (the "Purchaser")
AND
3. HANSON OVERSEAS HOLDINGS LIMITED of 1 Grosvenor Place, London, SW1X 7JH
(the "Company")
AND
4. SCM CHEMICALS LIMITED of [UK Stallingborough office address]
("Chemicals UK")
AND
5. HANSON SCMC BV of [Dutch address] ("HSCMC BV")
AND
6. SCM AUSTRALIA PTY of [Australian address] ("Chemicals
Australia")
NOW THIS DEED WITNESSES as follows:-
1. Interpretation
In this deed of covenant:-
(A) the following expressions shall have the following meanings:-
"Accounts" means, in relation to the Company, its
balance sheet drawn up as at the
Accounts Date and, in relation to
HSCMC BV, its balance sheet drawn up
as at its last accounting date prior
to Demerger Date;
"Accounts Date" means September 30, 1996;
"Business Day" means a day (other than a Saturday or
a Sunday) on which banks are open for
business
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2
in London;
"Claim" means the issue of any notice, letter
or other document by or on behalf of
any Tax Authority or the taking of any
other action by or on behalf of any
Tax Authority from which notice,
letter, document or action it appears
that a Tax Liability is to be, or may
come to be, imposed on the Company or
HSCMC BV;
"Deemed Tax Liability" has the meaning given in sub-clause
(B)(ii);
"Demerger Date" means October 1, 1996
"Distribution" has the meaning given in sub-clause
(C)(iii);
"Event" includes (without limitation) any
transaction, action or omission, any
change in the residence of any person
for the purposes of any Tax, and a
failure to take any action which would
avoid an apportionment or deemed
distribution of income (regardless of
whether the taking of any such action
after the Demerger Date could have
avoided such apportionment or deemed
distribution) and shall also include
the demerger of Millennium Chemicals
Inc by Hanson PLC;
"Income, Profits or Gains" has the meaning given in sub-clause
(C)(i);
"Proceedings" means any proceeding, suit or action
arising out of or in connection with
this deed;
"Relevant Amount" has the meaning set out in clause 5(C)
(Reliefs, etc.);
"Relevant Company" has the meaning set out in clause 2(C)
(Covenant);
"Relief" means any relief, allowance or credit
in respect of any Tax or any deduction
in computing Income, Profits or Gains
for the purposes of any Tax;
"Service Document" has the meaning given in clause 24(F)
(Agent for Service);
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3
"Tax" means:-
(i) within the United Kingdom,
corporation tax, advance
corporation tax, income tax
(including income tax required to
be deducted or withheld from or
accounted for in respect of any
payment), capital gains tax,
value added tax, national
insurance contributions, capital
duty, stamp duty, stamp duty
reserve tax, duties of customs
and excise, and any liability
arising under section 601 of, or
Chapter IV of, the Income and
Corporation Taxes Act 1988, and
any other taxes, levies, duties,
charges, imposts or withholdings
corresponding to, similar to,
replaced by or replacing any of
them, together with all
penalties, charges and interest
relating to any of them or to any
failure to file any return
required for the purposes of any
of them; and
(ii) outside the United Kingdom, all
taxes and all levies, duties,
imposts, charges and withholdings
in the nature of a tax including
(without limitation) taxes on
gross or net Income, Profits or
Gains and taxes on receipts,
sales, use, occupation,
franchise, value added and
personal property, together with
all penalties, charges and
interest relating to any of them
regardless (in either case) of
whether any such taxes, levies,
duties, imposts, charges,
withholdings, penalties and interest
are chargeable directly or primarily
against or attributable directly or
primarily to the Company or HSCMC BV
or any other person and of whether
any amount in respect of any of them
is recoverable from any other person
as mentioned in clause 6 (Recovery
from other persons);
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4
"Tax Assessment" means any assessment, demand,
direction or other similar formal
notice of a Tax Liability issued by
or on behalf of any Tax Authority by
virtue of which the Company or HSCMC
BV either is liable to make a payment
of Tax or will, with the passing of
time, become so liable (in the
absence of any successful application
to postpone any such payment);
"Tax Authority" means any taxing or other authority
(whether within or outside the United
Kingdom) competent to impose any Tax
Liability;
"Tax Liability" has the meaning given in sub-clause
(B)(i);
"Millennium Chemicals means Millennium Chemicals Inc and
Group" all companies, wherever incorporated,
that may after the Demerger Date be
treated for the purposes of any Tax
as being a member of the same group
of companies as Millennium Chemicals
Inc or as being associated with
Millennium Chemicals Inc.
"Working Hours" means 9.30 a.m. to 5.30 p.m. on a
Business Day;
(B) (i) references to any "Tax Liability" of the Company or
HSCMC BV shall mean both liabilities of the Company or
HSCMC BV to make actual payments of Tax (or amounts in
respect of Tax), and also:-
(a) the loss, or the setting off against Income,
Profits or Gains or against any Tax otherwise
chargeable, of any Relief which would (were
it not for the said loss or setting off) have
been available to the Company or HSCMC BV and
which has been taken into account in
computing (and so reducing) any provision for
deferred Tax which appears in the Accounts
(or which, but for the presumed availability
of such Relief, would have appeared in the
Accounts);
(b) the loss of a right to repayment of Tax which
has been treated as an asset of the Company
or HSCMC BV in preparing the Accounts or the
setting off of any such right to repayment of
Tax against any actual Tax Liability in
respect of which the Purchaser would, but for
that setting off, have been able to make a
claim against the Covenantor under this deed;
and
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5
(c) the setting off against Income, Profits or
Gains which were earned, accrued or received
on or before the Demerger Date or in respect
of a period ended on or before the Demerger
Date or against any Tax otherwise chargeable
in respect of an Event occurring (or deemed
to occur) on or before the Demerger Date or
in respect of a period ended on or before the
Demerger Date of any Relief which arises as a
consequence of or by reference to an Event
occurring (or deemed to occur) after the
Demerger Date or in respect of a period
commencing after the Demerger Date and not as
a consequence of or by reference to any Event
occurring (or deemed to occur) on or before
the Demerger Date or in respect of a period
ended on or before the Demerger Date in
circumstances where, but for such setting
off, the Company or HSCMC BV would have had
an actual Tax Liability in respect of which
the Purchaser would have been able to make a
claim against the Covenantor under this deed;
and
(ii) in any case falling within any of sub-paragraphs (a),
(b) and (c) of paragraph (i) of this sub-clause, the
amount that is to be treated for the purposes of this
deed as a Tax Liability of the Company or HSCMC BV
(the "Deemed Tax Liability") shall be determined as
follows:-
(a) in a case which falls within sub-paragraph
(b) of paragraph (i) of this sub-clause, the
Deemed Tax Liability shall be the amount of
the repayment that would have been obtained
but for the loss or setting off mentioned in
that sub-paragraph;
(b) in a case which falls within sub-paragraph
(a) or (c) of paragraph (i) of this
sub-clause and where the Relief that was the
subject of the loss or setting off mentioned
in those sub-paragraphs was a deduction from
or offset against Tax, the Deemed Tax
Liability shall be the amount of that Relief;
and
(c) in a case which falls within sub-paragraph
(a) or (c) of paragraph (i) of this
sub-clause and where the Relief that was the
subject of the loss or setting off mentioned
in those sub-paragraphs was a deduction from
or offset against Income, Profits or Gains,
the Deemed Tax Liability shall be:-
(1) if the Relief was the subject of
such a loss, the amount of Tax which
would, on the basis of the rates of
Tax current at the date of the loss,
have been saved but for the loss; or
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6
(2) if the Relief was the subject of
such a setting off, the amount of
Tax which has been saved in
consequence of the setting off;
(C) references to:-
(i) "Income, Profits or Gains" shall include any income,
profits or gains which are deemed to be earned,
accrued or received for the purposes of any Tax;
(ii) Income, Profits or Gains (as defined in paragraph (i)
of this sub-clause) as being earned, accrued or
received on or before a particular date or in respect
of a particular period shall mean Income, Profits or
Gains which are regarded as having been, or are deemed
to have been, earned, accrued or received on or before
that date or in respect of that period for the
purposes of any Tax;
(iii) any "Distribution" shall include anything which is, or
is deemed to be, a dividend or distribution for the
purposes of any Tax and shall also include any other
Event which gives rise to an obligation to account for
advance corporation tax or amounts corresponding to or
similar to advance corporation tax; and
(iv) any Distribution as occurring on or before a
particular date shall include any Distribution which
has fallen due to be made on or before that date for
the purposes of any Tax;
(D) unless otherwise specified:-
(i) references to clauses, sub-clauses, paragraphs and
sub-paragraphs are to clauses, sub-clauses, paragraphs
and sub-paragraphs of this deed;
(ii) a reference to any statute or statutory provision
shall be construed as a reference to the same as it
may have been, or may from time to time be, amended,
modified or re-enacted;
(iii) references to a "person" shall be construed so as to
include any individual, firm, company, government,
state or agency of a state or any joint venture,
association or partnership (whether or not having
separate legal personality);
(iv) references to a "company" shall be construed so as to
include any company, corporation or other body
corporate, wherever and however incorporated or
established;
(v) the expression "body corporate" shall have the meaning
given in the Companies Act 1985;
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7
(vi) references to writing shall include any modes of
reproducing words in a legible and non-transitory
form;
(vii) references to times of the day are to London time;
(viii) headings to clauses are for convenience only and do
not affect the interpretation of this deed;
(ix) references to any English legal term for any action,
remedy, method of judicial proceeding, legal document,
legal status, court, official, or any legal concept or
thing shall in respect of any jurisdiction other than
England be deemed to include what most nearly
approximates in that jurisdiction to the English legal
term; and
(x) (a) the rule known as the ejusdem generis
rule shall not apply and accordingly general
words introduced by the word "other" shall
not be given a restrictive meaning by reason
of the fact that they are preceded by words
indicating a particular class of acts,
matters or things; and
(b) general words shall not be given a
restrictive meaning by reason of the fact
that they are followed by particular examples
intended to be embraced by the general words.
2. Covenant
Subject to the provisions of clause 3 (Limits on clause 2), the
Covenantor hereby covenants with the Purchaser to pay to the Purchaser
an amount equal to any of the following:-
(A) any Tax Liability of the Company or HSCMC BV arising:-
(i) as a consequence of or by reference to any Event which
occurred on or before the Demerger Date or was deemed
to occur on or before the Demerger Date for the
purposes of any Tax; or
(ii) in respect of or by reference to any Income, Profits
or Gains which were earned, accrued or received on or
before the Demerger Date or in respect of a period
ending on or before the Demerger Date;
(B) any Tax Liability of the Company or HSCMC BV arising as a
consequence of or by reference to any of the following
occurring or being deemed to occur at any time after Demerger
Date:-
(i) the disposal by any Relevant Company of any asset or
of any interest in or right over any asset; or
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8
(ii) any Relevant Company ceasing to be resident in the
United Kingdom for the purposes of any Tax,
and, for the purposes of this sub-clause, the term "Relevant
Company" shall mean the Covenantor and any company, other than
any member of the Millennium Chemicals Group, that may be
treated for the purposes of any Tax as being a member of the
same group of companies as the Covenantor or as being
associated with the Covenantor; or
(C) any costs and expenses reasonably and properly incurred by the
Purchaser, and/or the Company or HSCMC BV in connection either
with any such Tax Liability as is mentioned in sub-clauses (A)
and (B) or with any Claim therefor or in taking or defending
any action under this deed.
3. Limits on Clause 2
3.1 The covenant given in clause 2 (Covenant) shall not cover any Tax
Liability of the Company or HSCMC BV:-
(A) to the extent that provision or reserve in respect of that Tax
Liability is made in the Accounts; or
(B) to the extent that the Tax Liability arises or is increased as
a result only of any increase in rates of Tax made after the
Demerger Date with retrospective effect or of any change in
law or officially published practice (excluding, for the
avoidance of doubt, any private rulings given in
correspondence) occurring after the Demerger Date with
retrospective effect; or
(C) to the extent that the Tax Liability would not have arisen but
for a voluntary transaction, action or omission carried out or
effected by any member of the Millennium Chemicals Group at
any time after the Demerger Date, other than any such
transaction, action or omission:-
(i) carried out or effected under a legally binding
commitment created on or before the Demerger Date; or
(ii) carried out or effected in the ordinary course of
business of the Company or HSCMC BV, provided that a
chargeable payment such as is referred to in (E) below
shall in no circumstances be regarded as made in the
ordinary course of business; or
(D) if and to the extent that the Tax Liability has been recovered
pursuant to a claim under any other document; or
(E) to the extent that the Tax Liability would not have arisen but
for the making by any member of the Millennium Chemicals Group
of a chargeable payment
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9
as that term is defined in section 214 of the Income and
Corporation Taxes Act 1988; or
(F) if and to the extent that the Tax Liability arises (or is
increased) solely as a result of a reduction in the amount of
credit for United States federal income tax which may be
claimed by the Company against United Kingdom corporation tax
under the provisions of part XVIII of the Income and
Corporation Taxes Act 1988 (Double Taxation Relief); or
(G) arising in respect of stamp duty or stamp duty reserve tax on
the transfer or delivery of shares to the Purchaser by the
Covenantor on the Demerger Date pursuant to an exempt
distribution by the Covenantor under section 213 Income and
Corporation Taxes Act 1988; or
(H) arising in respect of stamp duty or stamp duty reserve tax on
the transfer or delivery of shares or loan stock in any of
HSCMC BV, HM Anglo American Limited, Hanson America Inc or HM
Holdings Inc to the Company or any subsidiary thereof by any
member of the same group of companies as the Covenantor.
3.2 Nothing in this deed shall be deemed to relieve the Purchaser or the
Company or HSCMC BV from any duty to mitigate any loss or damage
incurred by them.
3.3 The provisions of this Clause shall remain in force and be fully
applicable in all circumstances and in particular shall not be
discharged by any claim under this deed whatever its nature or
consequence.
4. Chargeable Payments
4.1 The Purchaser hereby covenants with the Covenantor to pay to the
Covenantor an amount equal to any Tax Liability of the Covenantor or of
any other company which is a member of the same group of companies as
the Covenantor or is associated with the Covenantor arising as a
consequence of, or by reference to, the making by the Purchaser, or any
company which is a member of the Millennium Chemicals Group, of any
such payment or deemed payment as constitutes a chargeable payment for
the purposes of section 214 of the Income and Corporation Taxes Act
1988.
4.2 The Covenantor hereby covenants with the Purchaser to pay to the
Purchaser an amount equal to any Tax Liability of the Purchaser or the
Millennium Chemicals Group arising as a consequence of, or by reference
to, the making by the Covenantor, or any company which is the member as
the same group of companies for Tax purposes as the Covenantor, or
which is associated with the Covenantor for Tax purposes, of a
chargeable payment for the purposes of section 214 Income and
Corporation Taxes Act 1988.
<PAGE>
<PAGE>
10
5. Reliefs, etc
(A) Unless the parties hereto shall agree otherwise, if the
auditors for the time being of the Company or HSCMC BV shall
certify (at the request and expense of the Covenantor) that
any Tax Liability which has resulted in a payment having been
made or becoming due from the Covenantor under this deed will
give rise to a Relief for any member of the Millennium
Chemicals Group which would not otherwise have arisen, then,
as and when the liability of such member of the Millennium
Chemicals Group to make an actual payment of or in respect of
Tax is reduced, by reason of that Relief and after taking
account of the effect of all other Reliefs that are or become
available to any other member of the Millennium Chemicals
Group (including any Relief derived from a subsequent
accounting period), from the amount that that liability would
have been but for the availability of that Relief, the amount
by which that liability is so reduced shall be dealt with in
accordance with sub-clause (C).
(B) Unless the parties hereto shall agree otherwise, if the
auditors for the time being of the Purchaser shall certify (at
the request and expense of the Covenantor) that an amount of
Tax has been repaid in respect of an accounting period ending
on or before the Accounts Date or an accounting period which
includes the Accounts Date
(i) which has not been treated as an asset in the Accounts
of the Company or HSCMC BV (including, without
limitation, the repayment of Tax which it is
anticipated will be received by the Company in respect
of the accounting period ended 30 September 1993); and
(ii) the repayment has not arisen as a result of the
utilisation of a Relief which arose after the
Demerger Date,
then the amount of such Tax (together with any interest in
respect of such Tax paid by the relevant Tax Authority) shall
be dealt with in accordance with sub-clause (C).
(C) Where it is provided under sub-clause (A) or (B) that any
amount (the "Relevant Amount") is to be dealt with in
accordance with this sub-clause:-
(i) the Relevant Amount shall first be set off against any
payment then due from the Covenantor under this deed;
and
(ii) to the extent there is an excess, a refund shall be
made to the Covenantor of any previous payment or
payments made by the Covenantor under this deed and
not previously refunded under this clause up to the
amount of such excess; and
<PAGE>
<PAGE>
11
(iii) in the case of a Relevant Amount arising under
sub-clause (B) but not (A), to the extent that the
excess referred to in paragraph (ii) of this
sub-clause is not exhausted under that paragraph, the
remainder of that excess shall be paid to the
Covenantor.
(D) Where any such certification as is mentioned in sub-clause (A)
or (B) has been made, the Covenantor or the Purchaser or the
Company or HSCMC BV may request the auditors for the time
being of the Company or HSCMC BV to review such certification
in the light of all relevant circumstances, including any
facts which have become known only since such certification,
and to certify whether such certification remains correct or
whether, in the light of those circumstances, the amount that
was the subject of such certification should be amended.
(E) If the auditors certify under sub-clause (D) that an amount
previously certified should be amended, that amended amount
shall be substituted for the purposes of sub-clause (C) as the
Relevant Amount in respect of the certification in question in
place of the amount originally certified, and such adjusting
payment (if any) as may be required by virtue of the
above-mentioned substitution shall be made as soon as
practicable by the Covenantor or (as the case may be) to the
Covenantor.
6. Recovery from other persons
If, in the event of any payment becoming due from the Covenantor under
clause 2 (Covenant), any member of the Millennium Chemicals Group
either is immediately entitled at the due date for the making of that
payment to recover from any person (not being any other member of the
Millennium Chemicals Group but including any Tax Authority) any sum in
respect of the Tax Liability that has resulted in that payment becoming
due from the Covenantor, or at some subsequent date becomes entitled to
make such a recovery, then the Purchaser shall or shall procure that
the other member of the Millennium Chemicals Group entitled to make
that recovery shall promptly notify the Covenantor of its entitlement
and shall, if so required by the Covenantor and at the Covenantor's
sole expense, take all appropriate steps to enforce that recovery
(keeping the Covenantor fully informed of the progress of any action
taken); and if the Covenantor has made a payment under clause 2
(Covenant) in respect of the Tax Liability in question, the Purchaser
shall account to the Covenantor for whichever is the lesser of:-
(A) any sum so recovered by the other member of the Millennium
Chemicals Group in respect of that Tax Liability (including
any interest or repayment supplement paid by the Tax Authority
or other person on or in respect thereof less any Tax
chargeable on any other member of the Millennium Chemicals
Group in respect of that interest); and
<PAGE>
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12
(B) the amount paid by the Covenantor under clause 2 (Covenant)
in respect of that Tax Liability.
7. Claims Procedure
(A) Upon the Purchaser or the Company or HSCMC BV becoming aware
of a Claim relevant for the purposes of this deed, the
Purchaser shall forthwith give written notice of that Claim to
the Covenantor or, as the case may be, shall procure that the
Company or HSCMC BV forthwith give written notice of that
Claim to the Covenantor, and the Purchaser shall further
procure that the Company or HSCMC BV (if the Covenantor shall
indemnify and secure the Purchaser and/or the Company or HSCMC
BV to their reasonable satisfaction against all losses, costs,
damages and expenses, including interest on overdue Tax, which
may be incurred thereby) take such action and give such
information and assistance in connection with the affairs of
the Company or HSCMC BV as the Covenantor may reasonably and
promptly by written notice request to avoid, resist, appeal or
compromise the Claim;
PROVIDED THAT the Purchaser shall not be obliged to procure
that the Company or HSCMC BV appeal against any Tax Assessment
if, the Covenantor having been given written notice of the
receipt of that Tax Assessment in accordance with the
preceding provisions of this sub-clause, the Purchaser or the
Company or HSCMC BV have not within 30 days thereafter
received instructions in writing from the Covenantor, in
accordance with the preceding provisions of this sub-clause,
to make that appeal.
(B) The actions which the Covenantor may reasonably request under
sub-clause (A) shall include (without limitation) the Company
or HSCMC BV applying to postpone (so far as legally possible)
the payment of any Tax and/or allowing the Covenantor to take
on or take over at its own expense the conduct of all or any
proceedings of whatsoever nature arising in connection with
the Claim in question, and, if the Covenantor take on or take
over the conduct of proceedings, the Purchaser shall provide
and shall procure that the Company or HSCMC BV provide such
information and assistance as the Covenantor may reasonably
require in connection with the preparation for and conduct of
those proceedings.
8. Tax Returns
(A) The Covenantor or its duly authorised agent shall prepare the
Tax returns of the Company and HSCMC BV for all accounting
periods ending on or before the Accounts Date (collectively
"Relevant Accounting Periods"), consulting with the Purchaser
and taking account of the Purchaser's reasonable requests,
suggestions and comments in relation to any matter which could
have a material effect upon the position of the Millennium
Chemicals Group in respect of any Tax Liability.
<PAGE>
<PAGE>
13
(B) Subject to sub-clause (A) above, the Purchaser shall procure
that the Company and HSCMC BV shall cause the returns
mentioned in sub-clause (A) to be authorised, signed and
submitted to the appropriate authority without amendment or
with such amendments as the Covenantor shall agree and shall
give the Covenantor or its agents all such assistance as may
be required to agree those returns with the appropriate
authorities;
PROVIDED THAT the Purchaser shall not be obliged to procure
that the Company or HSCMC BV take any such action as is
mentioned in this sub-clause in relation to any Tax return
that is not full, true and accurate in all material respects.
(C) The Covenantor or its duly authorised agents shall prepare all
documentation and deal with all matters (including
correspondence) relating to the Tax returns of the Company and
HSCMC BV for the Relevant Accounting Periods and the Purchaser
shall procure that the Company and HSCMC BV shall afford such
access to their books, accounts and records as is necessary
and reasonable to enable the Covenantor or its duly authorised
agents to prepare those returns and conduct matters relating
thereto in accordance with the Covenantor's rights under this
clause.
(D) Nothing done by the Company or HSCMC BV pursuant to this
clause shall in any respect restrict or reduce any rights the
Purchaser may have to make a claim against the Covenantor
under this deed in respect of any such Tax Liability as is
mentioned in clause 2 (Covenant).
(E) (i) The Purchaser shall procure that the Company or HSCMC
BV shall make such claims, surrenders and elections as
may reasonably be directed by the Covenantor
(including, for the avoidance of doubt, any claim,
surrender or election relating to a notified Claim
which the Covenantor wishes to reduce or extinguish by
the making of any such claim, surrender or election)
relating to Relevant Accounting Periods as it is by law
entitled to make. Without limitation the Purchaser
shall procure that (to the extent that such amounts are
eligible for relief or surplus advance corporation tax
is available and can be validly surrendered) the
Company will accept surrenders of amounts eligible for
relief from corporation tax and amounts of surplus
advance corporation tax (and will complete all
necessary documentation and render all such assistance
as is reasonably necessary to give effect thereto)
sufficient to reduce or extinguish any liability of the
Company to Tax for the Relevant Accounting Periods (or
any of them), such surrender or surrenders to be made
without payment therefor by the company;
(ii) without prejudice to the generality of the provisions
of paragraph (i) above, the Purchaser shall procure
that the Company will surrender to
<PAGE>
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14
such member or members of the Covenantor's group or
former subsidiary or former subsidiaries of the
Covenantor as the Covenantor may direct such amounts
eligible for relief from Tax as are available to it and
can validly be surrendered in respect of the Relevant
Accounting Periods (and will complete all necessary
documentation and render all such assistance as is
necessary to give effect thereto) such surrender or
surrenders to be made without payment to the Company
therefor (unless the relevant relief is an asset in the
Accounts of the Company, in which event payment shall
be made to the Company equal to the Tax thereby saved
by the relevant company);
(iii) The Purchaser shall use all reasonable endeavours to
procure that the Company shall not reduce or
extinguish any relief or allowance to which it is
entitled in respect of any Relevant Accounting Period
or disclaim any part of the benefit of capital or
other allowances or claims for group relief, advance
corporation tax surrender or roll-over against tax
claimed in respect of a Relevant Accounting Period.
(F) The Purchaser or its duly authorised agent shall prepare,
submit and deal with the tax returns of the Company and HSCMC
BV for all accounting periods other than Relevant Accounting
Periods. In respect of the Tax return for the accounting
period ending after, but including, the Demerger Date,
Purchaser shall consult with Covenantor and take into account
Covenantor's reasonable requests, suggestions and comments in
relation to any matter which could have a material effect on
the Covenantor's own position in respect of any Tax Liability
(or that of any other current or previous member of the same
group of companies as the Covenantor).
9. Chemicals UK, Chemicals Australia
(A) In this clause Chemicals UK and Chemicals Australia are
collectively referred to as the "Excluded Companies".
(B) The Covenantor shall not be liable to make any payment to the
Purchaser or to the Excluded Companies, or either of them, in
respect of any Tax Liability of the Excluded Companies, or
either of them, for any period whether before or after the
Demerger Date.
(C) The Purchaser or its duly authorised agent shall prepare,
submit and deal with the Tax Returns of the Excluded Companies
for all accounting periods. The Purchaser shall consult with
Covenantor and take into account Covenantor's reasonable
requests, suggestions and comments in relation to any matter
which could have a material effect on the amounts eligible for
relief from corporation tax ("Group Relief") which it is
anticipated will be surrendered to Chemicals UK for the
accounting periods referred to in the Table in sub-clause (E)
below.
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15
(D) For the avoidance of doubt, neither the Covenantor, nor any
member of the same group of companies as the Covenantor, shall
be liable in respect of any Tax Liability of Chemicals
Australia arising out of the loss of any Relief which might be
available, or have been available, for any accounting period
ending on or prior to 30 September 1996 regardless of whether
payment shall have been made by Chemicals Australia for the
benefit of any such relief. In circumstances where payment has
been made by Chemicals Australia for the surrender or transfer
of any Relief, no refund or repayment will be made to
Chemicals Australia in the event that such Relief ceases to be
available.
(E) The following Table shows amounts of Group Relief "Notified
Amounts") which either have provisionally been, or will
provisionally be, surrendered by the Covenantor (or other
company in the same group as the Covenantor) to Chemicals UK:
<TABLE>
<CAPTION>
Accounting Group
Period ending: Profit Relief
------------- ------ ------
'L' 'L'
<S> <C> <C>
28.2.87 25,187,259 22,179,150
30.9.87 22,511,588 22,511,588
30.9.88 48,702,459 48,702,459
30.9.89 63,311,835 63,311,835
30.9.90 59,866,768 59,866,768
30.9.91 36,923,129 36,923,129
30.9.92 22,714,721 22,714,721
30.9.93 3,488,168 3,488,168
30.9.94 5,221,707 5,221,707
30.9.95 21,173,000 21,173,000
30.9.96 35,000,000 35,000,000
</TABLE>
(F) Without guaranteeing the availability thereof, the Covenantor
undertakes to use its best endeavours to ensure that Group
Relief of an amount equal to the Notified Amounts will be
surrendered to Chemicals UK to the intent that the profit
chargeable to corporation tax will be nil for all accounting
periods of Chemicals UK ending on, or prior to, 30 September
1996, other than the period ending 28 February 1987.
(G) No payment shall be made by Chemicals UK for Group Relief
surrendered to it of an amount not exceeding the Notified
Amount for any accounting period referred to in the Table in
clause 8(E) hereof.
(H) Subject to (G) above, the Purchaser shall procure that (to the
extent that such Group Relief or surplus advance corporation
tax is available and, in either case, can validly be
surrendered) Chemicals UK will accept surrenders of Group
Relief additional to the Notified Amounts or surplus ACT
sufficient to reduce or extinguish any Tax Liability of
Chemicals UK for any accounting
<PAGE>
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16
period ending on or prior to 30 September 1996 and shall pay
to the surrendering company an amount equal to the Tax saved
by Chemicals UK.
(I) Covenantor and Purchaser will, and Purchaser will procure that
Chemicals UK will, co-operate in the making of all claims and
surrenders in pursuance of the foregoing provisions.
10. Decontrolled Companies
(A) The following companies are referred to collectively as the
"Decontrolled Companies":
SCM Industries Limited
Vanity Fair Industries International Limited
Big Dutchman (International) AG SA
Meredith Group Corp
Spartus (HK) Limited
(B) The Covenantor hereby covenants with the Purchaser to pay to
the Purchaser an amount equal to any Tax Liability of the
Decontrolled Companies, or any of them, (but not any Tax
Liability of any United States shareholder in such
Decontrolled Companies) in respect of any accounting period
ending on or before Demerger Date, but excluding any
accounting period during which, or during any part of which,
the Decontrolled Company or Companies was or were wholly-owned
by HM Anglo American Limited.
11. Due Date of Payment
(A) Where the Covenantor becomes liable to make any payment under
clause 2 (Covenant), the due date for the making of that
payment shall be:-
(i) in a case that involves an actual payment of Tax by
the Company or HSCMC BV, the date that is the last
date on which the Company or HSCMC BV has to pay or
would have had to have paid to the appropriate Tax
Authority the Tax that has given rise to the
Covenantor's liability under this deed in order to
avoid incurring a liability to interest or a charge or
penalty in respect of that Tax Liability; or
(ii) in a case falling within any of sub-paragraphs (a),
(b) and (c) of clause 1(B)(i) (Interpretation), the
date falling seven days after the date when the
Covenantor has been notified by the Purchaser that the
auditors for the time being of the Company or HSCMC BV
have certified, at the request of the Purchaser, that
the Covenantor has a liability for a determinable
amount under clause 2 (Covenant).
<PAGE>
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17
(B) All amounts due to be paid under this deed shall be payable
and paid in Pounds Sterling. If any Tax Liability or other sum
relevant to the terms of this deed is denominated in a
currency other than Sterling then it will be converted for all
purposes hereof into Sterling as of the due date for its
payment or reimbursement in accordance with the terms hereof.
(C) If any payment required to be made by the Covenantor under
this deed is not made by the due date for the making thereof,
then, except to the extent that the Covenantor's liability
under clause 2 (Covenant) compensates the Purchaser for the
late payment by virtue of its extending to interest and
penalties, that payment shall carry interest from that due
date until the date when the payment is actually made at prime
rate from time to time of Chase Manhattan Bank to its
corporate clients.
12. Deductions from Payments, etc.
(A) All sums payable by the Covenantor to the Purchaser under this
deed shall be paid free and clear of all deductions or
withholdings whatsoever, save only as may be required by law.
(B) If any deductions or withholdings are required by law to be
made from any of the sums payable as mentioned in sub-clause
(A), the Covenantor shall be obliged to pay to the Purchaser
such sum as will, after the deduction or withholding has been
made, leave the Purchaser with the same amount as it would
have been entitled to receive in the absence of any such
requirement to make a deduction or withholding provided that
this clause (B) shall not apply to any deduction or
withholding which is required to be made by virtue of
Millennium Chemicals Inc causing the Covenantor to be in
breach of the representations made by it to the UK Inland
Revenue in a letter dated [1996] (a copy of which is attached
to this deed).
(C) If any sum payable by the Covenantor to the Purchaser under
this deed (other than interest under clause 11 (Due date of
payment)) shall be subject to a Tax Liability in the hands of
the Purchaser, the Covenantor shall be under the same
obligation to make an increased payment in relation to that
Tax Liability as if the liability were a deduction or
withholding required by law.
(D) The Purchaser will, and will procure that the Company and
HSCMC BV will, consult with the Covenantor and take all
reasonable steps requested by the Covenantor to minimise the
deduction or withholding on any payment due by the Covenantor
under this deed.
13. Remedies and Waivers
(A) No delay or omission on the part of any party to this deed in
exercising any right, power or remedy provided by law or under
this deed shall:-
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18
(i) impair such right, power or remedy; or
(ii) operate as a waiver thereof.
(B) The single or partial exercise of any right, power or remedy
provided by law or under this deed shall not preclude any
other or further exercise thereof or the exercise of any other
right, power or remedy.
14. Assignment
(A) The benefits of this deed may be assigned (together with any
cause of action arising in connection with any of them) by the
Purchaser to any other member of the Millennium Chemicals
Group; and
(B) obligations under this deed shall not be assignable.
15. Further Assurance
Each of the parties hereto shall from time to time, on being reasonably
required to do so by the other party now or at any time in the future,
do or procure the doing of all such acts and/or execute or procure the
execution of all such documents in a form satisfactory to the other
party as may reasonably be required for giving full effect to this
deed.
16. Co-operation
The Covenantor and the Purchaser will co-operate fully with each other
with respect to, and will make available to each other, such Tax data
or other information relating to the Company HSCMC BV, Chemicals UK and
Chemicals Australia as may be reasonably required for the preparation
by the Covenantor or the Purchaser of any Tax Returns or other
documentation or matters required to be prepared or dealt with by the
Covenantor or the Purchaser hereunder.
17. Notices
(A) Any notice or other communication given or made under or in
connection with the matters contemplated by this deed shall be
in writing.
(B) Any such notice or other communication shall be addressed as
provided in sub-clause (C) and, if so addressed, shall be
deemed to have been duly given or made as follows:-
(i) if sent by personal delivery, upon delivery at the
address of the relevant party;
(ii) if sent by first class post, two Business Days after
the date of posting; and
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19
(iii) if sent by facsimile, when despatched;
PROVIDED THAT if, in accordance with the above provisions, any
such notice or other communication would otherwise be deemed
to be given or made outside Working Hours, such notice or
other communication shall be deemed to be given or made at the
start of Working Hours on the next Business Day.
(C) The relevant addressee, address, and facsimile number of each
party for the purposes of this deed, subject to sub-clause
(D), are:-
<TABLE>
<CAPTION>
Name of party Address
<S> <C>
Hanson plc 1 Grosvenor Place, London, SW1X 7JH
F.A.O. G Dransfield Esq
Facsimile No.
0171 235 3455
Millennium Chemicals Inc [UK office address]
[Details]
Hanson Overseas Holdings Ltd [new UK office address]
[Details]
SCM Chemicals Ltd [Stallingborough address]
[Details]
Hanson SCMC BV [Dutch address]
[Details]
SCM Australia Pty [Australian address]
[Details]
</TABLE>
(D) A party may notify the other party to this deed of a change to
its name, relevant addressee, address or facsimile number for
the purposes of sub-clause (C) PROVIDED THAT such notification
shall only be effective on:-
(i) the date specified in the notification as the date on
which the change is to take place; or
(ii) if no date is specified or the date specified is less
than five Business Days after the date on which notice
is given, the date falling five Business Days after
notice of any such change has been given.
(E) For the avoidance of doubt, the parties agree that the
provisions of this clause shall not apply in relation to the
service of Service Documents.
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20
18. Counterparts
(A) This deed may be executed by the parties on separate
counterparts, but shall not be effective until each party has
executed at least one counterpart.
(B) Each counterpart shall constitute the original of this deed,
but all the counterparts shall together constitute but one and
the same instrument.
19. Time of Essence
Save as otherwise expressly provided, time is of the essence of this
deed.
20. Invalidity
If at any time any provision of this deed is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, that shall not affect or impair:-
(A) the legality, validity or enforceability in that jurisdiction
of any other provision of this deed; or
(B) the legality, validity or enforceability under the law of any
other jurisdiction of that or any other provision of this
deed.
21. Language
(A) Each notice, demand, request, statement, instrument,
certificate, or other communication given, delivered or made
by either party to the other under or in connection with this
deed shall be:-
(i) in English; or
(ii) if not in English, accompanied by an English
translation made by a translator, and certified by
such translator in a manner, approved by the receiving
party.
(B) The receiving party shall be entitled to assume the accuracy
of and rely upon any English translation of any document
provided pursuant to sub-clause (A)(ii).
22. Choice of Governing Law
This deed shall be governed by and construed in accordance with English
law.
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21
23. Jurisdiction
The parties to this deed irrevocably agree for the exclusive benefit of
the Purchaser that the courts of England are to have exclusive
jurisdiction to settle any disputes which may arise out of or in
connection with this deed and that accordingly any Proceedings shall be
brought in such courts.
24. Agent for Service
(A) The Purchaser irrevocably agrees that any Service Document may
be sufficiently and effectively served on it in connection
with Proceedings in England and Wales by service at its
address set out at the head of this deed or, if at any time
the Purchaser shall cease to have an address in England and
Wales, [UK Solicitors] as agent for service, or on the
replacement agent if one has been appointed and notified to
the Covenantor.
(B) Any Service Document served pursuant to this clause shall be
marked for the attention of:-
(i) [UK Solicitor and address] or such other address
within England or Wales as may be notified to the
Covenantor by the Purchaser; or
(ii) such other person as is appointed as agent for service
pursuant to sub-clause (D) at the address notified
pursuant to sub-clause (D).
(C) Any document addressed in accordance with sub-clause (B) shall
be deemed to have been duly served if:-
(i) left at the specified address, when it is left; or
(ii) sent by first class post, two Business Days after the
date of posting.
(D) If the agent referred to in sub-clause (A) (or any replacement
agent appointed pursuant to this sub-clause) at any time
ceases for any reason to act as such, the Purchaser shall
appoint a replacement agent to accept service having an
address for service in England or Wales and shall notify the
Covenantor of the name and address of the replacement agent;
failing such appointment and notification, the Covenantor
shall be entitled by notice to the Purchaser to appoint such a
replacement agent to act on the Purchaser's behalf.
(E) A copy of any Service Document served on an agent pursuant to
this clause shall be sent by post to the Purchaser at its
address for the time being for the service of notices and
other communications under clause 17 (Notices), but no failure
or delay in so doing shall prejudice the effectiveness of
service of the Service Document in accordance with the
provisions of sub-clause (A).
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(F) "Service Document" means a writ, summons, order, judgement or
other process issued out of the courts of England and Wales
relating to or in connection with any Proceedings.
IN WITNESS WHEREOF this document has been executed and delivered as a deed the
day and year first before written.
SIGNED as a deed by )
HANSON PLC acting by a )
director and its secretary/ )
two directors )
.............................
Director
.............................
Secretary/Director
SIGNED as a deed by )
MILLENNIUM )
CHEMICALS INC acting )
by a director and its )
secretary/two directors )
.............................
Director
.............................
Secretary/Director
SIGNED as a deed by )
HANSON OVERSEAS )
HOLDINGS LIMITED )
acting by a director and its )
secretary/two directors )
.............................
Director
.............................
Secretary/Director
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SIGNED as a deed by )
SCM CHEMICALS )
LIMITED acting by a )
director and its secretary/ )
two directors )
.............................
Director
.............................
Secretary/Director
SIGNED as a deed by )
HANSON SCMC BV acting )
by a director and its )
secretary/two directors )
.............................
Director
.............................
Secretary/Director
SIGNED as a deed by )
SCM AUSTRALIA PTY )
acting by a director and its )
secretary/two directors )
.............................
Director
.............................
Secretary/Director
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Exhibit 10.10
FORM OF CORPORATE TRANSITION AGREEMENT
CORPORATE TRANSITION AGREEMENT, dated as of July 1, 1996
(this "Agreement"), between Hanson North America, Inc., a Delaware corporation
("Hanson") and HM Anglo American Ltd., a Delaware corporation ( the "Company").
RECITALS
A. Millennium Chemicals Inc., a Delaware corporation
("Millennium") is a newly formed corporation established for the purpose of
owning and operating the chemicals businesses currently held by Hanson PLC
("HPLC") and certain of its affiliates and conducted by Quantum Chemical
Corporation, SCM Chemicals Inc., Glidco Inc. and their affiliates (the
"Chemicals Businesses") which are currently indirectly owned by the Company.
B. The Board of Directors of HPLC has determined that it is in
the best interests of HPLC, the Chemicals Businesses and HPLC's shareholders
to demerge the Chemicals Businesses (the "Demerger") by transferring the
Chemicals Business to Millennium in consideration for Millennium issuing
shares representing all of its then outstanding Common Stock to HPLC's
shareholders.
C. Hanson and its affiliates and the Company wish to provide for
an orderly transition of management of both the Company and Hanson and its
affiliates including the employment of, and allocation of various corporate
assets and liabilities and certain other matters with respect to employee
benefit plans, executive compensation plans and certain other employee plans and
arrangements with respect to, employees who will be employed by the Company and
Hanson or its affiliates, respectively.
NOW, THEREFORE, in consideration of the covenants and agreements
set forth herein, effective as of the Demerger, the parties hereto hereby agree
as follows:
1. EMPLOYMENT. Effective as of July 1, 1996, the Company
hereby transfers and assigns, and Hanson shall, or shall cause one of its
affiliates to, accept and assume and agree to employ, the employees of the
Company listed on Schedule A ("Hanson Employees"). Hanson and its affiliates
shall assume liability and responsibility (except as may otherwise be agreed)
with respect to each Hanson Employee and the Company shall retain liability and
responsibility
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for any benefits with respect to its employees who do not become Hanson
Employees ("Company Employees").
2. TERMS AND CONDITIONS OF EMPLOYMENT. Effective as of the date
hereof and unless otherwise specifically provided in an individual employment
agreement with a Company Employee, Hanson shall provide each Company
Employee who becomes a Hanson Employee with substantially identical base
compensation rates and related annualized target bonuses and terms and
conditions of employment as those in effect for such employee immediately
prior to the date hereof. With respect to any Company Employee covered by an
individual employment agreement with Hanson or one of its affiliates, on or
prior to the Demerger, Hanson or such affiliate shall assign, and the Company
shall assume, such agreement. With respect to any Hanson Employee covered by an
individual employment agreement with the Company, on or prior to the Demerger,
the Company shall assign, and Hanson or one of its affiliates shall assume,
such agreement.
3. BENEFIT PLANS.
(a) Establishment. With respect to the "employee benefit plans"
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), and any other plan or arrangement, including
any supplemental pension or bonus plan, maintained or sponsored by the Company
or the entities which are to Subsidiaries of the Company (other than the
Discontinued Businesses as defined in the Registration Statement on Form 10 of
the Company dated August __, 1996) which are listed on Schedule B (the "Company
Plans"), prior to the completion of the Demerger, Hanson or one of its
affiliates shall establish and maintain substantially identical "mirror" plans
to those listed on Schedule B other than the Hanson Industries Pension Plan for
the benefit of the Company Employees (the "Hanson Plans"). Effective as of
October 1, 1996, Hanson or one of its affiliates shall establish and maintain
the Hanson Plans and a defined benefit plan substantially identical to the
Hanson Industries Pension Plan for the benefit of the Hanson Employees (the
"Hanson Retirement Plan") which shall be deemed a Hanson Plan for purposes of
this agreement.
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The Hanson Plans shall recognize service with Hanson or any of its affiliates
for Hanson Employees for all purposes to the extent recognized under the
corresponding Company Plans.
(b) Company Plans. Upon the Demerger, Hanson or one of its
affiliates shall assume sponsorship of the Hanson Retirement Plan and retain
responsibility for benefit liabilities under each respective Hanson Plan with
respect to the Hanson Employees.
(c) Qualified Plans Transfer of Assets. On or after the Demerger,
the Company shall cause assets to be transferred from (i) any trust or trusts
maintained by the Company or one of its affiliates which is tax-exempt under
Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and which is associated with one or more defined contribution plans maintained
by the Company or one of its affiliates (the "Company DC Trust") to a mirror
trust or trusts established by Hanson or one of its affiliates (the "Hanson DC
Trust") in an amount determined as of the most recent valuation date of the
Company DC Trust equal to the assets attributable to the account balances for
each Hanson Plan which is a defined contribution plan, and (ii) the Master Trust
Agreement as amended from time to time between HM Holdings, Inc. and The Bank of
New York dated January 1, 1988 (the "Company Master Trust") to a mirror trust
established by Hanson or one of its affiliates (the "Hanson Master Trust"), in
an amount determined as of the most recent valuation date of the Company Master
Trust in accordance with ERISA, including Section 4044 of ERISA if applicable,
for each Hanson Plan which is a defined benefit plan, in each case together
with an allocable share of earnings and/or losses of the respective distributing
trusts from such respective valuation dates to the actual dates of transfer of
assets; provided, however that in no event shall such transfer take place until
Hanson or one of its affiliates has furnished to the Company either: (i) a
favorable determination letter from the Internal Revenue Service with respect to
the qualification of the Hanson Plans that are intended to be qualified plans
under Section 401(a) of the Code and the tax-exempt status of the Hanson DC
Trust and the Hanson Master Trust under Section 501(a) of the Code or (ii) an
opinion of counsel of Hanson or one of its affiliates that such plans and trusts
are qualified under the Code. Following the Closing, Hanson or one of its
affiliates shall continue in effect any Hanson Plan which is a "pension plan"
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(within the meaning of Section 3(2) of ERISA) for a period at least until the
completion of the transfer of all of the assets attributable to such Hanson
Plans from the Company DC Trust and the Company Master Trust to the Hanson DC
Trust and the Hanson Master Trust, respectively. Following the transfer of
assets as contemplated hereunder, the Company shall not have any further
obligation or responsibility with respect to such benefit liabilities under any
Hanson Plan, which shall be considered for all purposes as having been satisfied
as a result of such transfer.
(d) Welfare Plans. With respect to each Company Plan which is a
"welfare plan" (within the meaning of Section 3(1) of ERISA), including workers
compensation, the Company shall be responsible for all claims incurred by the
Company Employees and their dependents prior to, on or after the Demerger.
Hanson or one of its affiliates shall retain responsibility for all claims
incurred prior to, on or after the Demerger by the Hanson Employees and their
dependents under the terms of the corresponding Company Plans. Upon his or her
employment commencement date with Hanson or one of its affiliates, each Hanson
Employee, together with dependents and survivors thereof shall cease to be
covered by any Company Plans which are "welfare plans" (within the meaning of
Section 3(1) of ERISA). Hanson and its affiliates shall agree that any
pre-existing conditions requirements in any of the Hanson Plans which are
welfare plans shall be waived with respect to the Hanson Employees and their
dependents, to the extent such conditions and requirements were not applicable
to them immediately prior to the Demerger, and that such employees will be given
credit toward applicable deductibles and annual out-of-pocket limits for
expenses incurred prior to the Demerger during the applicable plan year.
(e) Company Liability. Following the transfer of assets as
contemplated hereunder and except as otherwise specifically agreed in writing,
the Company shall not have any further obligation or responsibility with respect
to benefit liabilities under any Hanson Plan, which shall be considered for all
purposes as having been satisfied as a result of such transfer.
(f) Nonqualified Plans. With respect to each Hanson Plan which is
a nonqualified pension plan and any other stock incentive or bonus plan (except
to the extent that any portion of a bonus for the current fiscal year shall be
paid by the Company in connection with the
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Demerger) which is not funded, Hanson or one of its affiliates shall assume
liability and be responsible for all benefits accrued through the Demerger with
respect to the Hanson Employees and their beneficiaries.
(g) Vacation. Effective as of the Demerger, all earned, but not
taken, vacation time with the Company of all Hanson Employees shall become the
responsibility of Hanson or one of its affiliates, and the Company shall cease
to have any liability in respect thereof.
4. EMPLOYEE WITHHOLDING. Hanson and its affiliates and the
Company agree that, pursuant to the "Alternative Procedure" provided in Section
5 of Revenue Procedure 84-77, 1984-2 C.B. 753, with respect to filing and
furnishing IRS Forms W-2, W-3 and 941, (a) Hanson or one of its affiliates and
the Company shall each report on a "predecessor-successor" basis, as set forth
therein, (b) the Company shall be relieved from furnishing Forms W-2 to any of
the employees of Hanson or one of its affiliates who become Hanson Employees and
(c) Hanson or one of its affiliates shall assume the obligations of the Company
to furnish such Forms W-2 to such employees for the full 1996 calendar year.
5. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and their respective subsidiaries and should not
be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
6. MUTUAL COOPERATION. Hanson and its affiliates and the Company
agree that each shall cooperate whenever and as reasonably requested to do so by
the other party in preparation and filings of any necessary governmental
filings, participant communications, reconciliations and such other actions to
properly effectuate the transactions contemplated hereunder.
7. INDEMNITY. (a) The Company shall, jointly and severally,
indemnify and hold harmless Hanson and its affiliates and any of their
respective directors, officers, employees, agents, consultants, representatives,
successors, transferees or assignees in respect of any and all claims, losses,
liabilities, obligations, costs, costs of defense (as and when incurred, and
including reasonable outside attorneys' and consultants' fees), expenses, fines,
taxes,
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levies, imposts, duties, deficiencies, assessments, changes, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever ("Damages") resulting from or
relating to each of the following:
i) any Company Plan, including any multiemployer plan
(within the meaning of Section 3(37) of ERISA), but excluding any Hanson
Plan and any plan assumed hereunder or listed on Schedule B, including
but not limited to any liability with respect to: (A) the Pension
Benefit Guaranty Corporation under Title IV of ERISA; (B) a
multiemployer plan (within the meaning of Section 3(37) of ERISA); (C)
any non-compliance with the notice and benefit continuation requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended; (D) any non-compliance with ERISA or any other applicable laws;
and (E) any suit, proceeding or claim which is brought against Hanson or
any of its affiliates, any Company Plan, and any fiduciary or former
fiduciary of any Company Plan; and
ii) except as otherwise specifically agreed by and among
Hanson and its affiliates and the Company, the employment or termination
of employment, including a constructive termination, of any Company
Employee by the Company or any of its subsidiaries attributable to any
actions or inactions by the Company or any of its subsidiaries,
including any severance benefits.
(b) Hanson and its affiliates shall, jointly and severally,
indemnify and hold harmless the Company and any of its subsidiaries, and any of
their respective directors, officers, employees, agents, consultants,
representatives, successors, transferees or assignees in respect of any and all
Damages resulting from or relating to each of the following:
i) any Hanson Plan, including any multiemployer plan
(within the meaning of Section 3(37) of ERISA), including any plan
assumed hereunder or listed on Schedule B, maintained by, contributed
to, or obligated to contribute to, at any time, by [Hanson or any of its
Subsidiaries] other than the Company Plans, including but not limited to
any liability with respect to: (A) the Pension Benefit Guaranty
Corporation under Title IV of ERISA; (B) a multiemployer plan (within
the
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meaning of Section 3(37) of ERISA); (C) any non-compliance with the
notice and benefit continuation requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended; (D) any non-compliance
with ERISA or any other applicable laws; and (E) any suit, proceeding or
claim which is brought against Hanson or any of its affiliates or any of
its affiliates, any Hanson Plan, and any fiduciary or former fiduciary
of any Hanson Plan; and
(ii) except as otherwise specifically agreed by and among Hanson
and its affiliates and the Company, the employment or termination of
employment, including a constructive termination, by Hanson or any of
its affiliates of any employee of any of them other than the Company
Employees attributable to any actions or inactions by Hanson or any of
its affiliates, including any severance benefits.
Payments due to be made under this Agreement shall be reduced by
the amount by which any taxes for which the indemnified party would have been
accountable or liable to be assessed is either (i) actually reduced prior to
payment falling due hereunder or (ii) is likely to be reduced subsequent to
payment falling due hereunder in the reasonable opinion of the indemnified party
acting in good faith in the light of the circumstances prevailing at the time of
delivery of written notice. The reduction of any payments to be made in
accordance with this section for tax benefits which will likely be recognized
within one year after the date on which the indemnified party receives
indemnification under this Agreement shall be made without regard to the time
value of money. The reduction of any payments to be made in accordance with this
section for tax benefits which will not likely be recognized within one year
after the date on which the indemnified party receives indemnification under
this Agreement shall take into account the time value of money from the time the
applicable payment is received until the date such tax benefits are likely to
be recognized, using as the discount rate the prime rate charged by Chase
Manhattan Bank, N.A. to its corporate customers at the time the payment is
received.
Notwithstanding the above, no directors, officers, employees,
agents and consultants of Hanson and the Company or any of their affiliates
shall be entitled to indemnification under this Section 7 for any action by such
individual for which such individual would not be indemnified notwithstanding
this Agreement.
8. FURNITURE, EQUIPMENT, ETC. The Company shall permit Hanson or
any of its affiliates to remove furniture, equipment (e.g., computers and
facsimile machines) and personalty, including wall hangings etc., presently
located in or allocable to Hanson Employees (except cubicle furniture) and
certain conference rooms as agreed to between the Company and Hanson and its
affiliates. Hanson or one of its affiliates shall assume and transfer the leases
and other operating contracts and agreements with respect to any
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photocopying and other leased equipment as set forth on Schedule C attached
hereto.
9. ARBITRATION. Resolution of any and all disputes arising from
or in connection with this Agreement, whether based on contract, tort, statute
or otherwise, including, but not limited to, disputes over arbitrability and
disputes in connection with claims by third parties (collectively, "Disputes")
shall be exclusively governed by and settled in accordance with the provisions
of this Section 9; provided, however, that nothing contained herein shall
preclude either party from seeking or obtaining (a) injunctive relief or (b)
equitable or other judicial relief to enforce the provisions hereof or, pending
resolution of Disputes hereunder, to preserve the status quo. Any party hereto
(each a "Party") may commence proceedings hereunder by delivering a written
notice to the other Party providing reasonable description of the Dispute to the
other, and expressly requesting arbitration hereunder. The parties hereby agree
to submit all Disputes to arbitration under the terms hereof, which arbitration
shall be final, conclusive and binding upon the parties, their successors and
assigns. The arbitration shall be conducted in New York City by three
arbitrators acting by majority vote (the "Panel") selected by agreement of the
Parties not later than ten (10) days after delivery of the Demand or, failing
such agreement, appointed pursuant to the commercial arbitration rules of the
American Arbitration Association, as amended from time to time (the "AAA
Rules"). If an arbitrator so selected becomes unable to serve, his or her
successors shall be similarly selected or appointed. The arbitration shall be
conducted pursuant to the Federal Arbitration Act and such procedures as the
Parties may agree, or, in the absence of or failing such agreement, pursuant to
the AAA Rules. Notwithstanding the foregoing: (i) each Party shall have the
right to audit the books and records of the other Party that are reasonably
related to the Dispute; (ii) each Party shall provide to the other, reasonably
in advance of any hearing, copies of all documents which a Party intends to
present in such hearing; and (iii) each party shall be allowed to conduct
reasonable discovery through written requests for information, document
requests, requests for stipulation of fact and depositions, the nature and
extent of which discovery shall be determined by the Panel, taking into account
the needs of the Parties and the desirability of making discovery expeditious
and cost effective. All hearings shall be conducted on an expedited schedule,
and all proceedings shall be confidential. Either Party may at its expense make
a
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stenographic record thereof. The Panel shall complete all hearings not later
than ninety (90) days after its selection or appointment, and shall make a final
award not later than thirty (30) days thereafter. The award shall be in writing
and shall specify the factual and legal basis for the award. The Panel shall
apportion all costs and expenses of arbitration, including the Panel's fees and
expenses and fees and expenses of experts, between the prevailing and
non-prevailing Party as the Panel deems fair and reasonable. Notwithstanding the
foregoing, in no event may the Panel award multiple, punitive or exemplary
damages. Any arbitration award shall be binding and enforceable against the
parties hereto and judgment may be entered thereon in any court of competent
jurisdiction.
10. ASSIGNMENTS. No party hereto may assign or transfer any of
its rights and obligations under this Agreement without the prior written
consent of the other parties.
11. GOVERNING LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York
and may be executed in more than one counterpart and by different parties of
each counterpart and all such counterparts when executed shall form one and the
same agreement.
IN WITNESS WHEREOF, Hanson and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
HANSON NORTH AMERICA, INC.
By:_________________________________
Name:
Title:
HM ANGLO AMERICAN LTD.
By:_________________________________
Name:
Title:
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Exhibit 10.11
FORM OF JOINT OWNERSHIP AGREEMENT
This Joint Ownership Agreement entered into as of this _____ day of
__________, 1996 (the "Agreement") by and between Hanson North America, Inc., a
corporation organized and existing under the laws of the State of Delaware
("Hanson") and HM Anglo American Ltd., a corporation organized and existing
under the laws of the State of Delaware ("Anglo") (Hanson and Anglo shall each
individually be referred to as a "Co-Owner" and shall collectively be referred
to as the "Co-Owners").
WITNESSETH:
WHEREAS, on the commencement date of this Agreement, Hanson and Anglo
will each own an undivided fifty percent (50%) interest in one (1) British
Aerospace BAe 125 series 1000A aircraft bearing Federal Aviation Administration
("FAA") registration number N2SG and manufacturer's serial number NA1007 (the
"Hawker"); and
WHEREAS, on the commencement date of this Agreement, Hanson and Anglo
will each own an undivided fifty percent (50%) interest in one (1) Sikorsky
S-76B helicopter bearing FAA registration number N9HM and manufacturer's serial
number 760430 (the "Helicopter") (the Hawker and the Helicopter and their
respective replacements are collectively referred to as the "Aircraft" and each
interest of each Co-Owner in each of the Aircraft shall be referred to as an
"Interest"); and
WHEREAS, on the commencement date of this Agreement, Hanson and Anglo
will apply for registration of the Aircraft at the FAA in the names of the
Co-Owners; and
WHEREAS, each of the Co-Owners are desirous of establishing terms and
conditions governing the use, maintenance, operation and joint ownership of the
Aircraft.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, Hanson and Anglo
hereby agree as follows:
1. Commencement and Term of Agreement.
This Agreement shall commence on October 1, 1996 and shall continue in
effect until the earliest of (a) the transfer by one of the Co-Owners of its
Interest pursuant to Section 9 of this Agreement, (b) the sale of an Aircraft by
the Co-Owners, (c) thirty (30) days (or such other period as the parties shall
agree) after an Aircraft is stolen and not recovered, (d) thirty
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(30) days (or such other period as the parties shall agree) after an Aircraft is
destroyed, seized or confiscated and not returned, (e) the date on which an
Aircraft is rendered permanently obsolete or unairworthy (whether by Applicable
Laws (as defined in Section 4(b)) or otherwise), or (f) the date on which an
Aircraft is damaged beyond repair or permanently rendered unfit for safe and
proper flight (the "Term"). Upon the occurrence of any of the events specified
in the preceding sentence with respect to one of the Aircraft, this Agreement
shall terminate only as to such Aircraft.
2. Relationship of the Co-Owners and Interests.
(a) Undivided Interests. Hanson and Anglo hereby acknowledge and agree
that their Interests shall represent undivided interests in the Aircraft, shall
be indivisible, and shall be subject to the terms and conditions of this
Agreement. Each of the Co-Owners shall be entitled to its pro rata share of the
depreciation, gain, loss, deduction, credit or any tax benefits with respect to
the Aircraft.
(b) Tenants-in-Common. The Co-Owners shall be tenants-in-common of the
Aircraft. Notwithstanding the foregoing, each of the Co-Owners waives any right
it may have to demand the partition, or sale for partition, of either Aircraft
under the laws of any jurisdiction, and hereby agrees that the sole and adequate
means by which a Co-Owner may divest itself of its Interest in an Aircraft shall
be the transfer of the Interest in such Aircraft in accordance with Section 9 of
this Agreement or the sale of such Aircraft by both Co-Owners.
(c) Mutual Agreements. Each of the Co-Owners agrees that decisions
relating to the Aircraft shall be reached by mutual agreement and payments
relating to the Aircraft shall be allocated and paid by or through the "Payment
Administrator" in accordance with Section 3.
(d) No Partnership. It is not the purpose or intention of this
Agreement to create, and this Agreement shall not be considered as creating a
partnership, joint venture, or other relationship whereby any party shall be
held liable for the omissions or commissions of any other party. No partnership,
legal person, association, or legal entities are intended or hereby created by
the parties.
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3. Operation and Maintenance of Aircraft
(a) General/No Agency/Standard of Care. The Co-Owners acknowledge and
agree that they will be jointly and equally responsible for the activities
relating to the Aircraft (collectively, the "Activities") (except as provided in
the following sentence) and the cost of the Activities. To the extent
practicable, actions taken with respect to the Activities should be based upon
the mutual agreement of the Co-Owners, except that Hanson shall bear sole
operational control of the Aircraft whether it is operated for Hanson or for
Anglo. Each Co-Owner hereby authorizes such maintenance, repairs, alterations,
retrofittings and modifications in and to the Aircraft as may be required from
time to time to meet maintenance requirements in accordance with the maintenance
program for the Aircraft and consistent with past practice relating to each of
the Aircraft and Applicable Law. Notwithstanding section 2(c), in the event a
Co-Owner determines that one or more of the Activities must be performed and the
other Co-Owner is not available or based upon the circumstances an immediate
decision is deemed necessary, such Co-Owner shall be authorized to make such
determination regarding the performance of such Activities based on its reasoned
business assessment of the situation using such care as is customarily exercised
by such Co-Owner in connection with its own business and shall not be liable to
the other Co-Owner for such decision. Neither Co-Owner shall act or be deemed to
be acting as an agent on behalf of the other Co-Owner, nor shall either Co-Owner
have the authority to enter into any contracts for or otherwise bind the other
Co-Owner with respect to any other matter.
(b) Establishment of Aircraft Account/Payment of Expenses/Accounting.
(i) Establishment of Aircraft Account. The Co-Owners shall
mutually agree upon a third party to perform the bookkeeping function for the
Co-Owners in connection with the collection of each Co-Owner's share of expenses
and the payment of all expenses relating to the Aircraft (the "Payment
Administrator"). A bank account (the "Aircraft Account") shall be maintained by
the Payment Administrator on behalf of the Co-Owners at a financially reputable,
federally-insured depository institution to be used for the collection and
payment of any and all expenses and amounts incurred or to be paid by the
Co-Owners in connection with the Aircraft, including, without limitation,
payments to be made in connection with (A) the improvement, maintenance, repair,
modification, alteration, refurbishment, retrofitting, storage or use of the
Aircraft, including but not limited to flight crew (and Aircraft support
personnel) salaries, benefits and expenses, (B) insurance, (C) registration,
recordation and similar fees, (D) taxes imposed in connection with the purchase,
ownership, or storage of the Aircraft, and (E) professional fees in connection
with the operation, use, ownership or sale of the Aircraft. Upon commencement of
this Agreement, each of the Co-Owners shall deposit Fifty Thousand U.S. Dollars
($50,000) into the Aircraft
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Account as an operating deposit to cover initial expenses. Upon request, the
Payment Administrator shall provide such Co-Owner with copies of the Aircraft
Account statements.
(ii) Funding of Expenses by Co-Owners.
(aa) Fixed Expenses. Each of the Co-Owners shall
share equally all fixed expenses relating to the Aircraft, including any capital
improvements, insurance, shop equipment for maintaining and cleaning the
Aircraft, maps, charts and navigation aids, hangar costs, flight crew (and
Aircraft support personnel salaries), benefits, training and expenses, and all
other expenses relating to the Aircraft that (x) cannot be attributed directly
to a specific flight or use by one of the Co-Owners, (y) do not generally
increase or decrease with increased or decreased hours of operation or use of an
Aircraft or (z) otherwise are not "Variable Expenses" as defined in Subsection
(bb) ("Fixed Expenses"). Each Co-Owner's share of the Fixed Expenses shall be
paid into the Aircraft Account on an ongoing basis as and when requested by the
Payment Administrator to ensure timely payment to the suppliers of the goods and
services constituting the Fixed Expenses. Notwithstanding the preceding
sentence, Hanson, as the Co-Owner with operational control of the Aircraft,
shall pay directly the insurance and the flight crew (and Aircraft support
personnel) salaries, benefits, training and expenses (as the employer), and
shall not be required to pay into the Aircraft Account its portion of such
amounts, such portion to be credited to Hanson as if paid by Hanson. Anglo's
portion of such amounts shall be paid by the Payment Administrator to Hanson as
a direct reimbursement of fifty percent (50%) of such costs.
(bb) Variable Expenses. Subject to a reconciliation
in accordance with Section 10, each of the Co-Owners shall share equally all
expenses relating to fuel, oil, lubricants, maintenance (whether scheduled or
unscheduled), repair and replacement of parts and other expenses relating to the
Aircraft that generally increase or decrease with the increased or decreased
hours of operation or use of an Aircraft, other than Directly Attributable
Expenses, as defined below ("Variable Expenses"). All expenses that can be
directly attributed to a specific flight or use by one of the Co-Owners, for
example, catering costs (other than stock supplies), landing fees, fuel for the
Hawker, crew expenses, passenger ground transportation, hangar and tie down
expenses when away from the Aircraft base and customs and foreign permits
("Directly Attributable Expenses") shall be the responsibility of that Co-Owner.
Each Co-Owner's share of Variable Expenses and each Co-Owner's Directly
Attributable Expenses shall be invoiced by the Payment Administrator to that
Co-Owner within thirty (30) days after the end of each calendar month and paid
by such Co-Owner.
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(cc) Each such invoice shall be accompanied by a
report showing (A) the specific Fixed and Variable Expenses incurred during the
previous month, by item and amount, (B) a calculation of each Co-Owner's share
of the Fixed and Variable Expenses and (C) the Directly Attributable Expenses
for such Co-Owner. Co-Owners shall promptly pay such amounts by wire transfer to
the Aircraft Account or by such other method as shall be agreed by the Co-Owners
and the Payment Administrator.
All expenses relating to the Aircraft including expenses related to Voluntary
Aircraft Improvements (as hereinafter defined) shall collectively be referred to
as the "Aircraft Expenses."
(dd) Notwithstanding the foregoing subsections (aa)
and (bb), at such other times as the Payment Administrator may deem necessary
for the payment of Aircraft Expenses, the Payment Administrator shall be
entitled to request advances from the Co-Owners based on an equal allocation of
Fixed Expenses and Variable Expenses (other than Directly Attributable Expenses)
or such other basis as may be agreed by the Co-Owners, together with such
additional amounts as may be reasonably requested by the Payment Administrator
from either Co-Owner to cover Directly Attributable Expenses of such Co-Owner.
(iii) Payment of Aircraft Expenses. The Co-Owners agree that
the Payment Administrator shall have the authority to use funds deposited in the
Aircraft Account from time to time to pay Aircraft Expenses for and on behalf of
the Co-Owners in accordance with the expense allocation provisions set forth
herein. The Co-Owners further agree that the Payment Administrator shall in the
exercise of its reasonable business judgment be entitled, but not required, to
advance payments to the supplier of goods and services as may be deemed
appropriate pending receipt of such funds by each of the Co-Owners and the
Co-Owners will reimburse the Payment Administrator for any such amounts advanced
by the Payment Administrator.
(iv) Maintenance of Books and Records. The Payment
Administrator shall maintain books and records showing all receipts and
disbursements respecting the Aircraft. Each Co-Owner shall have the right to
review records maintained by the Payment Administrator relating to the Aircraft
and to inspect invoices and other data supporting receipts collected and
disbursements made by the Payment Administrator on behalf of the Co-Owners,
which invoices and data shall be available for inspection and copying during
reasonable business hours.
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(c) Reports and Filings. As operator of the Aircraft, Hanson shall
prepare or cause to be prepared all reports or other documents or materials and
make or cause to be made all filings which are required to be or, in the
reasonable business judgment of Hanson and in the best interests of the
Co-Owners, should be prepared and/or filed from time to time in connection with
the improvement, maintenance, repair, modification, alteration, refurbishment,
retrofitting, storage, use, or ownership of the Aircraft; provided, however,
that Hanson shall advise Anglo in advance of the filing of any such report or
other document or materials with any governmental authority and neither Co-Owner
shall be authorized to execute any document on behalf of the other Co-Owner,
except pursuant to express prior written authorization applicable to the report
or filing identified in the authorization. Hanson shall provide copies of any
such reports, documents, materials or filings upon request.
(d) Hangar and Storage Arrangements. The Co-Owners shall mutually agree
upon a company for hangar and storage of each Aircraft, the agreements with such
company with respect to the Aircraft, and the principal base of operations of
each Aircraft (currently Morristown, New Jersey), if modified from those in
effect on the date hereof. After each use of an Aircraft by a Co-Owner, the
Aircraft shall be returned by such Co-Owner as promptly as possible to the
Aircraft's principal base of operations.
(e) Voluntary Aircraft Improvements/Capital Improvements Costs. Either
Co-Owner may propose to the other Co-Owner additions, alterations,
retrofittings, modifications or other changes to the Aircraft in addition to
basic maintenance requirements as contemplated by the third sentence of Section
3(a) or Applicable Law (any such addition, alteration, retrofitting or
modification is referred to herein as a "Voluntary Aircraft Improvement"). No
Voluntary Aircraft Improvement may be undertaken or made if either Co-Owner
objects to the making of such Voluntary Aircraft Improvement; provided, however,
no Co-Owner shall unreasonably object to the making of a Voluntary Aircraft
Improvement if the amount thereof is less than $50,000. Unless otherwise agreed
by the Co-Owners, all expenses of Voluntary Aircraft Improvements shall be
treated as Fixed Expenses and shared equally.
4. Use of the Aircraft.
(a) General. The Aircraft shall be operated (i) in accordance with
section 91.501(b)(6) of the Federal Aviation Regulations ("FARs"), as may be
amended from time to time; (ii) in accordance with Part 375 of the U.S.
Department of Transportation ("DOT") regulations, as may be amended from time to
time; (iii) in accordance with the Aircraft use rules established pursuant to
this Agreement, as such rules may be modified from time to
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time upon the mutual agreement of the Co-Owners; and (iv) in such a manner as to
prevent the denial or loss of coverage of any insurance policy.
(b) Compliance with Applicable Laws. The operation of the Aircraft and
the rules established by the Co-Owners shall comply with all applicable laws,
treaties, statutes, rules, regulations or orders of any government or
governmental authority having jurisdiction with respect to the Aircraft or the
operation thereof, including, without limitation, any and all rules, regulations
and requirements promulgated by the FAA and the DOT ("Applicable Laws").
5. Scheduling Co-Owners' Access to the Aircraft
(a) Each Co-Owner shall arrange its use of the Aircraft with the flight
crew and Aircraft support personnel. In the event of a conflict, priority access
to each of the Aircraft shall be granted to the first Co-Owner to reserve such
Aircraft with a specific flight plan; provided, however, that during any such
conflict, neither Co-Owner shall be entitled to reserve and use an Aircraft for
more than seven (7) consecutive days and the second Co-Owner shall have priority
entitlement to reserve such Aircraft beginning immediately after the end of the
first Co-Owner's reserved period and continuing for a period of time equal to
the first Co-Owner's reserved period. Furthermore, in the event an Aircraft is
reserved but not used by a Co-Owner during the reserved period, such Co-Owner
shall lose its first priority entitlement to occur in a scheduling conflict
following its failure to use the Aircraft when reserved.
(b) In the event of continued conflicts in scheduling, either Co-Owner
shall have the right to request usage of the Hawker on an alternating weekly
priority basis and/or usage of the Helicopter on an alternating daily priority
basis. In the event the scheduling of either of the Aircraft is changed to the
alternating priority basis described in the preceding sentence, each Co-Owner
agrees to make the Aircraft available to the other Co-Owner in the event that
the Co-Owner with priority access during a particular day or week does not
intend to use the Aircraft during such time.
(c) The Co-Owners shall agree upon and abide by such other reasonable
rules and standards pertaining to the scheduling of access to the Aircraft by
the Co-Owners as they deem necessary and appropriate.
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6. Insurance
(a) Aircraft Public Liability and Property Damage Liability Insurance.
During the Term, the Co-Owners shall maintain or cause to be maintained in
effect aircraft and airport premises liability insurance (providing, among other
things, coverage with respect to liabilities arising while the Aircraft is not
in operation), passenger legal liability insurance, contractual liability and
property damage liability insurance of the type, insuring against such risks,
and in such amounts as are customarily carried and maintained in connection with
similar aircraft operated in a similar manner to the Aircraft. All such policies
of insurance shall be maintained in effect with insurers of recognized
reputation and responsibility and shall name each of the Co-Owners with Hanson
identified as the operator of the Aircraft, and such other parties as shall be
agreed by the Co-Owners as insureds or additional insureds, as applicable.
(b) Insurance Against Loss or Damage to the Aircraft. During the Term,
the Co-Owners shall maintain or cause to be maintained in effect with insurers
of recognized reputation and responsibility: (a) all-risk ground and flight
aircraft hull insurance covering the Aircraft; (b) fire, transit and extended
coverage with respect to the engines, avionics or other component parts while
removed from the Aircraft; and (c) war risks coverage, including the perils of
(i) strikes, riots, civil commotions or labor disturbances, (ii) any vandalism,
malicious act or act of sabotage, and (iii) hijacking, or any unlawful seizure
or wrongful exercise of control of the Aircraft or crew in flight made by any
person or persons on board the Aircraft without the consent of the insured. All
such insurance shall be in full force and effect throughout any geographical
areas at any time traversed by the Aircraft (other than war zones and other
areas of political instability not customarily covered in corporate universal
aircraft insurance policies) and shall be of the type and in such amount, and
with such deductibles, as is customarily carried and maintained by owners and
operators of aircraft similar to the Aircraft and for uses similar to those for
which the Aircraft is intended to be used and as mutually agreed by the
Co-Owners. All policies carried in accordance with this subsection 6(b) shall
name the Co-Owners as loss payees as their interests may appear.
(c) Uninsured Damage. If the Aircraft or any part thereof or any
property located thereon during its operation is damaged or destroyed as a
result of any willful, intentional or negligent act or omission of either
Co-Owner, their respective employees, family, guests or invitees and such loss
or damage is not covered by insurance in whole or in part, such Co-Owner shall
promptly pay any costs or expenses of such repair or replacement to the extent
not covered by insurance.
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(d) Waiver of Subrogation. Each Co-Owner hereby waives all rights
against the other Co-Owner and against those for whom the other Co-Owner is
legally responsible for all losses covered by any insurance required hereunder.
If the insurance policies require an endorsement to provide for continued
coverage where there is a waiver of subrogation, the Co-Owners will cause the
policies to be so endorsed.
(e) Special Provisions. All insurance policies required hereunder shall
contain a provision that the coverages afforded under such policies will not be
canceled or not renewed until at least thirty (30) days prior written notice has
been received by each Co-Owner and shall provide breach of warranty coverage in
favor of each Co-Owner. Neither Co-Owner may carry any insurance concurrent in
coverage and contributing in the event of loss with any insurance maintained
hereunder if the effect of such separate insurance would be to reduce the
payment to be made under the insurance maintained hereunder.
(f) Adjustment of Loss and Payment of Proceeds. All insurance policies
shall provide that any loss thereunder shall be adjusted by the Co-Owners and
the proceeds shall be payable to each of the Co-Owners as their interests shall
appear.
7. Covenants of Co-Owners.
(a) Registration. Each Co-Owner covenants and agrees that it shall not
take or permit any action inconsistent with the continued registration of the
Aircraft in the names of both of the Co-Owners under Title 49, subtitle VII of
the United States Code (the "Transportation Act").
(b) Prohibition Against Encumbrances and Transfers. Each Co-Owner
covenants and agrees that it shall not encumber the Aircraft or such Co-Owner's
Interest in the Aircraft or, except as provided in Section 9, transfer the
Interest without the other Co-Owner's prior written consent, and in the case of
transfers of Interest, DOT's consent to the extent required.
(c) Contractual Obligations. Each of the Co-Owners shall be reflected
on contracts relating to the Aircraft, its maintenance or upkeep, including,
among others, maintenance agreements and agreements relating to hangar usage.
(d) Payments. Each Co-Owner covenants and agrees that (i) it will pay
in full and when due its share of all amounts payable under this Agreement and
(ii) the operation of and payments in relation to the Aircraft will generate no
profit or financial gain nor will either
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Co-Owner operate or permit the Aircraft to be operated for remuneration or hire.
The Co-Owners intend and agree that the limited payments contemplated and made
in accordance with this Agreement relate to payments associated with the
ownership of the Aircraft by the Co-Owners, and do not constitute remuneration
or hire or a commercial air operation. In the event either Co-Owner shall fail
to pay any costs, expenses or indebtedness to be paid by such Co-Owner hereunder
when due, the other Co-Owner may at its election pay such amount and the
Co-Owner failing to make such payment within 15 days of invoice shall reimburse
the Co-Owner making such payment upon request, with interest thereon from the
date of invoice to the date of reimbursement at the prime rate of borrowing
announced from time to time by the Bank of America.
(e) Use. Each Co-Owner covenants and agrees that it will use and permit
the Aircraft to be used only in strict accordance with this Agreement and
Applicable Laws.
8. Indemnification.
Each Co-Owner will indemnify, protect, defend and hold harmless the
other Co-Owner from and against any and all loss, cost, damage, injury or
expense, including, without limitation, reasonable attorneys' fees, wheresoever
and howsoever arising which the indemnified party or its stockholders, or any of
its, or their, directors, officers, agents, employees, stockholders or partners,
may incur by reason of any breach by the indemnifying party of any of its
representations or obligations set forth in this Agreement. In the event any
claim for indemnification hereunder arises on account of a claim or action made
or instituted by a third person against the non-indemnifying party, the
non-indemnifying party shall notify the indemnifying party promptly after the
receipt of notice by the non-indemnifying party that such claim was made or that
such action was commenced. The indemnifying party shall be entitled to
participate in the defense of any such claim or action at its own expense. If
the indemnifying party shall participate in the defense of such claim or action,
the same shall not be settled without its prior written consent (which consent
shall not be unreasonably withheld or delayed) unless the indemnifying party
shall deny or fail to confirm after written request the other party's right to
indemnification. Each Co-Owner also hereby indemnifies and shall hold the other
harmless against any loss sustained or reasonable expense incurred by the other
as the direct result of or arising out of the imposition on the Aircraft, or the
Interest, of any federal or other tax lien or the foreclosure thereof by virtue
of the failure to pay or underpayment by the indemnifying party of federal or
other taxes payable by such indemnifying party. It is specifically agreed and
understood that the parties shall not be liable for the indemnification of (i)
indirect, special or consequential damages
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suffered by the other party, or (ii) losses, costs, damages, injuries or
expenses arising solely out of the non-indemnifying party's gross negligence or
willful misconduct.
9. Transfer of Interests.
(a) In the event either Co-Owner requests a termination of the
relationship with respect to either or both of the Aircraft at any time during
the Term, the Co-Owners shall have fifteen (15) days to negotiate in good faith
regarding the sale of such Aircraft to a third party or the purchase or sale of
the Interest(s) to the other Co-Owner. In the event such agreement cannot be
reached, one Co-Owner (the "Offering Co-Owner") may notify the other Co-Owner
(the "Receiving Co-Owner") that it will either purchase from or sell to the
Receiving Co-Owner its Interest in either or both of the Aircraft at a price
(the "Price") set forth in such notice (the "Notice"). The Notice shall also
state whether the Offering Co-Owner offers to purchase from or sell to the
Receiving Co-Owner such Interest(s) in the event the Receiving Co-Owner fails to
respond timely to the Notice, as provided in the last sentence of this
sub-paragraph. Within ten (10) Business Days (as defined below) after receipt of
the Notice, the Receiving Co-Owner shall advise the Offering Co-Owner whether it
will purchase the Interest(s) of the Offering Co-Owner at the Price or sell its
Interest(s) to the Offering Co-Owner at the Price. The Receiving Co-Owner's
failure to notify the Offering Co-Owner within such ten (10) Business Day period
shall be deemed its acceptance of the offer set forth in the Notice.
(b) The closing on the transfer of the Interests under this Section 9
shall occur on the fifth (5th) Business Day following the Receiving Co-Owner's
decision to purchase or sell the Interest(s) or its deemed acceptance of the
offer pursuant to section 9(a). For purposes of this section, a "Business Day"
shall be a day on which banks are open in the State of New York. There shall be
no conditions precedent to the transfer of the Interest and the selling Co-Owner
shall give no warranties with respect to the Aircraft other than warranting that
the selling Co-Owner has good title to and the lawful right to sell the Interest
being sold and has not caused to be attached to the Aircraft any liens or
encumbrances except as permitted by this Agreement. At closing the selling
Co-Owner shall deliver a bill of sale in the form attached hereto as Exhibit A
and an FAA form bill of sale and the purchasing Co-Owner shall execute and
deliver to the selling Co-Owner a Receipt and Acceptance Certificate in a form
substantially as attached hereto as Exhibit B. In addition, the selling Co-Owner
shall transfer to the purchasing Co-Owner all right and title to all insurance
proceeds from any possible claim under the Aircraft's hull insurance policy
resulting from any damage to the Aircraft on and after the date of the Notice,
and shall execute any and all documents reasonably requested by the purchasing
Co-Owner to effectuate such transfer.
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(c) Each Co-Owner further agrees that no additional Co-Owners shall be
added nor Interests transferred to third parties except with prior approval of
DOT to the extent such approval is required.
10. Reconciliation of Payments.
Within 60 days after the last day of each fiscal year of Hanson during
the term hereof (or, if this Agreement terminates as to an Aircraft prior to the
end of any such fiscal year, within 60 days after such termination date), the
Payment Administrator shall prepare or cause to be prepared a report (the
"Report") detailing all Aircraft Expenses incurred during the period (the
"Period") from the date of this Agreement (or the last day of the immediately
preceding period for which a Report was issued, of later), to the last day of
such fiscal year (or termination date, if applicable). Such report shall detail
all Fixed Expenses (including expenses of Voluntary Aircraft Improvement),
Variable Expenses for each Aircraft and Directly Attributable Expenses incurred
during the Period, all payments made by each Co-Owner hereunder during the
Period, the amount in the Aircraft Account at the beginning and end of the
Period, the hours of operation and use of each Aircraft during the Period by
each Co-Owner, and any other information requested by either Co-Owner. Such
report shall also contain a reallocation of all Variable Expenses of each
Aircraft (other than Directly Attributable Expenses) between the two Co-Owners
based upon the hours of operation and use of each such Aircraft during the
Period. The Payment Administrator shall send invoices to the Co-Owners with the
report if necessary to collect amounts due from one Co-Owner to the other
Co-Owner as a result of such reallocation. Any such invoiced amount shall be
paid by the paying Co-Owner to the receiving Co-Owner within fifteen (15) days
of receipt. The Co-Owners agree that to the extent justified based upon actual
hours of operation or use of the Aircraft, the allocation of Fixed Expenses may
be adjusted with the consent of the Co-Owners to more accurately reflect actual
hours of operation or use of the Aircraft.
11. Notices.
All notices and other communications under this Agreement shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt or refusal to accept receipt) by delivery in person, by telefax (with a
confirmation copy sent by first class mail
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properly addressed and postage prepaid), or by a reputable overnight courier
service, addressed as follows:
If to Hanson: Hanson North America, Inc.
581 Main Street
Woodbridge, NJ 08830
Attn: Keith Terreri
Telephone: 908-603-6659
Telefax: 908-603-6851
If to Anglo: HM Anglo American, Ltd.
99 Wood Avenue South
Iselin, NJ 08830
Attn: C. William Carmean
Telephone: 908-603-6618
Telefax: 908-603-6848
or to such other addresses as may be hereafter furnished by the parties by
written notice provided in accordance with this section.
12. Failure or Delay in Performance.
Neither party shall be liable for any failure or delay hereunder if
such failure or delay is due to acts of God or the public enemy, civil war or
insurrection or riots, fires or explosions or serious accidents, strikes or
labor disputes, inability, after exercising all due diligence, to obtain
necessary materials or equipment from the manufacturers thereof or any other
cause beyond the reasonable control of the party from whom performance was
required.
13. Miscellaneous.
(a) Assignments. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement may not be assigned by any party without the consent of the other
party hereto and the approval of DOT, to the extent such approval is required.
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(b) Severability. The provisions of this Agreement shall be deemed
independent and severable and the invalidity, partial invalidity or
unenforceability of any one provision or portion of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability and any prohibition or unenforceability in
any particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
(c) Headings. The headings herein are inserted only for convenience
and shall not affect the interpretation of this Agreement.
(d) Entire Agreement. This Agreement constitutes the entire agreement,
both written and oral, between the parties or their respective representatives
with respect to the subject matter hereof and is not intended to confer upon any
other person any rights or remedies hereunder not expressly granted thereto.
This Agreement shall not be further amended or modified unless in writing duly
signed by the parties hereto and approved by the DOT to the extent required.
(e) Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of New
York without giving effect to the principles of conflicts of law thereunder.
(f) Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, all of which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above and verify that they have read the Agreement,
understand its contents, and have full authority to bind and hereby do bind
their respective parties.
HANSON NORTH AMERICA, INC. HM ANGLO AMERICAN LTD.
By:_______________________________ By:_____________________________
Name:_____________________________ Name:___________________________
Title:____________________________ Title:__________________________
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Exhibit 10.12
FORM OF AGREEMENT
THIS AGREEMENT is made as of the 1st day of October, 1996
BETWEEN:
HANSON PACIFIC LIMITED, a company incorporated under the laws of England and
Wales, having its registered office at 1 Grosvenor Place, London SW1X 7JH and
its principal place of business at 5107 Central Plaza, 18 Harbour Road, Wanchai,
Hong Kong ("Hanson Pacific"); and
HM HOLDINGS, INC., a company incorporated under the laws of the state of
Delaware with its principal office at 99 Wood Avenue South, Iselin, New Jersey
08830, USA (the "Company")
WHEREAS the Company wishes to continue to retain the services of Hanson Pacific
to assist the Company to establish and expand its presence in the Territory on
the terms and conditions hereinafter set forth.
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
In this Agreement the following words and expressions shall have
the following respective meanings:-
"Commencement Date" means October 1, 1996;
"Territory" means countries within East Asia, including Japan,
North and South Korea, Greater China (China, Hong Kong, Macau,
Taiwan) or South East Asia, including Vietnam, Thailand,
Indonesia, Singapore, Malaysia, the Philippines and Myanmar.
2. APPOINTMENT
(a) The Company hereby appoints Hanson Pacific as an
adviser to provide general advice to the Company
in identifying, considering and/or negotiating
projects or business activities within the
Territory ("Business Prospects") and to assist the
Company in accordance with such instructions as
the Company may, at its sole discretion, from time
to time give to Hanson Pacific with respect to
specific Business Prospects.
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(b) Nothing herein shall preclude:
(i) Hanson Pacific from acting in a similar capacity for
any company which was formerly or is now a subsidiary
or affiliate of Hanson PLC, or whose business
activities in the Territory are not in conflict with
those of the Company; or
(ii) the Company from appointing or using the services of
any other adviser, consultant, negotiator or other
agency, whether alone or in conjunction with Hanson
Pacific, in connection with any project or business
activities within the Territory.
3. DURATION
Unless terminated earlier in accordance with this Agreement, the initial
term of this Agreement is for a period of three (3) years from the
Commencement Date. Thereafter this Agreement may be renewed by the
parties by express written agreement for such further duration and on
such terms as may then be mutually agreed, but if not so renewed it will
terminate on the third anniversary of the Commencement Date subject to
the provisions of Clauses 6 and 8 hereof.
4. OBLIGATIONS OF THE COMPANY
The Company shall at all times during the term of this
Agreement:-
(a) provide Hanson Pacific with all such information or samples as
the Company may consider necessary to assist Hanson Pacific to
fulfil its obligations hereunder;
(b) pay Hanson Pacific a retainer fee of US$250,000 per annum payable
within thirty days of the Commencement Date and the anniversary
thereof, with respect to its role in providing general advice;
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(c) pay Hanson Pacific such additional fees (if any), in relation to
any specific Business Prospects during the term of this Agreement
and in relation to which Hanson Pacific's services are to be
used, and upon such terms as are agreed in advance in relation
thereto by the parties on a case by case basis;
(d) reimburse Hanson Pacific for such reasonable costs and expenses
properly incurred by Hanson Pacific within such guidelines and/or
limits or otherwise as may have been expressly previously
authorised by the Company in the performance of its duties on
behalf of the Company, provided that Hanson Pacific shall submit
bills, receipts and vouchers to support all requests for such
reimbursements.
5. OBLIGATIONS OF HANSON PACIFIC
(a) With respect to its role in providing general advice, Hanson
Pacific agrees, during the term of this Agreement, to the extent
that it has the capacity and capability to do so, to perform the
following services:
(i) to promote wherever practicable, the interests of the
Company within the Territory;
(ii) to notify the Company from time to time with respect to
the general economic, political and business conditions
within the Territory in relation to the markets
relevant to the Company and the activities of its
competitors or potential partners within the Territory;
(iii) at the request of the Company to arrange for
appointments and meetings for officers of the Company
with government officials, potential partners and to
accompany the Company officers in connection with such
visits or meetings; and
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(iv) to liaise and maintain good rapport with the relevant
government officials at all levels on behalf of the
Company in the countries within the Territory where the
Company has a significant business interest.
(b) With respect to any specific Business Prospects Hanson Pacific,
upon such terms as are agreed in advance, will perform the
following services for and in accordance with such instructions
as shall be given by the Company and agreed with Hanson Pacific
in advance:
(i) to identify and evaluate investment opportunities in
the Territory for the Company with an emphasis on joint
venture and/or acquisition opportunities to enable the
Company to develop its presence in the Territory;
(ii) to conduct such preliminary due diligence as the
Company may request on any prospective investment
opportunities for the Company;
(iii) to assist the Company in negotiations and the
preparation of legal documentation in connection with
any proposed transaction in the Territory introduced by
Hanson Pacific; and
(iv) to seek necessary advice from various local
professionals on behalf of the Company.
6. CONFIDENTIALITY
(a) During the continuance of this Agreement and at all times after
its termination for whatever reason, Hanson Pacific covenants and
agrees to maintain all information in respect of the Company, the
business and the products of the Company confidential and will
not use any of such information for its own purpose and will not
divulge or communicate any such information except
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as may be necessary for the proper performance of any contractual
obligations under any agreement to which the Company or Hanson
Pacific is bound or on a strictly confidential basis and upon
receiving appropriate undertaking to maintain confidentiality, to
prospective partners and/or investors.
(b) The confidentiality obligation contained in this
Section 6 shall not apply to:
(i) information available within the public domain not
through the fault of Hanson Pacific;
(ii) information made available from a third party directly
to Hanson Pacific; or
(iii) information the disclosure of which is compelled by
law, court order or competent regulatory authority.
7. TERMINATION
This Agreement shall be terminated upon the occurrence of any of the
following:
(a) if a breach or default shall continue 30 days after a notice of
default has been given by the non-defaulting party requesting
rectification of default or breach by the defaulting party, and
the non-defaulting party elects to terminate the Agreement; or
(b) forthwith if at any time either party becomes bankrupt, makes a
general assignment for the benefit of its creditors, commences
liquidation, winding-up or dissolution proceedings, makes any
statutory arrangement with its creditors or if a liquidator,
receiver and manager or trustee in bankruptcy is appointed and
such appointment shall remain unrevoked for a period of thirty
(30) days.
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8. EFFECT OF TERMINATION
Upon the termination of this Agreement in accordance with its terms:
(a) neither party shall be liable to the other party for any damage
or loss, including but not limited to loss of prospective profits
or loss of goodwill, caused by the termination of this Agreement;
(b) notwithstanding subclause (a), neither party shall be relieved
from its liability to the other party which has been caused by
its breach of this Agreement.
(c) any liabilities for payments to be made under this
Agreement shall immediately become due;
(d) Hanson Pacific shall within reasonable time return at its own
cost to the Company all confidential materials/documents
originally furnished to Hanson Pacific by the Company which are
in Hanson Pacific's possession or under its control.
9. NOTICES
Any notice given for the purposes hereof shall be in writing and shall
be sufficiently served if delivered to the party to whom it is given or
mailed by prepaid registered mail to such party:-
in the case of the Company to
Attn: Robert E Lee, President
and in the case of Hanson Pacific, to:
5107 Central Plaza
18 Harbour Road
Wanchai
Hong Kong
Attn:
6
<PAGE>
<PAGE>
or to such other address as such party shall have last notified to the
other party, giving the same in the manner provided herein. Any notice
mailed as aforesaid shall be deemed to have been given and received on
the fifth business day following the sending thereof.
10. SEVERANCE
If any provision or term of this Agreement or any part thereof shall
become or be declared illegal, invalid or unenforceable for any reason
whatsoever, such term or provision shall be divisible from this
Agreement and shall be deemed to be deleted from this Agreement provided
always that if either party considers that any such deletion
substantially affects or alters the commercial basis of this Agreement
it may give notice in writing to the other party to terminate this
Agreement forthwith.
11. GOVERNING LAW AND JURISDICTION
(a) This Agreement shall be governed by and construed
in accordance with the laws of England.
(b) Any dispute or difference between the parties to this Agreement
shall be referred to a sole arbitrator (the "Arbitrator") and:
(i) any such arbitration shall be held in London;
(ii) the Arbitrator shall be appointed by the parties or,
failing agreement, by the President of the Law Society
upon application by either party;
(iii) the procedure for such arbitration shall be as agreed
by the parties or, failing agreement, as determined by
the Arbitrator; and
(iv) if either party fails to comply with any procedural
order made by the Arbitrator, the Arbitrator shall have
power to proceed
7
<PAGE>
<PAGE>
in the absence of that party and deliver
the award.
(c) Any such arbitration shall be final and binding on the parties
and accordingly:
(i) the right of appeal by either party to the High Court
under section 1 of the Arbitration Act 1979 shall be
excluded in relation to any award by the Arbitrator;
and
(ii) neither party shall have the right to apply to the High
Court under section 2(1)(a) of the Arbitration Act 1979
for the determination of any question of law arising in
the course of the reference to arbitration.
12. MISCELLANEOUS
(a) The headings in this Agreement are inserted for convenience only
and shall not affect the construction hereof.
(b) Words importing the singular shall also include the plural and
vice versa.
(c) The benefit of this Agreement is personal to Hanson Pacific and
shall not be assigned without the prior written consent of the
Company. Subject thereto, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
(d) This Agreement constitutes the entire agreement between the
parties, and supersedes all prior agreements, arrangements and
undertakings whether oral or written with respect to the subject
matter thereof.
(e) No waiver of any provision of this Agreement shall be effective
unless it is given in writing and executed by the party giving
such waiver.
8
<PAGE>
<PAGE>
(f) No amendment of this Agreement shall be effective unless it is
given in writing and executed by the parties.
(g) Waiver by either party of any default hereunder by the other
party shall not affect or impair that party's rights in respect
of any subsequent default of the same or a different kind.
(h) No failure or delay on the part of either party hereto to
exercise any right or remedy under this Agreement shall be
construed or operate as a waiver thereof nor shall any single or
partial exercise of any right or remedy under this Agreement
preclude the further exercise of any other right or remedy or
preclude the further exercise of such right or remedy as the case
may be. The rights and remedies provided in this Agreement are
cumulative and are not exclusive of any rights or remedies
provided by law.
(i) Each party shall bear its own costs in relation to the
negotiation, drafting, preparation, execution and performance of
this Agreement.
AS WITNESS the hands of the representatives of the parties hereto the day and
year first above written.
SIGNED by )
duly authorised for and on behalf )
of HANSON PACIFIC LIMITED )
SIGNED by )
duly authorised for and on behalf )
of HM HOLDINGS, INC. )
9
<PAGE>
<PAGE>
Exhibit 10.13
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of this 1st day of October 1996 by and
between Welbeck Management Limited (hereinafter referred to as "Welbeck"), a
Bermuda Corporation, having its principal office in Hamilton, Bermuda, and
Diversity Insurance Company Ltd., Cue Insurance Limited and KIC Ltd (each,
a "Company" and collectively the "Companies"), each a Bermuda Corporation, and
each having its principal office in Hamilton, Bermuda,
WHEREAS, Welbeck is a corporation engaged in providing certain
management and administrative services to insurance companies; and
WHEREAS, each Company desires to employ Welbeck to perform
certain management and administrative services on its behalf;
NOW THEREFORE, in consideration of their respective promises and
covenants hereinafter contained, Welbeck and each Company agree as follows:
1. Welbeck shall, but only to the extent and specifically as requested
by each Company, provide the following services:
a. Provide and maintain a reinsurance programme on behalf of and as
authorized by each Company, keeping detailed records of any such
business transaction, transacted in connection therewith;
b. Prepare and execute, as hereinafter authorized, all policies and
contracts of reinsurance, and all binders and endorsements on
behalf of each Company in connection therewith;
c. Prepare financial, statistical and other reports as and when
requested by and for each Company, its directors or shareholders;
d. Subject to each Company's approval, provide or arrange for the
provision of supervisory loss adjustment services including
arrangements for on-site loss adjustments by recognized
experienced loss adjustors;
e. Maintain proper financial records and books of account concerning
all business of each Company effected by Welbeck on behalf of
each Company pursuant to the terms of this Agreement, including
all reinsurance transactions and other receipts and disbursements
of each Company in relation thereto, in a form
<PAGE>
<PAGE>
approved by each Company, such approval not to be unreasonably
withheld, and which the independent auditors of each Company may
certify as being in accordance with generally accepted accounting
principles applicable to the business of reinsurance, and prepare
for each Company, within 30 days after each month end, monthly
statements of the financial position and results of the business
and such other reports as it is reasonable for Welbeck to provide
in connection with its obligations under this Agreement.
f. For the purpose of lawfully performing its obligations under this
Agreement, open, maintain and operate bank accounts in Bermuda in
the name of each Company; make deposits and disbursements
therefrom; transfer monies from bank current accounts to bank
time deposit accounts and vice versa to meet cash flow
requirements, in each case in accordance with such limitations
and restrictions as may be set forth in written instructions from
each Company to Welbeck;
g. Invest the funds of each Company in investments other than bank
current accounts and bank time deposit accounts, liquidate or
change such investments and reinvest such funds, but only
pursuant to written investment guidelines provided by each
Company to Welbeck. Welbeck shall have no liability whatsoever
for the soundness of any such investment, the amount of return
therefrom, the solvency of the institution in which such funds
are invested or deposited or any other action or failure to act
pursuant to such investment guidelines unless proven to be
caused by Welbeck's gross negligence or willful malfeasance;
h. So long as this Agreement is in effect, continue to act as the
Principal Representative of each Company as required by the
Insurance Act (Bermuda), 1978 or any successor statute and all
Regulations made thereunder; and
i. Prepare and file all Bermudian governmental reports, including
tax reports, on each Company's behalf on the basis of information
generated by or made available to Welbeck.
Save as hereinbefore specifically set out, Welbeck is not obliged to provide any
other services to any Company pursuant to this Agreement including without
limitation legal counsel, investment advice, or independent auditing services.
2
<PAGE>
<PAGE>
2. Each Company hereby:
a. Authorizes Welbeck to perform for and on its behalf all the
duties set out hereinbefore and, when called upon to do so, will
ratify and confirm the performance of such duties and the
execution of any of the aforesaid documents or contracts entered
into pursuant to the specific terms of this agreement;
b. Accepts sole responsibility for the investment of any funds of
such Company which become available for investment and for the
production of the investment guidelines hereinbefore mentioned;
c. Agrees to pay Welbeck as compensation in full for all services
rendered by Welbeck as described in Section 1 fees for the "First
Year" (as that term is defined in Section 3b) as set forth in
Exhibit A hereto and as negotiated for subsequent years, to be
paid in equal installments quarterly in advance until this
Agreement is terminated. The parties agree to negotiate in good
faith, prior to the anniversary date of this Agreement, with a
view to arriving at an annual fee for the succeeding year. If no
such fee is agreed, the annual fee for the prior year shall
continue in effect for the succeeding year;
d. Agrees to act, within a reasonable period of time, upon any
proposals for reinsurance which may be submitted to it for
approval by Welbeck and will, within such like period, comply
with any request for instructions or information made by Welbeck
in order that Welbeck may efficiently perform its duties under
this Agreement;
e. Agrees to reimburse Welbeck for its reasonable and necessary
out-of-pocket expenses, incurred on behalf of and with the
approval of such Company and not paid directly by such Company,
including without limitation lawyers' fees, taxes, printing,
photocopying, forms, stationery, office supplies, telephone,
cables, postage, hotel and meal and travel expenses.
f. Agrees to pay and bear the reasonable and necessary expense of
any taxes and commissions to selling agents or brokers which
Welbeck may incur with the approval and on behalf of such Company
in connection with Welbeck's management of such Company's
reinsurance business.
3
<PAGE>
<PAGE>
3. IT IS MUTUALLY AGREED AND COVENANTED between the parties hereto
that:
a. Each Company or its duly authorized representatives may at any
reasonable time inspect the records maintained on its behalf by
Welbeck during the "Effective Period" of the Agreement (as the
term is defined in Sub-section b hereinbelow), or until such
later time as such records are returned as required by Section 4
hereof.
b. The "Effective Period" of this Agreement shall commence as of 1st
October 1996 and shall remain in full force and effect thereafter
for the year ended 30th September 1997 (the "First Year") and
thereafter for subsequent years (October 1 to the following
September 30) (each year of the Effective Period being referred
to as a "Year"); provided that any party may terminate this
Agreement by giving written notice of termination to the other
parties at their addresses hereinbefore set out (or such other
address as any party should designate by notice given in like
manner) at least ninety (90) days in advance of the last day of
the Year at the end of which termination is to take place;
c. Termination of this Agreement shall not be deemed to
affect the terms, prior to expiration of their contract
terms, of any policies and binders of reinsurance effected
prior to the date of termination of this Agreement;
d. Termination of this Agreement shall not relieve any
party of liability for the performance of obligations
imposed upon said party during the Effective Period of
this Agreement which have not been performed at the time
of termination of this Agreement;
e. Anything to the contrary in this Agreement
notwithstanding, it shall be automatically terminated
without notice by the insolvency, receivership, bankruptcy
or liquidation of any party;
f. The relationship between the parties established by this
Agreement is that of independent contracting parties. As
such, subject to the rights retained or granted to and the
obligations undertaken by each party pursuant to this
Agreement, each shall conduct its business at its own
initiative, responsibility and expense. Welbeck shall have
no power to enter into any contract other than a
reinsurance contract on behalf of any Company or as
otherwise provided in this Agreement, unless specifically
instructed by such Company to do so.
4
<PAGE>
<PAGE>
4. It is hereby understood and agreed that each Company retains
ownership of all books, records, reports and statistics of or
relating to such Company and other materials produced by Welbeck on
behalf of such Company pursuant to the terms of this Agreement. All
such books, records, reports, statistics and other materials shall
be delivered to such Company or its designee promptly after any
termination hereof.
5. If, in connection with any services or matters that are the subject
of this Agreement, Welbeck becomes involved in any capacity in any
action or legal proceeding, each Company agrees (i) to reimburse
Welbeck for the reasonable legal fees, disbursements of counsel and
other expenses (including the cost of investigation and preparation)
incurred by Welbeck on behalf of such Company, and (ii) to indemnify
and hold Welbeck harmless against any losses, claims, damages or
liabilities, joint or several, to which Welbeck may become subject
in connection with the services or matters which are the subject
of this Agreement; provided, however, that the Company shall not
be liable under the foregoing indemnity in respect of any loss,
claim, damage or liability to the extent that a court having
jurisdiction shall have determined by a final judgment that such
loss, claim, damage or liability resulted directly from
Welbeck's gross negligence, bad faith or willful misconduct. The
provisions of this paragraph shall survive the expiration of the
period of this Agreement, including any extensions thereof. The
benefit of the agreements of each of the Companies in this paragraph
shall, upon the same terms and conditions, extend to and inure
to the benefit of each person, if any, who may be deemed to
control Welbeck and the officers, directors, employees and
affiliates of Welbeck and each such controlling person.
6. Notwithstanding anything else to the contrary contained in this
Agreement, Welbeck shall not have any liability hereunder except for
its gross negligence, bad faith or willful misconduct.
7. Confidentiality.
a. During the continuance of this Agreement and at all times
after its termination for whatever reason, Welbeck
covenants and agrees to maintain all information in
respect of each Company and its respective business
confidential and will not use any of such information for
its own purpose and will not divulge or communicate any
such information except as may be necessary for the proper
performance of any contractual obligations under any
agreement to which any Company is bound.
5
<PAGE>
<PAGE>
b. The confidentiality obligation contained in this Section 7
shall not apply to:
(i) information available within the public domain not
through the fault of Welbeck;
(ii) information made available from a third party
directly to Welbeck; or
(iii) information the disclosure of which is required by
law, regulations, court order or competent
regulatory authority.
9. This Agreement may not be assigned in whole or in part, whether
by operation of law or otherwise, by either party without the
written consent of the other party.
10. This Agreement shall be governed by and construed in accordance
with the laws of the Island of Bermuda applied to contracts
executed and performed wholly within such Island.
11. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have hereunto set their hands to
duplicate originals hereof, the day and year first above written, at Hamilton,
Bermuda.
Given effect to in Bermuda on the day and year first above written.
ATTEST: WELBECK MANAGEMENT LIMITED
________________________ By: _________________________________
ATTEST: DIVERSITY INSURANCE COMPANY LTD.
________________________ By: _________________________________
ATTEST: CUE INSURANCE LIMITED.
________________________ By: _________________________________
ATTEST: KIC LTD.
________________________ By: _________________________________
6
<PAGE>
<PAGE>
Exhibit 10.14
CONFORMED COPY
================================================================================
================================================================================
CREDIT AGREEMENT
Dated as of July 26, 1996
among
HANSON AMERICA INC.,
MILLENNIUM CHEMICALS INC., as Guarantor,
THE BORROWING SUBSIDIARIES PARTY HERETO,
THE LENDERS PARTY HERETO
THE CHASE MANHATTAN BANK,
as Documentation Agent
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
================================================================================
================================================================================
[CS&M Ref. No. 4408-025]
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
<S> <C> <C> <C>
SECTION 1.01. Definitions.................................... 1
SECTION 1.02. Accounting Terms............................... 22
SECTION 1.03. Terms Generally................................ 22
SECTION 1.04. Exchange Rates................................. 23
ARTICLE II
The Loans
SECTION 2.01. Commitments.................................... 23
SECTION 2.02. Loans.......................................... 24
SECTION 2.03. Competitive Bid Procedure...................... 26
SECTION 2.04. Notice of Standby and Multicurrency
Borrowings................................... 29
SECTION 2.05. Conversions and Continuations.................. 30
SECTION 2.06. Fees........................................... 31
SECTION 2.07. Repayment of Loans; Evidence
of Debt...................................... 32
SECTION 2.08. Interest on Loans.............................. 33
SECTION 2.09. Interest on Overdue Amounts;
Alternative Rate of Interest................. 34
SECTION 2.10. Termination and Reduction of Standby
Commitments; Termination, Reduction
and Increase of Multicurrency
Commitments.................................. 34
SECTION 2.11. Prepayment of Loans............................ 35
SECTION 2.12. Reserve Requirements; Change in
Circumstances................................ 37
SECTION 2.13. Change in Legality............................. 38
SECTION 2.14. Indemnity...................................... 40
SECTION 2.15. Pro Rata Treatment............................. 41
SECTION 2.16. Sharing of Setoffs............................. 41
SECTION 2.17. Taxes.......................................... 42
SECTION 2.18. Duty to Mitigate; Assignment
of Commitments Under Certain
Circumstances................................ 45
SECTION 2.19. Borrowing Subsidiaries......................... 46
</TABLE>
<PAGE>
<PAGE>
2
<TABLE>
ARTICLE III
Representations and Warranties
<S> <C> <C> <C>
SECTION 3.01. Organization................................... 46
SECTION 3.02. Authorization.................................. 46
SECTION 3.03. Absence of Conflicts........................... 47
SECTION 3.04. Governmental Approvals......................... 47
SECTION 3.05. Enforceability................................. 47
SECTION 3.06. Financial Statements........................... 47
SECTION 3.07. Material Adverse Effect........................ 48
SECTION 3.08. Litigation..................................... 48
SECTION 3.09. Compliance with Laws and Agreements............ 48
SECTION 3.10. Federal Reserve Regulations.................... 48
SECTION 3.11. Tax Returns.................................... 48
SECTION 3.12. Employee Benefit Plans......................... 49
SECTION 3.13. No Material Misstatements...................... 49
SECTION 3.14. Investment Company Act; Public
Utility Holding Company Act.................. 49
SECTION 3.15. Subsidiaries................................... 49
SECTION 3.16. Agreements..................................... 50
SECTION 3.17. Environmental and Safety Matters............... 50
SECTION 3.18. Title to Properties............................ 50
SECTION 3.19. Labor Matters.................................. 50
SECTION 3.20. Ranking........................................ 51
SECTION 3.21. Immunities, Etc................................ 51
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Borrowings................................. 51
SECTION 4.02. First Borrowing................................ 52
SECTION 4.03. Borrowing in Respect of Each
Borrowing Subsidiary......................... 53
ARTICLE V
Affirmative Covenants
SECTION 5.01. Corporate Existence............................ 55
SECTION 5.02. Businesses and Properties...................... 55
SECTION 5.03. Insurance...................................... 55
SECTION 5.04. Taxes.......................................... 55
SECTION 5.05. Financial Statements, Reports, etc. ........... 56
SECTION 5.06. Litigation and Other Notices................... 57
SECTION 5.07. ERISA.......................................... 57
SECTION 5.08. Access to Premises and Records................. 58
</TABLE>
<PAGE>
<PAGE>
3
<TABLE>
<S> <C> <C> <C>
SECTION 5.09. Use of Proceeds................................ 59
SECTION 5.10. Compliance with Laws........................... 59
SECTION 5.11. Environmental Compliance....................... 59
SECTION 5.12. Demerger....................................... 59
SECTION 5.13 Exchangeable Notes............................. 60
SECTION 5.14. HANV Loan Obligations.......................... 60
ARTICLE VI
Negative Covenants
SECTION 6.01. Liens.......................................... 61
SECTION 6.02. Sale and Leaseback Transactions................ 63
SECTION 6.03. Subsidiary Indebtedness and
Preferred Stock.............................. 64
SECTION 6.04. Leverage Ratio................................. 64
SECTION 6.05. Interest Coverage Ratio........................ 64
SECTION 6.06. Consolidations, Mergers,
Sales of Assets.............................. 65
SECTION 6.07. Transactions with Affiliates................... 65
SECTION 6.08. Dividend Restrictions Affecting
Subsidiaries................................. 65
SECTION 6.09. HANV Loan Obligations; HHN Note................ 66
SECTION 6.10. Maintenance of Borrowing Subsidiaries.......... 66
SECTION 6.11. Demerger....................................... 66
ARTICLE VII
Events of Default ............................................... 66
ARTICLE VIII
Administrative Agent .............................................71
ARTICLE IX
Guarantee ............................................... 73
ARTICLE X
Miscellaneous
SECTION 10.01. Notices........................................ 75
SECTION 10.02. No Waivers; Amendments......................... 76
SECTION 10.03. Payments....................................... 77
</TABLE>
<PAGE>
<PAGE>
4
<TABLE>
<S> <C> <C> <C>
SECTION 10.04. Governing Law; Submission to
Jurisdiction................................. 77
SECTION 10.05. Expenses; Documentary Taxes;
Indemnity.................................... 79
SECTION 10.06. Survival of Agreements, Representations and
Warranties, etc. ............................ 80
SECTION 10.07. Successors and Assigns......................... 80
SECTION 10.08. Right of Setoff................................ 83
SECTION 10.09. Severability................................... 84
SECTION 10.10. Cover Page, Table of Contents and
Section Headings............................. 84
SECTION 10.11. Counterparts; Effectiveness.................... 84
SECTION 10.12. Waiver of Jury Trial........................... 84
SECTION 10.13. Entire Agreement............................... 85
SECTION 10.14. Conversion of Currencies....................... 85
SECTION 10.15. Obligations of Millennium...................... 85
SECTION 10.16. Certain Obligations of HAI..................... 86
Exhibits and Schedules
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Standby Borrowing Request
Exhibit C-1 Form of Competitive Bid Request
Exhibit C-2 Form of Notice of Competitive Bid Request
Exhibit C-3 Form of Competitive Bid
Exhibit C-4 Form of Competitive Bid Accept/Reject
Letter
Exhibit D-1 Form of Opinion of Counsel--George H.
Hempstead, III, Esq.
Exhibit D-2 Form of Opinion of Counsel--Fried, Frank, Harris,
Shriver & Jacobson
Exhibit D-3 Form of Opinion of Counsel--Clifford
Chance, counsel for HANV
Exhibit D-4 Form of Opinion of Borrowing Subsidiary Counsel
Exhibit E-1 Form of Hanson America Inc. Resolutions
Exhibit E-2 Form of HANV Resolutions
Exhibit E-3 Form of HANV Subordination Letter
Exhibit E-4 Form of HHN Note
Exhibit F Form of Borrowing Subsidiary Agreement
Exhibit G Form of Borrowing Subsidiary Termination
Schedule 1.01 Post-Demerger Organization of Millennium and
its Subsidiaries
Schedule 2.01 Lenders, Standby Commitments, Multicurrency
Lenders and Multicurrency Commitments
</TABLE>
<PAGE>
<PAGE>
5
<TABLE>
<S> <C> <C> <C>
Schedule 3.15 Subsidiaries
Schedule 6.03 Certain Subsidiary Indebtedness
Schedule 10.01 Addresses for Notices
Schedule 10.16 HAI's Financial Covenants
</TABLE>
<PAGE>
<PAGE>
CREDIT AGREEMENT dated as of July 26, 1996, among
HANSON AMERICA INC., a Delaware corporation ("HAI");
MILLENNIUM CHEMICALS INC., a Delaware corporation
("Millennium"), as Guarantor; the lenders from time to
time party hereto, initially consisting of those listed on
Schedule 2.01 hereto (the "Lenders"); THE CHASE MANHATTAN
BANK, as Documentation Agent; and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as administrative agent (in
such capacity, the "Administrative Agent").
The Borrowers (such term and each other capitalized term used but
not defined herein having the meaning assigned to it in Article I) have
requested the Lenders to extend credit in order to enable them to borrow on a
revolving basis an aggregate principal amount not in excess of $2,250,000,000.
The proceeds of such borrowings are to be used, together with other funds of the
Borrowers, to provide working capital to the Borrowers and for general corporate
purposes of the Borrowers including, without limitation, the payment of the
purchase price and fees and expenses in connection with the purchase of the
Exchangeable Notes, and the payment of the Hanson Loan and of the HANV Loan
Obligations in connection with the Demerger. The Lenders are willing to extend
such credit to the Borrowers on the terms and subject to the conditions set
forth herein.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows (it
being understood that the obligations of Millennium hereunder and the rights of
the Borrowing Subsidiaries to borrow hereunder will take effect only as provided
in Section 10.15):
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Agreement, the
capitalized terms in the preamble and the recitals hereto shall have the
meanings therein given them, and the following words and terms shall have the
meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR
Loans.
"ABR Loan" shall mean any Standby Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with Article
II.
<PAGE>
<PAGE>
2
"Administrative Fees" shall have the meaning assigned to
such term in Section 2.06(b).
"Affiliate" shall mean, with respect to any person, any other
person which directly or indirectly controls, is under common control with or is
controlled by such person. As used in this definition, "control" (including,
with correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Agreement Currency" shall have the meaning assigned to such
term in Section 10.14.
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next higher 1/16th of 1%) equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including, without limitation, the
inability of the Administrative Agent to obtain sufficient bids in accordance
with the terms hereof, the Alternate Base Rate shall be determined without
regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist.
"Applicable Lending Office" shall mean, with respect to each
Lender, (i) such Lender's Domestic Lending Office in the case of an ABR Loan, a
NIBOR Loan or a Fixed Rate Loan, (ii) such Lender's LIBOR Lending Office in the
case of a LIBOR Loan or (iii) such Lender's (or its Affiliate's) A$ Lending
Office, in the case of a Domestic A$ Loan.
"Applicable Percentage" shall mean, for any day, with respect to
any LIBOR Loan (other than any Competitive Loan) or NIBOR Loan, or with respect
to the Facility Fee, as the case may be, the applicable percentage set forth
below under the caption "LIBOR/NIBOR
<PAGE>
<PAGE>
3
Spread" or "Facility Fee Percentage", as the case may be, based upon the ratings
by S&P and Moody's, respectively, applicable on such date to the Index Debt:
<TABLE>
<CAPTION>
Facility
LIBOR/NIBOR Fee
Spread Percentage
------ ----------
<S> <C> <C>
Category 1
At least
A from S&P or
A2 from Moody's .135% .065%
Category 2
A- from S&P or
A3 from Moody's .170% .080%
Category 3
BBB+ from S&P
or Baa1 from
Moody's .200% .100%
Category 4
BBB from
S&P or
Baa2 from
Moody's .225% .125%
Category 5
BBB- from S&P or
Baa3 from Moody's .275% .150%
Category 6
BB+ or lower from
S&P or
Ba1 or lower from
Moody's .475% .250%
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P shall
not have in effect a rating for Index Debt (other than by reason of the
circumstances referred to in the last two sentences of this definition), then
such rating agency shall be deemed to have established a rating in Category 6;
(ii) if the ratings established or deemed to have been established by Moody's
and S&P for the Index Debt shall fall within adjacent Categories, the Applicable
Percentage shall be based on the higher of the two ratings; (iii) if the ratings
established or deemed to have been established by Moody's and S&P for the Index
Debt differ by two Categories, the Applicable Percentage shall be based on the
middle Category, (iv) if the ratings established or deemed to have been
established by Moody's and S&P for the Index Debt differ by more than two
Categories, the Applicable Percentage shall be based on the
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4
Category next above that in which the lower rating falls, (v) if the ratings
established or deemed to have been established by Moody's and S&P for the Index
Debt shall be changed (other than as a result of a change in the rating system
of Moody's or S&P), such change shall be effective as of the date on which it is
first announced by the applicable rating agency and (vi) if Moody's and/or S&P
shall have in effect indicative ratings for Index Debt, such ratings shall be
employed as provided herein to determine the Applicable Percentage
notwithstanding that no Index Debt shall be outstanding. Each change in the
Applicable Percentage shall apply during the period commencing on the effective
date of such change and ending on the date immediately preceding the effective
date of the next such change. If, following the Demerger Date, only a single
rating agency shall so far have established a rating for the Index Debt, the
Applicable Percentage shall be based on such rating. If the rating system of
Moody's or S&P shall change, or if either such rating agency shall cease to be
in the business of rating corporate debt obligations, HAI or Millennium, as the
case may be, and the Administrative Agent shall negotiate in good faith to amend
this definition to reflect such changed rating system or the non-availability of
ratings from such rating agency and, pending the effectiveness of any such
amendment, the Applicable Percentage shall be determined by reference to the
rating most recently in effect prior to such change or cessation.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee, in the form of Exhibit A.
"A$" shall mean the lawful currency of Australia.
"A$ Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "A$ Lending Office" in Schedule 2.01 or,
as to any person who becomes a Lender after the Closing Date, in the Assignment
and Acceptance executed by such person or such other office of such Lender as
such Lender may hereafter designate from time to time as its "A$ Lending Office"
by notice to HAI or Millennium, as applicable, and the Administrative Agent.
"A$ Rate" shall mean, in relation to each Interest Period, the
rate (expressed as a percentage per annum) which is the bid rate shown at
approximately 10:15 a.m., Sydney time, on page "BBSY" on the Reuters Monitor
System on the first day of such Interest Period for a term approximately equal
to such Interest Period; provided that if such rate is no longer available, "A$
Rate" shall mean the rate determined by the Administrative Agent to be the
average rate at which Westpac Banking Corporation, Australia and New Zealand
Banking Group and Commonwealth Bank of Australia are purchasing bills of
exchange accepted by Australian banks for a term approximately equal to such
Interest Period on the first day of such Interest Period.
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5
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrower" shall mean (i) prior to the Demerger Date, HAI, and
(ii) on and after the Demerger Date, any Borrowing Subsidiary.
"Borrowing" shall mean a Loan or group of Loans of a single Type
and currency made by the Lenders (or (a) in the case of Multicurrency Loans, by
the Multicurrency Lenders, or (b) in the case of Competitive Loans, by the
Lender or Lenders whose Competitive Bids have been accepted pursuant to Section
2.03), on a single date and as to which a single Interest Period is in effect.
"Borrowing Date" shall mean any Business Day specified in a
notice pursuant to Section 2.03 or 2.04 as a date on which the relevant Borrower
requests Loans to be made hereunder.
"Borrowing Subsidiaries" shall mean from and after the Demerger
Date HAI or any other Subsidiary of Millennium designated as a Borrowing
Subsidiary by Millennium pursuant to Section 2.19.
"Borrowing Subsidiary Agreement" shall mean a Borrowing
Subsidiary Agreement substantially in the form of Exhibit F.
"Borrowing Subsidiary Termination" shall mean a Borrowing
Subsidiary Termination substantially in the form of Exhibit G.
"Business Day" shall mean any day which is not a Saturday, Sunday
or legal holiday in the State of New York on which banks are open for business
in New York City; provided, however, that (i) when used in connection with a
LIBOR Loan, the term "Business Day" shall also exclude any day on which banks
are not open for dealings in deposits in the applicable currency in the London
interbank market, (ii) when used in connection with a NIBOR Loan, the term
"Business Day" shall also exclude any day on which the lending offices of the
Lender which is the Administrative Agent where its foreign currency and exchange
operations and Eurodollar funding operations are customarily conducted are
closed, (iii) when used in connection with a Domestic A$ Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
business in Sydney and (iv) when used in connection with any Loan to a Borrowing
Subsidiary, the term "Business Day" shall also exclude any day on which banks in
the jurisdiction where such Loans are being made and where payments thereof are
required to be made are closed.
"Calculation Date" shall mean (a) the last Business Day of each
calendar quarter and (b) at any time when the aggregate amount of the Dollar
Credit Exposures exceeds 85% of the Total Commitment, the last Business Day of
each two-calendar week period.
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6
"Capitalized Lease Obligations" of any person shall mean
obligations of such person and its consolidated subsidiaries to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real and/or personal property, which obligations are accounted for as a
capital lease on the consolidated balance sheet of such person.
"Cash Management Subsidiary" shall mean a Subsidiary engaged
solely in borrowing, lending and investing in HAI and its Subsidiaries (and, on
and after the Demerger Date, Millennium and its Subsidiaries) and short-term
investment activities in connection with HAI and its Subsidiaries (and, on and
after the Demerger Date, Millennium and its Subsidiaries) and that holds no
material assets other than cash, cash equivalents and intercompany receivables.
"Change in Law" shall mean (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof after the date of
this Agreement or (c) compliance by any Lender with any request, guideline or
directive (whether or not having the force of law), in each case of any
Governmental Authority made or issued after the date of this Agreement.
"Chemicals Business" shall have the meaning assigned to such
term in the Form 10.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time.
"Competitive Bid" shall mean an offer by a Lender to make a
Competitive Loan pursuant to Section 2.03.
"Competitive Bid Accept/Reject Letter" shall mean a notification
made by the applicable Borrower pursuant to Section 2.03(d) in the form of
Exhibit C-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made
by a Lender pursuant to Section 2.03(b), (i) in the case of a LIBOR Loan, the
Margin and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest
offered by the Lender making such Competitive Bid. The Competitive Bid Rate
submitted by any Lender shall include any and all reserve requirement costs of
such Lender pursuant to Section 2.12(a).
"Competitive Bid Request" shall mean a request made pursuant to
Section 2.03 in the form of Exhibit C-1.
"Competitive Borrowing" shall mean a Borrowing consisting of
a Competitive Loan or concurrent Competitive Loans from the Lender or
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7
Lenders whose Competitive Bids for such Borrowing have been accepted by the
applicable Borrower under the bidding procedure described in Section 2.03.
"Competitive Loan" shall mean a loan from a Lender to a Borrower
pursuant to the bidding procedure described in Section 2.03. Each Competitive
Loan shall be denominated in Dollars and shall be a LIBOR Competitive Loan or a
Fixed Rate Loan.
"Competitive Loan Exposure" shall mean, with respect to any
Lender at any time, the aggregate principal amount at such time of all
outstanding Competitive Loans made by such Lender.
"Consolidated Net Tangible Assets" shall mean the total amount of
assets of Millennium and its Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
the write-ups of capital assets (excluding write-ups in connection with
accounting for acquisitions in conformity with GAAP), after deducting therefrom
all goodwill, trade names, trademarks, patents, unamortized debt issuance fees
and expenses and other like intangibles, determined (a) at any time prior to the
Demerger Date, on a pro forma combined basis (giving effect to the Demerger) and
(b) at any time on or after the Demerger Date, on a consolidated basis.
"Covered HANV Loan Obligations" shall mean at any time (i) prior
to the Demerger Date, the outstanding principal amount of the HANV Loan
Obligations at such time, and (ii) on or after the Demerger Date, a principal
amount of the HANV Loan Obligations equal to the aggregate amount of Offsetting
Receivables outstanding at such time.
"Default" shall mean any event which with the giving of notice or
lapse of time or both would constitute an Event of Default.
"Demerger" shall mean the following transactions in the following
sequence: (a) the sale to Hanson PLC or certain of its subsidiaries by the
subsidiaries of HAI of all of their businesses and assets (other than as
specified in clause (c) below) that do not constitute part of the Chemicals
Business for consideration determined to represent the fair market value of such
businesses and assets; (b) the transfer by Hanson PLC to Millennium, by virtue
of the transfer to Millennium of all of the outstanding stock of Hanson
Overseas, of all of the businesses and assets of Hanson PLC and its subsidiaries
that constitute part of the Chemicals Business in exchange for the issuance by
Millennium of all of its then outstanding common stock to the Hanson PLC
shareholders; (c) the sale to Hanson PLC or certain of its subsidiaries by
subsidiaries of HAI of Cornerstone Spectrum Inc. and Kidde Industries Inc. for
consideration determined to represent the fair market value of such businesses
and assets; and (d)(i) during the period from the Demerger Date to and including
the date ten days thereafter or, with respect to the HANV Loan Obligations,
December 31, 1996, the use of
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8
the sale proceeds of one or more of the foregoing transactions, together with
cash balances, Borrowing proceeds and, in the case of the HANV Loan Obligations,
any Offsetting Receivables to discharge the HANV Loan Obligations (as
contemplated by Section 5.14 and subject to having obtained the consents under
the Exchangeable Notes as contemplated by Section 5.13) and to discharge in full
the Hanson Loan and (ii) during the period from the Demerger Date to and
including the date ninety days thereafter, the payment by Hanson PLC to
Millennium, or by Millennium to Hanson PLC, as the case may be, of such amount
as shall be necessary in order that the Pro Forma Net Debt (as defined in the
Form 10) of Millennium as of the Demerger Date will not exceed $2 billion, all
of the foregoing transactions being on substantially the terms set forth in the
Form 10 and resulting in the organizational structure set forth in Schedule 1.01
or another organizational structure that, in any case, achieves substantially
the economic benefits with respect to Millennium and its Subsidiaries, as a
whole, of all of the foregoing transactions and does not adversely affect the
rights or interests of the Lenders.
"Demerger Adjustment Date" shall mean the date, not more than
ninety days after the Demerger Date, on which the last of the transactions set
forth in clauses (c) and (d) of the definition of "Demerger" shall have been
consummated.
"Demerger Date" shall mean the date on which the last of the
transactions set forth in clauses (a) and (b) of the definition of "Demerger"
shall have been consummated; provided, however, that if the Demerger Date has
not occurred prior to December 31, 1996, and except as provided in Section 6.11,
each reference to the Demerger Date and the consequences thereof shall be of no
force and effect.
"Dollar Credit Exposure" shall mean, with respect to any Lender
at any time, the sum of the Standby Loan Exposure, the Competitive Loan Exposure
and the Multicurrency Loan Exposure of such Lender at such time.
"Dollar Equivalent" shall mean, on any date of determination,
with respect to any amount in any Eligible Currency, the equivalent in Dollars
of such amount, determined by the Administrative Agent using the Exchange Rate
with respect to such Eligible Currency then in effect as determined pursuant to
Section 1.04(a).
"Dollars" or "$" shall mean lawful currency of the United
States of America.
"Domestic A$ Borrowing" shall mean a Borrowing comprised of
Domestic A$ Loans.
"Domestic A$ Loan" shall mean a Multicurrency Loan denominated in
A$ and bearing interest at a rate determined by reference to the A$ Rate in
accordance with Article II.
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9
"Domestic Lending Office" shall mean, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" on Schedule
2.01 or, as to any person who becomes a Lender after the Closing Date, in the
Assignment and Acceptance executed by such person or such other office of such
Lender as such Lender may hereafter designate from time to time as its "Domestic
Lending Office" by notice to HAI or Millennium, as applicable, and the
Administrative Agent.
"EBITDA" shall mean, with respect to Millennium and its
Subsidiaries for any period, (a) the sum of (i) Operating Income, (ii)
amortization, depreciation and depletion and (iii) non-cash compensation expense
(including deferred compensation expense), determined (a) at any time prior to
the Demerger Date on a pro-forma combined basis (giving effect to the Demerger)
and (b) at any time on or after the Demerger Date, on a consolidated basis.
"Eligible Currency" shall mean A$, Pounds Sterling and any other
currency (other than Dollars) that shall be designated by a Borrower in a notice
delivered to the Administrative Agent and each Multicurrency Lender by HAI or,
on or after the Demerger Date, Millennium and that is freely tradeable and
exchangeable into Dollars in the London market and for which an Exchange Rate
can be determined by reference to the Reuters World currency page or another
publicly available service for displaying exchange rates agreed upon by the
Administrative Agent and HAI or, on or after the Demerger Date, Millennium.
"Environmental and Safety Laws" shall have the meaning assigned
to such term in Section 3.17.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that, together with any Loan Party, is treated as a single
employer under Section 414 of the Code.
"Event of Default" shall have the meaning specified in
Article VII.
"Exchange Rate" shall mean, with respect to any Eligible Currency
on a particular date, the rate at which such Eligible Currency may be exchanged
into Dollars, as set forth on such date on the Reuters currency page more
particularly described in Schedule 2.01(b) for Loans to be made in such Eligible
Currency. In the event that such rate does not appear on any Reuters currency
page, the Exchange Rate with respect to such Eligible Currency shall be
determined by reference to such other publicly available service for displaying
exchange rates as may be agreed upon by the Administrative Agent and HAI or, on
or after the Demerger Date, Millennium, or, in the absence of such agreement,
such
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10
Exchange Rate shall instead be the arithmetic average of the spot rates of
exchange of the Lender which is the Administrative Agent in the market where its
foreign currency exchange operations in respect of such Eligible Currency are
then being conducted, at or about 10:00 A.M., local time, at such date for the
purchase of Dollars with such Eligible Currency for delivery two Business Days
later, provided, however, that if at the time of any such determination, for any
reason, no such spot rate is being quoted, the Administrative Agent may use any
reasonable method it deems appropriate to determine such rate, and such
determination shall be conclusive absent manifest error.
"Exchangeable Notes" shall mean the 2.39% Senior Exchangeable
Discount Notes Due 2001 of HAI (including the Rights appurtenant thereto issued
by Hanson (Bermuda) Limited, which permit the Exchangeable Notes to be redeemed
by HAI and the proceeds thereof to be used by the holders thereof to purchase
American Depositary Shares of Hanson PLC).
"Facility Fee" shall have the meaning assigned to such term
in Section 2.06(a).
"Federal Funds Effective Rate" shall mean, for any day, a
fluctuating interest rate per annum equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fee Percentage" shall mean the percentage set forth in the
definition of "Applicable Percentage" appearing under the Facility Fee
Percentage column.
"Fees" shall mean the Facility Fee and the Administrative
Fees.
"Financial Officer" of any person shall mean the chief financial
officer, the treasurer or the principal accounting officer of such person.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of
Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan bearing
interest at a fixed percentage rate per annum (expressed in the form of a
decimal to no more than four decimal places) specified by the Lender making such
Loan in its Competitive Bid.
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11
"Form 10" shall mean the Registration Statement on Form 10 filed
by Millennium with the Securities and Exchange Commission in preliminary form on
July 8, 1996.
"GAAP" shall mean generally accepted accounting principles
applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" of or by any person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) 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 Indebtedness; provided, however, that
the term "Guarantee", when used with respect to HAI, Millennium or any
Subsidiary, shall not include any of the foregoing guarantee obligations with
respect to Indebtedness of any person (i) to the extent of any reserves
maintained with respect thereto on the books of HAI, Millennium or any
Subsidiary in accordance with GAAP or (ii) in the event such person shall have
been a Subsidiary or an Affiliate of HAI, Millennium or any Subsidiary at the
time any such guarantee obligation was incurred, to the extent of any Offsetting
Guarantee/Indemnity of any person reasonably expected to be able to perform its
obligations thereunder in effect with respect to such guarantee obligation; and
provided, further, that the term "Guarantee", when used with respect to
Millennium or any of its Subsidiaries, shall exclude guarantees of up to
$12,000,000 in aggregate principal amount of loans made by third party lenders
to officers and directors of Millennium or any of its Subsidiaries to enable
them to acquire common stock of Millennium or any of its Subsidiaries pursuant
to an employee stock ownership plan.
"HAI" shall mean Hanson America, Inc., a Delaware corporation, to
be renamed after the Demerger Date as Millennium America Inc.
"HANV" shall mean Hanson Antilles N.V., a Netherlands
Antilles corporation.
"HANV Loan Obligations" shall mean the obligations of HAI to HANV
in respect of the $2,250,000,000 subordinated loan made by HANV to
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12
HAI pursuant to the resolutions of the Board of Managing Directors of HANV
adopted on October 15, 1993 and February 1, 1994.
"HM Anglo American" shall mean HM Anglo American, Ltd., a
corporation incorporated under the laws of Delaware.
"HM Holdings" shall mean HM Holdings, Inc., a Delaware
corporation.
"Hanson Loan" shall mean an existing approximately $1.9 billion
loan to HM Anglo American from a wholly owned subsidiary of Hanson PLC.
"Hanson Overseas" shall mean Hanson Overseas Holdings Ltd., a
corporation incorporated under the laws of England.
"Hanson PLC" shall mean Hanson PLC, a corporation incorporated
under the laws of England and the indirect owner on the date hereof of all the
issued and outstanding capital stock of HAI.
"HHN Note" shall mean the subordinated note from HM Holdings to
Hanson Holdings Netherlands B.V., a corporation incorporated under the laws of
the Netherlands, or its registered assigns, in the principal amount of
approximately $403 million given in consideration of the acquisition of a
portion of the stock of HM Holdings held by Hanson Holdings Netherlands B.V.
"Illegality" shall have the meaning assigned to such term in
Section 2.13(a).
"Indebtedness" of any person shall mean, with respect to any
person, without duplication, (a) all obligations of such person for borrowed
money or with respect to deposits or advances of any kind (including repurchase
obligations), (b) all obligations of such person evidenced by bonds, debentures,
notes or similar instruments or letters of credit in support of bonds, notes,
debentures or similar instruments, (c) all obligations of such person upon which
interest charges are customarily paid, (d) all obligations of such person under
any conditional sale or other title retention agreement relating to property
purchased by such person, (e) all obligations of such person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers incurred in the ordinary course of business and paid when
due), (f) all Capitalized Lease Obligations of such person, (g) all obligations
of others secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on property
or assets owned or acquired by such person, whether or not the obligations
secured thereby have been assumed and (h) all Guarantees of such person.
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13
"Index Debt" shall mean the senior unsecured non-credit enhanced
long-term debt of (i) prior to the Demerger Date, HAI, and (ii) on or after the
Demerger Date, Millennium; provided, that if on or after the Demerger Date there
shall be no senior unsecured non-credit enhanced long-term debt issued by
Millennium, any such debt issued by HAI and guaranteed by Millennium (and by no
other person) or, if no such debt is guaranteed by Millennium, the Exchangeable
Notes (so long as they remain unsecured and, except to the extent of a Guarantee
of HM Holdings or Millennium, non-credit enhanced), shall be deemed to be Index
Debt.
"Interest Coverage Ratio" shall mean the ratio of EBITDA to Net
Interest Expense for Millennium and its Subsidiaries, determined (a) at any time
prior to the Demerger Date on a pro forma combined basis (giving effect to the
Demerger) and (b) at any time on or after the Demerger Date, on a consolidated
basis.
"Interest Payment Date" shall mean (a) with respect to any Loan,
the last day of each Interest Period applicable to the Borrowing of which such
Loan is a part, and (b) in the case of a LIBOR Loan, a NIBOR Loan, a Domestic A$
Loan or a Fixed Rate Loan with an Interest Period of more than three months'
duration, each day that would have been an Interest Payment Date had successive
Interest Periods of three months' duration been applicable to such Loan and, in
addition, the date of any continuation or conversion of such Loan with or to a
Loan of a different Type.
"Interest Period" shall mean (a) as to any LIBOR Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3 or 6 months thereafter (or such other periods as the applicable Borrower
and all the Lenders may agree), as the applicable Borrower may elect, (b) as to
any NIBOR Borrowing, the period commencing on the date of such Borrowing or on
the last day of the immediately preceding Interest Period applicable to such
Borrowing, as the case may be, and ending (1) on the numerically corresponding
day (or, if there is no numerically corresponding day, on the last day) in the
calendar month that is 1, 2, 3, or 6 months thereafter as the applicable
Borrower may elect or (2) as determined by the Administrative Agent after
consultation with the Lenders on the corresponding day of the week that is one
week or two weeks thereafter, as the applicable Borrower may elect, (c) as to
any ABR Borrowing, the period commencing on the date of such Borrowing or on the
last day of the immediately preceding Interest Period applicable to such
Borrowing, as the case may be, and ending on the next succeeding March 31, June
30, September 30 or December 31 or, if earlier, the date of prepayment or
conversion of such Borrowing, (d) as to any Fixed Rate Borrowing, the period
commencing on the date of such Borrowing and ending on the date
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14
specified in the Competitive Bids in which the offers to make the Fixed Rate
Loans comprising such Borrowing were extended, which shall not be earlier than 7
days after the date of such Borrowing or later than 360 days after the date of
such Borrowing and (e) as to any Domestic A$ Borrowing, the period of 30, 60, 90
or 180 days' duration, as the applicable Borrower may elect, commencing on the
date of such Borrowing or on the last day of the immediately preceding Interest
Period applicable to such Borrowing, as the case may be; provided, however, that
(i) if any Interest Period would end on a day that shall not be a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless, in the case of LIBOR Loans, NIBOR Loans or Domestic A$ Loans only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (ii) no
Interest Period with respect to any Loan shall end later than the Maturity Date,
and (iii) interest shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest Period.
"Judgment Currency" shall have the meaning assigned to such
term in Section 10.14.
"Leverage Ratio" shall mean the ratio of Total Indebtedness
(minus (i) the outstanding principal amount of the Covered HANV Loan Obligations
and (ii) during the period from the Demerger Date to and including the date ten
days thereafter, the Hanson Loan) to Total Capitalization, determined for
Millennium and its Subsidiaries at any time (a) prior to the Demerger Date, on a
pro forma combined basis (giving effect to the Demerger) and (b) on or after the
Demerger Date, on a consolidated basis.
"LIBO Rate" shall mean, with respect to any Borrowing comprised
of LIBOR Loans for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next higher 1/16th of 1%) equal to the rate at
which deposits in Dollars or the applicable Eligible Currency approximately
equal in principal amount to the LIBOR Loan of the Lender which is the
Administrative Agent (or, in the case of a Borrowing comprised of LIBOR
Competitive Loans, a principal amount that would have been such Lender's portion
of such Competitive Borrowing had such Competitive Borrowing been a Standby
Borrowing) and for a maturity comparable to the applicable Interest Period are
offered in immediately available funds to such Lender in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"LIBOR Borrowing" shall mean a Borrowing comprised of LIBOR
Loans.
"LIBOR Competitive Borrowing" shall mean a Competitive Borrowing
comprised of LIBOR Competitive Loans.
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15
"LIBOR Competitive Loan" shall mean any Competitive Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"LIBOR Lending Office" shall mean, with respect to each Lender,
the branches or Affiliates of such Lender which such Lender has designated as
its "LIBOR Lending Office" on Schedule 2.01 or, as to any person who becomes a
Lender after the Closing Date, in the Assignment and Acceptance executed by such
person or such other office of such Lender as such Lender may hereafter
designate from time to time as its "LIBOR Lending Office" by notice to HAI or
Millennium, as applicable, and the Administrative Agent.
"LIBOR Loan" shall mean any LIBOR Standby Loan, any LIBOR
Competitive Loan or any LIBOR Multicurrency Loan.
"LIBOR Multicurrency Loan" shall mean any Multicurrency Loan
bearing interest at a rate determined by reference to the LIBO Rate in
accordance with the provisions of Article II.
"LIBOR Standby Borrowing" shall mean a Borrowing comprised of
LIBOR Standby Loans.
"LIBOR Standby Loan" shall mean any Standby Loan bearing interest
at a rate determined by reference to the LIBO Rate in accordance with the
provisions of Article II.
"Lien" shall mean, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset or
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loan" shall mean a Competitive Loan, a Standby Loan or a
Multicurrency Loan, whether made as a LIBOR Loan, a NIBOR Loan, an ABR Loan, a
Fixed Rate Loan or a Domestic A$ Loan, as permitted hereby.
"Loan Documents" shall mean (i) this Agreement, (ii) each
Borrowing Subsidiary Agreement, (iii) each of the agreements referred to in
Section 4.02(e), and (iv) each amendment, supplement, modification, consent or
waiver of, to or in respect of any of the foregoing.
"Loan Parties" shall mean (i) prior to the Demerger Date, HAI,
and (ii) on and after the Demerger Date, the Borrowing Subsidiaries and
Millennium.
"Margin" shall mean, as to any LIBOR Competitive Loan, the
margin (expressed as a percentage rate per annum in the form of a
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16
decimal to no more than four decimal places) to be added to or subtracted from
the LIBO Rate in order to determine the interest rate applicable to such Loan,
as specified in the Competitive Bid relating to such Loan.
"Margin Stock" shall have the meaning given such term under
Regulation U.
"Material Adverse Effect" shall mean (a) a materially adverse
effect on the business, assets, operations, prospects or financial condition of
HAI and its Subsidiaries taken as a whole (prior to the Demerger Date) or
Millennium and its Subsidiaries taken as a whole (on or after the Demerger
Date), (b) material impairment of the ability of HAI and its Subsidiaries taken
as a whole (prior to the Demerger Date) or Millennium and its Subsidiaries taken
as a whole (on or after the Demerger Date) to perform any obligations of any
Loan Party under any Loan Document or (c) material impairment of the rights of
or benefits available to the Lenders or the Administrative Agent under any Loan
Document. It is understood that (i) neither the Demerger, to the extent
undertaken in accordance with the definition of such term and Section 5.12, nor
any conflict, breach or default that occurs or is alleged to have occurred in
connection with the Exchangeable Notes resulting from or arising out of the
Demerger (and not as a result of the extension of credit hereunder), shall be
deemed to result in a Material Adverse Effect and (ii) in determining whether a
Material Adverse Effect has occurred, subsidiaries and assets to be sold or
otherwise transferred as part of the Demerger shall be excluded, except to the
extent a change therein would materially and adversely affect Millennium and its
Subsidiaries that will remain following the Demerger, taken as a whole.
"Material Subsidiary" shall mean (a) each of Quantum Chemical
Corporation, SCM Chemicals Inc., SCM Chemicals Limited, SCM Chemicals Ltd. and
Glidco Inc., (b) each other Subsidiary other than Subsidiaries that,
individually or in the aggregate, do not account for more than 10% of the
assets, or more than 10% of the revenues for the four fiscal quarters most
recently ended, of (i) prior to the Demerger Date, HAI and its Subsidiaries on a
consolidated basis and (ii) on or after the Demerger Date, Millennium and its
Subsidiaries on a consolidated basis, and (c) any Subsidiary that owns a
Material Subsidiary; provided that the term "Material Subsidiary" shall exclude
any Cash Management Subsidiary.
"Maturity Date" shall mean the fifth anniversary of the
Closing Date.
"Moody's" shall mean Moody's Investors Service, Inc., and
its successors.
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17
"Multicurrency Borrowing" shall mean a Borrowing comprised
of Multicurrency Loans.
"Multicurrency Commitment" shall mean, with respect to each
Multicurrency Lender, the commitment of such Lender (expressed in Dollars) to
make Multicurrency Loans hereunder as set forth in Schedule 2.01 under the
heading "Multicurrency Commitments", as the same may be permanently terminated
or reduced or increased from time to time pursuant to Section 2.01(c), Section
2.10 or Article VII or increased or reduced from time to time pursuant to
assignments under Section 10.07.
"Multicurrency Equivalent" shall mean, on any date of
determination, with respect to any amount in Dollars, the equivalent in the
relevant Eligible Currency of such amount, determined by the Administrative
Agent using the Exchange Rate with respect to such Eligible Currency then in
effect as determined pursuant to Section 1.04(a).
"Multicurrency Lender" shall mean any Lender (or any Affiliate,
branch or agency thereof) designated by HAI or Millennium and agreed upon by
such Lender, as set forth on Schedule 2.01, as amended from time to time.
"Multicurrency Loan" shall mean any loan denominated in an
Eligible Currency and made pursuant to Section 2.01(b). Each Multicurrency Loan
shall be a LIBOR Multicurrency Loan or a Domestic A$ Loan.
"Multicurrency Loan Exposure" shall mean, with respect to any
Lender at any time, such Lender's Pro Rata Percentage of the Dollar Equivalent
of the aggregate principal amount of the outstanding Multicurrency Loans.
"Multiemployer Plan" shall mean a multiemployer plan as defined
in Section 4001(a)(3) of ERISA to which any Loan Party or ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Net Interest Expense" shall mean, with respect to Millennium and
its Subsidiaries for any period, (a) the interest expense of Millennium and its
Subsidiaries, including, without limitation, (i) the amortization of debt
discounts, (ii) the amortization of all fees (including, without limitation,
fees with respect to interest rate protection agreements) payable in connection
with the incurrence of Indebtedness to the extent included in interest expense
and (iii) the portion of any Capitalized Lease Obligation allocable to interest
expense, less (b) (i) the amortization of any discounts relating to retiree
health benefits of Millennium and its Subsidiaries for such
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18
period and (ii) the amount of interest income of Millennium and its Subsidiaries
for such period, in each case determined (x) at any time prior to the Demerger
Date, on a pro forma combined basis (giving effect to the Demerger) and (y) at
any time on or after the Demerger Date, on a consolidated basis. For purposes of
the foregoing, interest expense shall be determined after giving effect to any
net payments made or received by Millennium and its Subsidiaries with respect to
interest rate protection agreements entered into as a hedge against interest
rate exposure.
"NIBO Rate" shall mean, with respect to any Borrowing comprised
of NIBOR Loans for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next higher 1/16th of 1%) equal to the interest
rate at which Dollar deposits approximately equal in principal amount to the
NIBOR Loan of the Lender which is the Administrative Agent for which the NIBO
Rate is being determined and for a maturity equal to the applicable Interest
Period are offered in immediately available funds to such Lender at the
Eurodollar lending offices where its foreign currency and exchange operations
and Eurodollar funding operations are customarily conducted in the international
interbank market at approximately 10:00 a.m., New York City time, two Business
Days prior to the commencement of such Interest Period.
"NIBOR Borrowing" shall mean a Borrowing comprised of NIBOR
Loans.
"NIBOR Loan" shall mean any Standby Loan bearing interest at a
rate determined by reference to the NIBO Rate in accordance with the provisions
of Article II.
"Obligations" shall mean the obligations of the Borrowers under
this Agreement or any other Loan Document (as the same may hereafter be amended,
restated, extended, supplemented or otherwise modified from time to time) with
respect to the due and punctual payment, whether at maturity, by acceleration or
otherwise, of (i) the principal amount of the Loans, (ii) the interest on the
Loans, and (iii) all other monetary obligations of the Borrowers, whether for
fees, costs, indemnification or otherwise.
"Offsetting Guarantee/Indemnity" shall mean any agreement by any
person to guarantee, indemnify, reimburse or otherwise hold harmless HAI,
Millennium or any Subsidiary, as the case may be, against any liability incurred
in connection with any assurance provided by HAI, Millennium or any Subsidiary
for the payment of any Indebtedness of another person.
"Offsetting Receivables" shall mean any receivables generated in
connection with the sale by Subsidiaries of HAI to Hanson PLC and certain of its
subsidiaries of businesses and assets not in the Chemicals Business as part of
the Demerger; Hanson PLC and certain of
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19
its subsidiaries will be obligated to pay such receivables (with interest) to
HAI or its Subsidiaries on or prior to December 31, 1996.
"Operating Income" shall mean with respect to Millennium and its
Subsidiaries for any period the aggregate net income (or deficit) of Millennium
and its Subsidiaries for such period equal to operating revenues and other
proper income less, to the extent included in operating revenues or income, the
aggregate for Millennium and its Subsidiaries of (i) operating expenses, (ii)
selling, administrative and general expenses, (iii) depreciation, depletion and
amortization of properties and (iv) any other items that are treated as expenses
under GAAP, determined (a) at any time prior to the Demerger Date, on a pro
forma combined basis (giving effect to the Demerger) and (b) at any time on or
after the Demerger Date, on a consolidated basis. The computation of Operating
Income shall exclude the effect of a $40,000,000 charge against earnings in the
first calendar quarter of 1996 relating to the asset impairment expense of SCM
Chemicals Inc., as calculated under FASB 121.
"Other Taxes" shall have the meaning given such term in
Section 2.17(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA and any successor thereto.
"person" shall mean any natural person, judicial entity,
corporation, division of a corporation, business trust, joint venture,
association, company, limited liability company, partnership or government, or
any agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (as defined
in Section 3(2) of ERISA) (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code with respect to which
any Loan Party or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Preferred Stock" of any person shall mean capital stock of such
person of any class or classes (however designated) that ranks prior, as to the
payment of dividends and/or as to the distribution of assets upon any voluntary
or involuntary liquidation, dissolution or winding up of such person, to shares
of capital stock of any other class of such person.
"Prime Rate" shall mean the rate of interest per annum announced
from time to time by Bank of America National Trust and Savings Association as
its prime rate in effect at its principal office in San Francisco; each change
in the Prime Rate shall be effective on the date such change is announced.
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20
"Pro Rata Percentage" shall mean, with respect to any Lender, the
percentage of the Total Commitment represented by such Lender's Standby
Commitment. If the Standby Commitments shall have been terminated or shall have
expired, the Pro Rata Percentages shall be determined based upon the Standby
Commitments most recently in effect, giving effect to any subsequent assignments
pursuant to Section 10.07.
"Register" shall have the meaning assigned to such term in
Section 10.07(f).
"Regulation G" shall mean Regulation G of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).
"Required Lenders" shall mean Lenders representing at least 51%
of the Total Commitment; provided, however, that for purposes of acceleration of
the Loans pursuant to clause (ii) of Article VII or following the termination of
the Commitments, "Required Lenders" shall mean Lenders holding Loans
representing at least 51% of the aggregate Dollar Equivalent of the principal
amount of the Standby Loans, Multicurrency Loans and Competitive Loans
outstanding.
"Reset Date" shall have the meaning assigned to such term in
Section 1.04(a).
"Responsible Officer" of any person shall mean the chairman of
the board of directors, the president, the treasurer, any assistant treasurer,
any vice president, the chief financial officer, the principal accounting
officer, the secretary or any assistant secretary of such person.
"S&P" means Standard & Poor's Ratings Group.
"SEC" shall mean the Securities and Exchange Commission.
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21
"Securitization Transaction" shall mean any transaction in which
HAI, Millennium or any Subsidiary sells or otherwise transfers accounts
receivable (a) to one or more third party purchasers or (b) to a special purpose
entity that borrows against such accounts receivable or sells such accounts
receivable to one or more third party purchasers, but only to the extent that
(i) amounts received in connection with the sale or other transfer of such
accounts receivable would not under GAAP be accounted for as liabilities on a
consolidated balance sheet of HAI or Millennium and (ii) the aggregate
outstanding amount at any time of the accounts receivable sold pursuant to all
such transactions by HAI, Millennium and the Subsidiaries does not exceed
$100,000,000.
"Standby Borrowing" shall mean a Borrowing consisting of
simultaneous Standby Loans from each of the Lenders.
"Standby Borrowing Request" shall mean a request made pursuant to
Section 2.04 in the form of Exhibit B.
"Standby Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Standby Loans hereunder as set forth in
Schedule 2.01 under the heading "Standby Commitments", as the same may be
permanently terminated or reduced from time to time pursuant to Section 2.10 or
Article VII or increased or reduced from time to time pursuant to assignments
under Section 10.07.
"Standby Loan Exposure" shall mean, with respect to any Lender at
any time, the aggregate principal amount at such time of all outstanding Standby
Loans made by such Lender.
"Standby Loans" shall mean the revolving loans made by the
Lenders pursuant to Section 2.01(a). Each Standby Loan shall be in Dollars and
shall be a LIBOR Standby Loan, a NIBOR Loan or an ABR Loan.
"Subsidiary" shall mean (a) prior to the Demerger Date, any
subsidiary of HAI or Millennium (giving effect to the Demerger) and (b) on or
after the Demerger Date, any subsidiary of Millennium.
"subsidiary" shall mean, with respect to any person (the
"parent"), any corporation, association or other business entity of which
securities or other ownership interests representing 50% or more of the ordinary
voting power are, at the time as of which any determination is being made,
beneficially owned by the parent, by one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Taxes" shall have the meaning assigned to such term in
Section 2.17(a).
"Total Capitalization" shall mean at any time, as to
Millennium and its Subsidiaries, the sum of (a) the Total Indebtedness
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22
of Millennium and its Subsidiaries and (b) the stockholders' equity of
Millennium and its Subsidiaries determined (a) at any time prior to the Demerger
Date, on a pro forma combined basis (giving effect to the Demerger) and (b) at
any time on or after the Demerger Date, on a consolidated basis.
"Total Commitment" shall mean at any time the aggregate amount of
the Standby Commitments at such time.
"Total Multicurrency Commitment" shall mean at any time the
aggregate amount of the Multicurrency Commitments at such time.
"Total Indebtedness" shall mean, as to any person, (a) all
Indebtedness of such person less (b) all cash and cash equivalents of such
person in excess of $25,000,000, all determined on a consolidated basis in
accordance with GAAP.
"Transferee" shall have the meaning assigned to such term in
Section 2.17(a).
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall
include the LIBO Rate, the NIBO Rate, the Alternate Base Rate, any fixed rate
and the A$ Rate.
"Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Accounting Terms. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided that
if HAI or, on or after the Demerger Date, Millennium notifies the Administrative
Agent that it requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Administrative
Agent notifies HAI or, on or after the Demerger Date, Millennium that the
Required Lenders request an amendment to any provision hereof for such purpose),
then such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.
SECTION 1.03. Terms Generally. Except where the context
requires otherwise, the definitions in Section 1.01 shall apply equally
to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding
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23
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
Unless otherwise stated, references to Sections, Articles, Schedules and
Exhibits made herein are to Sections, Articles, Schedules or Exhibits, as the
case may be, of this Agreement.
SECTION 1.04. Exchange Rates. (a) Not later than 1:00 p.m., New
York City time, on each Calculation Date, the Administrative Agent shall (i)
determine the Exchange Rate as of such Calculation Date with respect to each
Eligible Currency and (ii) give notice thereof to the Lenders and HAI or, on or
after the Demerger Date, Millennium. The Exchange Rates so determined shall
become effective on the first Business Day immediately following the relevant
Calculation Date (a "Reset Date"), shall remain effective until the next
succeeding Reset Date, and shall for all purposes of this Agreement (other than
Section 2.01(c), Section 2.01(d), Section 10.14 or any other provision expressly
requiring the use of a current Exchange Rate) be the Exchange Rates employed in
converting any amounts between Dollars and Eligible Currencies.
(b) Not later than 5:00 p.m., New York City time, on each Reset
Date and each Borrowing Date, the Administrative Agent shall (i) determine the
Dollar Equivalent of the aggregate principal amount of the Multicurrency Loans
then outstanding (after giving effect to any Multicurrency Loans to be made or
repaid on such date) and (ii) notify the Lenders and HAI or, on or after the
Demerger Date, Millennium of the results of such determination.
ARTICLE II
The Loans
SECTION 2.01. Commitments. (a) Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Lender agrees, severally and not jointly, to make Standby Loans in Dollars
to any Borrower, at any time and from time to time on and after the date hereof
and until the earlier of the Maturity Date and the termination of the Standby
Commitment of such Lender.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Multicurrency Lender
agrees, severally and not jointly, to make Multicurrency Loans to any Borrower,
at any time and from time to time on and after the date hereof and until the
earlier of the Maturity Date and the termination of the Multicurrency Commitment
of such Multicurrency Lender.
(c) In the event that (i) the principal of or interest on any
Multicurrency Borrowing shall not be paid within five Business Days after the
date on which it is due and any Multicurrency Lender holding a
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Multicurrency Loan of which such Multicurrency Borrowing is comprised shall
deliver to the Administrative Agent a request that the provisions of this
paragraph take effect with respect to such Borrowing or (ii) the Standby
Commitments shall be terminated or the Loans accelerated pursuant to Article
VII, then (x) the Obligations of the applicable Borrower in respect of the
principal of and interest on such Multicurrency Borrowing shall without further
action be converted into Obligations denominated in Dollars at the applicable
Exchange Rate on the date of such conversion, as determined by the
Administrative Agent, (y) such converted obligations will bear interest at the
rate applicable to ABR Borrowings under Sections 2.08 and 2.09 and (z) each
Lender shall acquire a participation in such Obligations equal to its Pro Rata
Percentage of the face amount thereof and shall pay the purchase price therefor
by wire transfer of immediately available funds in Dollars to the Administrative
Agent in the manner provided in Section 2.02(c) (and the Administrative Agent
shall promptly wire the amounts so received to the Multicurrency Lenders ratably
in accordance with their respective Multicurrency Loans comprising such
Multicurrency Borrowing). Upon any event specified in clause (ii) above, the
Multicurrency Commitments shall be permanently terminated. The obligations of
the Lenders to acquire and pay for participations in Multicurrency Borrowings
pursuant to this paragraph shall be absolute and unconditional under any and all
circumstances.
(d) Notwithstanding anything to the contrary contained in this
Agreement, in no event may Loans be borrowed under this Article II if, after
giving effect thereto (and to any concurrent repayment or prepayment of Loans),
(i) the aggregate Dollar Credit Exposures would exceed the Total Commitment,
(ii) the sum of the Standby Loan Exposure and the Multicurrency Loan Exposure of
any Lender would exceed such Lender's Standby Commitment or (iii) the Dollar
Equivalent of the aggregate principal amount of the Multicurrency Loans
outstanding would exceed the Total Multicurrency Commitment.
(e) Within the foregoing limits, each Borrower may borrow, pay or
prepay and reborrow Standby Loans and Multicurrency Loans hereunder, on and
after the Closing Date and prior to the Maturity Date, subject to the terms,
conditions and limitations set forth herein.
SECTION 2.02. Loans. (a) Each Standby Loan shall be made as part
of a Borrowing consisting of Standby Loans made ratably by the Lenders in
accordance with their respective Standby Commitments; provided, however, that
the failure of any Lender to make any Standby Loan shall not in itself relieve
any other Lender of its obligation to lend hereunder (it being understood,
however, that no Lender shall be responsible for the failure of any other Lender
to make any Standby Loan to be made by such other Lender). Each Multicurrency
Loan shall be made as part of a Borrowing consisting of Multicurrency Loans
denominated in the same Eligible Currency and made by the Multicurrency Lenders
ratably in accordance with their Multicurrency Commitments; provided, however,
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25
that the failure of any Multicurrency Lender to make any Multicurrency Loan
shall not in itself relieve any other Multicurrency Lender of its obligation to
lend hereunder (it being understood, however, that no Multicurrency Lender shall
be responsible for the failure of any other Multicurrency Lender to make any
Multicurrency Loan required to be made by such other Multicurrency Lender). Each
Competitive Loan shall be made in accordance with the procedures set forth in
Section 2.03. The Loans comprising any Borrowing shall be (i) in the case of
Competitive Loans, in an aggregate principal amount which is not less than
$25,000,000, (ii) in the case of Standby Loans, in an aggregate principal amount
which is an integral multiple of $1,000,000 and not less than the lesser of
$25,000,000 and the remaining aggregate balance of the Standby Commitments, and
(iii) in the case of Multicurrency Loans, in an aggregate principal amount the
Dollar Equivalent of which is not less than the lesser of $15,000,000 and the
remaining aggregate balance of the Multicurrency Commitments.
(b) Each Competitive Borrowing shall be comprised entirely of
LIBOR Competitive Loans or Fixed Rate Loans, each Standby Borrowing shall be
comprised entirely of LIBOR Standby Loans, NIBOR Loans or ABR Loans and each
Multicurrency Borrowing shall be comprised entirely of LIBOR Multicurrency Loans
or Domestic A$ Loans, as the applicable Borrower may request pursuant to Section
2.03 or Section 2.04, as applicable. Each Lender may at its option make any
LIBOR Standby Loan, LIBOR Competitive Loan or NIBOR Loan, and each Multicurrency
Lender may at its option make any Multicurrency Loan, by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; provided, however,
that any exercise of such option shall not affect the obligation of such
Borrower to repay such Loan in accordance with the terms of this Agreement;
provided, further, that if the designation of any such foreign branch or
Affiliate shall result in any costs, reductions or Taxes which would not
otherwise have been applicable and for which such Lender would, but for this
proviso, be entitled to request compensation under Section 2.13, 2.14 or 2.17,
such Lender shall not be entitled to request such compensation unless it shall
in good faith have determined such designation to be necessary or advisable to
avoid any material disadvantage to it. Borrowings of more than one Type may be
outstanding at the same time; provided, however, that no Borrower shall be
entitled to request any Borrowing which, if made, would result in an aggregate
of more than 20 separate Borrowings (excluding Competitive Borrowings) being
outstanding hereunder at any one time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Subject to Section 2.05 and paragraph (d) below, each Lender
shall make its Loans on the proposed date or dates thereof (i) in the case of
Standby Loans and Competitive Loans, by wire transfer of immediately available
funds to the Administrative Agent in New York, New York, not later than 12:00
noon, New York City time, (ii) in the case of
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26
LIBOR Multicurrency Loans, 10:00 a.m., London time, and (iii) in the case of
Domestic A$ Loans, 12:00 noon, Sydney time. The Administrative Agent shall
credit on such date the amounts so received to the general deposit account of
the applicable Borrower with the Administrative Agent or to another account
specified by such Borrower and acceptable to the Administrative Agent (i) in the
case of Standby Loans and Competitive Loans, by 3:00 p.m., New York City time,
(ii) in the case of LIBOR Multicurrency Loans, 3:00 p.m., London time, and (iii)
in the case of Domestic A$ Loans, 3:00 p.m., Sydney time; provided, that if a
Borrowing shall not occur on such date because any condition precedent herein
specified shall not have been met, the Administrative Agent shall return the
amounts so received to the respective Lenders. Standby Loans and Multicurrency
Loans shall be made by the Lenders pro rata in accordance with Section 2.15 and
Competitive Loans shall be made by the Lender or Lenders whose Competitive Bids
therefor are accepted pursuant to Section 2.03 in the amounts so accepted.
Unless the Administrative Agent shall have received notice from a Lender prior
to the date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender's portion of such Borrowing, the Administrative
Agent may assume that such Lender has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with this
paragraph (c) and the Administrative Agent may, in reliance upon such
assumption, make available to the applicable Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have made
such portion available to the Administrative Agent, such Lender and the
applicable Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount, together with interest thereon,
for each day from the date such amount is made available to such Borrower until
the date such amount is repaid to the Administrative Agent at (i) in the case of
such Borrower, the interest rate applicable at the time to the Loans comprising
such Borrowing and (ii) in the case of such Lender, the Federal Funds Effective
Rate or, in the case of Loans in any Eligible Currency, such other rate as shall
customarily be employed with respect to such currency for the settlement of
errors between banks. If such Lender shall repay to the Administrative Agent
such corresponding amount, such amount shall be deemed to constitute such
Lender's Loan as part of such Borrowing for purposes of this Agreement as if it
were made on the date of such Borrowing.
(d) Notwithstanding any other provision of this Agreement, no
Borrower shall be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
SECTION 2.03. Competitive Bid Procedure. (a) In order to request
Competitive Bids, a Borrower shall hand deliver or telecopy to the
Administrative Agent a duly completed Competitive Bid Request in the form of
Exhibit C-1, to be received by the Administrative Agent (i) in the case of a
LIBOR Competitive Borrowing, not later than 10:00 a.m., New York City time, four
Business Days before a proposed LIBOR
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Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., New York City time, one Business Day before a proposed
Competitive Borrowing. No ABR Borrowing or NIBOR Borrowing shall be requested
in, or made pursuant to, a Competitive Bid Request. A Competitive Bid Request
that does not conform substantially to the format of Exhibit C-1 may be rejected
in the Administrative Agent's sole discretion, and the Administrative Agent
shall promptly notify the applicable Borrower of such rejection by telecopier.
Such request shall in each case refer to this Agreement and specify, (x) whether
such Borrowing is to be a LIBOR Competitive Borrowing or a Fixed Rate Borrowing,
(y) the date of such Borrowing (which shall be a Business Day) and the aggregate
principal amount thereof (which shall comply with the fourth sentence of Section
2.02(a)) and (z) the Interest Period with respect thereto (which may not end
after the Maturity Date). Promptly after its receipt of a Competitive Bid
Request that is not rejected as aforesaid, the Administrative Agent shall invite
by telecopier (in the form set forth in Exhibit C-2) the Lenders to bid, on the
terms and conditions of this Agreement, to make Competitive Loans pursuant to
such Competitive Bid Request.
(b) Each Lender may, in its sole discretion, make one or more
Competitive Bids to the appropriate Borrower responsive to a Competitive Bid
Request. Each Competitive Bid by a Lender must be received by the Administrative
Agent by telecopier, in the form of Exhibit C-3, (i) in the case of a LIBOR
Competitive Borrowing, not later than 9:30 a.m., New York City time, three
Business Days before a proposed Competitive Borrowing and (ii) in the case of a
Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the day
of a proposed Competitive Borrowing. Multiple bids will be accepted by the
Administrative Agent. Competitive Bids that do not conform substantially to the
format of Exhibit C-3 may be rejected by the Administrative Agent after
conferring with, and upon the instruction of, the applicable Borrower, and the
Administrative Agent shall notify the Lender making such nonconforming bid of
such rejection as soon as practicable. Each Competitive Bid shall refer to this
Agreement and specify (x) the principal amount (which shall be in a minimum
principal amount of $5,000,000 and which may equal the entire principal amount
of the Competitive Borrowing requested by the appropriate Borrower) of the
Competitive Loan that the applicable Lender is willing to make to such Borrower,
(y) the Competitive Bid Rate or Rates at which such Lender is prepared to make
the Competitive Loan or Loans and (z) the Interest Period and the last day
thereof. A Competitive Bid submitted by a Lender pursuant to this paragraph (b)
shall be irrevocable.
(c) The Administrative Agent shall promptly notify the
appropriate Borrower by telecopier of all the Competitive Bids made, the
Competitive Bid Rate and the principal amount of each Competitive Loan in
respect of which a Competitive Bid was made and the identity of the Lender that
made each bid. The Administrative Agent shall send a copy of all Competitive
Bids to the appropriate Borrower for its records as
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soon as practicable after completion of the bidding process set forth in
this Section 2.03.
(d) The appropriate Borrower may in its sole and absolute
discretion, subject only to the provisions of this paragraph (d), accept or
reject any Competitive Bid referred to in paragraph (c) above. The appropriate
Borrower shall notify the Administrative Agent by telephone, confirmed by
telecopier in the form of a Competitive Bid Accept/Reject Letter in the form of
Exhibit C-4, whether and to what extent it has decided to accept or reject any
of or all the bids referred to in paragraph (c) above, (x) in the case of a
LIBOR Competitive Borrowing, not later than 10:30 a.m., New York City time,
three Business Days before a proposed Competitive Borrowing and (y) in the case
of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City time, on the
day of a proposed Competitive Borrowing; provided, however, that (i) the failure
by such Borrower to give such notice shall be deemed to be a rejection of all
the bids referred to in paragraph (c) above, (ii) such Borrower shall not accept
a bid made at a particular Competitive Bid Rate with respect to any Competitive
Bid Request if such Borrower has decided to reject a bid made at a lower
Competitive Bid Rate with respect to such Competitive Bid Request, (iii) the
aggregate amount of the Competitive Bids accepted by such Borrower shall not
exceed the principal amount specified in such Competitive Bid Request, (iv) if
such Borrower shall accept a bid or bids made at a particular Competitive Bid
Rate but the amount of such bid or bids shall cause the total amount of bids to
be accepted by such Borrower to exceed the amount specified in the Competitive
Bid Request, then such Borrower shall accept a portion of such bid or bids in an
amount equal to the amount specified in the Competitive Bid Request less the
amount of all other Competitive Bids at lower Competitive Bid Rates accepted
with respect to such Competitive Bid Request, which acceptance, in the case of
multiple bids at such Competitive Bid Rate, shall be made pro rata in accordance
with the amount of each such bid at such particular Competitive Bid Rate and (v)
no bid shall be accepted for a Competitive Loan unless such Competitive Loan is
in a minimum principal amount of $5,000,000; provided further, however, that, if
a Competitive Loan must be in an amount less than $5,000,000 because of the
provisions of clause (iv) above, such Competitive Loan may be for a minimum of
$1,000,000 or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple bids at a particular
Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to
integral multiples of $1,000,000 in a manner which shall be in the discretion of
such Borrower. A notice given by the applicable Borrower pursuant to this
paragraph (d) shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding
Lender whether or not its Competitive Bid has been accepted (and, if so, in what
amount and at what Competitive Bid Rate) by telecopier sent by the
Administrative Agent, and each successful bidder will thereupon become bound,
subject to the other applicable conditions
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29
hereof, to make the Competitive Loan in respect of which its bid has
been accepted.
(f) Each Borrower may submit Competitive Bid Requests for more
than one Type of Loan or for more than one Interest Period at the same time on
any day, but no Competitive Bid Request shall be made within five Business Days
after any date on which one or more Competitive Bid Requests have previously
been submitted.
(g) If the Administrative Agent shall elect to submit a
Competitive Bid in its capacity as a Lender, it shall submit such bid directly
to the applicable Borrower one-quarter of an hour earlier than the latest time
at which the other Lenders are required to submit their bids to the
Administrative Agent pursuant to paragraph (b) above.
(h) All notices required by this Section 2.03 shall be given in
accordance with Section 10.01.
SECTION 2.04. Notice of Standby and Multicurrency Borrowings. (a)
In order to request a Standby Borrowing, the applicable Borrower shall give
written or telecopy notice (or telephone notice promptly confirmed in writing or
by telecopy) to the Administrative Agent in the form of Exhibit B (i) in the
case of a LIBOR Standby Borrowing or a NIBOR Borrowing, not later than 11:00
a.m., New York City time, three Business Days before a proposed Borrowing, and
(ii) in the case of an ABR Borrowing, not later than 10:00 a.m., New York City
time, on the day of a proposed Borrowing. No Fixed Rate Loan shall be requested
or made pursuant to a Standby Borrowing Request.
(b) In order to request a Multicurrency Borrowing, a Borrower
shall give written or telecopy notice (or telephone notice promptly confirmed in
writing or by telecopy) to the Administrative Agent in the form of Exhibit B (i)
in the case of a LIBOR Multicurrency Borrowing, not later than 11:00 a.m., New
York City time, four Business Days before a proposed Borrowing, and (ii) in the
case of a Domestic A$ Borrowing, not later than 12:00 noon, Sydney time, four
Business Days before a proposed Borrowing.
(c) The Administrative Agent may waive any prior notice in
connection with any Standby Borrowing or any Multicurrency Borrowing to be made
on the date hereof. Any notice given pursuant to this Section 2.04 shall be
irrevocable and shall in each case refer to this Agreement and specify (x)
whether such Borrowing is to be a LIBOR Standby Borrowing, a LIBOR Multicurrency
Borrowing, a NIBOR Borrowing, an ABR Borrowing or a Domestic A$ Borrowing; (y)
the date of such Borrowing (which shall be a Business Day) and the amount
thereof; and (z) if such Borrowing is to be a LIBOR Borrowing, a NIBOR Borrowing
or a Domestic A$ Borrowing, the Interest Period with respect thereto. If no
election as to the Type of Borrowing is specified in any such notice, then the
requested Borrowing shall be an ABR Borrowing. If no Interest Period
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30
with respect to any LIBOR Borrowing or NIBOR Borrowing is specified in any such
notice, then the applicable Borrower shall be deemed to have selected an
Interest Period of one month's duration. If no Interest Period with respect to
any Domestic A$ Borrowing is specified in any such notice, then the applicable
Borrower shall be deemed to have selected an Interest Period of 30 days'
duration. The Administrative Agent shall promptly advise the Lenders of each
notice given pursuant to this Section 2.04 and of each Lender's portion of the
requested Borrowing.
SECTION 2.05. Conversions and Continuations. The applicable
Borrower shall have the right at any time upon prior irrevocable telephonic
notice (which shall be confirmed promptly in writing or by telecopy) to the
Administrative Agent (i) before 10:00 a.m., New York City time, on the day of
conversion, to convert any LIBOR Standby Borrowing or NIBOR Borrowing into an
ABR Borrowing, (ii) before 11:00 a.m., New York City time, three Business Days
prior to conversion, to convert any ABR Borrowing into a LIBOR Standby Borrowing
or a NIBOR Borrowing, (iii) before 11:00 a.m., New York City time, four Business
Days prior to conversion, to convert the Interest Period with respect to any
LIBOR Borrowing (other than a Competitive Borrowing) or NIBOR Borrowing to
another permissible Interest Period, (iv) before 11:00 a.m., New York City time,
three Business Days prior to continuation, to continue any LIBOR Borrowing
(other than a Competitive Borrowing) or NIBOR Borrowing into a subsequent
Interest Period, (v) before 10:00 a.m., Sydney time, four Business Days prior to
conversion, to convert the Interest Period with respect to any Domestic A$
Borrowing to another permissible Interest Period, or (vi) before 10:00 a.m.,
Sydney time, four Business Days prior to continuation, to continue any Domestic
A$ Borrowing into a subsequent Interest Period, subject in each case to the
following:
(a) if fewer than all the Loans comprising any Borrowing are to
be converted or continued, such conversion or continuation shall be made
pro rata among the Lenders in accordance with the respective Loans of
such Lenders that are part of such Borrowing immediately prior to such
conversion or continuation;
(b) in the case of a conversion or continuation of fewer than all
the Loans comprising any Borrowing, the aggregate principal amount of
Loans converted or continued shall be an amount that would be a
permitted Borrowing amount for Loans of the same Type under the fourth
sentence of Section 2.02(a);
(c) accrued interest on a Loan (or portion thereof) being
converted or continued shall be paid by the appropriate Borrower at the
time of conversion or continuation;
(d) if any LIBOR Loan, NIBOR Loan or Domestic A$ Loan is
converted at a time other than the end of an Interest Period
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31
applicable thereto, the appropriate Borrower shall pay any
increased costs associated therewith pursuant to Section 2.14; and
(e) no portion of a Loan may be converted into or continued as a
LIBOR Loan, a NIBOR Loan or a Domestic A$ Loan with an Interest Period
ending after the Maturity Date; any portion of a LIBOR Standby Loan or
NIBOR Loan for which the shortest available Interest Period would extend
beyond such date shall be automatically converted at the end of the
Interest Period at the time in effect into an ABR Loan, and any portion
of a Multicurrency Loan for which the shortest available Interest Period
would extend beyond such date shall be prepaid at the end of the
Interest Period currently in effect with respect thereto.
The Interest Period applicable to any LIBOR Loan, NIBOR Loan or
Domestic A$ Loan resulting from a conversion of a Loan shall be specified by the
applicable Borrower in the irrevocable notice of conversion delivered pursuant
to this Section; provided, however, that if no such Interest Period shall be
specified, the applicable Borrower shall be deemed to have selected an Interest
Period of one month's duration, in the case of a LIBOR Loan or a NIBOR Loan, or
30 days' duration, in the case of a Domestic A$ Loan. If the applicable Borrower
shall not have given timely notice to continue any Loan (other than a
Competitive Loan) into a subsequent Interest Period (and shall not otherwise
have given notice to convert such Loan), such Loan (unless repaid pursuant to
the terms hereof) shall, subject to clauses (c), (d), and (e) above,
automatically be continued into a new Interest Period, which shall be of one
month's duration in the case of a LIBOR Loan or a NIBOR Loan and of 30 days'
duration in the case of a Domestic A$ Loan. The Administrative Agent shall
promptly advise the Lenders of any notice given pursuant to this Section and of
each Lender's portion of the continuation or conversion hereunder.
SECTION 2.06. Fees. (a) HAI agrees to pay to each Lender, through
the Administrative Agent, on each March 31, June 30, September 30 and December
31, commencing September 30, 1996, and on the date on which the Commitment of
such Lender shall be terminated as provided herein, a facility fee (the
"Facility Fee") equal to the Fee Percentage in effect from time to time on the
amount of the Standby Commitment of such Lender, whether used or unused, during
the preceding quarter (or other period commencing on the Closing Date or ending
on the Maturity Date or any date on which the Standby Commitment of such Lender
shall be terminated). The Facility Fee shall be computed on the basis of the
actual number of days elapsed over a year of 360 days. The Facility Fee due to
each Lender shall commence to accrue on the Closing Date and shall cease to
accrue on the earlier of the Maturity Date and the termination of the Standby
Commitment of such Lender as provided herein.
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(b) HAI agrees to pay to the Administrative Agent, for its own
account, agent and administrative fees (the "Administrative Fees") at the times
and in the amounts agreed upon in the fee letter agreement dated July 26, 1996,
between HAI and the Administrative Agent.
(c) All Fees shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders. Once paid, none of the Fees shall be refundable
under any circumstances.
SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) Each
Borrower hereby agrees as to Loans made to it that (i) the outstanding principal
balance of each Standby Loan or Multicurrency Loan shall be payable on the
Maturity Date and (ii) the outstanding principal balance of each Competitive
Loan shall be payable on the last day of the Interest Period applicable thereto.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it
will record (i) the amount of each Loan made hereunder, the currency of each
Loan, the Borrower of each Loan, the Type of each Loan and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from each Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder from
any Loan Party and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) above shall, to the extent permitted by applicable law,
be prima facie evidence of the existence and amounts of the obligations therein
recorded; provided, however, that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligations of each Borrower to repay the Loans in
accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the
event any Lender shall request a promissory note or notes evidencing the Loans
made by it hereunder to any Borrower, such Borrower shall deliver such a note or
notes, satisfactory to the Administrative Agent, payable to such Lender and its
registered assigns, and the interests represented by such note or notes shall at
all times (including after any assignment of all or part of such interests
pursuant to Section 10.07) be represented by one or more promissory notes
payable to the payee named therein or its registered assigns.
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SECTION 2.08. Interest on Loans. (a) Subject to the provisions of
Section 2.09, ABR Loans shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 365 or 366 days, as the case may be, for
periods during which the Alternate Base Rate is determined by reference to the
Prime Rate and 360 days for other periods) at a rate per annum equal to the
Alternate Base Rate. Interest on each ABR Loan shall be payable on each
applicable Interest Payment Date. The Alternate Base Rate shall be determined by
the Administrative Agent, and such determination shall be conclusive absent
manifest error.
(b) Subject to the provisions of Section 2.09, (i) each LIBOR
Loan (other than a LIBOR Competitive Loan) and each NIBOR Loan shall bear
interest (computed on the basis of the actual number of days elapsed over a year
of 360 days) at a rate per annum equal to the LIBO Rate or NIBO Rate, as the
case may be, for the Interest Period in effect for such Loan plus the Applicable
Percentage, and (ii) each LIBOR Competitive Loan shall bear interest (computed
on the basis of the actual number of days elapsed over a year of 360 days) at a
rate per annum equal to the LIBO Rate for the Interest Period in effect for such
Competitive Loan plus the Margin offered by the Lender making such Competitive
Loan and accepted by the applicable Borrower pursuant to Section 2.03. Interest
on each LIBOR Loan shall be payable on each applicable Interest Payment Date.
The LIBO Rate or NIBO Rate, as applicable, for each Interest Period shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error. The Administrative Agent shall promptly advise
the applicable Borrowers and each applicable Lender of such determination.
(c) Subject to the provisions of Section 2.09, each Fixed Rate
Loan shall bear interest at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the fixed rate
of interest offered by the Lender making such Loan and accepted by the
applicable Borrower pursuant to Section 2.03. Interest on each Fixed Rate Loan
shall be payable on the Interest Payment Dates applicable to such Loan except as
otherwise provided in this Agreement.
(d) Subject to the provisions of Section 2.09, each Domestic A$
Loan shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 360 days) at a rate per annum equal to the A$ Rate for
the Interest Period in effect for such Loan plus the Applicable Percentage.
Interest on each Domestic A$ Loan shall be payable on each applicable Interest
Payment Date. The A$ Rate for each Interest Period shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error. The Administrative Agent shall promptly advise the applicable Borrowers
and each Multicurrency Lender of such determination.
(e) Interest on each Loan shall accrue from and including the
date on which such Loan is made and to but excluding the date such Loan is
repaid, unless the date of repayment is the same as the date
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such Loan is made and the amount repaid is not reborrowed on such date, in which
case such date shall be included.
SECTION 2.09. Interest on Overdue Amounts; Alternative Rate of
Interest. (a) If any Borrower shall default in the payment of the principal of
or interest on any Loan or any Fees or other amount becoming due hereunder,
whether by scheduled maturity, notice of prepayment, acceleration or otherwise,
such Borrower shall on demand from time to time from the Administrative Agent
pay interest from and including the date of such default, to the extent
permitted by law, on such defaulted amount up to (but not including) the date of
actual payment (after as well as before judgment) at a rate per annum (computed
as provided in Section 2.08(a)) equal to (i) in the case of the principal of any
Loan, the rate otherwise applicable to such Loan plus 2% per annum and (ii) in
the case of any other amount, the Alternate Base Rate plus 2% per annum.
(b) In the event, and on each occasion, that on the day two
Business Days prior to the commencement of any Interest Period for a LIBOR
Borrowing or NIBOR Borrowing the Administrative Agent shall have determined that
deposits in the applicable currency in the requested principal amounts of the
LIBOR Loans or NIBOR Loans, as applicable, are not generally available in the
London interbank market or the international interbank market, as applicable, to
the Required Lenders (or, in the case of a LIBOR Multicurrency Loan, Lenders
representing a majority of the Multicurrency Commitments), or that reasonable
means do not exist for ascertaining the LIBO Rate or the NIBO Rate or that the
rate at which such deposits in the applicable currency are being offered will
not adequately and fairly reflect the cost to the Required Lenders (or, in the
case of a Multicurrency LIBOR Loan, Lenders representing a majority of the
Multicurrency Commitments) of making such LIBOR Loan or NIBOR Loan, as
applicable, during such Interest Period, the Administrative Agent shall, as soon
as practicable thereafter, give written or telecopy notice of such determination
to the Borrowers and any request by any Borrower for a LIBOR Borrowing in any
affected currency or a NIBOR Borrowing shall, until the circumstances giving
rise to such notice no longer exist, (i) if such notice relates to a Standby
Borrowing, be deemed a request for an ABR Borrowing; provided, however, that
such Borrower may withdraw any such request prior to the making of any such ABR
Borrowing or (ii) if such notice relates to a Multicurrency Borrowing, be of no
force or effect (and such Borrowing, if already outstanding, shall be prepaid at
the end of the Interest Period currently in effect therefor). Each determination
by the Administrative Agent hereunder shall be conclusive absent manifest error.
SECTION 2.10. Termination and Reduction of Standby
Commitments; Termination, Reduction and Increase of Multicurrency
Commitments. (a) The Standby Commitments and the Multicurrency
Commitments shall be automatically and permanently terminated on the
Maturity Date.
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(b) Upon at least three Business Days' prior irrevocable written
or telecopy notice to the Administrative Agent (a copy of which the
Administrative Agent shall promptly provide to each Lender), HAI (prior to the
Demerger Date) and HAI or Millennium (on or after the Demerger Date) may at any
time in whole permanently terminate, or from time to time in part permanently
reduce, the Total Commitment; provided, however, that (i) each partial reduction
of the Total Commitment shall be in an integral multiple of $1,000,000 and in a
minimum principal amount of $25,000,000 and (ii) no such termination or
reduction shall be made (A) which would reduce the Total Commitment to an amount
less than the sum of the aggregate Dollar Credit Exposures or (B) which would
reduce any Lender's Standby Commitment to an amount that is less than the sum of
such Lender's Standby Loan Exposure and Multicurrency Loan Exposure.
(c) Upon at least four Business Days' prior irrevocable written
or telecopy notice to the Administrative Agent, the Borrowers may at any time
(i) in whole permanently terminate, or from time to time in part reduce, the
Multicurrency Commitments; provided, however, that (x) each such partial
reduction shall be in a minimum amount the Dollar Equivalent of which shall be
$25,000,000 and (y) no such termination or reduction shall be made (A) which
would reduce the Total Multicurrency Commitment to an amount less than the
Dollar Equivalent of the aggregate Multicurrency Loan Exposures or (B) which
would reduce any Lender's Multicurrency Commitment to an amount that is less
than the Dollar Equivalent of the aggregate principal amount of such Lender's
outstanding Multicurrency Loans, or (ii) subject to the consent of each
Multicurrency Lender, increase the aggregate amount of the Multicurrency
Commitments. The Multicurrency Commitments shall automatically terminate on the
date of any termination of the Standby Commitments.
(d) Each reduction in the Total Commitment or in the Total
Multicurrency Commitment hereunder shall be made ratably among the Lenders in
accordance with their respective Standby Commitments or Multicurrency
Commitments, as the case may be. HAI shall pay to the Administrative Agent for
the account of the Lenders, on the date of each termination or reduction of the
Standby Commitments, the Facility Fee on the amount of the Standby Commitments
so terminated or reduced accrued through the date of such termination or
reduction.
SECTION 2.11. Prepayment of Loans. (a) Each Borrower shall have
the right at any time and from time to time to prepay any Standby Borrowing or
Multicurrency Borrowing, in whole or in part, upon giving telephonic notice
(which shall be confirmed promptly in writing or by telecopy) to the
Administrative Agent (which shall promptly provide a copy to each Lender): (i)
before 11:00 a.m., New York City time, three Business Days prior to prepayment,
in the case of LIBOR Loans or NIBOR Loans, (ii) before 11:00 a.m., New York City
time, one Business Day prior to prepayment, in the case of ABR Loans and (iii)
by 10:00 a.m. Sydney time, four Business Days prior to prepayment, in the
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36
case of Domestic A$ Loans; provided, however, that each such partial prepayment
of principal shall be (x) in the case of a Standby Borrowing, in a minimum
principal amount of $10,000,000 and an integral multiple of $1,000,000 or (y) in
the case of a Multicurrency Borrowing, a minimum amount the Dollar Equivalent of
which is at least $10,000,000. No Borrower shall have the right to prepay any
Competitive Borrowing.
(b) On the date of any termination or reduction of the Total
Commitment pursuant to Section 2.10, each Borrower shall pay or prepay so much
of the Standby Borrowings or Multicurrency Borrowings as shall be necessary in
order that the sum of the aggregate Dollar Credit Exposures will not exceed the
Total Commitment after giving effect to such termination or reduction.
(c) If, on the last day of any Interest Period (after giving
effect to any Loans to be made or repaid on such date) (i) the aggregate Dollar
Credit Exposures would exceed the Total Commitment, (ii) the sum of the Standby
Loan Exposure and the Multicurrency Loan Exposure of any Lender would exceed
such Lender's Standby Commitment, (iii) the Dollar Equivalent of the aggregate
principal amount of the Multicurrency Loans outstanding would exceed the Total
Multicurrency Commitment or (iv) the Dollar Equivalent of the aggregate
principal amount of the Multicurrency Loans outstanding of any Multicurrency
Lender would exceed such Lender's Multicurrency Commitment, the Borrowers shall
prepay Loans on such day to the extent necessary to eliminate such excess;
provided that in lieu of making any such prepayment of a LIBOR Loan or a
Domestic A$ Loan, the applicable Borrower may deposit cash collateral in the
principal amount and currency of such Loan with the Administrative Agent, in
which event (x) such Loan shall continue to be outstanding and to bear interest
as provided in this Agreement, (y) the amount so deposited will, so long as no
Event of Default shall exist hereunder, be invested by the Administrative Agent
in overnight or short-term obligations selected by it (it being agreed that the
Borrower shall bear the risk of loss in connection with any such investment) and
(z) such amount and any interest earned thereon shall be held by the
Administrative Agent for the benefit of the Lenders as collateral for the
payment of such Borrower's Obligations hereunder and applied to pay the
principal amount of such Loan (and, to the extent of any excess, paid over to
such Borrower) on the last day of the Interest Period in effect therefor.
(d) Except to the extent otherwise specified by the Borrower
making a prepayment, all prepayments under this Section 2.11 shall be applied,
to the extent made in Dollars, to outstanding ABR Loans up to the full amount
thereof and then shall be applied to outstanding LIBOR Loans (other than LIBOR
Competitive Loans) up to the full amount thereof.
(e) All prepayments under this Section shall be subject to
Section 2.14 but otherwise without premium or penalty. All prepayments
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shall be accompanied by accrued interest on the principal amount being prepaid
to the date of prepayment.
SECTION 2.12. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein (but subject to paragraph (d) below
and Section 2.18), if after the date of this Agreement any change in applicable
law or regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration thereof
(whether or not having the force of law) shall change the basis of taxation of
payments to any Lender of the principal of or interest on any LIBOR Loan, NIBOR
Loan, Fixed Rate Loan or Domestic A$ Loan made by such Lender or any fees or
other amounts payable hereunder (other than changes in respect of taxes imposed
on the overall net income of such Lender by the jurisdiction in which such
Lender has its principal office or by any political subdivision or taxing
authority therein), or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of or credit extended by such Lender or shall impose on such Lender,
or the London interbank market or the international interbank market for
deposits of the applicable currency any other condition affecting this Agreement
or LIBOR Loans, NIBOR Loans, Fixed Rate Loans or Domestic A$ Loans made by such
Lender, and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any such Loan or to reduce the amount of
any sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise) in respect thereof by an amount deemed by such Lender to
be material, then the applicable Borrower (or, if such cost or reduction shall
not be attributable to a particular Loan or Loans, HAI or Millennium, at
Millennium's election on or after the Demerger Date), will pay to such Lender
upon demand such additional amount or amounts as will compensate such Lender for
such additional costs incurred or reduction suffered.
(b) Subject to Section 2.18, if any Lender shall have determined
that the adoption after the date hereof of any law, rule, regulation or
guideline regarding capital adequacy, or any change in any of the foregoing or
in the interpretation or administration of any of the foregoing by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or any lending office of such Lender) or
any Lender's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) made or promulgated after the
date hereof by any such Governmental Authority, has or would have the effect of
reducing the rate of return on such Lender's capital or on the capital of such
Lender's holding company, if any, as a consequence of its obligations under this
Agreement or the Loans made by such Lender pursuant hereto to a level below that
which such Lender or such Lender's holding company could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
guidelines with respect to capital adequacy) by an amount deemed by such Lender
to be material, then from
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time to time HAI (or Millennium, at Millennium's election on or after the
Demerger Date) shall pay to such Lender such additional amount or amounts as
will compensate such Lender or such Lender's holding company for any such
reduction suffered.
(c) A certificate of each Lender setting forth such amount or
amounts as shall be necessary to compensate such Lender (or its participating
banks or other entities pursuant to Section 10.07) as specified in paragraph (a)
or (b) above, as the case may be, shall be delivered to HAI or, on or after the
Demerger Date, Millennium and shall be conclusive absent manifest error. Except
as provided in paragraph (d) below, the applicable Borrowers, HAI or Millennium,
as the case may be, shall pay each Lender the amount shown as due on any such
certificate delivered by such Lender within 30 days after receipt of the same.
Each Lender shall submit such a certificate no more often than monthly;
provided, however, that certificates with respect to amounts due with respect to
identifiable Loans may be submitted at the ends of such Loans' Interest Periods.
(d) Failure on the part of any Lender to demand compensation for
any increased costs or reduction in amounts received or receivable or reduction
in return on capital shall not constitute a waiver of such Lender's rights with
respect to any period to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to such period or any other period; provided, however, that no
Lender shall be entitled to compensation under this Section 2.12 for any costs
incurred or reductions suffered with respect to any date unless it shall have
notified HAI or, on or after the Demerger Date, Millennium that it will demand
compensation for such costs or reductions under paragraph (c) above not more
than 90 days after the later of (i) such date and (ii) the date on which it
shall have become aware of such costs or reductions. Notwithstanding any other
provision of this Section 2.12, no Lender shall demand compensation for any
increased cost or reduction referred to above if it shall not at the time be the
general policy or practice of such Lender to demand such compensation in similar
circumstances under comparable provisions of other credit agreements, if any. If
any Lender shall receive as a refund any moneys from any source that it has
listed on the certificate provided pursuant to (c) above as an increased cost,
to the extent that the applicable Borrower or HAI, as the case may be, has
previously paid such increased cost to such Lender, such Lender shall promptly
forward such refund to such Borrower or HAI without interest.
SECTION 2.13. Change in Legality. (a) Notwithstanding anything to
the contrary herein contained (but subject to Section 2.18), if after the date
of this Agreement any change in any law or regulation or in the interpretation
thereof or any new law, regulation or interpretation by any Governmental
Authority charged with the administration or interpretation thereof or any
judgment, order or
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directive of any competent court, tribunal or authority shall make it unlawful
for any Lender or its Applicable Lending Office to make or maintain any LIBOR
Loan, NIBOR Loan or Multicurrency Loan or to give effect to its obligations as
contemplated hereby with respect to any LIBOR Loan, NIBOR Loan or Multicurrency
Loan or shall limit the convertibility into Dollars of any applicable Eligible
Currency or make such conversion commercially impracticable (collectively, an
"Illegality"), then, by written notice to HAI or, on or after the Demerger Date,
Millennium and to the Administrative Agent, such Lender, so long as such
Illegality continues to exist:
(i) may declare that LIBOR Loans, NIBOR Loans or Multicurrency
Loans in any affected Eligible Currency, as applicable, will not
thereafter be made by such Lender hereunder, whereupon any request by
any Borrower for a LIBOR Borrowing, a NIBOR Borrowing or a Multicurrency
Borrowing in such Eligible Currency, as applicable, (x) shall, as to
such Lender only, be deemed a request for an ABR Borrowing or (y) at the
option of such Borrower, shall be withdrawn as to such Lender prior to
the time for making such Borrowing; and
(ii) shall promptly enter into negotiations with the applicable
Borrower and negotiate in good faith to agree to a solution to such
Illegality; provided, however, that if such an agreement has not been
reached by the date at which such change in law is given effect with
respect to the outstanding LIBOR Loans, NIBOR Loans or Multicurrency
Loans of such Lender, such Borrower shall immediately prepay the
affected Loans.
In the event any Multicurrency Lender shall exercise its rights under (i) above
with respect to Multicurrency Loans, all payments and prepayments in respect of
such Multicurrency Loans shall thereafter be made in Dollars.
(b) For purposes of this Section 2.13, a notice by a Lender shall
be effective as to each Loan, if lawful, on the last day of the then current
Interest Period with respect thereto; provided, however, that such notice shall
be effective on the date of receipt if there are no outstanding LIBOR Loans,
NIBOR Loans or Multicurrency Loans in the affected currency; provided further,
that if it is not lawful for such Lender to maintain any Loan in its current
form until the end of the Interest Period applicable thereto, then the notice
shall be effective upon receipt.
(c) Each Lender which has delivered a notice of Illegality
pursuant to paragraph (a) above agrees that it will notify HAI or, on or after
the Demerger Date, Millennium as soon as practicable if the conditions giving
rise to the Illegality cease to exist.
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SECTION 2.14. Indemnity. Each Borrower agrees, severally and not
jointly, to indemnify each Lender against any loss or expense which such Lender
may sustain or incur as a consequence of (a) any payment, prepayment or
conversion of a LIBOR Loan, NIBOR Loan, Multicurrency Loan or Fixed Rate Loan
made to it required by any provision of this Agreement or otherwise made, or any
transfer of any such Loan pursuant to Section 2.18(b), on a date other than the
last day of the applicable Interest Period, (b) any default in payment or
prepayment of the principal amount of any Loan made to it or any part thereof or
interest accrued thereon, as and when due and payable (whether at scheduled
maturity, by notice of prepayment, acceleration or otherwise), (c) the
occurrence of any Event of Default, including any loss sustained or incurred or
to be sustained or incurred in liquidating or employing deposits from third
parties acquired to effect or maintain such Loan or any part thereof as a LIBOR
Loan, NIBOR Loan, Multicurrency Loan or Fixed Rate Loan, (d) any failure by such
Borrower to fulfill on the date of any Borrowing by it hereunder the applicable
conditions set forth in Article IV or (e) any failure of such Borrower to borrow
or to convert or continue any Loan made to it hereunder after irrevocable notice
of such borrowing, conversion or continuation has been given pursuant to Section
2.03, 2.04 or 2.05. Such loss or expense shall be the difference as reasonably
determined by such Lender between (x) an amount equal to the principal amount of
such LIBOR Loan, NIBOR Loan, Multicurrency Loan or Fixed Rate Loan being paid,
prepaid, converted or transferred or not borrowed, converted or continued
multiplied by a percentage per annum (computed on the basis of a 360-day year
and actual days remaining for the balance of the Interest Period applicable, or
which would have been applicable, to such LIBOR Loan, NIBOR Loan, Multicurrency
Loan or Fixed Rate Loan being paid, prepaid, converted, transferred or not
borrowed, converted or continued) equal to the greater of (i) the LIBO Rate or
NIBO Rate applicable to such LIBOR Loan or NIBOR Loan being paid, prepaid,
converted or transferred or not borrowed, converted or continued or, in the case
of a Fixed Rate Loan, the fixed rate of interest applicable thereto or (ii) such
Lender's cost of obtaining the funds for such LIBOR Loan, NIBOR Loan,
Multicurrency Loan or such Fixed Rate Loan being paid, prepaid, converted,
transferred or not borrowed, converted or continued, but in the case of LIBOR
Loans or NIBOR Loans, not in excess of the LIBO Rate or NIBO Rate applicable to
such Loan plus 1/16th of 1% per annum, and (y) any lesser amount that would be
realized by such Lender in reemploying the funds received in payment,
prepayment, conversion or transfer or as a result of the failure to borrow,
convert or continue during the period from the date of such payment, prepayment,
conversion or transfer or failure to borrow, convert or continue to the end of
the Interest Period applicable to such LIBOR Loan, NIBOR Loan, Multicurrency
Loan or Fixed Rate Loan at the interest rate that would apply to an interest
period of approximately such duration (and in the case of any conversion
pursuant to Section 2.01(c) such loss shall also include any loss sustained by a
Multicurrency Lender as a result of its inability to convert Dollars received by
it into amounts of the applicable foreign currencies equal
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to the amounts of its Multicurrency Loans). Any such Lender shall provide to the
applicable Borrower a statement explaining the amount of any such loss or
expense, which statement shall, in the absence of manifest error, be conclusive.
SECTION 2.15. Pro Rata Treatment. Each payment of the Facility
Fee and each reduction of the Standby Commitments shall be allocated pro rata
among the Lenders in accordance with their respective Standby Commitments. Each
reduction of the Multicurrency Commitments shall be allocated pro rata among the
Multicurrency Lenders in accordance with their respective Multicurrency
Commitments. Except as required under Section 2.13, each payment or prepayment
of principal of any Standby Borrowing and each continuation or conversion of any
Standby Borrowing shall be allocated pro rata among the Lenders participating in
such Borrowing in accordance with the respective principal amounts of their
outstanding Standby Loans comprising such Borrowing. Each payment of interest on
any Standby Borrowing shall be allocated pro rata among the Lenders
participating in such Borrowing in accordance with the respective amounts of
accrued and unpaid interest on their outstanding Standby Loans comprising such
Borrowing. Except as required under Section 2.13, each payment or prepayment of
principal of any Multicurrency Borrowing and each continuation or conversion of
any Multicurrency Borrowing shall be allocated pro rata among the Multicurrency
Lenders participating in such Borrowing in accordance with the respective
principal amounts of their outstanding Multicurrency Loans comprising such
Borrowing. Each payment of interest on any Multicurrency Borrowing shall be
allocated pro rata among the Multicurrency Lenders participating in such
Borrowing in accordance with the respective amounts of accrued and unpaid
interest on their outstanding Multicurrency Loans comprising such Borrowing.
Each payment of principal of any Competitive Borrowing shall be allocated pro
rata among the Lenders participating in such Borrowing in accordance with the
respective principal amounts of their outstanding Competitive Loans comprising
such Borrowing. Each payment of interest on any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective amounts of accrued and unpaid interest on their
outstanding Competitive Loans comprising such Borrowing. Each Lender agrees that
in computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Lender's portion of such
Borrowing to the next higher or lower whole unit amount of the applicable
currency.
SECTION 2.16. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
or pursuant to a secured claim under Section 506 of Title 11 of the United
States Code or other security or interest arising from, or in lieu of, such
secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, obtain payment (voluntary or
involuntary) in respect of any Standby Loan or Loans as a result of which the
unpaid principal portion of its
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Standby Loans shall be proportionately less than the unpaid principal portion of
the Standby Loans of any other Lender, it shall be deemed simultaneously to have
purchased from such other Lender at face value, and shall promptly pay to such
other Lender the purchase price for, a participation in the applicable Standby
Loans of such other Lender, so that the aggregate unpaid principal amount of
such Standby Loans and participations in such Loans held by each Lender shall be
in the same proportion to the aggregate unpaid principal amount of all such
Standby Loans then outstanding as the principal amount of its Standby Loans
prior to such exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all such Standby Loans outstanding prior to such
exercise of such banker's lien, setoff or counterclaim or other event; provided,
however, that (i) if any such purchase or adjustments shall be made pursuant to
this Section 2.16 and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded to the
extent of such recovery and the purchase price or prices or adjustment restored
without interest and (ii) the provisions of this Section shall not be construed
to apply to any payment obtained by a Lender as consideration for the assignment
of or sale of a participation in any of its Loans to any assignee or participant
other than Millennium, any Borrower, any Subsidiary or any Affiliate thereof.
Each Borrower expressly consents to the foregoing arrangements and agrees that
any Lender holding a participation in a Loan made to it and deemed to have been
so purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by such Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
such Borrower in the amount of such participation.
SECTION 2.17. Taxes. (a) Any and all payments by each Borrower
hereunder shall be made, severally and not jointly, in accordance with Section
10.03, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings (except as permitted
by paragraph (f) of this Section 2.17), and all liabilities with respect
thereto, excluding net income and franchise taxes imposed on the Administrative
Agent or any Lender (or any transferee or assignee, including a participation
holder, whether by means of Section 2.01(c) or otherwise (any such entity a
"Transferee")) by the United States, or any jurisdiction under the laws of which
it is organized or where it is engaged in business (other than solely the
business of performing its obligations under this Agreement) or has an office,
or any political subdivision thereof (all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If any Loan Party shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder to the Lenders (or any
Transferee) or the Administrative Agent (i) the sum payable by such Loan Party
shall be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.17) such Lender (or Transferee) or the Administra-
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43
tive Agent (as the case may be) shall receive an amount equal to the sum it
would have received from such Loan Party had no such deductions been made, (ii)
such Loan Party shall make such deductions and (iii) such Loan Party shall pay
the full amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
(b) In addition, each Loan Party agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder by such Loan Party
or from the execution, delivery or registration by such Loan Party of this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
(c) Each Borrower will, severally and not jointly, indemnify each
Lender (or Transferee) and the Administrative Agent for the full amount of Taxes
and Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section 2.17) paid by such Lender (or Transferee)
or the Administrative Agent, as the case may be, with respect to Loans made to
or payments made by such Borrower and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted by the relevant
taxing authority or other Governmental Authority. Such indemnification shall be
made within 30 days after the date any Lender (or Transferee) or the
Administrative Agent, as the case may be, makes written demand therefor. If a
Lender (or Transferee) or the Administrative Agent shall become aware that it is
entitled to receive a refund in respect of Taxes or Other Taxes, it shall
promptly notify the applicable Borrower of the availability of such refund and
shall, within 10 days after receipt of a request by such Borrower, apply for
such refund at such Borrower's expense. If any Lender (or Transferee) or the
Administrative Agent receives a refund in respect of any Taxes or Other Taxes
for which such Lender (or Transferee) or the Administrative Agent has received
payment from any Loan Party under this Section, it shall promptly repay such
refund (including any penalties or interest received with respect thereto) to
such Loan Party, net of all out-of-pocket expenses of such Lender, provided that
such Loan Party, upon the request of such Lender (or Transferee) or the
Administrative Agent, agrees to return such refund (plus penalties, interest or
other charges) to such Lender (or Transferee) or the Administrative Agent in the
event such Lender (or Transferee) or the Administrative Agent is required to
repay such refund.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by any Loan Party in respect of any payment to any Lender
(or Transferee) or the Administrative Agent, such Loan Party will furnish to the
Administrative Agent, at its address referred to in Section 10.01 for delivery
to such Lender (or Transferee), or to be
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retained by the Administrative Agent, as applicable, the original or a certified
copy of a receipt, if any, evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.17
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.
(f) In the case of a Lender (or Transferee) which is organized
outside the jurisdiction in which any Borrower to which it makes a Loan is
located, (i) such Lender (or Transferee) shall so notify such Borrower and the
Administrative Agent and shall also promptly notify such Borrower and the
Administrative Agent of any change in its funding office and shall in each case
timely deliver to such Borrower and the Administrative Agent, to the extent it
is qualified to do so under applicable law, such properly completed and executed
certificates, documents or other evidence as are required by applicable law to
establish that payments hereunder are not subject to withholding tax (or subject
to a reduced rate of tax) by any Governmental Authority of the jurisdiction in
which such Borrower is located, (ii) each Lender (or Transferee) agrees to take
such steps (including a change in its relevant funding office) as reasonably may
be available to it under applicable tax laws and any applicable tax treaty or
convention (including, if legally available, furnishing a certificate or
document) to obtain an exemption from, or reduction (to the lowest applicable
rate) of, the Taxes described in paragraph (a) of this Section, except to the
extent that taking such a step would be materially disadvantageous to such
Lender (or Transferee), and (iii) unless, in the case of any Borrower located in
an Initial Jurisdiction, such Borrower and the Administrative Agent have
received documents reasonably satisfactory to them indicating that payments
hereunder are not subject to withholding tax pursuant to the laws of the
relevant Initial Jurisdiction or any relevant treaty, such Borrower or the
Administrative Agent shall withhold taxes from such payments at the applicable
statutory rate. No Loan Party located in any Initial Jurisdiction shall be
required to pay any additional amounts to any Lender (or Transferee) in respect
of withholding tax pursuant to the laws of the relevant Initial Jurisdiction and
any relevant treaty and paragraph (a) above if the obligation to pay such
additional amounts would not have arisen but for a failure by such Lender (or
Transferee) to comply with the provisions of clauses (i) or (ii) of the
preceding sentence for any reason other than (i) a change in applicable law,
regulation or official interpretation thereof or (ii) an amendment, modification
or revocation of any applicable tax treaty or a change in official position
regarding the application or interpretation thereof, in each case after the
Closing Date (and, in the case of a Transferee, after the date of assignment or
transfer to such Transferee).
(g) If, (A) as to an Initial Jurisdiction, solely as a
result of an event described in subparagraph (i) or (ii) of the final
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sentence of paragraph (f) above after the Closing Date (or, in the case of a
Transferee, after the date of assignment or transfer to such Transferee), or (B)
as to any jurisdiction other than an Initial Jurisdiction, a Lender (or
Transferee) (i) is unable to provide to the applicable Loan Party a certificate
or document described in clause (i) of the first sentence of paragraph (f)
above, or (ii) makes any payment or becomes liable to make any payment on
account of any Taxes with respect to payments by the applicable Loan Party
hereunder (and, in either case, is unable to avoid such adverse result through a
change in its funding office as described in clause (ii) of the first sentence
of paragraph (f) above), the applicable Loan Party may, at its option, either
(x) prepay the portion of the Loans held by such Lender (or Transferee) or (y)
continue to make payments to such Lender (or Transferee) under the terms of this
Agreement, which payments shall be made in accordance with paragraph (a) above.
As used in this Section, "Initial Jurisdiction" shall mean the
United States, the United Kingdom or Australia, and any political subdivision of
each, as the case may be.
SECTION 2.18. Duty to Mitigate; Assignment of Commitments Under
Certain Circumstances. (a) Any Lender (or Transferee) claiming any additional
amounts payable pursuant to Section 2.12 or exercising its rights under Section
2.13 shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document requested by HAI or, on or
after the Demerger Date, Millennium or to change the jurisdiction of its
Applicable Lending Office if the making of such a filing or change would avoid
the need for or reduce the amount of any such additional amounts which may
thereafter accrue or avoid the circumstances giving rise to such exercise and
would not, in the sole determination of such Lender (or Transferee), be
otherwise disadvantageous to such Lender (or Transferee).
(b) In the event that any Lender shall have delivered a notice or
certificate pursuant to Section 2.12 or 2.13, or any Borrower shall be required
to make additional payments to any Lender under Section 2.17, HAI or, on or
after the Demerger Date, Millennium shall have the right, at its own expense
(which shall include the processing and recordation fee referred to in Section
10.07(b)), upon notice to such Lender and the Administrative Agent, to require
such Lender to transfer and assign without recourse (in accordance with and
subject to the restrictions contained in Section 10.07) all its interests,
rights and obligations hereunder to another financial institution approved by
the Administrative Agent (which approval shall not be unreasonably withheld)
which shall assume such obligations; provided, however, that (i) no such
assignment shall conflict with any law, rule or regulation or order of any
Governmental Authority and (ii) the assignee or HAI or, on or after the Demerger
Date, Millennium shall pay to the affected Lender in immediately available funds
on the date of such assignment the principal of and interest accrued to the date
of payment on the Loans
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made by it hereunder and all other amounts accrued for its account or owed to it
hereunder (including the additional amounts asserted and payable pursuant to
Section 2.12 or 2.17, if any).
SECTION 2.19. Borrowing Subsidiaries. On or after the Demerger
Date, Millennium may designate any Subsidiary as a Borrowing Subsidiary by
delivery to the Administrative Agent (which shall deliver to each Lender a copy
thereof) of a Borrowing Subsidiary Agreement executed by such Subsidiary and
Millennium, and upon such delivery such Subsidiary shall for all purposes of
this Agreement be a Borrowing Subsidiary until Millennium shall have executed
and delivered to the Administrative Agent a Borrowing Subsidiary Termination
with respect to such Subsidiary, whereupon such Subsidiary shall cease to be a
Borrowing Subsidiary and a party to this Agreement. Notwithstanding the
preceding sentence, no Borrowing Subsidiary Termination will become effective as
to any Borrowing Subsidiary at a time when any principal of or interest on any
Loan to such Borrowing Subsidiary shall be outstanding hereunder and no
Borrowing Subsidiary Termination will in any event become effective as to HAI.
ARTICLE III
Representations and Warranties
As of the Closing Date and any other applicable date prior to the
Demerger Date HAI, with respect to itself and each of its Material Subsidiaries,
represents and warrants to each of the Lenders, and as of the Demerger Date and
any other applicable date thereafter Millennium, with respect to itself, each
Borrowing Subsidiary and each of its Material Subsidiaries, represents and
warrants to each of the Lenders, in each case as follows (it being understood
that no conflict, breach or default that occurs or is alleged to have occurred
in connection with the Exchangeable Notes resulting from or arising out of the
Demerger (and not as a result of the extension of credit hereunder) shall be
deemed to constitute or result in a breach of any representation or warranty
hereunder):
SECTION 3.01. Organization. It is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has the requisite power and authority to own its property and
assets and to carry on its business as now conducted and is duly qualified and
is in good standing and is authorized to do business in every jurisdiction where
such qualification or authorization is required, except where the failure so to
qualify could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.02. Authorization. It has the corporate power
and authority to execute, deliver and carry out the provisions of this
Agreement and the other Loan Documents to which it is a party and, if it
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is a Borrower, to borrow hereunder and, in the case of Millennium, to guarantee
the Obligations hereunder, and all such actions have been duly and validly
authorized by all necessary corporate proceedings on its part.
SECTION 3.03. Absence of Conflicts. The execution, delivery and
performance by it of this Agreement and the other Loan Documents to which it is
a party, any Borrowings by it hereunder and the Demerger, if completed, and
related transactions will not (a) violate (i) any provision of law, statute,
rule or regulation (including Regulation G, U or X) or its certificate or
articles of incorporation or its by-laws or (ii) any order of any court, or any
law, rule, regulation or order of any other agency of government binding upon
it, (b) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a material default under any indenture,
agreement or other instrument to which it is a party, or by which it or any of
its properties or assets are or may be bound, or (c) result in or require the
creation or imposition of any Lien upon any of its material property or assets,
except to the extent of conflicts or Liens resulting from the Demerger that
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.04. Governmental Approvals. No registration with or
consent or approval of, or other action by, any Governmental Authority is or
will be required in connection with its execution, delivery or performance of
this Agreement or any other Loan Document or any Borrowing hereunder, other than
any which have been made or obtained or the failure to obtain, give, file or
take which could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.05. Enforceability. This Agreement, and each other Loan
Document when executed and delivered by it, will constitute its legal, valid and
binding obligation, enforceable in accordance with the terms hereof and thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application from time to
time affecting the rights of creditors generally.
SECTION 3.06. Financial Statements. HAI has heretofore furnished
to the Lenders (i) the unaudited income statement of Millennium and its
Subsidiaries prepared on a pro forma combined basis (giving effect to the
Demerger) for the 12-month period ended December 31, 1995 and for the
three-month period ended March 31, 1996, and (ii) the unaudited balance sheet of
Millennium and its Subsidiaries prepared on a pro forma combined basis (giving
effect to the Demerger), at December 31, 1995 and March 31, 1996. Such pro forma
income statement and balance sheet have been prepared in good faith by HAI on
Millennium's behalf, based on the assumptions used to prepare the pro forma
financial information contained in the Form 10 (which assumptions are believed
by HAI on the date hereof to be reasonable), are based on
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48
the best information available to HAI as of the date of delivery thereof,
accurately reflect all adjustments required to be made to give effect to the
Demerger and present fairly on a pro forma basis the estimated combined
financial position of Millennium and its Subsidiaries as of December 31, 1995
and as of March 31, 1996, assuming that the Demerger had actually occurred at
the first day of the respective periods covered thereby.
SECTION 3.07. Material Adverse Effect. Since March 31,
1996, there has not occurred any Material Adverse Effect.
SECTION 3.08. Litigation. There are no actions, suits or
proceedings at law or in equity or by or before any Governmental Authority now
pending or, to its knowledge, threatened against or affecting it or any of its
Subsidiaries or the businesses, assets or rights of it or any of its
Subsidiaries as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
SECTION 3.09. Compliance with Laws and Agreements. (a) Neither it
nor any of its Subsidiaries is in violation of any law, or in default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
(b) Neither it nor any of its Subsidiaries is in default under
any provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.10. Federal Reserve Regulations. (a) Neither it
nor any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of the Loans has been or will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose which entails a violation of the provisions of the
Regulations of the Board, including, without limitation, Regulation G, U or X
thereof. Not more than 25% of the assets subject to the restrictions of Section
6.01 will at any time consist of Margin Stock.
SECTION 3.11. Tax Returns. It and each of its Subsidiaries
have filed or caused to be filed all Federal, state, local and foreign
tax returns which to their knowledge are required to be filed by them or
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49
on their behalf, and have paid or caused to be paid all taxes shown to be due
and payable on such returns or on any assessments received by them, except where
the failure to do so could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.12. Employee Benefit Plans. (a) It and its ERISA
Affiliates are in compliance in all material respects with those provisions of
ERISA and the regulations and published interpretations thereunder which are
applicable to it, except where noncompliance could not reasonably be expected to
result in a Material Adverse Effect. No Reportable Event has occurred with
respect to any Plan that could reasonably be expected to result in a Material
Adverse Effect, and no unfunded liabilities exist under all of the Plans in the
aggregate that could reasonably be expected to result in a Material Adverse
Effect.
(b) Neither it nor any ERISA Affiliate has incurred any
Withdrawal Liability that materially and adversely affects the financial
condition of it and its Subsidiaries taken as a whole or that materially and
adversely impairs its ability to perform its obligations under this Agreement or
any other Loan Document. Neither it nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated, where such
reorganization or termination has resulted or is likely to result in an increase
in the contributions required to be made to such Multiemployer Plan that could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.13. No Material Misstatements. No information, report,
financial statement, exhibit or schedule furnished by or on behalf of it to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or included herein contained or contains any material misstatement of
fact or omitted or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 3.14. Investment Company Act; Public Utility Holding
Company Act. Neither it nor any of its Subsidiaries is an "investment company"
as defined in, or is otherwise subject to regulation under, the Investment
Company Act of 1940. Neither it nor any of its Subsidiaries is subject to
regulation as a "holding company" under the Public Utility Holding Company Act
of 1935.
SECTION 3.15. Subsidiaries. At the date hereof, except as set
forth in Schedule 3.15, all the issued and outstanding shares of capital stock
or the partnership interests, as the case may be, of each of its Subsidiaries
have been validly issued and are fully paid and nonassessable and are owned
directly or indirectly by it free and clear of all Liens whatsoever, and there
are no options, warrants, calls, conversion or exchange rights, commitments or
agreements of any
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character obligating any of the Subsidiaries to issue, deliver or sell
additional shares of capital stock of any class or any securities convertible
into or exchangeable for any such capital stock or any additional partnership
interests.
SECTION 3.16. Agreements. Neither it nor any of its Subsidiaries
is a party to any agreement or instrument or subject to any corporate
restriction that (i) will have the effect of prohibiting or restraining, or will
impose adverse conditions upon, any of the transactions contemplated hereby or
the payment of dividends or the making of any loans, investments or transfers by
any such Subsidiary to or in it or (ii) has resulted or could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.17. Environmental and Safety Matters. It and each of
its Subsidiaries has complied in all material respects with all Federal, state,
local and other statutes, ordinances, orders, judgments, rulings and regulations
relating to the environment or to protection of the environment or to employee
health and safety ("Environmental and Safety Laws") except for violations that
either alone or in the aggregate could not reasonably be expected to result in a
Material Adverse Effect. Neither it nor any of its Subsidiaries manages or
handles any hazardous wastes, hazardous substances, hazardous materials, toxic
substances or toxic pollutants referred to in or regulated by Environmental and
Safety Laws, in violation of such Environmental and Safety Laws where such
violation could reasonably be expected to result, individually or together with
other violations, in a Material Adverse Effect. To the best of its knowledge,
neither it nor any of its Subsidiaries has any liabilities or contingent
liabilities relating to environmental or employee health and safety matters
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.
SECTION 3.18. Title to Properties. It and each of its
Subsidiaries has good and marketable title to, or valid leasehold interests in,
all its material assets and properties, except for such assets and properties as
are no longer being used or useful in the conduct of its businesses or have been
disposed of in the ordinary course of business and except for defects in title
and exceptions to leasehold interests that either alone or in the aggregate
could not reasonably be expected to result in a Material Adverse Effect. All
such material assets and properties are free and clear of all mortgages,
pledges, liens, charges, security interests and other encumbrances other than
those permitted by Section 6.01.
SECTION 3.19. Labor Matters. The hours worked and payments made
to its employees and the employees of each of its Subsidiaries have not been in
violation in any respect of the Fair Labor Standards Act or any other applicable
law dealing with such matters except for violations that either alone or in the
aggregate could not reasonably be expected
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51
to result in any Material Adverse Effect. All material payments due from it or
any of its Subsidiaries, or for which any claim may be made against it or any of
its Subsidiaries, on account of wages and employee health and welfare insurance
and other benefits have been paid or accrued as a liability on its books or the
books of such Subsidiary, as applicable, in compliance with GAAP.
SECTION 3.20. Ranking. The Obligations for which it is
liable as a Borrower or guarantor will rank equally with all of its
senior, unsecured indebtedness, whether now existing or hereafter
created.
SECTION 3.21. Immunities, Etc. Each Borrowing Subsidiary is
subject to civil and commercial law with respect to its obligations under this
Agreement, and the execution, delivery and performance by such Borrowing
Subsidiary of the applicable Borrowing Subsidiary Agreement and this Agreement
constitute and will constitute private and commercial acts rather than public or
governmental acts. Each Borrowing Subsidiary has validly given its consent to be
sued in respect of its obligations under the Borrowing Subsidiary Agreement and
this Agreement. Each Borrowing Subsidiary has waived every immunity (sovereign
or otherwise) to which it or any of its properties would otherwise be entitled
from any legal action, suit or proceeding, from jurisdiction of any court or
from setoff or any legal process (whether service or notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise) under the laws of the jurisdiction of its incorporation in respect of
its Obligations under the Borrowing Subsidiary Agreement and this Agreement. The
waiver by such Borrowing Subsidiary described in the immediately preceding
sentence is legal, valid and binding on such Borrowing Subsidiary.
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Borrowings. On the date of each Borrowing
(including any Multicurrency Borrowing or any Borrowing resulting from the
conversion or continuation of Loans pursuant to Section 2.05), the obligations
of the Lenders to make Loans hereunder shall be subject to the satisfaction of
the following conditions:
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 or Section 2.04, as applicable.
(b) The representations and warranties set forth in Article III
(except in the case of a Borrowing that does not increase the aggregate
principal amount of Loans of any Lender outstanding) shall be true and
correct in all material respects on
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52
and as of the date of such Borrowing with the same effect as though made
on and as of such date, except to the extent such representations and
warranties expressly relate to an earlier date.
(c) At the time of and immediately after such Borrowing no Event
of Default or Default shall have occurred and be continuing.
Each Borrowing shall be deemed to constitute a representation and warranty on
the date of such Borrowing as to the matters specified in paragraphs (b) and (c)
above by HAI or, on or after the Demerger Date, by Millennium and, as to itself
only, by any applicable Borrowing Subsidiary.
SECTION 4.02. First Borrowing. The obligation of each
Lender to make its initial Loan hereunder shall be subject to the
satisfaction of the following conditions:
(a) The Administrative Agent shall have received a certificate
dated the Closing Date and signed by a Financial Officer of HAI,
confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(b) The Administrative Agent shall have received for the benefit
of each Lender a signed copy of the favorable written opinion of (i)
George H. Hempstead, III, General Counsel of HAI, and counsel for
Millennium, (ii) Fried, Frank, Harris, Shriver & Jacobson, counsel for
HAI and Millennium, and (iii) Clifford Chance, special counsel for HANV,
each dated the Closing Date and addressed to the Lenders and
substantially in the forms set forth in Exhibits D-1, D-2 and D-3,
respectively, and satisfactory to Cravath, Swaine & Moore, counsel for
the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of
the certificate or articles of incorporation, as amended through the
Closing Date, of each of HAI and Millennium, certified by the relevant
Secretary of State as of a recent date; (ii) a certificate of the
Secretary or an Assistant Secretary of each such corporation dated the
Closing Date and certifying (A)(1) that attached thereto is a true and
complete copy of the by-laws of such corporation, as in effect on the
date of such certificate and (2) that the certificate or articles of
incorporation of such corporation have not been amended since the date
of the certification thereto furnished pursuant to clause (i) above and
(3) as to the incumbency and specimen signature of each officer of such
corporation executing this Agreement, the other Loan Documents or any
other instrument or document delivered in connection herewith and a
certification by another officer of such Loan Party as to the incumbency
and signature of the officer signing the certificate referred to in this
clause (ii), and (B) that attached
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53
thereto is a true, correct and complete copy of resolutions duly adopted
by the Board of Directors of such corporation authorizing the execution,
delivery and performance of this Agreement and the other Loan Documents
and that said resolutions have not been amended or revoked and are in
full force and effect on the date of such certificate; and (iii) such
other documents as the Administrative Agent or Cravath, Swaine & Moore,
counsel for the Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received counterparts of
this Agreement which, when taken together, bear the signatures of all
the parties hereto.
(e) The Administrative Agent shall have received, for the benefit
of each Lender (i) a copy of the resolutions adopted by each of HAI and
HANV, substantially in the form of Exhibits E-1 and E-2, respectively,
extending the maturity of the HANV Loan Obligations to October 15, 2003,
(ii) fully executed counterparts of an agreement of HANV, substantially
in the form of Exhibit E-3, subordinating the HANV Loan Obligations to
the Obligations, providing that the HANV Loan Obligations may be paid
and discharged in accordance with this Agreement and certifying the
resolutions adopted by HANV extending the maturity of the HANV Loan
Obligations to October 15, 2003, and (iii) a certified copy of the HHN
Note, substantially in the form of Exhibit E-4, subordinating the
obligations of HM Holdings thereunder to the Obligations.
(f) All legal matters incidental to this Agreement and the
borrowings hereunder shall be satisfactory to the Lenders and to
Cravath, Swaine & Moore, counsel for the Administrative Agent.
SECTION 4.03. Borrowings in Respect of Each Borrowing Subsidiary.
The obligations of the Lenders to make the initial Loans (including the initial
Domestic A$ Loan, which shall be made to a Borrowing Subsidiary) to each
Borrowing Subsidiary (other than HAI) hereunder are subject to the Demerger Date
having occurred in accordance with the provisions of this Agreement and to the
satisfaction of the following additional conditions:
(a) The Administrative Agent shall have received a copy of a
Borrowing Subsidiary Agreement executed by such Borrowing Subsidiary,
Millennium and the Administrative Agent.
(b) The Administrative Agent shall have received, on behalf of
itself and the Lenders, a favorable written opinion of counsel for such
Borrowing Subsidiary (which counsel shall be reasonably acceptable to
the Administrative Agent), substantially to the effect set forth in
Exhibit D-4, (A) dated the date of the applicable Borrowing Subsidiary
Agreement, (B) addressed to the
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54
Administrative Agent and the Lenders, and (C) covering such other
matters as the Administrative Agent shall reasonably request.
(c) All legal matters incidental to this Agreement, the
Borrowings and extensions of credit hereunder and the other Loan
Documents shall be reasonably satisfactory to the Lenders and to
Cravath, Swaine & Moore, counsel for the Administrative Agent.
(d) The Administrative Agent shall have received (i) a copy of
the certificate or articles of incorporation, including all amendments
thereto, of such Borrowing Subsidiary, certified by the Secretary of
State of the state of its organization as of a recent date (or similar
documentation with respect to any foreign Borrowing Subsidiary); (ii) a
certificate of the Secretary or an Assistant Secretary of such Borrowing
Subsidiary dated the date of the applicable Borrowing Subsidiary
Agreement and certifying (A) that attached thereto is a true and
complete copy of the by-laws of such Borrowing Subsidiary as in effect
on the date of such Agreement and at all times since a date prior to the
date of the resolutions of such Borrowing Subsidiary described in clause
(B) below, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors (or the appropriate
duly authorized committee thereof), of such Borrowing Subsidiary
authorizing the execution, delivery and performance of such Borrowing
Subsidiary Agreement and all other Loan Documents to which such
Borrowing Subsidiary is a party and the borrowings hereunder by such
Borrowing Subsidiary, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (C) that the
certificate or articles of incorporation (or similar documentation with
respect to any foreign Borrowing Subsidiary) of such Borrowing
Subsidiary have not been amended since the date of certification thereto
furnished pursuant to clause (i) above, and (D) as to the incumbency and
specimen signature of each officer of such Borrowing Subsidiary
executing such Borrowing Subsidiary Agreement, any other Loan Document
or any other document delivered in connection herewith or therewith; and
(iii) such other documents as the Administrative Agent or Cravath,
Swaine & Moore, counsel for the Administrative Agent, may reasonably
request.
(e) The Administrative Agent shall have received a certificate,
dated the date of the applicable Borrowing Subsidiary Agreement and
signed by a Financial Officer of Millennium, confirming (i) that the
representations and warranties set forth in Article III are true and
correct in all material respects on the date of such Borrowing
Subsidiary Agreement and (ii) compliance with the conditions precedent
set forth in paragraph (c) of Section 4.01.
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55
ARTICLE V
Affirmative Covenants
Prior to the Demerger Date, HAI covenants and agrees, and from
and after the Demerger Date, Millennium covenants and agrees, with each Lender
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any Fees or any other expenses or amounts payable
hereunder shall be unpaid, and unless the Required Lenders shall otherwise
consent in writing, it will, and will cause each of its Material Subsidiaries to
(it being understood that no conflict, breach or default that occurs or is
alleged to have occurred in connection with the Exchangeable Notes resulting
from or arising out of the Demerger (and not as a result of the extension of
credit hereunder) shall be deemed to constitute or result in a breach of any
covenant hereunder):
SECTION 5.01. Corporate Existence. Do or cause to be done
all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise permitted by
Section 6.06.
SECTION 5.02. Businesses and Properties. Except as otherwise
permitted by Section 6.06, at all times (a) do or cause to be done all things
necessary to preserve, renew and keep in full force and effect the rights,
licenses, permits, franchises, patents, copyrights, trademarks and trade names
material to the conduct of its business; and (b) maintain, preserve and protect
all property material to the conduct of such business.
SECTION 5.03. Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers, (b)
maintain such other insurance, to such extent and against such risks, as is
customary with companies similarly situated and in the same or similar business,
and (c) maintain in full force and effect public liability insurance against
claims for personal injury or death or property damage occurring upon, in, about
or in connection with the use of any properties owned, occupied or controlled by
it in such amount as it shall reasonably deem necessary; provided, however, that
nothing in this Section 5.03 shall preclude HAI or Millennium or any Subsidiary
from being self-insured (to the extent customary with companies similarly
situated in the same or similar business).
SECTION 5.04. Taxes. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might give rise to liens or charges
upon such properties or any part
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56
thereof, unless and to the extent that any such tax, assessment, charge, levy or
claim is being contested in good faith by appropriate proceedings and adequate
reserves are being maintained with respect thereto in accordance with GAAP.
SECTION 5.05. Financial Statements, Reports, etc. With
respect to Millennium, furnish to each of the Lenders:
(a) Within 90 days after the end of each fiscal year of
Millennium, financial statements (which shall include a balance sheet and income
statement, as well as statements of stockholder's equity and cash flows) showing
the financial condition and results of operations of Millennium and its
Subsidiaries as of the end of and for such fiscal year, (i) with respect to each
such fiscal year ending prior to the Demerger Date, prepared on a pro forma
combined basis giving effect to the Demerger as if it had occurred on the first
day of such fiscal year, and (ii) with respect to each such fiscal year ending
on or after the Demerger Date, prepared on a consolidated basis. From and after
the Demerger Date, the financial statements of Millennium and its consolidated
Subsidiaries delivered pursuant to this paragraph will be audited and reported
on by independent public accountants of recognized standing acceptable to the
Required Lenders and will be in a form reasonably acceptable to the Required
Lenders.
(b) Within 65 days after the end of each of the first three
fiscal quarters of each fiscal year of Millennium (including the six-month
period ended June 30, 1996, statements for which will be furnished to the
Lenders not later than September 30, 1996), unaudited financial statements
(which shall include a balance sheet and income statement, as well as statements
of stockholder's equity and cash flow) showing the financial condition and
results of operations of Millennium and its Subsidiaries as of the end of and
for such fiscal quarter, (i) with respect to each such fiscal quarter ending
prior to the Demerger Date, prepared on a pro forma combined basis giving effect
to the Demerger as if it had occurred on the dates specified with respect to the
financial statements referred to in Section 3.06, and (ii) with respect to each
such fiscal quarter ending on or after the Demerger Date, prepared on a
consolidated basis, in each case certified by the chief financial officer of
Millennium (or, prior to the Demerger Date, HAI) as presenting fairly the
financial position and results of operations of Millennium and its consolidated
Subsidiaries and as having been prepared in accordance with GAAP, subject to
year-end adjustments.
(c) Promptly after the same shall have been filed or furnished as
described below, copies of such registration statements, annual, periodic and
other reports, and such proxy statements and other information, if any, as shall
be filed by Millennium, any Borrower or any Subsidiary with the SEC pursuant to
the requirements of the Securities Act of 1933 or the Securities Exchange Act of
1934 or the
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57
rules promulgated thereunder or furnished to the holders of the
Exchangeable Notes.
(d) Concurrently with (a) and (b) above, a certificate of a
Financial Officer of Millennium or HAI, as the case may be, (i) certifying
compliance, as of the dates of the financial statements being furnished at such
time and for the periods then ended, with the covenants set forth in Sections
6.01, 6.02 and 6.03, and demonstrating compliance with the covenants set forth
in Sections 6.04 and 6.05, (ii) certifying that to the best knowledge of such
Financial Officer no Event of Default or Default has occurred or, if an Event of
Default or Default has occurred, specifying the nature and extent thereof and
any corrective action taken or proposed to be taken with respect thereto and
(iii) setting forth any change since the date hereof, or the last date such a
certificate was delivered, in the information set forth on Schedule 3.15.
(e) Promptly, from time to time, such other information regarding
this Agreement or the affairs, operations or condition (financial or otherwise)
of Millennium or any Borrower or Subsidiary as any Lender may reasonably request
and which is susceptible of being obtained, produced or generated by any of them
or of which any of them has knowledge.
SECTION 5.06. Litigation and Other Notices. Give each
Lender prompt written notice upon learning of the following:
(i) the issuance by any Governmental Authority of any injunction,
order, decision or other restraint prohibiting, or having the effect of
prohibiting, the making of the Loans, or having the effect of
invalidating any provision of this Agreement or any other Loan Document
or the initiation of any litigation or similar proceeding seeking any
such injunction, order, decision or other restraint;
(ii) the filing or commencement of any action, suit or proceeding
against Millennium or any Borrower or Subsidiary, whether at law or in
equity or by or before any Governmental Authority or any arbitrator, as
to which action, suit or proceeding there is a reasonable possibility of
an adverse determination and which, if determined adversely to
Millennium or any Borrower or Subsidiary, could reasonably be expected
to result in a Material Adverse Effect; and
(iii) any Event of Default or Default, specifying the nature and
extent thereof and the action (if any) which is proposed to be taken
with respect thereto.
SECTION 5.07. ERISA. (a) Comply in all material respects
with the applicable provisions of ERISA, except where noncompliance
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could not reasonably be expected to result in a Material Adverse Effect, and (b)
furnish to the Administrative Agent and each Lender (i) as soon as possible, and
in any event within 30 days after any Responsible Officer of Millennium, any
Borrower or any ERISA Affiliate knows that any Reportable Event has occurred
that alone or together with any other Reportable Event could reasonably be
expected to result in liability of Millennium, any Borrower or any Subsidiary to
the PBGC in an aggregate amount exceeding $20,000,000, a statement of a
Financial Officer setting forth details as to such Reportable Event and the
action proposed to be taken with respect thereto, together with a copy of the
notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after
receipt thereof, a copy of any notice that Millennium, any Borrower or any
Subsidiary may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate
that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) or to appoint a trustee to administer any Plan or
Plans, (iii) within 10 days after the due date for filing by Millennium, any
Borrower or any Subsidiary with the PBGC pursuant to Section 412(n) of the Code
of a notice of failure to make a required installment or other payment with
respect to a Plan, a statement of a Financial Officer setting forth details as
to such failure and the action proposed to be taken with respect thereto,
together with a copy of such notice given to the PBGC, and (iv) promptly and in
any event within 30 days after receipt thereof by Millennium, any Borrower or
any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each
notice concerning (A) the imposition of any Withdrawal Liability in an amount
exceeding $10,000,000 or (B) a determination that a Multiemployer Plan is, or is
expected to be, terminated or in reorganization, both within the meaning of
Title IV of ERISA, which, in each case, is expected to result in an increase in
annual contributions of Millennium, any Borrower or any Subsidiary to such
Multiemployer Plan in an amount exceeding $5,000,000.
SECTION 5.08. Access to Premises and Records. Maintain financial
records in accordance with GAAP, and upon reasonable notice permit
representatives of the Lenders to have access to such financial records and the
premises of Millennium, any Borrower or any Subsidiary at reasonable times and
to make such excerpts from such records as such representatives deem necessary
in connection with their evaluation of the ability of Millennium and the
Borrower to repay the Loans and perform their other obligations under the Loan
Documents. Each Lender agrees to keep all information obtained by it pursuant to
this Section 5.08 confidential except to the extent that (i) disclosure of such
information has been requested by any bank regulatory authority to which it is
subject or counsel for such Lender advises that disclosure of such information
should be made pursuant to applicable law, regulations, subpoena, judicial
process or the like to which it is subject or to its counsel or auditors or in
any legal proceeding arising out of this Agreement or any other Loan Document,
(ii) such information is or becomes publicly available other than by such
Lender's breach of
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this Section 5.08, (iii) such information becomes available to such Lender from
a third party which, by making such information available, has not breached, to
such Lender's knowledge, any obligation of confidentiality it may owe or (iv)
such information is made available by such Lender to any of its Affiliates or to
any permitted assignees or transferees that need to know such information in
connection with this Agreement or any other Loan Document and agree to be bound
by the confidentiality provisions of this Section 5.08 and to use such
information only in connection with this Agreement and the other Loan Documents.
SECTION 5.09. Use of Proceeds. Use the proceeds of
Borrowings only for the purposes set forth in the preamble to this
Agreement.
SECTION 5.10. Compliance with Laws. Comply with all applicable
laws, rules and regulations, and all orders of any Governmental Authority
applicable to it or any of its property, business, operations or transactions to
the extent noncompliance could reasonably be expected to result in (i) a
Material Adverse Effect or (ii) a Default or an Event of Default.
SECTION 5.11. Environmental Compliance. Comply with all
Environmental and Safety Laws, except where the failure so to comply could not
reasonably be expected to result in a Material Adverse Effect, and provide
prompt written notice to the Lenders following the receipt of any notice of any
violation of any Environmental and Safety Laws from any Federal, state or local
Governmental Authority charged with enforcing such Environmental and Safety Laws
which could reasonably be expected to result in a Material Adverse Effect.
SECTION 5.12. Demerger. (a) From and after the Demerger Date,
cause the Demerger and all related transactions to be completed substantially on
terms and with results substantially consistent with the information set forth
in the definition of "Demerger" and the Form 10, including without limitation
the pro forma financial information set forth therein.
(b) From and after the Demerger Date, cause the transactions
described in the definition of "Demerger" to occur substantially in the sequence
specified therein and the transactions described in clauses (a), (b), (c) and
(d)(i) thereof to be completed not more than ten days after the Demerger Date
or, with respect to the HANV Loan Obligations, December 31, 1996 (subject to
having obtained the consents under the Exchangeable Notes contemplated by
Section 5.13).
(c) Within 10 days after the Demerger Adjustment Date, furnish to
each of the Lenders a certificate of the chief financial officer of Millennium
(i) confirming compliance with the covenant set forth in paragraph (a) above and
(ii) certifying that since the date of
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the pro forma financial statements referred to in Section 3.06 there has not
occurred any Material Adverse Effect.
SECTION 5.13 Exchangeable Notes. (a) Prior to the Demerger Date,
use all reasonable efforts to obtain the consents described in the Form 10 in
connection with the Exchangeable Notes on substantially the terms set forth
therein, except that HAI may also seek consents to the modification or
elimination of the covenants in the indenture for the Exchangeable Notes
relating to delivery of financial statements, subsidiary indebtedness, liens and
other matters and may provide a Millennium guarantee.
(b) Following the Demerger Date, use all reasonable efforts to
complete the tender offer for the Exchangeable Notes described in the Form 10 on
substantially the terms set forth therein.
(c) At all times when Exchangeable Notes are outstanding and
there is existing a Default or Event of Default (as defined under the indenture
governing the Exchangeable Notes) resulting from or arising out of the Demerger,
have available Standby Commitments and other sources of cash (which need not be
in the form of committed credit facilities) sufficient in amount (taking into
account the other cash requirements of Millennium, the Borrowers and the
Subsidiaries) to pay the outstanding principal of and all other amounts owed in
respect of the Exchangeable Notes.
SECTION 5.14. HANV Loan Obligations. In the event the Demerger
Date shall have occurred and the consents referred to in Section 5.13 have been
obtained, cause to be discharged (by offset against the Offsetting Receivables,
to the extent the Offsetting Receivables shall be sufficient in amount for such
purpose), on or before December 31, 1996, the outstanding principal of and all
other amounts owed in respect of the HANV Loan Obligations.
ARTICLE VI
Negative Covenants
Prior to the Demerger Date, HAI covenants and agrees, and from
and after the Demerger Date, Millennium covenants and agrees, with each Lender
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any Fees or any other expenses or amounts payable
hereunder shall be unpaid, unless the Required Lenders shall otherwise consent
in writing, it will not and it will not cause or permit any of its Material
Subsidiaries, either directly or indirectly, to (it being understood that no
conflict, breach or default that occurs or is alleged to have occurred in
connection with the Exchangeable Notes resulting from or arising out of the
Demerger (and
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not as a result of the extension of credit hereunder) shall be deemed to
constitute or result in a breach of any covenant hereunder):
SECTION 6.01. Liens. Incur, create, assume or permit to exist any
Lien on any of its property or assets, whether owned at the date hereof or
hereafter acquired, or assign or convey any rights to or security interests in
any future revenues, except:
(a) Liens incurred and pledges and deposits made in the ordinary
course of business in connection with workmen's compensation, disability
or unemployment insurance, old-age pensions, retiree health benefits and
other social security benefits;
(b) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety, customs and appeal bonds and other obligations of a
like nature, incurred as an incident to and in the ordinary course of
business;
(c) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens, incurred in good faith in
the ordinary course of business and securing obligations which are not
yet due or which are being contested in good faith by appropriate
proceedings as to which HAI, Millennium or a Subsidiary, as the case may
be, shall have, to the extent required by GAAP, set aside on its books
adequate reserves;
(d) Liens securing the payment of taxes, assessments and
governmental charges or levies, either (i) not delinquent or (ii) being
contested in good faith by appropriate legal or administrative
proceedings and as to which HAI, Millennium or a Subsidiary, as the case
may be, shall have, to the extent required by GAAP, set aside on its
books adequate reserves;
(e) (i) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of
property or minor irregularities of title (and with respect to leasehold
interests, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by, through
or under a landlord or owner of the leased property, with or without
consent of the lessee) and (ii) licenses or leases of patents,
copyrights, trademarks, tradenames and other intellectual property,
which do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation
of its business;
(f) Liens upon any property acquired, constructed or
improved by HAI, Millennium or any Subsidiary which are created or
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incurred within 185 days of such acquisition, construction or
improvement to secure or provide for the payment of any part of the
purchase price of such property or the cost of such construction or
improvement, including carrying costs (but no other amounts); provided
that any such Lien shall not apply to any other property of HAI,
Millennium or any Subsidiary;
(g) (i) Liens existing on the date hereof securing obligations
under industrial revenue bonds in an aggregate principal amount not in
excess of $28,000,000, and (ii) Liens on property existing at the time
such property is acquired by HAI, Millennium or a Subsidiary or on
property of any person at the time such person becomes a Subsidiary;
provided that such Liens were not created in contemplation of the
acquisition by HAI, Millennium or such Subsidiary of such property or of
such person becoming a Subsidiary;
(h) Liens on the property or assets of any Subsidiary of HAI
or Millennium, as the case may be, in favor of HAI, Millennium or
any other Subsidiary;
(i) Liens on accounts receivable deemed to arise in
connection with any Securitization Transaction;
(j) extensions, renewals and replacements of Liens referred to in
clauses (a) through (i) above; provided that any such extension, renewal
or replacement Lien shall be limited to the property or assets covered
by the Lien extended, renewed or replaced and that the obligations
secured by any such extension, renewal or replacement Lien shall be in
an amount not greater than the amount of the obligations secured by the
Lien extended, renewed or replaced;
(k) prior to the Demerger Date, Liens and encumbrances arising
from the dedication or commitment by any Subsidiary in the ordinary
course of its business of coal reserves to the performance of any
particular coal supply agreement and in favor of the coal buyer or
buyers under such coal supply agreement, including, but not limited to,
dedications involving a grant of a purchase option for the dedicated
coal reserves, dedications restricting sales of coal mined from the
dedicated coal reserves and dedications granting preferential purchase
rights in respect of the dedicated coal reserves or coal mined
therefrom;
(l) attachment or judgment Liens not giving rise to a Default or
Event of Default and which are being contested in good faith by
appropriate proceedings;
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(m) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of HAI, Millennium and
their respective Subsidiaries;
(n) any option, contract or other agreement to sell an
asset; provided such sale is not otherwise prohibited hereunder;
(o) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with
the importation of goods; and
(p) Liens to secure Indebtedness or any other monetary obligation
if, immediately after the incurrence thereof, the sum (without
duplication) of (i) all amounts of Indebtedness and other monetary
obligations secured by Liens which would not be permitted but for this
clause (p), (ii) the obligations of HAI or Millennium and its
Subsidiaries in respect of sale and leaseback transactions referred to
in Section 6.02 and (iii) all amounts of unsecured Indebtedness and
Preferred Stock of Subsidiaries which would not be permitted but for
clause (f) of Section 6.03, does not exceed the greater of $400,000,000
or 10% of Consolidated Net Tangible Assets as shown, prior to the
Demerger Date, on the most recent pro forma combined balance sheet of
Millennium and its Subsidiaries and, from and after the Demerger Date,
on the most recent audited consolidated balance sheet of Millennium and
its Subsidiaries delivered pursuant to Section 5.05(a).
provided that none of the foregoing exceptions shall permit HAI, Millennium or
any Material Subsidiary to incur, create, assume or permit to exist any
consensual Lien on the capital stock owned by it of any Subsidiary.
SECTION 6.02. Sale and Leaseback Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, and used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred, without the
consent of the Required Lenders; provided, however, that, notwithstanding the
above, HAI or Millennium, as the case may be, or any Subsidiary may engage in
any sale and leaseback transaction, without seeking the consent of the Required
Lenders, if, immediately after the consummation of such transaction, the sum
(without duplication) of (i) all amounts of Indebtedness and other monetary
obligations secured by Liens which would not be permitted but for clause (p) of
Section 6.01, (ii) the obligations of HAI or Millennium and its Subsidiaries in
respect of sale and leaseback transactions referred to in this Section 6.02 and
(iii) all amounts of unsecured Indebtedness and Preferred Stock of Subsidiaries
which would not be permitted but for clause (f) of Section 6.03, does not exceed
the
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greater of $400,000,000 or 10% of Consolidated Net Tangible Assets as shown,
prior to the Demerger Date, on the most recent pro forma combined balance sheet
of Millennium and its Subsidiaries and, from and after the Demerger Date, on the
most recent audited consolidated balance sheet of Millennium and its
Subsidiaries delivered pursuant to Section 5.05(a); provided, further, that the
consideration received for the sale of such assets is at least equal to the
then-current fair market value of such assets. For purposes of the foregoing,
the value of each such sale and leaseback transaction shall (except as HAI or,
on or after the Demerger Date, Millennium, and the Required Lenders shall
otherwise agree) be deemed to be (a) the price at which the property pertaining
thereto is sold or transferred to the lessor thereof or (b) (if higher than (a)
and if the relevant lease or leases represent Capitalized Lease Obligations) the
balance sheet value of such lease or leases.
SECTION 6.03. Subsidiary Indebtedness and Preferred Stock. In the
case of the Subsidiaries (other than HAI), incur, create, assume or permit to
exist any Indebtedness or Preferred Stock other than (a) Indebtedness or
Preferred Stock of any Subsidiary issued to or held by Millennium or any other
Subsidiary, (b) the existing HM Holdings guarantee of the Exchangeable Notes
and, during the period from the Demerger Date to and including the date ten days
thereafter, the Hanson Loan, (c) Indebtedness of any Cash Management Subsidiary,
(d) Indebtedness of any Subsidiary in connection with any project financing that
provides for recourse only against the specific assets subject to such project
financing (and no recourse against the general assets of Millennium or any of
its Subsidiaries), (e) Indebtedness in an aggregate principal amount of
$52,000,000 (including Indebtedness referred to in Section 6.01(g)(i)) existing
on the date hereof and set forth in Schedule 6.03, and any extensions, renewals
or replacements of such Indebtedness and (f) any other Indebtedness or Preferred
Stock; provided that the sum (without duplication) of (i) all Indebtedness and
Preferred Stock of Subsidiaries which would not be permitted but for this clause
(f), (ii) all Indebtedness and other monetary obligations secured by Liens which
would not be permitted but for clause (p) of Section 6.01 and (iii) all
obligations of HAI or Millennium and its Subsidiaries in respect of sale and
leaseback transactions referred to in Section 6.02, shall not exceed the greater
of $400,000,000 or 10% of Consolidated Net Tangible Assets as shown, prior to
the Demerger Date, on the most recent pro forma combined balance sheet of
Millennium and its Subsidiaries and, from and after the Demerger Date, on the
most recent audited consolidated balance sheet of Millennium and its
Subsidiaries delivered pursuant to Section 5.05(a).
SECTION 6.04. Leverage Ratio. Permit the Leverage Ratio at
any time to exceed (a) on or before December 31, 1997, 0.65 to 1, or
(b) after December 31, 1997, 0.60 to 1.
SECTION 6.05. Interest Coverage Ratio. Permit the Interest
Coverage Ratio for any period of four consecutive fiscal quarters (or,
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prior to September 30, 1997, any such period ending on or after September 30,
1996) to be less than 3.5 to 1.
SECTION 6.06. Consolidations, Mergers, Sales of Assets. (a)
Consolidate with or merge into any other person, or permit another person to
merge into it, except that, so long as at the time thereof and immediately after
giving effect thereto no Event of Default or Default has occurred and is
continuing, any Subsidiary may be merged, liquidated or dissolved into HAI or,
on or after the Demerger Date, Millennium or (other than HAI) into another
Subsidiary.
(b) Sell, lease, transfer or assign to any person or otherwise
dispose of (whether in one transaction or a series of transactions) assets
representing all or substantially all the assets of HAI or, on or after the
Demerger Date, Millennium and its consolidated Subsidiaries (whether now owned
or hereafter acquired); provided that nothing in this Section shall limit the
completion of the Demerger in accordance with the provisions of Section 5.12.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any
assets to, or purchase or acquire any assets of, or otherwise engage in any
material transaction with, any Affiliate except upon fair and reasonable terms
no less favorable to it than it could obtain or could become entitled to in an
arm's-length transaction with a person that was not an Affiliate; provided that
this Section 6.07 shall not apply to (a) transactions between HAI or Millennium
and any wholly owned Subsidiary or between wholly owned Subsidiaries or (b)
sales, pledges, hypothecations or other transfers, dispositions or Liens on
accounts receivable of HAI, Millennium or any Subsidiary in connection with any
Securitization Transaction; provided, further, that (i) nothing in this Section
shall limit the completion of the Demerger in accordance with the provisions of
Section 5.12 and (ii) for purposes of this Section 6.07 only, prior to the
Demerger, so long as HAI beneficially owns directly or indirectly at least 89%
of the outstanding capital stock of HM Holdings and Hanson PLC beneficially owns
all such outstanding capital stock not owned by HAI, HM Holdings and its wholly
owned Subsidiaries shall be deemed to be wholly owned Subsidiaries of HAI.
SECTION 6.08. Dividend Restrictions Affecting Subsidiaries.
Create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends
or make any other distribution on its capital stock, or (ii) pay any
Indebtedness owed to HAI or Millennium, as the case may be, or a Subsidiary,
except any encumbrance or restriction with respect to a Subsidiary that is not a
Subsidiary on the date hereof in existence at the time such person becomes a
Subsidiary and not incurred in connection with, or in contemplation of, such
person becoming a Subsidiary.
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SECTION 6.09. HANV Loan Obligations; HHN Note. (a) In the
case of HAI, pay any amount of principal of the HANV Loan Obligations
other than on or after the Demerger Date, as required by Section 5.14.
(b) Make or cause to be made any payment on account of the
principal of the HHN Note, whether at maturity, upon acceleration, by means of
any redemption, prepayment, repurchase or otherwise, or make any other payment
on account of the HHN Note that is inconsistent with the provisions of Section 7
thereof, except for any such payment made to Millennium or any of its wholly
owned Subsidiaries, as holder of the HHN Note.
SECTION 6.10. Maintenance of Borrowing Subsidiaries.
Permit any Borrowing Subsidiary to cease to be a subsidiary of
Millennium.
SECTION 6.11. Demerger. If the Demerger Date has not
occurred prior to December 31, 1996, permit any of the transactions
comprising the Demerger to occur on or after such date.
ARTICLE VII
Events of Default
In case of the happening of any of the following events (herein
called "Events of Default"):
(a) any representation or warranty made or deemed made in or in
connection with this Agreement or the Borrowings hereunder or under any
Borrowing Subsidiary Agreement or any representation, warranty or
statement made or deemed made in any report, certificate, financial
statement or other instrument or agreement furnished in connection with
this Agreement or in connection with the Borrowings hereunder shall
prove to have been false or misleading in any material respect when made
or deemed made;
(b) default shall be made in the payment of any principal of any
Loan when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any
Loan or any Fee or any other amount under this Agreement when and as the
same shall become due and payable, and such default shall continue for a
period of three Business Days;
(d) (i) default shall be made in the due observance or
performance of any covenant, condition or agreement contained in Section
5.01, 5.06, 5.09, 5.12, 5.13 or 5.14 or in Article VI;
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(ii) default shall be made in the due observance or performance of any
covenant, condition or agreement contained in Section 5.05, which
default referred to in this clause (ii) shall continue for a period of
five days or (iii) default shall be made in the due observance or
performance of any other covenant, condition or agreement to be observed
or performed on the part of Millennium, any Borrower or any Subsidiary
pursuant to the terms of this Agreement, which default referred to in
this clause (iii) shall continue for a period of 30 days after notice
thereof from the Administrative Agent or the Required Lenders to the
applicable Borrower;
(e) Millennium, any Borrower or any Material Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code or any other Federal or state
bankruptcy, insolvency, liquidation or similar law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate
manner, any such proceeding or the filing of any such petition, (iii)
apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for Millennium, any Borrower
or any Material Subsidiary or for a substantial part of its property or
assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become
due or (vii) take corporate action for the purpose of effecting any of
the foregoing;
(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (i) relief in respect of Millennium, any Borrower or any
Material Subsidiary or of a substantial part of the property or assets
of Millennium, any Borrower or any Material Subsidiary, under Title 11
of the United States Code or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator or similar official for
Millennium, any Borrower or any Material Subsidiary or for a substantial
part of the property or assets of Millennium, any Borrower or any
Material Subsidiary or (iii) the winding up or liquidation of
Millennium, any Borrower or any Material Subsidiary; and such proceeding
or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall continue unstayed and
in effect for 30 days;
(g) other than any default that occurs or is alleged to have
occurred in connection with the Exchangeable Notes resulting from or
arising out of the Demerger (and not as a result of the credit extended
hereunder) or prepayments of the HANV Loan Obligations
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(so long as no Default has occurred and is continuing under Section
5.13) (i) default shall be made or another event shall occur with
respect to any Indebtedness of Millennium, any Borrower or any
Subsidiary if the effect of any such default or other event shall be to
accelerate, or to permit the holder or obligee of any Indebtedness (or
any trustee on behalf of such holder or obligee) to accelerate (with or
without the giving of notice or lapse of time or both), such
Indebtedness in an aggregate amount in excess of $50,000,000 (provided,
however, that a default (other than a payment default) under any
Indebtedness of a person existing at the time such person (other than
HAI or a Subsidiary existing on the Closing Date or, on or after giving
effect to the Demerger, the Demerger Date) becomes a Subsidiary (and not
incurred in connection with, or in contemplation of, such person
becoming a Subsidiary) ("Acquired Indebtedness") that would otherwise
constitute a Default under this clause (g)(i) arising out of such
person's becoming a Subsidiary shall not constitute an Event of Default
under this clause (g)(i) unless and until (x) the earlier of (A) the
date 180 days after such person shall have become a Subsidiary and (B)
the date any holder of the Acquired Indebtedness, or any representative
acting on behalf of such holder, shall exercise any remedies available
to such holder as a result of such default and (y) such default shall
not have been cured (whether by payment or otherwise) by the earlier of
the expiration of such 180-day period or the date five Business Days
after any acceleration in respect of such default); or (ii) any amount
of principal of or interest on any Indebtedness of Millennium, any
Borrower or any Subsidiary in an aggregate principal amount in excess of
$50,000,000 shall not be paid when due, whether at maturity, by
acceleration or otherwise (after giving effect to any period of grace
specified in the instrument evidencing or governing such Indebtedness);
or (iii) without limiting the rights of the Lenders under clauses (g)(i)
and (g)(ii) above, Millennium, any Borrower or any Subsidiary shall
default in the payment of principal of any Indebtedness, which
principal, individually or in the aggregate with other defaulted
principal, shall be in excess of $15,000,000, when due and payable
(after giving effect to any period of grace specified in the instrument
evidencing or governing such Indebtedness), or the principal of such
Indebtedness in excess of $15,000,000 shall be declared due and payable
prior to the date on which it would otherwise be due and payable and
such acceleration shall not have been rescinded or annulled, or such
accelerated Indebtedness shall not have been discharged, within five
Business Days of such acceleration;
(h) (A) a Reportable Event or Reportable Events, or a failure to
make a required payment (within the meaning of Section 412(n)(1) of the
Code), shall have occurred with respect to any Plan or Plans that
reasonably could be expected to result
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in a Material Adverse Effect and, within 30 days after the reporting of
any such Reportable Event to the Administrative Agent or after the
receipt by the Administrative Agent of the statement required pursuant
to Section 5.07, the Administrative Agent shall have notified the
applicable Borrower in writing that (i) the Required Lenders have made a
determination that, on the basis of such Reportable Event or Reportable
Events or failure to make a required payment, there are reasonable
grounds for the termination of such Plan or Plans by the PBGC, for the
appointment by the appropriate United States District Court of a trustee
to administer such Plan or Plans or for the imposition of a lien in
favor of a Plan and (ii) as a result thereof an Event of Default exists
hereunder; or (B) a trustee shall be appointed by a United States
District Court to administer any such Plan or Plans or the PBGC shall
institute proceedings to terminate any Plan or Plans and such
appointment or termination proceedings could reasonably be expected to
result in a Material Adverse Effect;
(i) (i) Millennium, any Borrower or any ERISA Affiliate shall
have been notified by the sponsor of a Multiemployer Plan that it has
incurred Withdrawal Liability to such Multiemployer Plan, (ii)
Millennium, such Borrower or such ERISA Affiliate does not have
reasonable grounds for contesting such Withdrawal Liability or is not,
in fact, contesting such Withdrawal Liability in a timely and
appropriate manner and (iii) the amount of the Withdrawal Liability
specified in such notice, when aggregated with all other amounts
required to be paid by Millennium, such Borrower and its ERISA
Affiliates to Multiemployer Plans in connection with Withdrawal
Liabilities (determined as of the date or dates of such notification),
exceeds $20,000,000 or requires payments exceeding $10,000,000 in any
year;
(j) Millennium, any Borrower or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, if solely as a result of such
reorganization or termination the aggregate annual contributions of
Millennium, any Borrower and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or have been or are being
terminated have been or will be increased over the amounts required to
be contributed to such Multiemployer Plans for their most recently
completed plan years by an amount exceeding $10,000,000;
(k) one or more judgments for the payment of money (not
reimbursed by insurance policies of Millennium, any Borrower or any
Subsidiary) in excess of $20,000,000 in the aggregate shall be rendered
by a court or other tribunal against Millennium, any Borrower or any
Subsidiary and shall remain undischarged for a period of 30 consecutive
days during which the execution of such
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judgments shall not have been stayed effectively or any action shall be
legally taken by a judgment creditor to levy upon assets or properties
of Millennium, any Borrower or any Subsidiary to enforce any such
judgment;
(l) (i) prior to the Demerger Date, Hanson PLC shall cease to own
directly or indirectly 100% of the then-outstanding voting stock of HAI,
or (ii) on or after the Demerger Date, Millennium shall cease to own
directly or indirectly 100% of the then-outstanding voting stock of HAI
(except upon a merger of HAI and Millennium), in each case free and
clear of any Liens (other than as permitted by Section 6.01); or
(m) the guarantee of Millennium hereunder or, while the HANV
Obligations are outstanding, any of the instruments or agreements
referred to in Section 4.02(e), or while the HHN Note is outstanding,
the subordination provisions thereof, shall not be (or shall be claimed
by any party thereto (other than the Administrative Agent) not to be)
valid and in full force and effect;
then, and in any such event (other than an event with respect to Millennium or
any Borrower described in paragraph (e) or (f) above), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
or at the written direction of the Required Lenders shall, by written or
telecopied notice to the Borrowers, take either or both of the following
actions, at the same or different times: (i) terminate forthwith the Standby
Commitments and the Multicurrency Commitments and (ii) declare the Loans then
outstanding to be forthwith due and payable, whereupon the principal of the
Loans so declared due and payable, together with accrued interest and any unpaid
accrued Fees and all other liabilities of the Borrowers accrued hereunder, shall
become forthwith due and payable both as to principal and interest, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Millennium and each Borrower, anything contained
herein to the contrary notwithstanding; provided, however, that, in the event of
a default with respect to Millennium or any Borrower described in paragraph (e)
or (f) above, the Standby Commitments and the Multicurrency Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of the Borrowers accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by Millennium and each Borrower, anything
contained herein to the contrary notwithstanding.
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ARTICLE VIII
Administrative Agent
Each of the Lenders irrevocably authorizes the Administrative
Agent to take such action on its behalf and to exercise such powers hereunder as
are specifically delegated to the Administrative Agent by the terms hereof
together with such powers as are reasonably incidental thereto. The
Administrative Agent may perform any and all its duties and exercise its rights
and powers by or through any one or more sub-agents selected and appointed by
the Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through
Affiliates or its or its Affiliates' employees. The exculpatory provisions of
the following paragraphs shall apply to any such sub-agent, to the Affiliates of
the Administrative Agent and any such sub-agent and to the directors, officers
and employees of the Administrative Agent, any such sub-agent and their
respective Affiliates.
The Administrative Agent is hereby expressly authorized and
directed by the Lenders, without hereby limiting any implied authority, (a) to
receive on behalf of the Lenders all payments of principal of and interest on
the Loans and all other amounts due to the Lenders hereunder, and promptly to
distribute to each Lender its proper share of each payment so received; (b) to
give notice on behalf of each of the Lenders to the Borrowers of any Event of
Default specified in this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and other
materials delivered by any Borrower pursuant to this Agreement as received by
the Administrative Agent.
Neither the Administrative Agent nor any of its directors,
officers, employees or agents shall be liable as such for any action taken or
omitted to be taken by it or them hereunder or in connection herewith (a) at the
request or with the approval of the Required Lenders (or, if otherwise
specifically required hereunder, the consent of all the Lenders) or (b) in the
absence of its or their own gross negligence or wilful misconduct. Each Lender
acknowledges that it has decided to enter into this Agreement and to extend the
Loans hereunder based on its own analysis of the creditworthiness of the
Borrowers and agrees that the Administrative Agent shall bear no responsibility
for such credit-worthiness.
The Administrative Agent shall not be responsible in any manner
to any of the Lenders for the effectiveness, enforceability, genuineness,
validity or due execution of any Loan Document or any other agreements or
certificates, requests, financial statements, notices or opinions of counsel or
for any recitals, statements, warranties or representations contained herein or
in any such instrument or be under
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any obligation to ascertain or inquire as to the performance or observance of
any of the terms, provisions, covenants, conditions, agreements or obligations
of this Agreement or any other agreements on the part of any Borrower and,
without limiting the generality of the foregoing, the Administrative Agent
shall, in the absence of knowledge to the contrary, be entitled to accept any
certificate furnished pursuant to any Loan Document as conclusive evidence of
the facts stated therein and shall be entitled to rely on any note, notice,
consent, certificate, affidavit, letter, telegram, teletype or telecopy message,
statement, order or other document which it reasonably believes to be genuine
and correct and to have been signed or sent by the proper person or persons. It
is understood and agreed that the Administrative Agent may exercise its rights
and powers under other agreements and instruments to which it is or may be a
party and engage in other transactions with any Borrower or any Subsidiary or
other Affiliate as though it were not the agent of the Lenders hereunder.
The Administrative Agent may consult with legal counsel selected
by it in connection with matters arising under this Agreement and any action
taken or suffered in good faith by it in accordance with the opinion of such
counsel shall be full justification and protection to it. The Administrative
Agent may exercise any of its powers and rights and perform any duty under this
Agreement through agents, bailees or attorneys.
The Lenders shall, in accordance with their Pro Rata Percentages
at the time of demand for indemnification hereunder by the Administrative Agent,
indemnify the Administrative Agent, in its capacity as agent on behalf of the
Lenders (to the extent not reimbursed by the Borrowers pursuant to the terms
hereof and without limiting the obligations of the Borrowers to do so) against
any cost, expense (including reasonable counsel fees and disbursements), claim,
demand, action, loss or liability (except such as results from the
Administrative Agent's gross negligence or wilful misconduct) that the
Administrative Agent may suffer or incur in connection with this Agreement or
any action taken or omitted by the Administrative Agent hereunder.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent may resign at
any time by notifying the Lenders and HAI or Millennium, as applicable. Upon any
such resignation, the Required Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be a bank having
an office (or an Affiliate with an office) in New York, New York, with a
combined capital and surplus of at least $500,000,000. Upon the acceptance of
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any appointment as Administrative Agent hereunder by a successor bank, such
successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative Agent and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any Administrative Agent's resignation hereunder,
the provisions of this Article shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
The Lenders hereby acknowledge that the Administrative Agent
shall not be under any duty to take any discretionary action permitted to be
taken by it pursuant to the provisions of this Agreement unless it shall be
requested in writing to do so by the Required Lenders or, where required, all
the Lenders.
ARTICLE IX
Guarantee
In order to induce the Lenders to extend credit hereunder,
Millennium, effective as of and after the Demerger Date, hereby irrevocably and
unconditionally guarantees, as a primary obligor and not merely as a surety, the
Obligations. Millennium further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its Guarantee hereunder notwithstanding any such
extension or renewal of any Obligation.
Millennium waives presentment to, demand of payment from and
protest to any Borrower of any of the Obligations, and also waives notice of
acceptance of its obligations and notice of protest for nonpayment. The
obligations of Millennium hereunder shall not be affected by (a) the failure of
any Lender or the Administrative Agent to assert any claim or demand or to
enforce any right or remedy against any Borrower under the provisions of this
Agreement or any of the other Loan Documents or otherwise; (b) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Agreement, any of the other Loan Documents or any other agreement; or (c) the
failure of any Lender to exercise any right or remedy against any Borrower.
Millennium further agrees that its agreement hereunder
constitutes a promise of payment when due (whether or not any bankruptcy or
similar proceeding shall have stayed the accrual or collection of any of the
Obligations or operated as a discharge thereof) and not merely of collection,
and waives any right to require that any resort be had by any Lender to any
balance of any deposit account or credit on the books of any Lender in favor of
any Borrower or any other person.
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The obligations of Millennium hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, and shall
not be subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever, by reason of the invalidity, illegality or unenforceability of the
Obligations, any impossibility in the performance of the Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
Millennium hereunder shall not be discharged or impaired or otherwise affected
by the failure of the Administrative Agent or any Lender to assert any claim or
demand or to enforce any remedy under this Agreement or under any other Loan
Document or any other agreement, by any waiver or modification in respect of any
thereof, by any default, failure or delay, wilful or otherwise, in the
performance of the Obligations, or by any other act or omission which may or
might in any manner or to any extent vary the risk of Millennium or otherwise
operate as a discharge of Millennium or any Borrower as a matter of law or
equity.
Millennium further agrees that its obligations hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by the Administrative Agent or any Lender upon the bankruptcy or
reorganization of any Borrower or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which the Administrative Agent or any Lender may have at law or in
equity against Millennium by virtue hereof, upon the failure of any Borrower to
pay any Obligation when and as the same shall become due, whether at maturity,
by acceleration, after notice of prepayment or otherwise, Millennium hereby
promises to and will, upon receipt of written demand by the Administrative
Agent, forthwith pay, or cause to be paid, in cash the amount of such unpaid
Obligation. Millennium further agrees that if payment in respect of any
Obligation shall be due in a currency other than Dollars and/or at a place of
payment other than New York and if, by reason of any Change in Law, disruption
of currency or foreign exchange markets, war or civil disturbance or similar
event, payment of such Obligation in such currency or at such place of payment
shall be impossible or, in the judgment of any applicable Lender, not consistent
with the protection of its rights or interests, then, at the election of any
applicable Lender, Millennium shall make payment of such Obligation in Dollars
(based upon the applicable Exchange Rate in effect on the date of payment)
and/or in New York, and shall indemnify such Lender against any losses or
expenses that it shall sustain as a result of such alternative payment.
Upon payment by Millennium of any Obligations, each Lender shall,
in a reasonable manner, assign the amount of the Obligations owed to it and so
paid to Millennium, such assignment to be pro tanto to the extent to which the
Obligations in question were discharged by Millennium, or make such disposition
thereof as Millennium shall direct
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(all without recourse to any Lender and without any representation or
warranty by any Lender).
Upon payment by Millennium of any sums as provided above, all
rights of Millennium against any Borrower arising as a result thereof by way of
right of subrogation or otherwise shall in all respects be subordinated and
junior in right of payment to the prior indefeasible payment in full of all the
Obligations to the Lenders.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Except as specifically provided elsewhere
herein, notices and other communications provided for herein shall be in writing
and shall be delivered or mailed (or, if by telecopy equipment of the sending
party, delivered by such equipment) addressed:
(a) if to HAI or Millennium, in all cases to it at
Hanson America Inc.
99 Wood Avenue South
Iselin, New Jersey 08830
Telecopy: 908-603-6848 and 908-603-6851
Attention of Mr. George H. Hempstead, III,
and Ms. Christine Wubbolding
(b) if to the Administrative Agent, in all cases to it at
Bank of America National Trust and Savings Association
1455 Market Street
San Francisco, CA 94103
Telecopy: 415-436-2700
Attention of Mr. Marc Tristant
(c) if to any Lender, in all cases to it at its address as set
forth in Schedule 10.01 or as it shall subsequently specify in writing to
Millennium and the Administrative Agent.
(d) if to any Borrowing Subsidiary, to it at the address (or
telecopy number) set forth above for Millennium. Each Borrowing Subsidiary
hereby irrevocably appoints Millennium as its agent for the purpose of giving on
its behalf any notice and taking any other action provided for in this Agreement
and hereby agrees that it shall be bound by any such notice or action given or
taken by Millennium hereunder or thereunder irrespective of whether or not any
such notice shall have in fact been authorized by such Borrowing Subsidiary and
irrespective of
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whether or not the agency provided for herein or therein shall have theretofore
been terminated.
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy equipment of the sender, or on the date five Business Days
after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 10.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 10.01. Copies of all notices
delivered to the Administrative Agent (other than any specific notice to the
Administrative Agent only) hereunder shall be delivered to the Lenders by the
Administrative Agent.
SECTION 10.02. No Waivers; Amendments. (a) No failure or delay of
the Administrative Agent or any Lender in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Administrative Agent and the Lenders hereunder are cumulative and not
exclusive of any rights or remedies which they would otherwise have. Except as
may be otherwise expressly provided herein, no waiver of any provision of this
Agreement nor any consent to any departure by any Borrower therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Administrative Agent on behalf of the Required Lenders (unless otherwise
specified herein), and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on any Borrower in any case shall entitle such Borrower to any other or further
notice or demand in similar or other circumstances.
(b) None of this Agreement, any other Loan Document or any
exhibit or schedule hereto or thereto may be amended or modified except pursuant
to an agreement or agreements in writing entered into by HAI or, on or after the
Demerger Date, Millennium and by the Required Lenders; provided, however, that
no such agreement shall (i) change the principal amount or currency of, or
extend or advance the maturity of or any date for the payment of any scheduled
installment of principal of or interest on, any Loan, or the amount or any date
for the payment of any fee, or waive or excuse any such payment or any part
thereof, or reduce the rate of interest on any Loan, or reduce the Facility Fee,
without the written consent of each Lender affected thereby, (ii) change the
Standby Commitment or the Multicurrency Commitment of any Lender without the
prior written consent of such Lender (and, in the case of any reduction in the
Standby Commitment of any Lender, each Multicurrency Lender), (iii) amend or
modify or otherwise affect the rights or duties
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of the Multicurrency Lenders without the prior written consent of Multicurrency
Lenders representing a majority in principal amount of the Multicurrency
Commitments and outstanding Multicurrency Loans, (iv) amend or modify or
otherwise affect the rights or duties of the Administrative Agent without the
prior written consent of the Administrative Agent, or (v) amend or modify the
definition of "Required Lenders", Section 2.15, Article IX, this Section 10.02
or Section 10.07 without the prior written consent of each Lender. Any amendment
or modification effected in accordance with this paragraph will be binding on
each Borrowing Subsidiary whether or not such Borrowing Subsidiary shall have
consented thereto.
SECTION 10.03. Payments. Except as otherwise provided in this
Agreement, all payments to be made by any Borrower to the Lenders hereunder
shall be made to the Administrative Agent in immediately available funds (a) in
the case of payments relating to any Standby Loan or Competitive Loan, at Bank
of America National Trust and Savings Association (ABA 121-000-358, Account
1233315183 and Reference: Millennium Chemicals Inc.) not later than 11:00 a.m.,
New York City time, on the date due and (b) in the case of payments relating to
LIBOR Multicurrency Loans and Domestic A$ Loans, at such place or places and not
later than such time or times as designated in writing by the Administrative
Agent. Funds received after the applicable time shall be deemed to have been
received by the Lenders on the following Business Day.
Unless otherwise provided herein, if any payment of principal,
interest or any other amount payable by any Borrower hereunder shall fall due on
a day that is not a Business Day, then such due date shall be extended to the
next succeeding Business Day, and such extension of time shall be included in
computing interest, if any, in connection with such payment.
Upon receipt of any payment for the accounts of the Lenders
hereunder, the Administrative Agent will promptly distribute to each Lender its
share of such payment.
SECTION 10.04. Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK.
(b) Each of the Borrowers and Millennium irrevocably submits to
the nonexclusive jurisdiction of any New York State or Federal court sitting in
the Borough of Manhattan, The City of New York, over any suit, action or
proceeding arising out of or relating to this Agreement or any other document
contemplated hereby, irrevocably waives and agrees not to assert, by way of
motion, as a defense or otherwise, any claim that it is not subject to the
jurisdiction of any such court, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in any
such court
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and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
(c) Each of the Borrowers and Millennium agrees, to the fullest
extent it may effectively do so under applicable law, that a judgment in any
suit, action or proceeding of the nature referred to in paragraph (b) above
brought in any such court shall be conclusive and binding upon Millennium or
such Borrower and may be enforced in the courts of the United States of America
or the State of New York (or any other courts to the jurisdiction of which
Millennium or such Borrower is or may be subject) by a suit upon such judgment.
(d) Each of the Borrowers and Millennium consents to process
being served in any suit, action or proceeding of the nature referred to in
paragraph (b) by mailing a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the address of Millennium or such
Borrower, as the case may be, as set forth or referred to in Section 10.01. Each
of the Borrowers and Millennium agrees that such service (i) shall be deemed in
every respect effective service of process upon Millennium or such Borrower, as
the case may be, in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to Millennium or such Borrower, as the case may be.
(e) Nothing in this Section 10.04 shall affect the right of the
Administrative Agent or any Lender to serve process in any manner permitted by
law, or limit any right that the Administrative Agent or any Lender may have to
bring proceedings against Millennium or any Borrower in the courts of any
jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.
(f) Each Borrowing Subsidiary hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to the Borrowing
Subsidiary Agreement, this Agreement or the other Loan Documents in any New York
State or Federal court. Each Borrowing Subsidiary hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(g) To the extent that any Borrowing Subsidiary has or hereafter
may acquire any immunity (sovereign or otherwise) from any legal action, suit or
proceeding, from jurisdiction of any court or from set-off or any legal process
(whether service or notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise) with respect to
itself or any of its property, such Borrowing Subsidiary hereby irrevocably
waives and agrees not to
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plead or claim such immunity in respect of its Obligations under the Borrowing
Subsidiary Agreement and this Agreement.
(h) Each Borrowing Subsidiary hereby agrees that the waivers set
forth in this Section shall have the fullest extent permitted under the Foreign
Sovereign Immunities Act of 1976 of the United States of America and are
intended to be irrevocable and not subject to withdrawal for purposes of such
Act.
SECTION 10.05. Expenses; Documentary Taxes; Indemnity. (a) HAI
agrees to pay all reasonable out-of-pocket expenses incurred by the
Administrative Agent, the Documentation Agent and the Lenders, as the case may
be, in connection with (i) the syndication of the facility established by this
Agreement and the preparation, execution and delivery of this Agreement and the
other Loan Documents (whether or not the transactions hereby or thereby
contemplated shall be consummated), (ii) the making of the Loans hereunder and
the enforcement of the rights of the Lenders and the Administrative Agent in
connection with this Agreement and the other Loan Documents, (iii) any action
which may be instituted by any person against the Lenders and the Administrative
Agent in respect of the foregoing or as a result of any transaction, action or
nonaction arising from the foregoing and (iv) the preparation of any amendments
to or waivers of this Agreement and the other Loan Documents, including, in the
case of (i), (ii), (iii) and (iv), the reasonable fees, disbursements and other
charges of Cravath, Swaine & Moore, counsel for the Administrative Agent and, in
the case of (iii) above, separate counsel for each Lender which, based on the
opinion of its counsel, has legal defenses available to it which are different
from or in addition to those available to another Lender; provided, however,
that in no event shall HAI be liable for such fees, disbursements or other
charges of more than one counsel for all similarly situated Lenders. HAI agrees
to indemnify each Lender and the Administrative Agent from and hold each Lender
and the Administrative Agent harmless against any documentary taxes, assessments
or similar charges made by any Governmental Authority by reason of the execution
and delivery of this Agreement or any other Loan Document. HAI agrees to pay all
reasonable out-of-pocket expenses (including reasonable counsel fees and
expenses, which shall include the reasonable and non-duplicative allocated
costs of in-house counsel) incurred by any Lender or the Administrative Agent in
connection with the enforcement of its rights under this Agreement or any other
Loan Document or with the Loans made hereunder or thereunder. The obligations of
the Borrowers under this Section 10.05 shall survive the termination of this
Agreement or any other Loan Document and/or the payment of the Loans.
(b) HAI (prior to the Demerger Date) and Millennium (on or after
the Demerger Date) agrees to indemnify each Lender and the Administrative Agent,
the Documentation Agent, each Affiliate of any of the foregoing and their
respective directors, officers, employees and agents (each such person being
called an "Indemnitee") against, and to
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hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including counsel fees and expenses, incurred
by or asserted against such Indemnitee arising out of, in any way in connection
with, or as a result of, (i) this Agreement or any of the other documents
contemplated hereby, the performance by the parties hereto and thereto of their
respective obligations hereunder and thereunder and consummation of the
transactions contemplated hereby and thereby or (ii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not
such Indemnitee is a party thereto; provided, however, that such indemnity shall
not, as to any Indemnitee, apply to any such losses, claims, damages,
liabilities or related expenses arising from the gross negligence or wilful
misconduct of such Indemnitee.
(c) The provisions of this Section 10.05 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement, or any investigation made by or on behalf of the
Lenders or the Administrative Agent. All amounts due under this Section 10.05
shall be payable on written demand therefor.
SECTION 10.06. Survival of Agreements, Representations and
Warranties, etc. All warranties, representations and covenants made by the
Borrowers herein or in any certificate or other instrument delivered by the
Borrowers or on their behalf in connection with this Agreement shall be
considered to have been relied upon by the Lenders and shall survive the making
of the Loans herein contemplated regardless of any investigation made by the
Lenders or on their behalf and shall continue in full force and effect so long
as any amount due or to become due hereunder is outstanding and unpaid. All
statements in any such certificate or other instrument shall constitute
representations and warranties by the Borrowers, severally and not jointly,
hereunder. The right of each Lender to receive payments pursuant to Sections
2.12 and 2.14 shall survive the termination of this Agreement and the repayment
of the Loans.
SECTION 10.07. Successors and Assigns. (a) This Agreement shall
be binding upon and inure to the benefit of the Borrowers, the Lenders, the
Administrative Agent and their respective successors and assigns. Neither
Millennium nor any Borrower may assign or transfer any of its rights or
obligations hereunder without the prior written consent of all the Lenders.
(b) Each Lender may assign all or a portion of its interests,
rights and obligations under this Agreement (including all or a portion of its
Standby Commitment or Multicurrency Commitment (and the Loans at the time owing
to it)); provided, however, that (i) except in the case of an assignment by a
Lender to an Affiliate of such Lender or
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to another Lender and so long as no Event of Default has occurred and is
continuing, the Borrower (and, in the case of an assignment of a Standby
Commitment, Lenders representing a majority of the Multicurrency Commitments)
must consent to such assignment in writing (which consent may not be
unreasonably withheld), (ii) each such assignment shall be of a constant, and
not a varying, percentage of all the assigning Lender's rights and obligations
under this Agreement, (iii) except in the case of an assignment to another
Lender or in the case of an assignment of the assigning Lender's total Standby
Commitment and Multicurrency Commitment, the aggregate amount of the Standby
Commitment and the Multicurrency Commitment of the assigning Lender subject to
any such assignment shall not be less than $25,000,000 (or any other smaller
amount agreed upon by the Administrative Agent and HAI (prior to the Demerger
Date) or Millennium (on or after the Demerger Date), and (iv) the parties to
each such assignment shall execute and deliver to the Administrative Agent for
its acceptance and recording in the Register an Assignment and Acceptance,
together with a processing and recordation fee of $3,500. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be (unless waived
by the Administrative Agent) at least five Business Days after the execution
thereof, (A) the assignee thereunder shall be a party hereto, and, to the extent
of the interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and (B) the assignor thereunder
shall, to the extent of the interest assigned by such Assignment and Acceptance,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of the
assignor's rights and obligations under this Agreement, the assignor shall cease
to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.12, 2.14 and 10.05 as well as to any interest and Facility Fee
accrued for its account hereunder and not yet paid). Notwithstanding the
foregoing, any Lender assigning its rights and obligations under this Agreement
may retain any Competitive Loans made by it outstanding at such time, and in
such case shall retain its rights hereunder in respect of any Loans so retained
until such Loans have been repaid in full in accordance with this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
assignor and the assignee thereunder shall be deemed to confirm to and agree
with each other and the Borrowers as follows: (i) such assignor warrants that it
is the legal and beneficial owner of the interest being assigned free and clear
of any adverse claim; (ii) except as set forth in clause (i) above, the assignor
makes no other representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any other instrument or document furnished
pursuant hereto or thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, or any
other instrument or document furnished pursuant hereto or thereto, or the
financial condition of Millennium or any Borrower or
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the performance or observance by Millennium or any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee represents and warrants that it
is legally authorized to enter into such Assignment and Acceptance; (iv) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the financial statements described in Section 3.06 or the most recent
financial statements delivered pursuant to Section 5.05, as applicable, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (v)
such assignee will independently and without reliance upon the assignor and
based on such documents and information as it shall deem appropriate at the time
continue to make its own credit decisions in taking or not taking action under
this Agreement; (vi) such assignee appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement, as are delegated to the Administrative Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will, to the extent of the interest assigned
to it, perform in accordance with their terms all the obligations which by the
terms of this Agreement are required to be performed by the Lenders.
(d) Each Borrower agrees that each Lender may without the consent
of such Borrower sell participations to one or more banks or other entities in
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Standby Commitment and the same
portion of the Standby Loans owing to it) and each Borrower agrees that any
purchaser of a participation in such Loans so acquired may exercise any and all
rights of banker's lien, setoff, counterclaim or otherwise with respect to any
and all moneys owing by any Borrower to such purchaser as fully as if such
purchaser were a Lender acquiring such Loans hereunder in the amount of such
participation; provided, however, that (i) such selling Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the applicable Borrowers for the performance of its
obligations hereunder, (iii) the participating lenders or other entities shall
be entitled to the benefit of the cost protection provisions contained in
Sections 2.12, 2.14 and 2.17 to the same extent as if they were such Lender and
(iv) the Borrowers shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement,
and such Lender shall retain the sole right to enforce the obligations of
Millennium or the applicable Borrower relating to the Loans and to approve,
without the consent of or consultation with any participant, any amendment,
modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers with respect to fees payable hereunder or
an increase in the amount of principal of or a decrease in the rate at which
interest is payable on the Loans, or an
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83
extension of the dates fixed for payments of principal of or interest on
the Loans or payments of fees).
(e) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers or the Subsidiaries
furnished to the Lenders (including pursuant to Section 5.08) by or on behalf of
the Borrowers or the Subsidiaries, as applicable; provided that, prior to any
such disclosure, each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or participant
shall agree (subject to customary exceptions) to preserve the confidentiality of
any confidential information relating to any Borrower or any Subsidiary received
from the Lenders.
(f) The Administrative Agent shall maintain at one of its offices
in The City of New York a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders,
the Standby Commitment and any Multicurrency Commitment of, and principal amount
of the Competitive Loans, Standby Loans and Multicurrency Loans owing to, each
Lender pursuant to the terms hereof (the "Register"). The entries in the
Register shall be conclusive in the absence of manifest error and the Borrowers,
the Administrative Agent and the Lenders may treat each person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrowers at any reasonable time and from time to time upon reasonable
prior notice.
(g) Any Lender may at any time pledge all or any portion of its
rights under this Agreement to a Federal Reserve Bank; provided that no such
pledge shall release any Lender from its obligations hereunder or substitute any
such Federal Reserve Bank for such Lender as a party hereto.
SECTION 10.08. Right of Setoff. (a) Upon the occurrence and
during the continuation of any Event of Default each Lender is hereby
authorized, in addition to any other right or remedy that any Lender may have by
operation of law or otherwise, at any time and from time to time, without notice
to the applicable Borrower (any such notice being expressly waived by such
Borrower), to exercise its banker's lien or right of setoff and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender or any of its
Affiliates to or for the credit or the account of Millennium or the applicable
Borrower against any and all the obligations of Millennium or the applicable
Borrower, now or hereafter existing under this Agreement, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured.
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84
(b) Each Lender agrees promptly to notify the Administrative
Agent and Millennium or the applicable Borrower after any such setoff and
application; provided, however, that the failure to give any such notice shall
not affect the validity of such setoff and application.
(c) Upon the insolvency or bankruptcy of any Lender, the
applicable Borrower is hereby authorized, in addition to any other right or
remedy that it may have by operation of law or otherwise, at any time and from
time to time, to exercise a right of setoff and apply any and all amounts due
and owing it from such Lender to or for the account of such Borrower against
amounts due from such Borrower to such Lender. Any such setoffs may be made only
against payments due to such insolvent or bankrupt Lender, when and as the same
become due, and no setoff may be made against any amount due and payable to any
other Lender. No Borrower may exercise any right of setoff with respect to all
or any portion of deposits which are insured by the Federal Deposit Insurance
Corporation.
SECTION 10.09. Severability. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 10.10. Cover Page, Table of Contents and Section
Headings. The cover page, Table of Contents and section headings used herein are
for convenience of reference only, are not part of this Agreement and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
SECTION 10.11. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts with the same effect as if the signatures
thereon and hereon were upon the same instrument. This Agreement shall become
effective when copies hereof which, when taken together, bear the signatures of
each of the parties hereto shall have been received by the Administrative Agent.
SECTION 10.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND
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85
THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.12.
SECTION 10.13. Entire Agreement. This Agreement, the other Loan
Documents and the letter agreements referred to in Section 2.06(b) constitute
the entire contract between the parties relative to the subject matter hereof.
Any previous agreement among the parties with respect to the subject matter
hereof is superseded by this Agreement, the other Loan Documents and such letter
agreements. Nothing in this Agreement, the other Loan Documents or such letter
agreements, expressed or implied, is intended to confer upon any party other
than the parties hereto and thereto and Indemnitees referred to in Section
10.05(b) any rights, remedies, obligations or liabilities under or by reason of
this Agreement, the other Loan Documents or such letter agreements.
SECTION 10.14. Conversion of Currencies. (a) If, for the purpose
of obtaining judgment in any court, it is necessary to convert a sum owing
hereunder in one currency into another currency, each party hereto agrees, to
the fullest extent that it may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures in the
relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final
judgment is given.
(b) The obligations of each Borrower in respect of any sum due to
any party hereto or any holder of the obligations owing hereunder (the
"Applicable Creditor") shall, notwithstanding any judgment in a currency (the
"Judgment Currency") other than the currency in which such sum is stated to be
due hereunder (the "Agreement Currency"), be discharged only to the extent that,
on the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 10.14 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.
SECTION 10.15. Obligations of Millennium. Notwithstanding any
other provision of this Agreement or any other Loan Document, it is understood
and agreed that the obligations of Millennium hereunder and the rights of the
Borrowing Subsidiaries hereunder shall become effective only on the Demerger
Date, and that prior to such date Millennium shall have no liabilities or
obligations hereunder or
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86
thereunder and the Borrowing Subsidiaries shall have no rights hereunder
or thereunder.
SECTION 10.16. Certain Obligations of HAI. If the Demerger Date
shall not have occurred prior to December 31, 1996, then (a) the definitions and
covenants set forth in Schedule 10.16 shall automatically be deemed to replace
the corresponding definitions and covenants contained in this Agreement, (b) HAI
shall promptly deliver all such consolidated financial statements as it would
have been required to deliver prior to such date pursuant to Section 5.05(a) and
Section 5.05(b) had such Sections taken effect on the date hereof and (c)
Millennium shall be automatically released from all its Obligations under this
Agreement.
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87
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their duly authorized officers as of the day and year
first above written.
HANSON AMERICA INC.,
by
/s/ Christine Wubbolding
--------------------------------------
Name: Christine Wubbolding
Title: Vice President & Treasurer
MILLENNIUM CHEMICALS INC.,
by
/s/ Graham Dransfield
--------------------------------------
Name: Graham Dransfield
Title: Vice President and Secretary
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, individually and as
Administrative Agent,
by
/s/ Steve A. Aronowitz
--------------------------------------
Name: Steve A. Aronowitz
Title: Vice President
THE CHASE MANHATTAN BANK,
individually and as Documentation
Agent,
by
/s/ Scott S. Ward
--------------------------------------
Name: Scott S. Ward
Title: Vice President
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88
ABN AMRO BANK N.V., NEW YORK BRANCH,
by
/s/ George M. Dugan
--------------------------------------
Name: George M. Dugan
Title: Vice President
by
/s/ Darin E. Cohen
--------------------------------------
Name: Darin E. Cohen
Title: C.B.O
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH,
by
/s/ Mallika Kambhampati
--------------------------------------
Name: Mallika Kambhampati
Title: Vice President
by
/s/ Joyce Thunnissen
--------------------------------------
Name: Joyce Thunnissen
Title: Vice President
THE BANK OF NEW YORK,
by
/s/ Walter C. Parelli
--------------------------------------
Name: Walter C. Parelli
Title: Assistant Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY,
by
/s/ Michael C. Irwin
--------------------------------------
Name: Michael C. Irwin
Title: Vice President
<PAGE>
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89
BANQUE NATIONALE DE PARIS,
by
/s/ Richard L. Sted
--------------------------------------
Name: Richard L. Sted
Title: Senior Vice President
by
/s/ Thomas N. George
--------------------------------------
Name: Thomas N. George
Title: Vice President
BANQUE PARIBAS,
by
/s/ Mary T. Finnegan/Ann C. Pifer
--------------------------------------
Name: Mary T. Finnegan/Ann C. Pifer
Title: Group Vice President/Vice
President
BARCLAYS BANK PLC,
by
/s/ Keith Mackie
--------------------------------------
Name: Keith Mackie
Title: Director
CIBC INC.,
by
/s/ Jerry H. Parisella
--------------------------------------
Name: Jerry H. Parisella
Title: Authorized Signatory
CITIBANK, N.A.,
by
/s/ William G. Martens III
--------------------------------------
Name: William G. Martens III
Title: Attorney-in-Fact
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90
COMMERZBANK AG, NEW YORK AND/OR GRAND
CAYMAN BRANCHES,
by
/s/ Juergen Schmieding
--------------------------------------
Name: Juergen Schmieding
Title: Vice President
by
/s/ Andrew Campbell
--------------------------------------
Name: Andrew Campbell
Title: Assistant Cashier
CREDIT LYONNAIS UNITED KINGDOM CREDIT LYONNAIS NEW YORK BRANCH,
MAIN OFFICE,
by by
/s/ A. Revill /s/ John C. Oberle
-------------------------------- -------------------------------------
Name: A. Revill Name: John C. Oberle
Title: Assistant General Manager Title: Vice President
CREDIT SUISSE,
by
/s/ Edward E. Barr
--------------------------------------
Name: Edward E. Barr
Title: Associate
by
/s/ Kristina Catlin
--------------------------------------
Name: Kristina Catlin
Title: Associate
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Jeffrey Lubatkin
--------------------------------------
Name: Jeffrey Lubatkin
Title: Associate Vice President
<PAGE>
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91
THE FUJI BANK, LIMITED,
NEW YORK BRANCH,
by
/s/ Gina Kearns
--------------------------------------
Name: Gina Kearns
Title: Vice President & Manager
THE INDUSTRIAL BANK OF JAPAN TRUST
COMPANY,
by
/s/ Robert W. Ramage, Jr.
--------------------------------------
Name: Robert W. Ramage, Jr.
Title: Senior Vice President
LLOYDS BANK PLC,
by
/s/ Paul D. Briamonte
--------------------------------------
Name: Paul D. Briamonte
Title: Vice President
B374
by
/s/ Stephen J. Attree
--------------------------------------
Name: Stephen J. Attree
Title: Assistant Vice President
A088
MELLON BANK, N.A.,
by
/s/ John Sabroske
--------------------------------------
Name: John Sabroske
Title: Vice President
MIDLAND BANK PLC, NEW YORK BRANCH,
by
/s/ Rochelle Forster
--------------------------------------
Name: Rochelle Forster
Title: Authorized Signatory
<PAGE>
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92
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK,
by
/s/ James S. Finch
--------------------------------------
Name: James S. Finch
Title: Vice President
NATIONAL WESTMINSTER BANK PLC, NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH,
by by
/s/ Maria Amaral-LeBlanc /s/ Maria Amaral-LeBlanc
----------------------------- ------------------------------------
Name: Maria Amaral-LeBlanc Name: Maria Amaral-LeBlanc
Title: Vice President Title: Vice President
NATIONSBANK, N.A.,
by
/s/ Marcus A. Boyer
--------------------------------------
Name: Marcus A. Boyer
Title: Senior Vice President
ROYAL BANK OF CANADA,
by
/s/ John M. Crawford
--------------------------------------
Name: John M. Crawford
Title: Senior Manager
THE SANWA BANK, LIMITED, NEW YORK BRANCH,
by
/s/ Jean-Michel Fatovic
--------------------------------------
Name: Jean-Michel Fatovic
Title: Vice President
SOCIETE GENERALE,
by
/s/ Karen M. Sager
--------------------------------------
Name: Karen M. Sager
Title: Vice President
<PAGE>
<PAGE>
93
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH,
by
/s/ Yoshinori Kawamura
--------------------------------------
Name: Yoshinori Kawamura
Title: Joint General Manager
TORONTO DOMINION (NEW YORK), INC.,
by
/s/ Debbie A. Greene
--------------------------------------
Name: Debbie A. Greene
Title: Vice President
<PAGE>
<PAGE>
EXHIBIT 10.15
HM Anglo-American, Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
(908) 603-6600
July 1, 1996
Mr. William M. Landuyt
[Address]
Dear Mr. Landuyt:
1. Introduction. On July 1, 1996, you were transferred from the
payroll of Hanson Industries to the payroll of HM Anglo-American, Ltd. (the
"Company") as a senior executive of the Company. The Company believes that the
establishment and maintenance of a sound and vital management of the Company and
of Millennium Chemicals Inc., which is intended to become the ultimate parent
corporation of the Company ("Millennium") in connection with the demerger by
Hanson PLC of its chemicals business (the "Demerger"), is essential to the
protection and enhancement of the interests of the Company and Millennium and
their stockholders. The Company also recognizes that the possibility of a Change
in Control (as defined in Part II of Exhibit A) of Millennium, with the
attendant uncertainties and risks, might result in the departure or distraction
of key employees of the Company to the detriment of the Company, Millennium and
their stockholders. In light of the possibility of a Change in Control of
Millennium, which is intended to become a separate publicly traded company as a
result of the Demerger,
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the Company has determined that it is appropriate to induce key employees to
remain with the Company, and to reinforce and encourage their continued
attention and dedication. Accordingly, subject to Section 9, upon your written
acceptance of the terms and conditions of this agreement (the "Agreement")
evidenced by signing below, the Company intends to provide you the protections
set forth herein as of the Effective Date set forth in Section 9. Capitalized
terms not defined in the body of this Agreement shall have the meanings set
forth in Exhibit A hereto, which is incorporated herein and made a part of this
Agreement.
2. Termination Following a Change in Control. If a Change in
Control occurs on or after the Effective Date and your employment is terminated
during the Post Change in Control Period (i) by the Company without Cause or due
to your Disability, (ii) by you for Good Reason or, subject to Section 3 below,
without Good Reason, (iii) due to your death or (iv) due to your Retirement,
then you shall be entitled to the amounts and benefits provided in Section 4
herein. Furthermore, if a Change in Control occurs on or after the Effective
Date and your employment was terminated within the Pre Change in Control Period
(i) by the Company without Cause or due to your Disability, (ii) by you for Good
Reason (based on an event that occurred within the Pre Change in Control
Period), or (iii) due to your death, you shall be entitled to the amounts and
benefits provided in Section 4 herein.
2
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<PAGE>
3. Direct Pay Letter of Credit. Notwithstanding anything else
herein, your right to voluntarily terminate employment without Good Reason after
the date of a Change in Control and receive the amounts due under Section 4
hereof shall be delayed until one-hundred and eighty (180) days after the Change
in Control if, simultaneous with the Change in Control, the Company or the
person or entity triggering the Change in Control delivers to you an irrevocable
direct pay letter of credit (the "Direct Pay Letter of Credit") satisfying the
requirements of this Section 3 and an indemnity agreement covering in a similar
manner the provisions of Section 6 with regard to activities after the Change in
Control. The Direct Pay Letter of Credit shall be in an amount equal to the
aggregate amount you would be entitled to receive under Sections 4(A)(i) and
(ii) hereof if you were terminated without Cause immediately upon the Change in
Control and shall have an expiration date of no less than two (2) years after
the date of such Change in Control. You (or, if applicable, your legal
representative) shall be entitled to draw on the Direct Pay Letter of Credit
upon presentation to the issuing bank of a demand for payment signed by you (or,
if applicable, your legal representative) that states that (i) a Good Reason
event has occurred and your employment has terminated during the Post Change in
Control Period, or (ii) one-hundred and eighty (180) days have expired since the
Change in Control and your employment has terminated during the Post Change in
Control Period. There shall be no other requirements (including no requirement
that you first make demand upon the
3
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<PAGE>
Company) with regard to payment of the Direct Pay Letter of Credit. To the
extent the Direct Pay Letter of Credit is not adequate to cover the amount owed
to you under this Agreement, is not submitted by you or is not paid by the
issuing bank, the Company shall remain liable to you for any amounts owed to you
pursuant to the terms of this Agreement. To the extent any amount is paid under
the Direct Pay Letter of Credit it shall be a credit against any amount the
Company then or thereafter would owe to you under Section 4 of this Agreement.
The Direct Pay Letter of Credit shall be issued by a national money center bank
with a rating of at least A by Standard and Poor's. The Company shall bear the
cost of the Direct Pay Letter of Credit.
4. Compensation on Change in Control Termination. If pursuant to
Section 2 you are entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to you: (A) in a lump sum
within five (5) days after such termination (or, if such termination occurred
during the Pre Change in Control Period, within five (5) days after the Change
in Control) (i) three (3) times your highest annual base salary in effect within
one-hundred and eighty (180) days prior to the Change in Control, (ii) three (3)
times the highest annual bonus paid or payable to you for any of the last three
(3) completed years by the Company or its predecessors (which shall in no event
include amounts contributed or allocated by the Company (or its predecessors) on
your behalf or paid to you under any supplemental executive bonus plans
applicable to you,
4
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<PAGE>
(including, without limitation, the 1993 or 1996 HI Long Term Incentive Plans,
any other plan commonly referred to by the Company as a "top-hat" plan or any
equity plan such as the Millennium Chemicals Inc. Long Term Stock Incentive
Plan)), (iii) any unreimbursed business expenses for the period prior to
termination payable in accordance with the Company's policies, and (iv) any base
salary, bonus, vacation pay or other deferred compensation accrued or earned
under law or in accordance with the Company's policies applicable to you but not
yet paid; (B) any other amounts or benefits due under the then applicable
employee benefit, equity or incentive plans of the Company applicable to you as
shall be determined and paid in accordance with such plans; (C) three (3) years
of additional service and compensation credit (at your highest compensation
level in the one-hundred and eighty (180) day period prior to the Change in
Control) for pension purposes under any defined benefit type qualified or
nonqualified pension plan or arrangement of the Company and its affiliates
applicable to you, measured from the date of termination of employment and not
credited to the extent that you are otherwise entitled to such credit during
such three (3) year period, which payments shall be made through and in
accordance with the terms of the nonqualified defined benefit pension plan or
arrangement if any then exists, or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company's defined or its
affiliates' benefit plan covering you); (D) an amount equal to three (3) years
of the maximum Company contribution (assuming you deferred the maximum
5
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<PAGE>
amount and continued to earn your then current salary), measured from the date
of termination of employment under any type of qualified or nonqualified 401(k)
plan (payable at the end of each such year and not payable to the extent
otherwise contributed to such plan); and (E) payment by the Company of the
premiums for you (except in the case of your death) and your dependents' health
coverage for three (3) years from the date of termination of your employment
under the Company's health plans which cover the senior executives of the
Company or materially similar benefits (to the extent not otherwise provided),
provided that in the case of termination within one hundred eighty (180) days
prior to a Change in Control, the obligations under this subpart (E) shall only
exist to the extent that you or your dependents, as the case may be, had timely
elected or timely elect COBRA coverage which continued at the time of the Change
in Control and the obligation with regard to the period prior to the Change in
Control shall be limited to reimbursement of the COBRA premiums previously paid
or due for such period. Any amendment or termination of benefits, equity or
incentive plans within one-hundred and eighty (180) days prior to, or after, a
Change in Control that is detrimental to you shall be ignored with respect to
(C), (D) and (E) above. Payments under (E) above may, at the discretion of the
Company, be made by continuing your participation in the plan as a terminee, by
paying the applicable COBRA premium for you and your dependents, or by covering
you and your dependents under substitute arrangements, provided that, to the
extent you incur tax that you would not have incurred as an
6
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<PAGE>
active employee as a result of the aforementioned coverage or the benefits
provided thereunder, you shall receive from the Company an additional payment in
the amount necessary so that you will have no additional cost for receiving such
items or any additional payment. Section 6 hereof shall also continue to apply
in all instances.
5. Special Tax Provision. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to you (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership covered by Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") or any person affiliated with the Company
or such person) as a result of a change in ownership of Millennium covered by
Code Section 280G(b)(2) (collectively, the "Covered Payments") is or becomes
subject to the excise tax imposed by or under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), and/or any interest or penalties
with respect to such excise tax (such excise tax, together with such interest
and penalties, is hereinafter collectively referred to as the "Excise Tax"), the
Company shall pay to you an additional amount (the "Tax Reimbursement Payment")
such that after payment by you of all taxes (including, without limitation, any
interest or penalties and any Excise Tax imposed on or attributable to the
7
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Tax Reimbursement Payment itself), you retain an amount of the Tax Reimbursement
Payment equal to the sum of (i) the amount of the Excise Tax imposed upon the
Covered Payments, and (ii) without duplication, an amount equal to the product
of (A) any deductions disallowed for federal, state or local income tax purposes
because of the inclusion of the Tax Reimbursement Payment in your adjusted gross
income, and (B) the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Tax
Reimbursement Payment is made or is to be made. The intent of this Section 5 is
that after paying your federal, state and local income tax and any payroll
taxes, you will be in the same position as if you were not subject to the Excise
Tax under Section 4999 of the Code and did not receive the extra payments
pursuant to this Section 5 and this Section 5 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 5(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable
8
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to you) appointed by such public accountants (or, if the public accountants
decline such appointment and decline appointing such legal counsel, such
independent certified public accountants as promptly mutually agreed on in good
faith by the Company and you) (the "Accountant"), deliver a written opinion to
you, reasonably satisfactory to your legal counsel, that you have a reasonable
basis to claim that the Covered Payments (in whole or in part) (A) do not
constitute "parachute payments", (B) represent reasonable compensation for
services actually rendered (within the meaning of Section 280G(b)(4) of the
Code) in excess of the "base amount" allocable to such reasonable compensation,
or (C) such "parachute payments" are otherwise not subject to such Excise Tax
(with appropriate legal authority, detailed analysis and explanation provided
therein by the Accountant); and (ii) the value of any Covered Payments which are
non-cash benefits or deferred payments or benefits shall be determined by the
Accountant in accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, you shall be deemed: (i) to pay federal, state and/or
local income taxes at the highest applicable marginal rate of income taxation
for the calendar year in which the Tax Reimbursement Payment is made or is to be
made, and (ii) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed due
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to the inclusion of the Tax Reimbursement Payment in your adjusted gross income.
(d) (i) (A) In the event that prior to the time you have filed
any of your tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatsoever, the correct amount of the Tax Reimbursement Payment
to be less than the amount determined at the time the Tax Reimbursement Payment
was made, you shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Tax Reimbursement Payment being repaid by you, using the assumptions and
methodology utilized to calculate the Tax Reimbursement Payment (unless
manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by you of any of your tax returns for
the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred but prior to one (1) year after the occurrence of such
change in ownership, you shall file at the request of the Company an amended tax
return in accordance with the Accountant's
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determination, but no portion of the Tax Reimbursement Payment shall be required
to be refunded to the Company until actual refund or credit of such portion has
been made to you, and interest payable to the Company shall not exceed the
interest received or credited to you by such tax authority for the period it
held such portion (less any tax you must pay on such interest and which you are
unable to deduct as a result of payment of the refund).
(C) In the event you receive a refund pursuant to (B) above and
repay such amount to the Company, you shall thereafter file for any refunds or
credits that may be due to you by reason of the repayments to the Company. You
and the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if your claim for such
refund or credit is denied.
(ii) In the event that the Excise Tax is later
determined by the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
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(iii) In the event of any controversy with the
Internal Revenue Service (or other taxing authority) under this Section 5,
subject to the second sentence of subpart (i)(C) above, you shall permit the
Company to control issues related to this Section 5 (at its expense), provided
that such issues do not potentially materially adversely affect you, but you
shall control any other issues. In the event the issues are interrelated, you
and the Company shall in good faith cooperate so as not to jeopardize resolution
of either issue, but if the parties cannot agree you shall make the final
determination with regard to the issues. In the event of any conference with any
taxing authority as to the Excise Tax or associated income taxes, you shall
permit the representative of the Company to accompany you, and you and your
representative shall cooperate with the Company and its representative.
(iv) With regard to any initial filing for a
refund or any other action required pursuant to this Section 5 (other than by
mutual agreement) or, if not required, agreed to by the Company and you, you
shall cooperate fully with the Company, provided that the foregoing shall not
apply to actions that are provided herein to be at your sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant, and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The
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Company shall use its best efforts to cause the Accountant to promptly deliver
the initial determination required hereunder and, if not delivered, within
ninety (90) days after the change in ownership event covered by Section
280G(b)(2) of the Code, the Company shall pay you the Tax Reimbursement Payment
set forth in an opinion from counsel recognized as knowledgeable in the relevant
areas selected by you, and reasonably acceptable to the Company, within five (5)
days after delivery of such opinion. In accordance with Section 15, the Company
may withhold from the Tax Reimbursement Payment and deposit into applicable
taxing authorities such amounts as they are required to withhold by applicable
law. To the extent that you are required to pay estimated or other taxes on
amounts received by you beyond any withheld amounts, you shall promptly make
such payments. The amount of such payment shall be subject to later adjustment
in accordance with the determination of the Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by your counsel.
(g) You and the Company shall mutually agree on and promulgate
further guidelines in accordance with this Section 5 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
5(d)(i)(C) hereof.
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6. Indemnification. (a) The Company and Millennium, jointly and
severally, agree that if you are made a party to or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that you are or were a
director or officer of the Company or Millennium, and/or any other affiliate of
any of such companies, or are or were serving at the request of any of such
companies as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, you shall be indemnified and held harmless by the Company and Millennium
to the fullest extent authorized by Delaware law (or, if different, the law
applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by you in connection therewith, and
such indemnification shall continue as to you even if you have ceased to be an
officer, director, member, fiduciary or agent, or are no longer employed by the
company, and shall inure to the benefit of your heirs, executors and
administrators. With respect to the obligations set forth in this Section 6, the
Company and Millennium shall become liable hereunder with respect to any
Proceeding which arises out of or relates to events occurring on or after July
1,
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1996, except to the extent that the liability relates to service with or for
another assignee under Section 10 hereof (in which case such assignee shall be
liable).
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and reasonable costs, reasonable attorneys' fees,
reasonable accountants' fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding
shall be paid by the Company and Millennium in advance upon your request and the
giving by you of any undertakings required by applicable law.
(d) You shall give the Company and Millennium prompt notice of
any claim made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Millennium such
information and cooperation as it may reasonably require and as shall be within
your power and at such times and places as are reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the
Company and Millennium of the commencement thereof: (i) the company will be
entitled to participate therein at its
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own expense; and (ii) except as otherwise provided below, to the extent that it
may wish, the company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof. You also shall have the
right to employ your own counsel in such Proceeding and the fees and expenses of
such counsel shall be at the expense of the company.
(f) The Company and Millennium shall not be liable to indemnify
you under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Millennium shall
settle any Proceeding in any manner which would impose any penalty or limitation
on you without your written consent. Neither the Company, Millennium nor you
will unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which you may have
or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
(h) The Company and Millennium agree to maintain or cause to be
maintained Officer and Director liability insurance policies covering you and
shall maintain at all times following the Effective Date and during your term of
employment with the
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Company and/or Millennium coverage under such policies in the aggregate with
regard to all officers and directors, including you, of an amount not less than
$20 million. The Company and Millennium shall maintain or cause to be maintained
for a six (6) year period commencing on the date you cease to be both an
employee or director of such entity or any of its affiliates, Officer and
Director liability insurance coverage for events occurring during the period you
were an employee or director of any such entity or any of its affiliates in the
same aggregate amount and under the same terms as are maintained for its active
officers and directors. The phrase "in the same aggregate amount and under the
same terms" shall include the same level of self-insurance by the entity as
shall be maintained for active officers and directors.
7. Legal Fees. In the event that a claim for payment or benefits
under this Agreement is disputed as a result of events which occurred after a
Change in Control, or during the Pre Change in Control Period, the Company shall
pay all reasonable attorney, accountant and other professional fees and
reasonable expenses incurred by you in pursuing such claim, unless the claim by
you is found to be frivolous by any court or arbitrator.
8. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way
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to reduce any amounts payable to you by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by you or benefit provided to
you as the result of employment by another employer or otherwise. Except as
otherwise provided herein and apart from any disagreement between you and the
Company concerning interpretation of this Agreement or any term or provision
hereof, the Company's obligations to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against you. The amounts due under Section 4 are inclusive, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due hereunder.
9. Effective Date and Term. (a) Notwithstanding anything else
herein, this Agreement shall become effective (the "Effective Date") as of the
date of the Demerger provided that you are employed by the Company on such date.
If the Demerger does not occur prior to March 31, 1997 or you are not employed
by the Company on the date of the Demerger for any reason whatsoever, the
provisions of this Agreement (other than this Section 9(a)) shall have no force
or effect and this Agreement shall be null and void.
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(b) This Agreement shall be for a term (the "Term") commencing on
the Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change in Control has taken place prior to
termination of this Agreement, this Agreement shall continue in full force and
effect during the Change in Control Protection Period and further provided that
the payment and other obligations hereunder shall survive such termination to
the extent a Change in Control has occurred during the Term, and in any event,
the obligations under Section 6 hereof shall survive the end of the Term with
regard to matters occurring during the Term (even if a claim is made after the
Term).
10. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. Reference to the Company herein shall also
include any successor to HM Anglo-American, Ltd. This Agreement shall inure to
the benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors,
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heirs, distributees, devises and legatees. If you die while any amount would
still by payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of the Agreement to the executors, personal representatives, estate
trustees, or administrators of your estate. This Agreement is personal to you
and neither this Agreement nor any rights hereunder may be assigned by you.
11. Communications. Any notice or other communication
required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by registered mail, postage prepaid
as follows:
(i) If to the Company or Millennium, to such
entity at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Senior Vice President -
Law and Administration
(ii) If to you, to the last
shown address on the
books of the Company or
Millennium.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
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12. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause, subject to the payment provisions
hereof if such termination is during the Change in Control Protection Period.
You acknowledge that you are aware that you shall have no claim against the
Company hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not specifically satisfy the
requirements hereof. The foregoing shall not affect your rights under any other
agreement with the Company.
13. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Company Board (as defined in Part III of Exhibit A). No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any prior
agreements between the Company and you. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All
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references to any law shall be deemed also to refer to any successor provisions
to such laws.
14. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and you have been given the opportunity to do so.
15. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
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16. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware
without reference to rules relating to conflicts of law.
Very truly yours,
HM ANGLO-AMERICAN, LTD.
By: /s/ GEORGE H. HEMPSTEAD,III
--------------------------------
Name: George H. Hempstead, III
Title: Senior Vice President-
Law and Administration
Agreed and Accepted this
1st day of July, 1996:
MILLENNIUM CHEMICALS INC. /s/ WILLIAM M. LANDUYT
(for purposes of Section 6 only) --------------------------------
William M. Landuyt
By: /s/ GRAHAM DRANSFIELD
---------------------------------
Name: Graham Dransfield
Title: Vice President and Director
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EXHIBIT A
Part I -- Cause
1. Subject to compliance with the notification provisions in this
Exhibit A, this Agreement shall not prevent the termination of your employment
by the Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause. For purposes of
this Agreement, the term "Cause" shall be limited to your: (i) willful
misconduct with regard to the Company or its affiliates or their businesses
which has a material adverse effect on the Company and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Company Board
provided that the foregoing refusal shall not be "Cause" if in good faith you
believe that such direction is illegal, unethical or immoral and you promptly so
notify the applicable Company Board; (iii) conviction of a felony (other than a
felony involving a motor vehicle) and either (x) exhausting all appeals without
a reversal of the conviction or (y) commencing a term of incarceration in a
house of detention; (iv) breach of any fiduciary duty owed to the Company or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or (v) your material fraud with regard to the Company or any
of its affiliates.
2. A notice of termination for Cause shall mean a notice that
shall set forth in reasonable detail the specific basis, facts and circumstances
which provide for a basis for termination for Cause and shall include a copy of
a resolution duly adopted by at least two-thirds of the directors of the
applicable Company at a meeting which was called for the purpose of considering
such termination and which you and your representative had the right to attend
and address, finding that, in the good faith opinion of the applicable board,
you engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. The date of termination
for a termination for Cause shall be the date indicated in the notice of
termination.
3. Notwithstanding anything to the contrary contained in this
Agreement, if any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a court
not to have been based on the grounds set forth in this Agreement, or not to
have followed the procedures set forth in this Agreement, such purported
termination for Cause shall be deemed a termination by the Company without Cause
and you shall be entitled to the amounts and benefits provided in Section 4 to
the extent, if any, applicable.
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Part II -- Change in Control
1. Change in Control. For purposes of this Agreement, the term
"Change in Control" shall mean (i) any "person" as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 ("Act") (other than
Millennium, any trustee or other fiduciary holding securities under any employee
benefit plan of Millennium or any company owned, directly or indirectly, by the
stockholders of Millennium in substantially the same proportions as their
ownership of Common Stock of Millennium), becoming the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
Millennium representing twenty-five percent (25%) or more of the combined voting
power of Millennium's then 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 beginning of such period constitute the Board
of Directors of Millennium, and any new director (other than a director
designated by a person who has entered into an agreement with Millennium to
effect a transaction described in clause (i), (iii), or (iv) of this paragraph
or a director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors of Millennium) whose election by the Board of Directors of
Millennium or nomination for election by Millennium'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
Millennium; (iii) the merger or consolidation of Millennium with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Millennium outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Millennium or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Millennium (or similar transaction) in which no person (other than those
covered by the exceptions in (i) above) acquires more than twenty-five percent
(25%) of the combined voting power of Millennium's then outstanding securities
shall not constitute a Change in Control of Millennium; or (iv) approval by the
stockholders of Millennium of a plan of complete liquidation of Millennium or
the closing of the sale or disposition by Millennium of all or substantially all
of Millennium's assets other than the sale of all or substantially all of the
assets of Millennium to a person or
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persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of Millennium at the time of the sale. Notwithstanding the foregoing, the
Demerger will not constitute a Change of Control for purposes of this Agreement.
Only one (1) Change in Control may occur under this Agreement.
2. Change in Control Protection Period. For purposes of this
Agreement, the term "Change in Control Protection Period" shall mean the Pre
Change in Control Period and the Post Change in Control Period as defined below.
3. Pre Change in Control Period. For purposes of this Agreement,
Pre Change in Control Period shall mean the one-hundred and eighty (180) day
period prior to the date of a Change in Control that occurs on or after the
Effective Date.
4. Post Change in Control Period. For purposes of this Agreement,
Post Change in Control Period shall mean the period commencing on the date of a
Change in Control that occurs on or after the Effective Date and ending the day
immediately prior to the second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be
deemed to refer to the Board of Directors of the Company and Millennium.
Part IV -- Disability
For purposes of this Agreement, the term "Disability" shall mean
your inability to perform your material duties and responsibilities hereunder
due to the same or related physical or mental reasons for more than one hundred
eighty (180) consecutive days in any twelve (12) consecutive month period. A
termination for Disability shall be deemed to occur when you are terminated by
the Company by written notice after you incur a Disability and while you remain
disabled.
Part V -- Good Reason
1. For purposes of this Agreement, a termination for "Good
Reason" shall mean a termination by you effected by a written notice of
termination for Good Reason given within ninety (90) days after the occurrence
of the Good Reason event. Subject to subsection 3 below, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the
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highest position held within the Pre Change in Control Period (except in each
case in connection with the termination of your employment for Cause, Disability
or as a result of your death, or in the case of a material diminution of duties
or responsibilities, temporarily as a result of your illness or other absence)
or the assignment to you of duties or responsibilities that are inconsistent
with your aforementioned highest position; (ii) your removal from, or the
nonreelection to, your positions as an officer with the Company or Millennium
held during the Pre Change in Control Period; (iii) a relocation of the
Company's principal United States executive offices to a location more than
twenty-five (25) miles from where they are at the time of the Change in Control,
or a relocation by the Company of your principal office away from such principal
United States executive offices; (iv) a failure by the Company or Millennium (A)
to continue any bonus plan, program or arrangement in which you were entitled to
participate during the Pre Change in Control Period (the "Bonus Plans"),
provided that any such Bonus Plans may be modified at the Company's discretion
from time to time but shall be deemed terminated if (x) any such plan does not
remain substantially in the form in effect prior to such modification or (y) if
plans providing you with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue you as a participant in the
Bonus Plans or Substitute Plans on not less than the same maximum level of award
and not more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in accordance
with the Bonus Plans and the Substitute Plans; (v) any material breach by the
Company or Millennium of any provision of this Agreement; (vi) if on the Company
Board during the Pre Change in Control Period, your removal from or failure to
be reelected to the Company Board; (vii) a reduction by the Company of your rate
of annual base salary to a level below your highest rate of base salary within
one-hundred and eighty (180) days prior to the Change in Control; or (viii)
failure of any successor of the Company to assume in a writing delivered to you
upon the assignee becoming such, the obligations of the Company hereunder.
2. A notice of termination for Good Reason shall indicate the
specific basis for termination relied upon and set forth in reasonable detail
the facts and circumstances claimed to provide a basis for a termination for
Good Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any of your rights hereunder or preclude you from
asserting such fact or circumstance in enforcing your rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such notice
of termination for Good Reason is given.
3. In the event that a Direct Pay Letter of Credit is delivered
in accordance with Section 3 of this Agreement at the
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time of a Change in Control, the definition of Good Reason shall not include the
events set forth in subsections 1(i), (ii) and (vi) above so long as during such
period you are maintained in a senior advisory capacity (without any line or
other staff responsibilities) to assist in the orderly transition to new
management.
Part VI - Retirement
For purposes of this Agreement, the term "Retirement" shall mean
your retirement by the Company at or after your sixtyfifth (65th) birthday to
the extent such termination is specifically permitted as a stated exception from
applicable federal and state age discrimination laws based on position and
retirement benefits.
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EXHIBIT 10.16
HM Anglo-American, Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
(908) 603-6600
July 1, 1996
Mr. Robert E. Lee
[Address]
Dear Mr. Lee:
1. Introduction. On July 1, 1996, you were transferred from the
payroll of Hanson Industries to the payroll of HM Anglo-American, Ltd. (the
"Company") as a senior executive of the Company. The Company believes that the
establishment and maintenance of a sound and vital management of the Company and
of Millennium Chemicals Inc., which is intended to become the ultimate parent
corporation of the Company ("Millennium") in connection with the demerger by
Hanson PLC of its chemicals business (the "Demerger"), is essential to the
protection and enhancement of the interests of the Company and Millennium and
their stockholders. The Company also recognizes that the possibility of a Change
in Control (as defined in Part II of Exhibit A) of Millennium, with the
attendant uncertainties and risks, might result in the departure or distraction
of key employees of the Company to the detriment of the Company, Millennium and
their stockholders. In light of the possibility of a Change in Control of
Millennium, which is intended to become a separate publicly traded company as a
result of the Demerger,
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the Company has determined that it is appropriate to induce key employees to
remain with the Company, and to reinforce and encourage their continued
attention and dedication. Accordingly, subject to Section 9, upon your written
acceptance of the terms and conditions of this agreement (the "Agreement")
evidenced by signing below, the Company intends to provide you the protections
set forth herein as of the Effective Date set forth in Section 9. Capitalized
terms not defined in the body of this Agreement shall have the meanings set
forth in Exhibit A hereto, which is incorporated herein and made a part of this
Agreement.
2. Termination Following a Change in Control. If a Change in
Control occurs on or after the Effective Date and your employment is terminated
during the Post Change in Control Period (i) by the Company without Cause or due
to your Disability, (ii) by you for Good Reason or, subject to Section 3 below,
without Good Reason, (iii) due to your death or (iv) due to your Retirement,
then you shall be entitled to the amounts and benefits provided in Section 4
herein. Furthermore, if a Change in Control occurs on or after the Effective
Date and your employment was terminated within the Pre Change in Control Period
(i) by the Company without Cause or due to your Disability, (ii) by you for Good
Reason (based on an event that occurred within the Pre Change in Control
Period), or (iii) due to your death, you shall be entitled to the amounts and
benefits provided in Section 4 herein.
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3. Direct Pay Letter of Credit. Notwithstanding anything else
herein, your right to voluntarily terminate employment without Good Reason after
the date of a Change in Control and receive the amounts due under Section 4
hereof shall be delayed until one-hundred and eighty (180) days after the Change
in Control if, simultaneous with the Change in Control, the Company or the
person or entity triggering the Change in Control delivers to you an irrevocable
direct pay letter of credit (the "Direct Pay Letter of Credit") satisfying the
requirements of this Section 3 and an indemnity agreement covering in a similar
manner the provisions of Section 6 with regard to activities after the Change in
Control. The Direct Pay Letter of Credit shall be in an amount equal to the
aggregate amount you would be entitled to receive under Sections 4(A)(i) and
(ii) hereof if you were terminated without Cause immediately upon the Change in
Control and shall have an expiration date of no less than two (2) years after
the date of such Change in Control. You (or, if applicable, your legal
representative) shall be entitled to draw on the Direct Pay Letter of Credit
upon presentation to the issuing bank of a demand for payment signed by you (or,
if applicable, your legal representative) that states that (i) a Good Reason
event has occurred and your employment has terminated during the Post Change in
Control Period, or (ii) one-hundred and eighty (180) days have expired since the
Change in Control and your employment has terminated during the Post Change in
Control Period. There shall be no other requirements (including no requirement
that you first make demand upon the
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Company) with regard to payment of the Direct Pay Letter of Credit. To the
extent the Direct Pay Letter of Credit is not adequate to cover the amount owed
to you under this Agreement, is not submitted by you or is not paid by the
issuing bank, the Company shall remain liable to you for any amounts owed to you
pursuant to the terms of this Agreement. To the extent any amount is paid under
the Direct Pay Letter of Credit it shall be a credit against any amount the
Company then or thereafter would owe to you under Section 4 of this Agreement.
The Direct Pay Letter of Credit shall be issued by a national money center bank
with a rating of at least A by Standard and Poor's. The Company shall bear the
cost of the Direct Pay Letter of Credit.
4. Compensation on Change in Control Termination. If pursuant to
Section 2 you are entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to you: (A) in a lump sum
within five (5) days after such termination (or, if such termination occurred
during the Pre Change in Control Period, within five (5) days after the Change
in Control) (i) three (3) times your highest annual base salary in effect within
one-hundred and eighty (180) days prior to the Change in Control, (ii) three (3)
times the highest annual bonus paid or payable to you for any of the last three
(3) completed years by the Company or its predecessors (which shall in no event
include amounts contributed or allocated by the Company (or its predecessors) on
your behalf or paid to you under any supplemental executive bonus plans
applicable to you,
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(including, without limitation, the 1993 or 1996 HI Long Term Incentive Plans,
any other plan commonly referred to by the Company as a "top-hat" plan or any
equity plan such as the Millennium Chemicals Inc. Long Term Stock Incentive
Plan)), (iii) any unreimbursed business expenses for the period prior to
termination payable in accordance with the Company's policies, and (iv) any base
salary, bonus, vacation pay or other deferred compensation accrued or earned
under law or in accordance with the Company's policies applicable to you but not
yet paid; (B) any other amounts or benefits due under the then applicable
employee benefit, equity or incentive plans of the Company applicable to you as
shall be determined and paid in accordance with such plans; (C) three (3) years
of additional service and compensation credit (at your highest compensation
level in the one-hundred and eighty (180) day period prior to the Change in
Control) for pension purposes under any defined benefit type qualified or
nonqualified pension plan or arrangement of the Company and its affiliates
applicable to you, measured from the date of termination of employment and not
credited to the extent that you are otherwise entitled to such credit during
such three (3) year period, which payments shall be made through and in
accordance with the terms of the nonqualified defined benefit pension plan or
arrangement if any then exists, or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company's defined or its
affiliates' benefit plan covering you); (D) an amount equal to three (3) years
of the maximum Company contribution (assuming you deferred the maximum
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amount and continued to earn your then current salary), measured from the date
of termination of employment under any type of qualified or nonqualified 401(k)
plan (payable at the end of each such year and not payable to the extent
otherwise contributed to such plan); and (E) payment by the Company of the
premiums for you (except in the case of your death) and your dependents' health
coverage for three (3) years from the date of termination of your employment
under the Company's health plans which cover the senior executives of the
Company or materially similar benefits (to the extent not otherwise provided),
provided that in the case of termination within one hundred eighty (180) days
prior to a Change in Control, the obligations under this subpart (E) shall only
exist to the extent that you or your dependents, as the case may be, had timely
elected or timely elect COBRA coverage which continued at the time of the Change
in Control and the obligation with regard to the period prior to the Change in
Control shall be limited to reimbursement of the COBRA premiums previously paid
or due for such period. Any amendment or termination of benefits, equity or
incentive plans within one-hundred and eighty (180) days prior to, or after, a
Change in Control that is detrimental to you shall be ignored with respect to
(C), (D) and (E) above. Payments under (E) above may, at the discretion of the
Company, be made by continuing your participation in the plan as a terminee, by
paying the applicable COBRA premium for you and your dependents, or by covering
you and your dependents under substitute arrangements, provided that, to the
extent you incur tax that you would not have incurred as an
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active employee as a result of the aforementioned coverage or the benefits
provided thereunder, you shall receive from the Company an additional payment in
the amount necessary so that you will have no additional cost for receiving such
items or any additional payment. Section 6 hereof shall also continue to apply
in all instances.
5. Special Tax Provision. (a) Anything in this Agreement to
the contrary notwithstanding, in the event that any amount or benefit paid,
payable, or to be paid, or distributed, distributable, or to be distributed to
or with respect to you (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a change of ownership covered by Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended (the "Code") or any person affiliated with the
Company or such person) as a result of a change in ownership of Millennium
covered by Code Section 280G(b)(2) (collectively, the "Covered Payments") is or
becomes subject to the excise tax imposed by or under Section 4999 of the Code
(or any similar tax that may hereafter be imposed), and/or any interest or
penalties with respect to such excise tax (such excise tax, together with such
interest and penalties, is hereinafter collectively referred to as the "Excise
Tax"), the Company shall pay to you an additional amount (the "Tax Reimbursement
Payment") such that after payment by you of all taxes (including, without
limitation, any interest or penalties and any Excise Tax imposed on or
attributable to the
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Tax Reimbursement Payment itself), you retain an amount of the Tax Reimbursement
Payment equal to the sum of (i) the amount of the Excise Tax imposed upon the
Covered Payments, and (ii) without duplication, an amount equal to the product
of (A) any deductions disallowed for federal, state or local income tax purposes
because of the inclusion of the Tax Reimbursement Payment in your adjusted gross
income, and (B) the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Tax
Reimbursement Payment is made or is to be made. The intent of this Section 5 is
that after paying your federal, state and local income tax and any payroll
taxes, you will be in the same position as if you were not subject to the Excise
Tax under Section 4999 of the Code and did not receive the extra payments
pursuant to this Section 5 and this Section 5 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 5(a), for purposes
of determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable
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to you) appointed by such public accountants (or, if the public accountants
decline such appointment and decline appointing such legal counsel, such
independent certified public accountants as promptly mutually agreed on in good
faith by the Company and you) (the "Accountant"), deliver a written opinion to
you, reasonably satisfactory to your legal counsel, that you have a reasonable
basis to claim that the Covered Payments (in whole or in part) (A) do not
constitute "parachute payments", (B) represent reasonable compensation for
services actually rendered (within the meaning of Section 280G(b)(4) of the
Code) in excess of the "base amount" allocable to such reasonable compensation,
or (C) such "parachute payments" are otherwise not subject to such Excise Tax
(with appropriate legal authority, detailed analysis and explanation provided
therein by the Accountant); and (ii) the value of any Covered Payments which are
non-cash benefits or deferred payments or benefits shall be determined by the
Accountant in accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, you shall be deemed: (i) to pay federal, state and/or
local income taxes at the highest applicable marginal rate of income taxation
for the calendar year in which the Tax Reimbursement Payment is made or is to be
made, and (ii) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed due
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to the inclusion of the Tax Reimbursement Payment in your adjusted gross income.
(d) (i) (A) In the event that prior to the time you have filed
any of your tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatsoever, the correct amount of the Tax Reimbursement Payment
to be less than the amount determined at the time the Tax Reimbursement Payment
was made, you shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Tax Reimbursement Payment being repaid by you, using the assumptions and
methodology utilized to calculate the Tax Reimbursement Payment (unless
manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above
is made by the Accountant after the filing by you of any of your tax returns for
the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred but prior to one (1) year after the occurrence of such
change in ownership, you shall file at the request of the Company an amended tax
return in accordance with the Accountant's
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determination, but no portion of the Tax Reimbursement Payment shall be required
to be refunded to the Company until actual refund or credit of such portion has
been made to you, and interest payable to the Company shall not exceed the
interest received or credited to you by such tax authority for the period it
held such portion (less any tax you must pay on such interest and which you are
unable to deduct as a result of payment of the refund).
(C) In the event you receive a refund pursuant to (B) above
and repay such amount to the Company, you shall thereafter file for any refunds
or credits that may be due to you by reason of the repayments to the Company.
You and the Company shall mutually agree upon the course of action, if any, to
be pursued (which shall be at the expense of the Company) if your claim for such
refund or credit is denied.
(ii) In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Tax Reimbursement Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Tax Reimbursement Payment), the Company shall make an
additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
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(iii) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) under this Section 5, subject to the
second sentence of subpart (i)(C) above, you shall permit the Company to control
issues related to this Section 5 (at its expense), provided that such issues do
not potentially materially adversely affect you, but you shall control any other
issues. In the event the issues are interrelated, you and the Company shall in
good faith cooperate so as not to jeopardize resolution of either issue, but if
the parties cannot agree you shall make the final determination with regard to
the issues. In the event of any conference with any taxing authority as to the
Excise Tax or associated income taxes, you shall permit the representative of
the Company to accompany you, and you and your representative shall cooperate
with the Company and its representative.
(iv) With regard to any initial filing for a refund or any
other action required pursuant to this Section 5 (other than by mutual
agreement) or, if not required, agreed to by the Company and you, you shall
cooperate fully with the Company, provided that the foregoing shall not apply to
actions that are provided herein to be at your sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant, and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The
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Company shall use its best efforts to cause the Accountant to promptly deliver
the initial determination required hereunder and, if not delivered, within
ninety (90) days after the change in ownership event covered by Section
280G(b)(2) of the Code, the Company shall pay you the Tax Reimbursement Payment
set forth in an opinion from counsel recognized as knowledgeable in the relevant
areas selected by you, and reasonably acceptable to the Company, within five (5)
days after delivery of such opinion. In accordance with Section 15, the Company
may withhold from the Tax Reimbursement Payment and deposit into applicable
taxing authorities such amounts as they are required to withhold by applicable
law. To the extent that you are required to pay estimated or other taxes on
amounts received by you beyond any withheld amounts, you shall promptly make
such payments. The amount of such payment shall be subject to later adjustment
in accordance with the determination of the Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by your counsel.
(g) You and the Company shall mutually agree on and promulgate
further guidelines in accordance with this Section 5 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
5(d)(i)(C) hereof.
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6. Indemnification. (a) The Company and Millennium, jointly and
severally, agree that if you are made a party to or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that you are or were a
director or officer of the Company or Millennium, and/or any other affiliate of
any of such companies, or are or were serving at the request of any of such
companies as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, you shall be indemnified and held harmless by the Company and Millennium
to the fullest extent authorized by Delaware law (or, if different, the law
applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by you in connection therewith, and
such indemnification shall continue as to you even if you have ceased to be an
officer, director, member, fiduciary or agent, or are no longer employed by the
company, and shall inure to the benefit of your heirs, executors and
administrators. With respect to the obligations set forth in this Section 6, the
Company and Millennium shall become liable hereunder with respect to any
Proceeding which arises out of or relates to events occurring on or after July
1,
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1996, except to the extent that the liability relates to service with or for
another assignee under Section 10 hereof (in which case such assignee shall be
liable).
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and reasonable costs, reasonable attorneys' fees,
reasonable accountants' fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding
shall be paid by the Company and Millennium in advance upon your request and the
giving by you of any undertakings required by applicable law.
(d) You shall give the Company and Millennium prompt notice of
any claim made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Millennium such
information and cooperation as it may reasonably require and as shall be within
your power and at such times and places as are reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the
Company and Millennium of the commencement thereof: (i) the company will be
entitled to participate therein at its
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own expense; and (ii) except as otherwise provided below, to the extent that it
may wish, the company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof. You also shall have the
right to employ your own counsel in such Proceeding and the fees and expenses of
such counsel shall be at the expense of the company.
(f) The Company and Millennium shall not be liable to indemnify
you under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Millennium shall
settle any Proceeding in any manner which would impose any penalty or limitation
on you without your written consent. Neither the Company, Millennium nor you
will unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which you may have
or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
(h) The Company and Millennium agree to maintain or cause to be
maintained Officer and Director liability insurance policies covering you and
shall maintain at all times following the Effective Date and during your term of
employment with the
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Company and/or Millennium coverage under such policies in the aggregate with
regard to all officers and directors, including you, of an amount not less than
$20 million. The Company and Millennium shall maintain or cause to be maintained
for a six (6) year period commencing on the date you cease to be both an
employee or director of such entity or any of its affiliates, Officer and
Director liability insurance coverage for events occurring during the period you
were an employee or director of any such entity or any of its affiliates in the
same aggregate amount and under the same terms as are maintained for its active
officers and directors. The phrase "in the same aggregate amount and under the
same terms" shall include the same level of self-insurance by the entity as
shall be maintained for active officers and directors.
7. Legal Fees. In the event that a claim for payment or benefits
under this Agreement is disputed as a result of events which occurred after a
Change in Control, or during the Pre Change in Control Period, the Company shall
pay all reasonable attorney, accountant and other professional fees and
reasonable expenses incurred by you in pursuing such claim, unless the claim by
you is found to be frivolous by any court or arbitrator.
8. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way
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to reduce any amounts payable to you by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by you or benefit provided to
you as the result of employment by another employer or otherwise. Except as
otherwise provided herein and apart from any disagreement between you and the
Company concerning interpretation of this Agreement or any term or provision
hereof, the Company's obligations to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against you. The amounts due under Section 4 are inclusive, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due hereunder.
9. Effective Date and Term. (a) Notwithstanding anything else
herein, this Agreement shall become effective (the "Effective Date") as of the
date of the Demerger provided that you are employed by the Company on such date.
If the Demerger does not occur prior to March 31, 1997 or you are not employed
by the Company on the date of the Demerger for any reason whatsoever, the
provisions of this Agreement (other than this Section 9(a)) shall have no force
or effect and this Agreement shall be null and void.
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(b) This Agreement shall be for a term (the "Term") commencing on
the Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change in Control has taken place prior to
termination of this Agreement, this Agreement shall continue in full force and
effect during the Change in Control Protection Period and further provided that
the payment and other obligations hereunder shall survive such termination to
the extent a Change in Control has occurred during the Term, and in any event,
the obligations under Section 6 hereof shall survive the end of the Term with
regard to matters occurring during the Term (even if a claim is made after the
Term).
10. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. Reference to the Company herein shall also
include any successor to HM Anglo-American, Ltd. This Agreement shall inure to
the benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors,
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heirs, distributees, devises and legatees. If you die while any amount would
still by payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of the Agreement to the executors, personal representatives, estate
trustees, or administrators of your estate. This Agreement is personal to you
and neither this Agreement nor any rights hereunder may be assigned by you.
11. Communications. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by registered mail, postage prepaid as follows:
(i) If to the Company or Millennium, to such entity at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Senior Vice President -
Law and Administration
(ii) If to you, to the last
shown address on the
books of the Company or
Millennium.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
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12. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause, subject to the payment provisions
hereof if such termination is during the Change in Control Protection Period.
You acknowledge that you are aware that you shall have no claim against the
Company hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not specifically satisfy the
requirements hereof. The foregoing shall not affect your rights under any other
agreement with the Company.
13. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Company Board (as defined in Part III of Exhibit A). No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any prior
agreements between the Company and you. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All
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references to any law shall be deemed also to refer to any successor provisions
to such laws.
14. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and you have been given the opportunity to do so.
15. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
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16. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware
without reference to rules relating to conflicts of law.
Very truly yours,
HM ANGLO-AMERICAN, LTD.
By: /s/ WILLIAM M. LANDUYT
Name: William M. Landuyt
Title: Chairman and Chief
Executive Officer
Agreed and Accepted
this 1st day of July, 1996:
MILLENNIUM CHEMICALS INC. /s/ ROBERT E. LEE
(for purposes of Section 6 only) _____________________________________
Robert E. Lee
By: /s/ GRAHAM DRANSFIELD
_______________________________
Name: Graham Dransfield
Title: Vice President and Director
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EXHIBIT A
Part I -- Cause
1. Subject to compliance with the notification provisions in this
Exhibit A, this Agreement shall not prevent the termination of your employment
by the Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause. For purposes of
this Agreement, the term "Cause" shall be limited to your: (i) willful
misconduct with regard to the Company or its affiliates or their businesses
which has a material adverse effect on the Company and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Company Board
provided that the foregoing refusal shall not be "Cause" if in good faith you
believe that such direction is illegal, unethical or immoral and you promptly so
notify the applicable Company Board; (iii) conviction of a felony (other than a
felony involving a motor vehicle) and either (x) exhausting all appeals without
a reversal of the conviction or (y) commencing a term of incarceration in a
house of detention; (iv) breach of any fiduciary duty owed to the Company or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or (v) your material fraud with regard to the Company or any
of its affiliates.
2. A notice of termination for Cause shall mean a notice that
shall set forth in reasonable detail the specific basis, facts and circumstances
which provide for a basis for termination for Cause and shall include a copy of
a resolution duly adopted by at least two-thirds of the directors of the
applicable Company at a meeting which was called for the purpose of considering
such termination and which you and your representative had the right to attend
and address, finding that, in the good faith opinion of the applicable board,
you engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. The date of termination
for a termination for Cause shall be the date indicated in the notice of
termination.
3. Notwithstanding anything to the contrary contained in this
Agreement, if any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a court
not to have been based on the grounds set forth in this Agreement, or not to
have followed the procedures set forth in this Agreement, such purported
termination for Cause shall be deemed a termination by the Company without Cause
and you shall be entitled to the amounts and benefits provided in Section 4 to
the extent, if any, applicable.
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Part II -- Change in Control
1. Change in Control. For purposes of this Agreement, the term
"Change in Control" shall mean (i) any "person" as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 ("Act") (other than
Millennium, any trustee or other fiduciary holding securities under any employee
benefit plan of Millennium or any company owned, directly or indirectly, by the
stockholders of Millennium in substantially the same proportions as their
ownership of Common Stock of Millennium), becoming the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
Millennium representing twenty-five percent (25%) or more of the combined voting
power of Millennium's then 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 beginning of such period constitute the Board
of Directors of Millennium, and any new director (other than a director
designated by a person who has entered into an agreement with Millennium to
effect a transaction described in clause (i), (iii), or (iv) of this paragraph
or a director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors of Millennium) whose election by the Board of Directors of
Millennium or nomination for election by Millennium'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
Millennium; (iii) the merger or consolidation of Millennium with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Millennium outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Millennium or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Millennium (or similar transaction) in which no person (other than those
covered by the exceptions in (i) above) acquires more than twenty-five percent
(25%) of the combined voting power of Millennium's then outstanding securities
shall not constitute a Change in Control of Millennium; or (iv) approval by the
stockholders of Millennium of a plan of complete liquidation of Millennium or
the closing of the sale or disposition by Millennium of all or substantially all
of Millennium's assets other than the sale of all or substantially all of the
assets of Millennium to a person or
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persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of Millennium at the time of the sale. Notwithstanding the foregoing, the
Demerger will not constitute a Change of Control for purposes of this Agreement.
Only one (1) Change in Control may occur under this Agreement.
2. Change in Control Protection Period. For purposes of this
Agreement, the term "Change in Control Protection Period" shall mean the Pre
Change in Control Period and the Post Change in Control Period as defined below.
3. Pre Change in Control Period. For purposes of this Agreement,
Pre Change in Control Period shall mean the one-hundred and eighty (180) day
period prior to the date of a Change in Control that occurs on or after the
Effective Date.
4. Post Change in Control Period. For purposes of this Agreement,
Post Change in Control Period shall mean the period commencing on the date of a
Change in Control that occurs on or after the Effective Date and ending the day
immediately prior to the second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be
deemed to refer to the Board of Directors of the Company and Millennium.
Part IV -- Disability
For purposes of this Agreement, the term "Disability" shall mean
your inability to perform your material duties and responsibilities hereunder
due to the same or related physical or mental reasons for more than one hundred
eighty (180) consecutive days in any twelve (12) consecutive month period. A
termination for Disability shall be deemed to occur when you are terminated by
the Company by written notice after you incur a Disability and while you remain
disabled.
Part V -- Good Reason
1. For purposes of this Agreement, a termination for "Good
Reason" shall mean a termination by you effected by a written notice of
termination for Good Reason given within ninety (90) days after the occurrence
of the Good Reason event. Subject to subsection 3 below, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the
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highest position held within the Pre Change in Control Period (except in each
case in connection with the termination of your employment for Cause, Disability
or as a result of your death, or in the case of a material diminution of duties
or responsibilities, temporarily as a result of your illness or other absence)
or the assignment to you of duties or responsibilities that are inconsistent
with your aforementioned highest position; (ii) your removal from, or the
nonreelection to, your positions as an officer with the Company or Millennium
held during the Pre Change in Control Period; (iii) a relocation of the
Company's principal United States executive offices to a location more than
twenty-five (25) miles from where they are at the time of the Change in Control,
or a relocation by the Company of your principal office away from such principal
United States executive offices; (iv) a failure by the Company or Millennium (A)
to continue any bonus plan, program or arrangement in which you were entitled to
participate during the Pre Change in Control Period (the "Bonus Plans"),
provided that any such Bonus Plans may be modified at the Company's discretion
from time to time but shall be deemed terminated if (x) any such plan does not
remain substantially in the form in effect prior to such modification or (y) if
plans providing you with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue you as a participant in the
Bonus Plans or Substitute Plans on not less than the same maximum level of award
and not more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in accordance
with the Bonus Plans and the Substitute Plans; (v) any material breach by the
Company or Millennium of any provision of this Agreement; (vi) if on the Company
Board during the Pre Change in Control Period, your removal from or failure to
be reelected to the Company Board; (vii) a reduction by the Company of your rate
of annual base salary to a level below your highest rate of base salary within
one-hundred and eighty (180) days prior to the Change in Control; or (viii)
failure of any successor of the Company to assume in a writing delivered to you
upon the assignee becoming such, the obligations of the Company hereunder.
2. A notice of termination for Good Reason shall indicate the
specific basis for termination relied upon and set forth in reasonable detail
the facts and circumstances claimed to provide a basis for a termination for
Good Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any of your rights hereunder or preclude you from
asserting such fact or circumstance in enforcing your rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such notice
of termination for Good Reason is given.
3. In the event that a Direct Pay Letter of Credit is delivered
in accordance with Section 3 of this Agreement at the
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time of a Change in Control, the definition of Good Reason shall not include the
events set forth in subsections 1(i), (ii) and (vi) above so long as during such
period you are maintained in a senior advisory capacity (without any line or
other staff responsibilities) to assist in the orderly transition to new
management.
Part VI - Retirement
For purposes of this Agreement, the term "Retirement" shall mean
your retirement by the Company at or after your sixty- fifth (65th) birthday to
the extent such termination is specifically permitted as a stated exception from
applicable federal and state age discrimination laws based on position and
retirement benefits.
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EXHIBIT 10.17
HM Anglo-American, Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
(908) 603-6600
July 1, 1996
George H. Hempstead, III, Esq.
[Address]
Dear Mr. Hempstead:
1. Introduction. On July 1, 1996, you were transferred from the
payroll of Hanson Industries to the payroll of HM Anglo-American, Ltd. (the
"Company") as a senior executive of the Company. The Company believes that the
establishment and maintenance of a sound and vital management of the Company and
of Millennium Chemicals Inc., which is intended to become the ultimate parent
corporation of the Company ("Millennium") in connection with the demerger by
Hanson PLC of its chemicals business (the "Demerger"), is essential to the
protection and enhancement of the interests of the Company and Millennium and
their stockholders. The Company also recognizes that the possibility of a Change
in Control (as defined in Part II of Exhibit A) of Millennium, with the
attendant uncertainties and risks, might result in the departure or distraction
of key employees of the Company to the detriment of the Company, Millennium and
their stockholders. In light of the possibility of a Change in Control of
Millennium, which is intended to become a separate publicly traded company as a
result of the Demerger,
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the Company has determined that it is appropriate to induce key employees to
remain with the Company, and to reinforce and encourage their continued
attention and dedication. Accordingly, subject to Section 9, upon your written
acceptance of the terms and conditions of this agreement (the "Agreement")
evidenced by signing below, the Company intends to provide you the protections
set forth herein as of the Effective Date set forth in Section 9. Capitalized
terms not defined in the body of this Agreement shall have the meanings set
forth in Exhibit A hereto, which is incorporated herein and made a part of this
Agreement.
2. Termination Following a Change in Control. If a Change in
Control occurs on or after the Effective Date and your employment is terminated
during the Post Change in Control Period (i) by the Company without Cause or due
to your Disability, (ii) by you for Good Reason or, subject to Section 3 below,
without Good Reason, (iii) due to your death or (iv) due to your Retirement,
then you shall be entitled to the amounts and benefits provided in Section 4
herein. Furthermore, if a Change in Control occurs on or after the Effective
Date and your employment was terminated within the Pre Change in Control Period
(i) by the Company without Cause or due to your Disability, (ii) by you for Good
Reason (based on an event that occurred within the Pre Change in Control
Period), or (iii) due to your death, you shall be entitled to the amounts and
benefits provided in Section 4 herein.
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3. Direct Pay Letter of Credit. Notwithstanding anything else
herein, your right to voluntarily terminate employment without Good Reason after
the date of a Change in Control and receive the amounts due under Section 4
hereof shall be delayed until one-hundred and eighty (180) days after the Change
in Control if, simultaneous with the Change in Control, the Company or the
person or entity triggering the Change in Control delivers to you an irrevocable
direct pay letter of credit (the "Direct Pay Letter of Credit") satisfying the
requirements of this Section 3 and an indemnity agreement covering in a similar
manner the provisions of Section 6 with regard to activities after the Change in
Control. The Direct Pay Letter of Credit shall be in an amount equal to the
aggregate amount you would be entitled to receive under Sections 4(A)(i) and
(ii) hereof if you were terminated without Cause immediately upon the Change in
Control and shall have an expiration date of no less than two (2) years after
the date of such Change in Control. You (or, if applicable, your legal
representative) shall be entitled to draw on the Direct Pay Letter of Credit
upon presentation to the issuing bank of a demand for payment signed by you (or,
if applicable, your legal representative) that states that (i) a Good Reason
event has occurred and your employment has terminated during the Post Change in
Control Period, or (ii) one-hundred and eighty (180) days have expired since the
Change in Control and your employment has terminated during the Post Change in
Control Period. There shall be no other requirements (including no requirement
that you first make demand upon the
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Company) with regard to payment of the Direct Pay Letter of Credit. To the
extent the Direct Pay Letter of Credit is not adequate to cover the amount owed
to you under this Agreement, is not submitted by you or is not paid by the
issuing bank, the Company shall remain liable to you for any amounts owed to you
pursuant to the terms of this Agreement. To the extent any amount is paid under
the Direct Pay Letter of Credit it shall be a credit against any amount the
Company then or thereafter would owe to you under Section 4 of this Agreement.
The Direct Pay Letter of Credit shall be issued by a national money center bank
with a rating of at least A by Standard and Poor's. The Company shall bear the
cost of the Direct Pay Letter of Credit.
4. Compensation on Change in Control Termination. If pursuant to
Section 2 you are entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to you: (A) in a lump sum
within five (5) days after such termination (or, if such termination occurred
during the Pre Change in Control Period, within five (5) days after the Change
in Control) (i) three (3) times your highest annual base salary in effect within
one-hundred and eighty (180) days prior to the Change in Control, (ii) three (3)
times the highest annual bonus paid or payable to you for any of the last three
(3) completed years by the Company or its predecessors (which shall in no event
include amounts contributed or allocated by the Company (or its predecessors) on
your behalf or paid to you under any supplemental executive bonus plans
applicable to you,
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(including, without limitation, the 1993 or 1996 HI Long Term Incentive Plans,
any other plan commonly referred to by the Company as a "top-hat" plan or any
equity plan such as the Millennium Chemicals Inc. Long Term Stock Incentive
Plan)), (iii) any unreimbursed business expenses for the period prior to
termination payable in accordance with the Company's policies, and (iv) any base
salary, bonus, vacation pay or other deferred compensation accrued or earned
under law or in accordance with the Company's policies applicable to you but not
yet paid; (B) any other amounts or benefits due under the then applicable
employee benefit, equity or incentive plans of the Company applicable to you as
shall be determined and paid in accordance with such plans; (C) three (3) years
of additional service and compensation credit (at your highest compensation
level in the one-hundred and eighty (180) day period prior to the Change in
Control) for pension purposes under any defined benefit type qualified or
nonqualified pension plan or arrangement of the Company and its affiliates
applicable to you, measured from the date of termination of employment and not
credited to the extent that you are otherwise entitled to such credit during
such three (3) year period, which payments shall be made through and in
accordance with the terms of the nonqualified defined benefit pension plan or
arrangement if any then exists, or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company's defined or its
affiliates' benefit plan covering you); (D) an amount equal to three (3) years
of the maximum Company contribution (assuming you deferred the maximum
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amount and continued to earn your then current salary), measured from the date
of termination of employment under any type of qualified or nonqualified 401(k)
plan (payable at the end of each such year and not payable to the extent
otherwise contributed to such plan); and (E) payment by the Company of the
premiums for you (except in the case of your death) and your dependents' health
coverage for three (3) years from the date of termination of your employment
under the Company's health plans which cover the senior executives of the
Company or materially similar benefits (to the extent not otherwise provided),
provided that in the case of termination within one hundred eighty (180) days
prior to a Change in Control, the obligations under this subpart (E) shall only
exist to the extent that you or your dependents, as the case may be, had timely
elected or timely elect COBRA coverage which continued at the time of the Change
in Control and the obligation with regard to the period prior to the Change in
Control shall be limited to reimbursement of the COBRA premiums previously paid
or due for such period. Any amendment or termination of benefits, equity or
incentive plans within one-hundred and eighty (180) days prior to, or after, a
Change in Control that is detrimental to you shall be ignored with respect to
(C), (D) and (E) above. Payments under (E) above may, at the discretion of the
Company, be made by continuing your participation in the plan as a terminee, by
paying the applicable COBRA premium for you and your dependents, or by covering
you and your dependents under substitute arrangements, provided that, to the
extent you incur tax that you would not have incurred as an
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active employee as a result of the aforementioned coverage or the benefits
provided thereunder, you shall receive from the Company an additional payment in
the amount necessary so that you will have no additional cost for receiving such
items or any additional payment. Section 6 hereof shall also continue to apply
in all instances.
5. Special Tax Provision. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to you (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership covered by Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") or any person affiliated with the Company
or such person) as a result of a change in ownership of Millennium covered by
Code Section 280G(b)(2) (collectively, the "Covered Payments") is or becomes
subject to the excise tax imposed by or under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), and/or any interest or penalties
with respect to such excise tax (such excise tax, together with such interest
and penalties, is hereinafter collectively referred to as the "Excise Tax"), the
Company shall pay to you an additional amount (the "Tax Reimbursement Payment")
such that after payment by you of all taxes (including, without limitation, any
interest or penalties and any Excise Tax imposed on or attributable to the
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Tax Reimbursement Payment itself), you retain an amount of the Tax Reimbursement
Payment equal to the sum of (i) the amount of the Excise Tax imposed upon the
Covered Payments, and (ii) without duplication, an amount equal to the product
of (A) any deductions disallowed for federal, state or local income tax purposes
because of the inclusion of the Tax Reimbursement Payment in your adjusted gross
income, and (B) the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Tax
Reimbursement Payment is made or is to be made. The intent of this Section 5 is
that after paying your federal, state and local income tax and any payroll
taxes, you will be in the same position as if you were not subject to the Excise
Tax under Section 4999 of the Code and did not receive the extra payments
pursuant to this Section 5 and this Section 5 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 5(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable
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to you) appointed by such public accountants (or, if the public accountants
decline such appointment and decline appointing such legal counsel, such
independent certified public accountants as promptly mutually agreed on in good
faith by the Company and you) (the "Accountant"), deliver a written opinion to
you, reasonably satisfactory to your legal counsel, that you have a reasonable
basis to claim that the Covered Payments (in whole or in part) (A) do not
constitute "parachute payments", (B) represent reasonable compensation for
services actually rendered (within the meaning of Section 280G(b)(4) of the
Code) in excess of the "base amount" allocable to such reasonable compensation,
or (C) such "parachute payments" are otherwise not subject to such Excise Tax
(with appropriate legal authority, detailed analysis and explanation provided
therein by the Accountant); and (ii) the value of any Covered Payments which are
non-cash benefits or deferred payments or benefits shall be determined by the
Accountant in accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, you shall be deemed: (i) to pay federal, state and/or
local income taxes at the highest applicable marginal rate of income taxation
for the calendar year in which the Tax Reimbursement Payment is made or is to be
made, and (ii) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed due
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to the inclusion of the Tax Reimbursement Payment in your adjusted gross income.
(d) (i) (A) In the event that prior to the time you have filed
any of your tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatsoever, the correct amount of the Tax Reimbursement Payment
to be less than the amount determined at the time the Tax Reimbursement Payment
was made, you shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Tax Reimbursement Payment being repaid by you, using the assumptions and
methodology utilized to calculate the Tax Reimbursement Payment (unless
manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by you of any of your tax returns for
the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred but prior to one (1) year after the occurrence of such
change in ownership, you shall file at the request of the Company an amended tax
return in accordance with the Accountant's
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determination, but no portion of the Tax Reimbursement Payment shall be required
to be refunded to the Company until actual refund or credit of such portion has
been made to you, and interest payable to the Company shall not exceed the
interest received or credited to you by such tax authority for the period it
held such portion (less any tax you must pay on such interest and which you are
unable to deduct as a result of payment of the refund).
(C) In the event you receive a refund pursuant to (B) above and
repay such amount to the Company, you shall thereafter file for any refunds or
credits that may be due to you by reason of the repayments to the Company. You
and the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if your claim for such
refund or credit is denied.
(ii) In the event that the Excise Tax is later
determined by the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
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(iii) In the event of any controversy with the
Internal Revenue Service (or other taxing authority) under this Section 5,
subject to the second sentence of subpart (i)(C) above, you shall permit the
Company to control issues related to this Section 5 (at its expense), provided
that such issues do not potentially materially adversely affect you, but you
shall control any other issues. In the event the issues are interrelated, you
and the Company shall in good faith cooperate so as not to jeopardize resolution
of either issue, but if the parties cannot agree you shall make the final
determination with regard to the issues. In the event of any conference with any
taxing authority as to the Excise Tax or associated income taxes, you shall
permit the representative of the Company to accompany you, and you and your
representative shall cooperate with the Company and its representative.
(iv) With regard to any initial filing for a
refund or any other action required pursuant to this Section 5 (other than by
mutual agreement) or, if not required, agreed to by the Company and you, you
shall cooperate fully with the Company, provided that the foregoing shall not
apply to actions that are provided herein to be at your sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant, and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The
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Company shall use its best efforts to cause the Accountant to promptly deliver
the initial determination required hereunder and, if not delivered, within
ninety (90) days after the change in ownership event covered by Section
280G(b)(2) of the Code, the Company shall pay you the Tax Reimbursement Payment
set forth in an opinion from counsel recognized as knowledgeable in the relevant
areas selected by you, and reasonably acceptable to the Company, within five (5)
days after delivery of such opinion. In accordance with Section 15, the Company
may withhold from the Tax Reimbursement Payment and deposit into applicable
taxing authorities such amounts as they are required to withhold by applicable
law. To the extent that you are required to pay estimated or other taxes on
amounts received by you beyond any withheld amounts, you shall promptly make
such payments. The amount of such payment shall be subject to later adjustment
in accordance with the determination of the Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by your counsel.
(g) You and the Company shall mutually agree on and promulgate
further guidelines in accordance with this Section 5 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
5(d)(i)(C) hereof.
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6. Indemnification. (a) The Company and Millennium, jointly and
severally, agree that if you are made a party to or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that you are or were a
director or officer of the Company or Millennium, and/or any other affiliate of
any of such companies, or are or were serving at the request of any of such
companies as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, you shall be indemnified and held harmless by the Company and Millennium
to the fullest extent authorized by Delaware law (or, if different, the law
applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by you in connection therewith, and
such indemnification shall continue as to you even if you have ceased to be an
officer, director, member, fiduciary or agent, or are no longer employed by the
company, and shall inure to the benefit of your heirs, executors and
administrators. With respect to the obligations set forth in this Section 6, the
Company and Millennium shall become liable hereunder with respect to any
Proceeding which arises out of or relates to events occurring on or after July
1,
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1996, except to the extent that the liability relates to service with or for
another assignee under Section 10 hereof (in which case such assignee shall be
liable).
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and reasonable costs, reasonable attorneys' fees,
reasonable accountants' fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding
shall be paid by the Company and Millennium in advance upon your request and the
giving by you of any undertakings required by applicable law.
(d) You shall give the Company and Millennium prompt notice of
any claim made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Millennium such
information and cooperation as it may reasonably require and as shall be within
your power and at such times and places as are reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the
Company and Millennium of the commencement thereof: (i) the company will be
entitled to participate therein at its
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own expense; and (ii) except as otherwise provided below, to the extent that it
may wish, the company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof. You also shall have the
right to employ your own counsel in such Proceeding and the fees and expenses of
such counsel shall be at the expense of the company.
(f) The Company and Millennium shall not be liable to indemnify
you under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Millennium shall
settle any Proceeding in any manner which would impose any penalty or limitation
on you without your written consent. Neither the Company, Millennium nor you
will unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which you may have
or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
(h) The Company and Millennium agree to maintain or cause to be
maintained Officer and Director liability insurance policies covering you and
shall maintain at all times following the Effective Date and during your term of
employment with the
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Company and/or Millennium coverage under such policies in the aggregate with
regard to all officers and directors, including you, of an amount not less than
$20 million. The Company and Millennium shall maintain or cause to be maintained
for a six (6) year period commencing on the date you cease to be both an
employee or director of such entity or any of its affiliates, Officer and
Director liability insurance coverage for events occurring during the period you
were an employee or director of any such entity or any of its affiliates in the
same aggregate amount and under the same terms as are maintained for its active
officers and directors. The phrase "in the same aggregate amount and under the
same terms" shall include the same level of self-insurance by the entity as
shall be maintained for active officers and directors.
7. Legal Fees. In the event that a claim for payment or benefits
under this Agreement is disputed as a result of events which occurred after a
Change in Control, or during the Pre Change in Control Period, the Company shall
pay all reasonable attorney, accountant and other professional fees and
reasonable expenses incurred by you in pursuing such claim, unless the claim by
you is found to be frivolous by any court or arbitrator.
8. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way
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to reduce any amounts payable to you by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by you or benefit provided to
you as the result of employment by another employer or otherwise. Except as
otherwise provided herein and apart from any disagreement between you and the
Company concerning interpretation of this Agreement or any term or provision
hereof, the Company's obligations to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against you. The amounts due under Section 4 are inclusive, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due hereunder.
9. Effective Date and Term. (a) Notwithstanding anything else
herein, this Agreement shall become effective (the "Effective Date") as of the
date of the Demerger provided that you are employed by the Company on such date.
If the Demerger does not occur prior to March 31, 1997 or you are not employed
by the Company on the date of the Demerger for any reason whatsoever, the
provisions of this Agreement (other than this Section 9(a)) shall have no force
or effect and this Agreement shall be null and void.
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(b) This Agreement shall be for a term (the "Term") commencing on
the Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change in Control has taken place prior to
termination of this Agreement, this Agreement shall continue in full force and
effect during the Change in Control Protection Period and further provided that
the payment and other obligations hereunder shall survive such termination to
the extent a Change in Control has occurred during the Term, and in any event,
the obligations under Section 6 hereof shall survive the end of the Term with
regard to matters occurring during the Term (even if a claim is made after the
Term).
10. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. Reference to the Company herein shall also
include any successor to HM Anglo-American, Ltd. This Agreement shall inure to
the benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors,
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heirs, distributees, devises and legatees. If you die while any amount would
still by payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of the Agreement to the executors, personal representatives, estate
trustees, or administrators of your estate. This Agreement is personal to you
and neither this Agreement nor any rights hereunder may be assigned by you.
11. Communications. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by registered mail, postage prepaid as follows:
(i) If to the Company or Millennium, to such
entity at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: William M. Landuyt
Chairman and Chief Executive
Officer
(ii) If to you, to the last
shown address on the
books of the Company or
Millennium.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
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12. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause, subject to the payment provisions
hereof if such termination is during the Change in Control Protection Period.
You acknowledge that you are aware that you shall have no claim against the
Company hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not specifically satisfy the
requirements hereof. The foregoing shall not affect your rights under any other
agreement with the Company.
13. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Company Board (as defined in Part III of Exhibit A). No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any prior
agreements between the Company and you. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All
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references to any law shall be deemed also to refer to any successor provisions
to such laws.
14. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and you have been given the opportunity to do so.
15. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
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16. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware
without reference to rules relating to conflicts of law.
Very truly yours,
HM ANGLO-AMERICAN, LTD.
By: /s/ WILLIAM M. LANDUYT
----------------------------------
Name: William M. Landuyt
Title: Chairman and Chief
Executive Officer
Agreed and Accepted this
1st day of July, 1996:
MILLENNIUM CHEMICALS INC. /s/ GEORGE H. HEMPSTEAD, III
(for purposes of Section 6 only) ---------------------------------------
George H. Hempstead, III
By: /s/ GRAHAM DRANSFIELD
-----------------------------
Name: Graham Dransfield
Title: Vice President and Director
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EXHIBIT A
Part I -- Cause
1. Subject to compliance with the notification provisions in this
Exhibit A, this Agreement shall not prevent the termination of your employment
by the Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause. For purposes of
this Agreement, the term "Cause" shall be limited to your: (i) willful
misconduct with regard to the Company or its affiliates or their businesses
which has a material adverse effect on the Company and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Company Board
provided that the foregoing refusal shall not be "Cause" if in good faith you
believe that such direction is illegal, unethical or immoral and you promptly so
notify the applicable Company Board; (iii) conviction of a felony (other than a
felony involving a motor vehicle) and either (x) exhausting all appeals without
a reversal of the conviction or (y) commencing a term of incarceration in a
house of detention; (iv) breach of any fiduciary duty owed to the Company or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or (v) your material fraud with regard to the Company or any
of its affiliates.
2. A notice of termination for Cause shall mean a notice that
shall set forth in reasonable detail the specific basis, facts and circumstances
which provide for a basis for termination for Cause and shall include a copy of
a resolution duly adopted by at least two-thirds of the directors of the
applicable Company at a meeting which was called for the purpose of considering
such termination and which you and your representative had the right to attend
and address, finding that, in the good faith opinion of the applicable board,
you engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. The date of termination
for a termination for Cause shall be the date indicated in the notice of
termination.
3. Notwithstanding anything to the contrary contained in this
Agreement, if any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a court
not to have been based on the grounds set forth in this Agreement, or not to
have followed the procedures set forth in this Agreement, such purported
termination for Cause shall be deemed a termination by the Company without Cause
and you shall be entitled to the amounts and benefits provided in Section 4 to
the extent, if any, applicable.
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Part II -- Change in Control
1. Change in Control. For purposes of this Agreement, the term
"Change in Control" shall mean (i) any "person" as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 ("Act") (other than
Millennium, any trustee or other fiduciary holding securities under any employee
benefit plan of Millennium or any company owned, directly or indirectly, by the
stockholders of Millennium in substantially the same proportions as their
ownership of Common Stock of Millennium), becoming the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
Millennium representing twenty-five percent (25%) or more of the combined voting
power of Millennium's then 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 beginning of such period constitute the Board
of Directors of Millennium, and any new director (other than a director
designated by a person who has entered into an agreement with Millennium to
effect a transaction described in clause (i), (iii), or (iv) of this paragraph
or a director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors of Millennium) whose election by the Board of Directors of
Millennium or nomination for election by Millennium'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
Millennium; (iii) the merger or consolidation of Millennium with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Millennium outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Millennium or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Millennium (or similar transaction) in which no person (other than those
covered by the exceptions in (i) above) acquires more than twenty-five percent
(25%) of the combined voting power of Millennium's then outstanding securities
shall not constitute a Change in Control of Millennium; or (iv) approval by the
stockholders of Millennium of a plan of complete liquidation of Millennium or
the closing of the sale or disposition by Millennium of all or substantially all
of Millennium's assets other than the sale of all or substantially all of the
assets of Millennium to a person or
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persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of Millennium at the time of the sale. Notwithstanding the foregoing, the
Demerger will not constitute a Change of Control for purposes of this Agreement.
Only one (1) Change in Control may occur under this Agreement.
2. Change in Control Protection Period. For purposes of this
Agreement, the term "Change in Control Protection Period" shall mean the Pre
Change in Control Period and the Post Change in Control Period as defined below.
3. Pre Change in Control Period. For purposes of this Agreement,
Pre Change in Control Period shall mean the one-hundred and eighty (180) day
period prior to the date of a Change in Control that occurs on or after the
Effective Date.
4. Post Change in Control Period. For purposes of this Agreement,
Post Change in Control Period shall mean the period commencing on the date of a
Change in Control that occurs on or after the Effective Date and ending the day
immediately prior to the second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be
deemed to refer to the Board of Directors of the Company and Millennium.
Part IV -- Disability
For purposes of this Agreement, the term "Disability" shall mean
your inability to perform your material duties and responsibilities hereunder
due to the same or related physical or mental reasons for more than one hundred
eighty (180) consecutive days in any twelve (12) consecutive month period. A
termination for Disability shall be deemed to occur when you are terminated by
the Company by written notice after you incur a Disability and while you remain
disabled.
Part V -- Good Reason
1. For purposes of this Agreement, a termination for "Good
Reason" shall mean a termination by you effected by a written notice of
termination for Good Reason given within ninety (90) days after the occurrence
of the Good Reason event. Subject to subsection 3 below, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the
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highest position held within the Pre Change in Control Period (except in each
case in connection with the termination of your employment for Cause, Disability
or as a result of your death, or in the case of a material diminution of duties
or responsibilities, temporarily as a result of your illness or other absence)
or the assignment to you of duties or responsibilities that are inconsistent
with your aforementioned highest position; (ii) your removal from, or the
nonreelection to, your positions as an officer with the Company or Millennium
held during the Pre Change in Control Period; (iii) a relocation of the
Company's principal United States executive offices to a location more than
twenty-five (25) miles from where they are at the time of the Change in Control,
or a relocation by the Company of your principal office away from such principal
United States executive offices; (iv) a failure by the Company or Millennium (A)
to continue any bonus plan, program or arrangement in which you were entitled to
participate during the Pre Change in Control Period (the "Bonus Plans"),
provided that any such Bonus Plans may be modified at the Company's discretion
from time to time but shall be deemed terminated if (x) any such plan does not
remain substantially in the form in effect prior to such modification or (y) if
plans providing you with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue you as a participant in the
Bonus Plans or Substitute Plans on not less than the same maximum level of award
and not more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in accordance
with the Bonus Plans and the Substitute Plans; (v) any material breach by the
Company or Millennium of any provision of this Agreement; (vi) if on the Company
Board during the Pre Change in Control Period, your removal from or failure to
be reelected to the Company Board; (vii) a reduction by the Company of your rate
of annual base salary to a level below your highest rate of base salary within
one-hundred and eighty (180) days prior to the Change in Control; or (viii)
failure of any successor of the Company to assume in a writing delivered to you
upon the assignee becoming such, the obligations of the Company hereunder.
2. A notice of termination for Good Reason shall indicate the
specific basis for termination relied upon and set forth in reasonable detail
the facts and circumstances claimed to provide a basis for a termination for
Good Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any of your rights hereunder or preclude you from
asserting such fact or circumstance in enforcing your rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such notice
of termination for Good Reason is given.
3. In the event that a Direct Pay Letter of Credit is delivered
in accordance with Section 3 of this Agreement at the
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time of a Change in Control, the definition of Good Reason shall not include the
events set forth in subsections 1(i), (ii) and (vi) above so long as during such
period you are maintained in a senior advisory capacity (without any line or
other staff responsibilities) to assist in the orderly transition to new
management.
Part VI - Retirement
For purposes of this Agreement, the term "Retirement" shall mean
your retirement by the Company at or after your sixty-fifth (65th) birthday to
the extent such termination is specifically permitted as a stated exception from
applicable federal and state age discrimination laws based on position and
retirement benefits.
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EXHIBIT 10.18
HM Anglo-American, Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
(908) 603-6600
July 1, 1996
Mr. John E. Lushefski
[Address]
Dear Mr. Lushefski:
1. Introduction. HM Anglo-American, Ltd. (the "Company") believes
that the establishment and maintenance of a sound and vital management of the
Company and of Millennium Chemicals Inc., which is intended to become the
ultimate parent corporation of the Company ("Millennium") in connection with the
demerger by Hanson PLC of its chemicals business (the "Demerger"), is essential
to the protection and enhancement of the interests of the Company and Millennium
and their stockholders. The Company also recognizes that the possibility of a
Change in Control (as defined in Part II of Exhibit A) of Millennium, with the
attendant uncertainties and risks, might result in the departure or distraction
of key employees of the Company to the detriment of the Company, Millennium and
their stockholders. In light of the possibility of a Change in Control of
Millennium, which is intended to become a separate publicly traded company as a
result of the Demerger, the Company has determined that it is appropriate to
induce key employees to remain with the Company, and to reinforce and encourage
their
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continued attention and dedication. Accordingly, subject to Section 9, upon your
written acceptance of the terms and conditions of this agreement (the
"Agreement") evidenced by signing below, the Company intends to provide you the
protections set forth herein as of the Effective Date set forth in Section 9.
Capitalized terms not defined in the body of this Agreement shall have the
meanings set forth in Exhibit A hereto, which is incorporated herein and made a
part of this Agreement.
2. Termination Following a Change in Control. If a Change in
Control occurs on or after the Effective Date and your employment is terminated
during the Post Change in Control Period (i) by the Company without Cause or due
to your Disability, (ii) by you for Good Reason or, subject to Section 3 below,
without Good Reason, (iii) due to your death or (iv) due to your Retirement,
then you shall be entitled to the amounts and benefits provided in Section 4
herein. Furthermore, if a Change in Control occurs on or after the Effective
Date and your employment was terminated within the Pre Change in Control Period
(i) by the Company without Cause or due to your Disability, (ii) by you for Good
Reason (based on an event that occurred within the Pre Change in Control
Period), or (iii) due to your death, you shall be entitled to the amounts and
benefits provided in Section 4 herein.
3. Direct Pay Letter of Credit. Notwithstanding anything else
herein, your right to voluntarily terminate employment without Good Reason after
the date of a Change in
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Control and receive the amounts due under Section 4 hereof shall be delayed
until one-hundred and eighty (180) days after the Change in Control if,
simultaneous with the Change in Control, the Company or the person or entity
triggering the Change in Control delivers to you an irrevocable direct pay
letter of credit (the "Direct Pay Letter of Credit") satisfying the requirements
of this Section 3 and an indemnity agreement covering in a similar manner the
provisions of Section 6 with regard to activities after the Change in Control.
The Direct Pay Letter of Credit shall be in an amount equal to the aggregate
amount you would be entitled to receive under Sections 4(A)(i) and (ii) hereof
if you were terminated without Cause immediately upon the Change in Control and
shall have an expiration date of no less than two (2) years after the date of
such Change in Control. You (or, if applicable, your legal representative) shall
be entitled to draw on the Direct Pay Letter of Credit upon presentation to the
issuing bank of a demand for payment signed by you (or, if applicable, your
legal representative) that states that (i) a Good Reason event has occurred and
your employment has terminated during the Post Change in Control Period, or (ii)
one-hundred and eighty (180) days have expired since the Change in Control and
your employment has terminated during the Post Change in Control Period. There
shall be no other requirements (including no requirement that you first make
demand upon the Company) with regard to payment of the Direct Pay Letter of
Credit. To the extent the Direct Pay Letter of Credit is not adequate to cover
the amount owed to you under this Agreement, is
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not submitted by you or is not paid by the issuing bank, the Company shall
remain liable to you for any amounts owed to you pursuant to the terms of this
Agreement. To the extent any amount is paid under the Direct Pay Letter of
Credit it shall be a credit against any amount the Company then or thereafter
would owe to you under Section 4 of this Agreement. The Direct Pay Letter of
Credit shall be issued by a national money center bank with a rating of at least
A by Standard and Poor's. The Company shall bear the cost of the Direct Pay
Letter of Credit.
4. Compensation on Change in Control Termination. If pursuant to
Section 2 you are entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to you: (A) in a lump sum
within five (5) days after such termination (or, if such termination occurred
during the Pre Change in Control Period, within five (5) days after the Change
in Control) (i) three (3) times your highest annual base salary in effect within
one-hundred and eighty (180) days prior to the Change in Control, (ii) three (3)
times the highest annual bonus paid or payable to you for any of the last three
(3) completed years by the Company or its predecessors (which shall in no event
include amounts contributed or allocated by the Company (or its predecessors) on
your behalf or paid to you under any supplemental executive bonus plans
applicable to you, (including, without limitation, the 1993 or 1996 HI Long Term
Incentive Plans, any other plan commonly referred to by the Company as a
"top-hat" plan or any equity plan such as the
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Millennium Chemicals Inc. Long Term Stock Incentive Plan)), (iii) any
unreimbursed business expenses for the period prior to termination payable in
accordance with the Company's policies, and (iv) any base salary, bonus,
vacation pay or other deferred compensation accrued or earned under law or in
accordance with the Company's policies applicable to you but not yet paid; (B)
any other amounts or benefits due under the then applicable employee benefit,
equity or incentive plans of the Company applicable to you as shall be
determined and paid in accordance with such plans; (C) three (3) years of
additional service and compensation credit (at your highest compensation level
in the one-hundred and eighty (180) day period prior to the Change in Control)
for pension purposes under any defined benefit type qualified or nonqualified
pension plan or arrangement of the Company and its affiliates applicable to you,
measured from the date of termination of employment and not credited to the
extent that you are otherwise entitled to such credit during such three (3) year
period, which payments shall be made through and in accordance with the terms of
the nonqualified defined benefit pension plan or arrangement if any then exists,
or, if not, in an actuarially equivalent lump sum (using the actuarial factors
then applying in the Company's defined or its affiliates' benefit plan covering
you); (D) an amount equal to three (3) years of the maximum Company contribution
(assuming you deferred the maximum amount and continued to earn your then
current salary), measured from the date of termination of employment under any
type of qualified or nonqualified 401(k) plan (payable at the end of each
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such year and not payable to the extent otherwise contributed to such plan); and
(E) payment by the Company of the premiums for you (except in the case of your
death) and your dependents' health coverage for three (3) years from the date of
termination of your employment under the Company's health plans which cover the
senior executives of the Company or materially similar benefits (to the extent
not otherwise provided), provided that in the case of termination within one
hundred eighty (180) days prior to a Change in Control, the obligations under
this subpart (E) shall only exist to the extent that you or your dependents, as
the case may be, had timely elected or timely elect COBRA coverage which
continued at the time of the Change in Control and the obligation with regard to
the period prior to the Change in Control shall be limited to reimbursement of
the COBRA premiums previously paid or due for such period. Any amendment or
termination of benefits, equity or incentive plans within one-hundred and eighty
(180) days prior to, or after, a Change in Control that is detrimental to you
shall be ignored with respect to (C), (D) and (E) above. Payments under (E)
above may, at the discretion of the Company, be made by continuing your
participation in the plan as a terminee, by paying the applicable COBRA premium
for you and your dependents, or by covering you and your dependents under
substitute arrangements, provided that, to the extent you incur tax that you
would not have incurred as an active employee as a result of the aforementioned
coverage or the benefits provided thereunder, you shall receive from the Company
an additional payment in the amount necessary so that you will
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have no additional cost for receiving such items or any additional payment.
Section 6 hereof shall also continue to apply in all instances.
5. Special Tax Provision. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to you (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership covered by Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") or any person affiliated with the Company
or such person) as a result of a change in ownership of Millennium covered by
Code Section 280G(b)(2) (collectively, the "Covered Payments") is or becomes
subject to the excise tax imposed by or under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), and/or any interest or penalties
with respect to such excise tax (such excise tax, together with such interest
and penalties, is hereinafter collectively referred to as the "Excise Tax"), the
Company shall pay to you an additional amount (the "Tax Reimbursement Payment")
such that after payment by you of all taxes (including, without limitation, any
interest or penalties and any Excise Tax imposed on or attributable to the Tax
Reimbursement Payment itself), you retain an amount of the Tax Reimbursement
Payment equal to the sum of (i) the amount of the Excise Tax imposed upon the
Covered Payments, and (ii)
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without duplication, an amount equal to the product of (A) any deductions
disallowed for federal, state or local income tax purposes because of the
inclusion of the Tax Reimbursement Payment in your adjusted gross income, and
(B) the highest applicable marginal rate of federal, state or local income
taxation, respectively, for the calendar year in which the Tax Reimbursement
Payment is made or is to be made. The intent of this Section 5 is that after
paying your federal, state and local income tax and any payroll taxes, you will
be in the same position as if you were not subject to the Excise Tax under
Section 4999 of the Code and did not receive the extra payments pursuant to this
Section 5 and this Section 5 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 5(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable to you) appointed by such public accountants (or, if the
public accountants decline such appointment and decline appointing such legal
counsel, such independent certified public accountants as
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promptly mutually agreed on in good faith by the Company and you) (the
"Accountant"), deliver a written opinion to you, reasonably satisfactory to your
legal counsel, that you have a reasonable basis to claim that the Covered
Payments (in whole or in part) (A) do not constitute "parachute payments", (B)
represent reasonable compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the "base amount"
allocable to such reasonable compensation, or (C) such "parachute payments" are
otherwise not subject to such Excise Tax (with appropriate legal authority,
detailed analysis and explanation provided therein by the Accountant); and (ii)
the value of any Covered Payments which are non-cash benefits or deferred
payments or benefits shall be determined by the Accountant in accordance with
the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, you shall be deemed: (i) to pay federal, state and/or
local income taxes at the highest applicable marginal rate of income taxation
for the calendar year in which the Tax Reimbursement Payment is made or is to be
made, and (ii) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed due to the
inclusion of the Tax Reimbursement Payment in your adjusted gross income.
(d) (i) (A) In the event that prior to the time you have filed
any of your tax returns for the calendar year in which
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the change in ownership event covered by Code Section 280G(b)(2) occurred, the
Accountant determines, for any reason whatsoever, the correct amount of the Tax
Reimbursement Payment to be less than the amount determined at the time the Tax
Reimbursement Payment was made, you shall repay to the Company, at the time that
the amount of such reduction in Tax Reimbursement Payment is determined by the
Accountant, the portion of the prior Tax Reimbursement Payment attributable to
such reduction (including the portion of the Tax Reimbursement Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the portion of the Tax Reimbursement Payment being repaid by you, using the
assumptions and methodology utilized to calculate the Tax Reimbursement Payment
(unless manifestly erroneous)), plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by you of any of your tax returns for
the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred but prior to one (1) year after the occurrence of such
change in ownership, you shall file at the request of the Company an amended tax
return in accordance with the Accountant's determination, but no portion of the
Tax Reimbursement Payment shall be required to be refunded to the Company until
actual refund or credit of such portion has been made to you, and interest
payable to the Company shall not exceed the interest
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received or credited to you by such tax authority for the period it held such
portion (less any tax you must pay on such interest and which you are unable to
deduct as a result of payment of the refund).
(C) In the event you receive a refund pursuant to (B) above and
repay such amount to the Company, you shall thereafter file for any refunds or
credits that may be due to you by reason of the repayments to the Company. You
and the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if your claim for such
refund or credit is denied.
(ii) In the event that the Excise Tax is later
determined by the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
(iii) In the event of any controversy with the
Internal Revenue Service (or other taxing authority) under this Section 5,
subject to the second sentence of subpart (i)(C) above, you shall permit the
Company to control issues related to
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this Section 5 (at its expense), provided that such issues do not potentially
materially adversely affect you, but you shall control any other issues. In the
event the issues are interrelated, you and the Company shall in good faith
cooperate so as not to jeopardize resolution of either issue, but if the parties
cannot agree you shall make the final determination with regard to the issues.
In the event of any conference with any taxing authority as to the Excise Tax or
associated income taxes, you shall permit the representative of the Company to
accompany you, and you and your representative shall cooperate with the Company
and its representative.
(iv) With regard to any initial filing for a
refund or any other action required pursuant to this Section 5 (other than by
mutual agreement) or, if not required, agreed to by the Company and you, you
shall cooperate fully with the Company, provided that the foregoing shall not
apply to actions that are provided herein to be at your sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant, and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The Company shall use its best efforts to cause the Accountant to
promptly deliver the initial determination required hereunder and, if not
delivered, within ninety (90) days after the change in ownership event covered
by Section 280G(b)(2) of the Code, the
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Company shall pay you the Tax Reimbursement Payment set forth in an opinion from
counsel recognized as knowledgeable in the relevant areas selected by you, and
reasonably acceptable to the Company, within five (5) days after delivery of
such opinion. In accordance with Section 15, the Company may withhold from the
Tax Reimbursement Payment and deposit into applicable taxing authorities such
amounts as they are required to withhold by applicable law. To the extent that
you are required to pay estimated or other taxes on amounts received by you
beyond any withheld amounts, you shall promptly make such payments. The amount
of such payment shall be subject to later adjustment in accordance with the
determination of the Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by your counsel.
(g) You and the Company shall mutually agree on and promulgate
further guidelines in accordance with this Section 5 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
5(d)(i)(C) hereof.
6. Indemnification. (a) The Company and Millennium, jointly and
severally, agree that if you are made a party to or threatened to be made a
party to any action, suit or proceeding,
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whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that you are or were a director or officer of the Company or
Millennium, and/or any other affiliate of any of such companies, or are or were
serving at the request of any of such companies as a director, officer, member,
employee, fiduciary or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including, without limitation, service with
respect to employee benefit plans, whether or not the basis of such Proceeding
is alleged action in an official capacity as a director, officer, member,
employee, fiduciary or agent while serving as a director, officer, member,
employee, fiduciary or agent, you shall be indemnified and held harmless by the
Company and Millennium to the fullest extent authorized by Delaware law (or, if
different, the law applicable to such company), as the same exists or may
hereafter be amended, against all Expenses incurred or suffered by you in
connection therewith, and such indemnification shall continue as to you even if
you have ceased to be an officer, director, member, fiduciary or agent, or are
no longer employed by the company, and shall inure to the benefit of your heirs,
executors and administrators. With respect to the obligations set forth in this
Section 6, the Company and Millennium shall become liable hereunder with respect
to any Proceeding which arises out of or relates to events occurring on or after
July 1, 1996, except to the extent that the liability relates to service with or
for another assignee under Section 10 hereof (in which case such assignee shall
be liable).
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(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and reasonable costs, reasonable attorneys' fees,
reasonable accountants' fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding
shall be paid by the Company and Millennium in advance upon your request and the
giving by you of any undertakings required by applicable law.
(d) You shall give the Company and Millennium prompt notice of
any claim made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Millennium such
information and cooperation as it may reasonably require and as shall be within
your power and at such times and places as are reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the
Company and Millennium of the commencement thereof: (i) the company will be
entitled to participate therein at its own expense; and (ii) except as otherwise
provided below, to the extent that it may wish, the company jointly with any
other indemnifying party similarly notified will be entitled to assume
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the defense thereof. You also shall have the right to employ your own counsel in
such Proceeding and the fees and expenses of such counsel shall be at the
expense of the company.
(f) The Company and Millennium shall not be liable to indemnify
you under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Millennium shall
settle any Proceeding in any manner which would impose any penalty or limitation
on you without your written consent. Neither the Company, Millennium nor you
will unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which you may have
or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
(h) The Company and Millennium agree to maintain or cause to be
maintained Officer and Director liability insurance policies covering you and
shall maintain at all times following the Effective Date and during your term of
employment with the Company and/or Millennium coverage under such policies in
the aggregate with regard to all officers and directors, including you, of an
amount not less than $20 million. The Company and
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Millennium shall maintain or cause to be maintained for a six (6) year period
commencing on the date you cease to be both an employee or director of such
entity or any of its affiliates, Officer and Director liability insurance
coverage for events occurring during the period you were an employee or director
of any such entity or any of its affiliates in the same aggregate amount and
under the same terms as are maintained for its active officers and directors.
The phrase "in the same aggregate amount and under the same terms" shall include
the same level of self-insurance by the entity as shall be maintained for active
officers and directors.
7. Legal Fees. In the event that a claim for payment or benefits
under this Agreement is disputed as a result of events which occurred after a
Change in Control, or during the Pre Change in Control Period, the Company shall
pay all reasonable attorney, accountant and other professional fees and
reasonable expenses incurred by you in pursuing such claim, unless the claim by
you is found to be frivolous by any court or arbitrator.
8. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to you by the Company pursuant
to this Agreement. Further, the amount of any payment or benefit provided for in
this Agreement shall not be reduced by any
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compensation earned by you or benefit provided to you as the result of
employment by another employer or otherwise. Except as otherwise provided herein
and apart from any disagreement between you and the Company concerning
interpretation of this Agreement or any term or provision hereof, the Company's
obligations to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against you. The amounts due under
Section 4 are inclusive, and in lieu of, any amounts payable under any other
salary continuation or cash severance arrangement of the Company and to the
extent paid or provided under any other such arrangement shall be offset against
the amount due hereunder.
9. Effective Date and Term. (a) Notwithstanding anything else
herein, this Agreement shall become effective (the "Effective Date") as of the
date of the Demerger provided that you are employed by the Company on such date.
If the Demerger does not occur prior to March 31, 1997 or you are not employed
by the Company on the date of the Demerger for any reason whatsoever, the
provisions of this Agreement (other than this Section 9(a)) shall have no force
or effect and this Agreement shall be null and void.
(b) This Agreement shall be for a term (the "Term") commencing on
the Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change
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in Control has taken place prior to termination of this Agreement, this
Agreement shall continue in full force and effect during the Change in Control
Protection Period and further provided that the payment and other obligations
hereunder shall survive such termination to the extent a Change in Control has
occurred during the Term, and in any event, the obligations under Section 6
hereof shall survive the end of the Term with regard to matters occurring during
the Term (even if a claim is made after the Term).
10. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. Reference to the Company herein shall also
include any successor to HM Anglo-American, Ltd. This Agreement shall inure to
the benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees. If you die while any amount would still by payable to you hereunder if
you had continued to live, all such amounts, unless otherwise provided
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herein, shall be paid in accordance with the terms of the Agreement to the
executors, personal representatives, estate trustees, or administrators of your
estate. This Agreement is personal to you and neither this Agreement nor any
rights hereunder may be assigned by you.
11. Communications. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by registered mail, postage prepaid as follows:
(i) If to the Company or Millennium, to such
entity at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Senior Vice President -
Law and Administration
(ii) If to you, to the last
shown address on the
books of the Company or
Millennium.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
12. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause,
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subject to the payment provisions hereof if such termination is during the
Change in Control Protection Period. You acknowledge that you are aware that you
shall have no claim against the Company hereunder or for deprivation of the
right to receive the amounts hereunder as a result of any termination that does
not specifically satisfy the requirements hereof. The foregoing shall not affect
your rights under any other agreement with the Company.
13. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Company Board (as defined in Part III of Exhibit A). No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any prior
agreements between the Company and you. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All references to any law shall be deemed also to refer to any successor
provisions to such laws.
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14. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and you have been given the opportunity to do so.
15. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
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16. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware
without reference to rules relating to conflicts of law.
Very truly yours,
HM ANGLO-AMERICAN, LTD.
By: /s/ WILLIAM M. LANDUYT
--------------------------
Name: William M. Landuyt
Title: Chairman and Chief
Executive Officer
Agreed and Accepted this
1st day of July, 1996:
MILLENNIUM CHEMICALS INC. /s/ JOHN E. LUSHEFSKI
(for purposes of Section 6 only) -----------------------------
John E. Lushefski
By: /s/ GRAHAM DRANSFIELD
-----------------------------------
Name: Graham Dransfield
Title: Vice President and Director
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EXHIBIT A
Part I -- Cause
1. Subject to compliance with the notification provisions in this
Exhibit A, this Agreement shall not prevent the termination of your employment
by the Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause. For purposes of
this Agreement, the term "Cause" shall be limited to your: (i) willful
misconduct with regard to the Company or its affiliates or their businesses
which has a material adverse effect on the Company and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Company Board
provided that the foregoing refusal shall not be "Cause" if in good faith you
believe that such direction is illegal, unethical or immoral and you promptly so
notify the applicable Company Board; (iii) conviction of a felony (other than a
felony involving a motor vehicle) and either (x) exhausting all appeals without
a reversal of the conviction or (y) commencing a term of incarceration in a
house of detention; (iv) breach of any fiduciary duty owed to the Company or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or (v) your material fraud with regard to the Company or any
of its affiliates.
2. A notice of termination for Cause shall mean a notice that
shall set forth in reasonable detail the specific basis, facts and circumstances
which provide for a basis for termination for Cause and shall include a copy of
a resolution duly adopted by at least two-thirds of the directors of the
applicable Company at a meeting which was called for the purpose of considering
such termination and which you and your representative had the right to attend
and address, finding that, in the good faith opinion of the applicable board,
you engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. The date of termination
for a termination for Cause shall be the date indicated in the notice of
termination.
3. Notwithstanding anything to the contrary contained in this
Agreement, if any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a court
not to have been based on the grounds set forth in this Agreement, or not to
have followed the procedures set forth in this Agreement, such purported
termination for Cause shall be deemed a termination by the Company without Cause
and you shall be entitled to the amounts and benefits provided in Section 4 to
the extent, if any, applicable.
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Part II -- Change in Control
1. Change in Control. For purposes of this Agreement, the term
"Change in Control" shall mean (i) any "person" as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 ("Act") (other than
Millennium, any trustee or other fiduciary holding securities under any employee
benefit plan of Millennium or any company owned, directly or indirectly, by the
stockholders of Millennium in substantially the same proportions as their
ownership of Common Stock of Millennium), becoming the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
Millennium representing twenty-five percent (25%) or more of the combined voting
power of Millennium's then 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 beginning of such period constitute the Board
of Directors of Millennium, and any new director (other than a director
designated by a person who has entered into an agreement with Millennium to
effect a transaction described in clause (i), (iii), or (iv) of this paragraph
or a director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors of Millennium) whose election by the Board of Directors of
Millennium or nomination for election by Millennium'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
Millennium; (iii) the merger or consolidation of Millennium with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Millennium outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Millennium or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Millennium (or similar transaction) in which no person (other than those
covered by the exceptions in (i) above) acquires more than twenty-five percent
(25%) of the combined voting power of Millennium's then outstanding securities
shall not constitute a Change in Control of Millennium; or (iv) approval by the
stockholders of Millennium of a plan of complete liquidation of Millennium or
the closing of the sale or disposition by Millennium of all or substantially all
of Millennium's assets other than the sale of all or substantially all of the
assets of Millennium to a person or
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persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of Millennium at the time of the sale. Notwithstanding the foregoing, the
Demerger will not constitute a Change of Control for purposes of this Agreement.
Only one (1) Change in Control may occur under this Agreement.
2. Change in Control Protection Period. For purposes of this
Agreement, the term "Change in Control Protection Period" shall mean the Pre
Change in Control Period and the Post Change in Control Period as defined below.
3. Pre Change in Control Period. For purposes of this Agreement,
Pre Change in Control Period shall mean the one-hundred and eighty (180) day
period prior to the date of a Change in Control that occurs on or after the
Effective Date.
4. Post Change in Control Period. For purposes of this Agreement,
Post Change in Control Period shall mean the period commencing on the date of a
Change in Control that occurs on or after the Effective Date and ending the day
immediately prior to the second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be
deemed to refer to the Board of Directors of the Company and Millennium.
Part IV -- Disability
For purposes of this Agreement, the term "Disability" shall mean
your inability to perform your material duties and responsibilities hereunder
due to the same or related physical or mental reasons for more than one hundred
eighty (180) consecutive days in any twelve (12) consecutive month period. A
termination for Disability shall be deemed to occur when you are terminated by
the Company by written notice after you incur a Disability and while you remain
disabled.
Part V -- Good Reason
1. For purposes of this Agreement, a termination for "Good
Reason" shall mean a termination by you effected by a written notice of
termination for Good Reason given within ninety (90) days after the occurrence
of the Good Reason event. Subject to subsection 3 below, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the
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highest position held within the Pre Change in Control Period (except in each
case in connection with the termination of your employment for Cause, Disability
or as a result of your death, or in the case of a material diminution of duties
or responsibilities, temporarily as a result of your illness or other absence)
or the assignment to you of duties or responsibilities that are inconsistent
with your aforementioned highest position; (ii) your removal from, or the
nonreelection to, your positions as an officer with the Company or Millennium
held during the Pre Change in Control Period; (iii) a relocation of the
Company's principal United States executive offices to a location more than
twenty-five (25) miles from where they are at the time of the Change in Control,
or a relocation by the Company of your principal office away from such principal
United States executive offices; (iv) a failure by the Company or Millennium (A)
to continue any bonus plan, program or arrangement in which you were entitled to
participate during the Pre Change in Control Period (the "Bonus Plans"),
provided that any such Bonus Plans may be modified at the Company's discretion
from time to time but shall be deemed terminated if (x) any such plan does not
remain substantially in the form in effect prior to such modification or (y) if
plans providing you with substantially similar benefits are not substituted
therefor ("Substitute Plans"), or (B) to continue you as a participant in the
Bonus Plans or Substitute Plans on not less than the same maximum level of award
and not more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in accordance
with the Bonus Plans and the Substitute Plans; (v) any material breach by the
Company or Millennium of any provision of this Agreement; (vi) if on the Company
Board during the Pre Change in Control Period, your removal from or failure to
be reelected to the Company Board; (vii) a reduction by the Company of your rate
of annual base salary to a level below your highest rate of base salary within
one-hundred and eighty (180) days prior to the Change in Control; or (viii)
failure of any successor of the Company to assume in a writing delivered to you
upon the assignee becoming such, the obligations of the Company hereunder.
2. A notice of termination for Good Reason shall indicate the
specific basis for termination relied upon and set forth in reasonable detail
the facts and circumstances claimed to provide a basis for a termination for
Good Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any of your rights hereunder or preclude you from
asserting such fact or circumstance in enforcing your rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such notice
of termination for Good Reason is given.
3. In the event that a Direct Pay Letter of Credit is delivered
in accordance with Section 3 of this Agreement at the
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time of a Change in Control, the definition of Good Reason shall not include the
events set forth in subsections 1(i), (ii) and (vi) above so long as during such
period you are maintained in a senior advisory capacity (without any line or
other staff responsibilities) to assist in the orderly transition to new
management.
Part VI - Retirement
For purposes of this Agreement, the term "Retirement" shall mean
your retirement by the Company at or after your sixty-fifth (65th) birthday to
the extent such termination is specifically permitted as a stated exception from
applicable federal and state age discrimination laws based on position and
retirement benefits.
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EXHIBIT 10.19
Quantum Chemical Corporation
11500 North Lake Drive
Cincinnati, Ohio 45249
July 1, 1996
Dr. Ronald H. Yocum
[Address]
Dear Dr. Yocum:
1. Introduction. Quantum Chemical Corporation (the "Company")
believes that the establishment and maintenance of a sound and vital management
of the Company and of Millennium Chemicals Inc., which is intended to become the
ultimate parent corporation of the Company ("Millennium") in connection with the
demerger by Hanson PLC of its chemicals business (the "Demerger"), is essential
to the protection and enhancement of the interests of the Company and Millennium
and their stockholders. The Company also recognizes that the possibility of a
Change in Control of the Company or a Change in Control of Millennium (each as
defined in Part II of Exhibit A), with the attendant uncertainties and risks,
might result in the departure or distraction of key employees of the Company to
the detriment of the Company, Millennium and their stockholders. In light of the
possibility of a Change in Control of the Company or Millennium, which is
intended to become a separate publicly traded company as a result of the
Demerger, the Company has determined that it is appropriate to induce key
employees to
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remain with the Company, and to reinforce and encourage their continued
attention and dedication. Accordingly, subject to Section 9, upon your written
acceptance of the terms and conditions of this agreement (the "Agreement")
evidenced by signing below, the Company intends to provide you the protections
set forth herein as of the Effective Date set forth in Section 9. Capitalized
terms not defined in the body of this Agreement shall have the meanings set
forth in Exhibit A hereto, which is incorporated herein and made a part of this
Agreement.
2. Termination Following a Change in Control. If a Change in
Control occurs on or after the Effective Date and your employment is terminated
during the Post Change in Control Period (i) by the Company without Cause or due
to your Disability (ii) by you for Good Reason or, subject to Section 3 below,
without Good Reason (iii) due to your death or (iv) due to your Retirement, then
you shall be entitled to the amounts and benefits provided in Section 4 herein.
Furthermore, if a Change in Control occurs on or after the Effective Date and
your employment was terminated within the Pre Change in Control Period (i) by
the Company without Cause or due to your Disability, (ii) by you for Good Reason
(based on an event that occurred within the Pre Change in Control Period), or
(iii) due to your death, you shall be entitled to the amounts and benefits
provided in Section 4 herein.
3. Direct Pay Letter of Credit. Notwithstanding anything else
herein, your right to voluntarily terminate
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employment without Good Reason after the date of a Change in Control and receive
the amounts due under Section 4 hereof shall be delayed until one-hundred and
eighty (180) days after the Change in Control if, simultaneous with the Change
in Control, the Company or the person or entity triggering the Change in Control
delivers to you an irrevocable direct pay letter of credit (the "Direct Pay
Letter of Credit") satisfying the requirements of this Section 3 and an
indemnity agreement covering in a similar manner the provisions of Section 6
with regard to activities after the Change in Control. The Direct Pay Letter of
Credit shall be in an amount equal to the aggregate amount you would be entitled
to receive under Sections 4(A)(i) and (ii) hereof if you were terminated without
Cause immediately upon the Change in Control and shall have an expiration date
of no less than two (2) years after the date of such Change in Control. You (or,
if applicable, your legal representative) shall be entitled to draw on the
Direct Pay Letter of Credit upon presentation to the issuing bank of a demand
for payment signed by you (or, if applicable, your legal representative) that
states that (i) a Good Reason event has occurred and your employment has
terminated during the Post Change in Control Period, or (ii) one-hundred and
eighty (180) days have expired since the Change in Control and your employment
has terminated during the Post Change in Control Period. There shall be no other
requirements (including no requirement that you first make demand upon the
Company) with regard to payment of the Direct Pay Letter of Credit. To the
extent the Direct Pay Letter of Credit is not
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adequate to cover the amount owed to you under this Agreement, is not submitted
by you or is not paid by the issuing bank, the Company shall remain liable to
you for any amounts owed to you pursuant to the terms of this Agreement. To the
extent any amount is paid under the Direct Pay Letter of Credit it shall be a
credit against any amount the Company then or thereafter would owe to you under
Section 4 of this Agreement. The Direct Pay Letter of Credit shall be issued by
a national money center bank with a rating of at least A by Standard and Poor's.
The Company shall bear the cost of the Direct Pay Letter of Credit.
4. Compensation on Change in Control Termination. If pursuant to
Section 2 you are entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to you: (A) in a lump sum
within five (5) days after such termination (or, if such termination occurred
during the Pre Change in Control Period, within five (5) days after the Change
in Control) (i) three (3) times your highest annual base salary in effect within
one-hundred and eighty (180) days prior to the Change in Control, (ii) three (3)
times the highest annual bonus paid or payable to you for any of the last three
(3) completed years by the Company or its predecessors (which shall in no event
include amounts contributed or allocated by the Company (or its predecessors) on
your behalf or paid to you under any supplemental executive bonus plans
applicable to you, (including, without limitation, the 1993 or 1996 HI Long Term
Incentive Plans, any other plan commonly referred to by the
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Company as a "top-hat" plan or any equity plan such as the Millennium Chemicals
Inc. Long Term Stock Incentive Plan)), (iii) any unreimbursed business expenses
for the period prior to termination payable in accordance with the Company's
policies, and (iv) any base salary, bonus, vacation pay or other deferred
compensation accrued or earned under law or in accordance with the Company's
policies applicable to you but not yet paid; (B) any other amounts or benefits
due under the then applicable employee benefit, equity or incentive plans of the
Company applicable to you as shall be determined and paid in accordance with
such plans; (C) three (3) years of additional service and compensation credit
(at your highest compensation level in the one-hundred and eighty (180) day
period prior to the Change in Control) for pension purposes under any defined
benefit type qualified or nonqualified pension plan or arrangement of the
Company and its affiliates applicable to you, measured from the date of
termination of employment and not credited to the extent that you are otherwise
entitled to such credit during such three (3) year period, which payments shall
be made through and in accordance with the terms of the nonqualified defined
benefit pension plan or arrangement if any then exists, or, if not, in an
actuarially equivalent lump sum (using the actuarial factors then applying in
the Company's or its affiliates' defined benefit plan covering you); (D) an
amount equal to three (3) years of the maximum Company contribution (assuming
you deferred the maximum amount and continued to earn your then current salary),
measured from the date of termination of employment under any type of
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qualified or nonqualified 401(k) plan (payable at the end of each such year and
not payable to the extent otherwise contributed to such plan); and (E) payment
by the Company of the premiums for you (except in the case of your death) and
your dependents' health coverage for three (3) years from the date of
termination of your employment under the Company's health plans which cover the
senior executives of the Company or materially similar benefits (to the extent
not otherwise provided), provided that in the case of termination within
one-hundred and eighty (180) days prior to a Change in Control, the obligations
under this subpart (E) shall only exist to the extent that you or your
dependents, as the case may be, had timely elected or timely elect COBRA
coverage which continued at the time of the Change in Control and the obligation
with regard to the period prior to the Change in Control shall be limited to
reimbursement of the COBRA premiums previously paid or due for such period. Any
amendment or termination of benefits, equity or incentive plans within
one-hundred and eighty (180) days prior to, or after a Change in Control that is
detrimental to you shall be ignored with respect to (C), (D) and (E) above.
Payments under (E) above may, at the discretion of the Company, be made by
continuing your participation in the plan as a terminee, by paying the
applicable COBRA premium for you and your dependents, or by covering you and
your dependents under substitute arrangements, provided that, to the extent you
incur tax that you would not have incurred as an active employee as a result of
the aforementioned coverage or the benefits provided thereunder, you shall
receive from the Company
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an additional payment in the amount necessary so that you will have no
additional cost for receiving such items or any additional payment. Section 6
hereof shall also continue to apply in all instances.
5. Special Tax Provision. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to you (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership covered by Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") or any person affiliated with the Company
or such person) as a result of a change in ownership of Millennium covered by
Code Section 280G(b)(2) (collectively, the "Covered Payments") is or becomes
subject to the excise tax imposed by or under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), and/or any interest or penalties
with respect to such excise tax (such excise tax, together with such interest
and penalties, is hereinafter collectively referred to as the "Excise Tax"), the
Company shall pay to you an additional amount (the "Tax Reimbursement Payment")
such that after payment by you of all taxes (including, without limitation, any
interest or penalties and any Excise Tax imposed on or attributable to the Tax
Reimbursement Payment itself), you retain an amount of the Tax Reimbursement
Payment equal to the sum of (i) the amount of
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the Excise Tax imposed upon the Covered Payments, and (ii) without duplication,
an amount equal to the product of (A) any deductions disallowed for federal,
state or local income tax purposes because of the inclusion of the Tax
Reimbursement Payment in your adjusted gross income, and (B) the highest
applicable marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement Payment is
made or is to be made. The intent of this Section 5 is that after paying your
federal, state and local income tax and any payroll taxes, you will be in the
same position as if you were not subject to the Excise Tax under Section 4999 of
the Code and did not receive the extra payments pursuant to this Section 5 and
this Section 5 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 5(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable to you) appointed by such public accountants (or, if the
public accountants decline such appointment and decline appointing such
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legal counsel, such independent certified public accountants as promptly
mutually agreed on in good faith by the Company and you) (the "Accountant"),
deliver a written opinion to you, reasonably satisfactory to your legal counsel,
that you have a reasonable basis to claim that the Covered Payments (in whole or
in part) (A) do not constitute "parachute payments", (B) represent reasonable
compensation for services actually rendered (within the meaning of Section
280G(b)(4) of the Code) in excess of the "base amount" allocable to such
reasonable compensation, or (C) such "parachute payments" are otherwise not
subject to such Excise Tax (with appropriate legal authority, detailed analysis
and explanation provided therein by the Accountant); and (ii) the value of any
Covered Payments which are non-cash benefits or deferred payments or benefits
shall be determined by the Accountant in accordance with the principles of
Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, you shall be deemed: (i) to pay federal, state and/or
local income taxes at the highest applicable marginal rate of income taxation
for the calendar year in which the Tax Reimbursement Payment is made or is to be
made, and (ii) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed due to the
inclusion of the Tax Reimbursement Payment in your adjusted gross income.
9
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(d) (i) (A) In the event that prior to the time you have filed
any of your tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatsoever, the correct amount of the Tax Reimbursement Payment
to be less than the amount determined at the time the Tax Reimbursement Payment
was made, you shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Tax Reimbursement Payment being repaid by you, using the assumptions and
methodology utilized to calculate the Tax Reimbursement Payment (unless
manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by you of any of your tax returns for
the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred but prior to one (1) year after the occurrence of such
change in ownership, you shall file at the request of the Company an amended tax
return in accordance with the Accountant's determination, but no portion of the
Tax Reimbursement Payment shall be required to be refunded to the Company until
actual
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refund or credit of such portion has been made to you, and interest payable to
the Company shall not exceed the interest received or credited to you by such
tax authority for the period it held such portion (less any tax you must pay on
such interest and which you are unable to deduct as a result of payment of the
refund).
(C) In the event you receive a refund pursuant to (B) above and
repay such amount to the Company, you shall thereafter file for any refunds or
credits that may be due to you by reason of the repayments to the Company. You
and the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if your claim for such
refund or credit is denied.
(ii) In the event that the Excise Tax is later
determined by the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
(iii) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) under this
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Section 5, subject to the second sentence of subpart (i)(C) above, you shall
permit the Company to control issues related to this Section 5 (at its expense),
provided that such issues do not potentially materially adversely affect you,
but you shall control any other issues. In the event the issues are
interrelated, you and the Company shall in good faith cooperate so as not to
jeopardize resolution of either issue, but if the parties cannot agree you shall
make the final determination with regard to the issues. In the event of any
conference with any taxing authority as to the Excise Tax or associated income
taxes, you shall permit the representative of the Company to accompany you, and
you and your representative shall cooperate with the Company and its
representative.
(iv) With regard to any initial filing for a
refund or any other action required pursuant to this Section 5 (other than by
mutual agreement) or, if not required, agreed to by the Company and you, you
shall cooperate fully with the Company, provided that the foregoing shall not
apply to actions that are provided herein to be at your sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant, and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The Company shall use its best efforts to cause the Accountant to
promptly deliver the initial determination required hereunder
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and, if not delivered, within ninety (90) days after the change in ownership
event covered by Section 280G(b)(2) of the Code, the Company shall pay you the
Tax Reimbursement Payment set forth in an opinion from counsel recognized as
knowledgeable in the relevant areas selected by you, and reasonably acceptable
to the Company, within five (5) days after delivery of such opinion. In
accordance with Section 15, the Company may withhold from the Tax Reimbursement
Payment and deposit into applicable taxing authorities such amounts as they are
required to withhold by applicable law. To the extent that you are required to
pay estimated or other taxes on amounts received by you beyond any withheld
amounts, you shall promptly make such payments. The amount of such payment shall
be subject to later adjustment in accordance with the determination of the
Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by your counsel.
(g) You and the Company shall mutually agree on and promulgate
further guidelines in accordance with this Section 5 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
5(d)(i)(C) hereof.
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6. Indemnification. (a) The Company and Millennium, jointly and
severally, agree that if you are made a party to or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that you are or were a
director or officer of the Company or Millennium, and/or any other affiliate of
any of such companies, or are or were serving at the request of any of such
companies as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, you shall be indemnified and held harmless by the Company and Millennium
to the fullest extent authorized by Virginia law (or, if different, the law
applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by you in connection therewith, and
such indemnification shall continue as to you even if you have ceased to be an
officer, director, member, fiduciary or agent, or are no longer employed by the
company, and shall inure to the benefit of your heirs, executors and
administrators. With respect to the obligations set forth in this Section 6, the
Company and Millennium shall become liable hereunder with respect to any
Proceeding which arises out of or relates to events occurring on or after July
1,
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1996, except to the extent that the liability relates to service with or for
another assignee under Section 10 hereof (in which case such assignee shall be
liable).
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and reasonable costs, reasonable attorneys' fees,
reasonable accountants' fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding
shall be paid by the Company and Millennium in advance upon your request and the
giving by you of any undertakings required by applicable law.
(d) You shall give the Company and Millennium prompt notice of
any claim made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Millennium such
information and cooperation as it may reasonably require and as shall be within
your power and at such times and places as are reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the
Company and Millennium of the commencement thereof: (i) the company will be
entitled to participate therein at its
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own expense; and (ii) except as otherwise provided below, to the extent that it
may wish, the company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof. You also shall have the
right to employ your own counsel in such Proceeding and the fees and expenses of
such counsel shall be at the expense of the company.
(f) The Company and Millennium shall not be liable to indemnify
you under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Millennium shall
settle any Proceeding in any manner which would impose any penalty or limitation
on you without your written consent. Neither the Company, Millennium nor you
will unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which you may have
or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
7. Legal Fees. In the event that a claim for payment or benefits
under this Agreement is disputed as a result of events which occurred after a
Change in Control, or during the Pre Change in Control Period, the Company shall
pay all
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reasonable attorney, accountant and other professional fees and reasonable
expenses incurred by you in pursuing such claim, unless the claim by you is
found to be frivolous by any court or arbitrator.
8. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to you by the Company pursuant
to this Agreement. Further, the amount of any payment or benefit provided for in
this Agreement shall not be reduced by any compensation earned by you or benefit
provided to you as the result of employment by another employer or otherwise.
Except as otherwise provided herein and apart from any disagreement between you
and the Company concerning interpretation of this Agreement or any term or
provision hereof, the Company's obligations to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against you. The amounts due under Section 4 are inclusive, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due hereunder.
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9. Effective Date and Term. (a) Notwithstanding anything else
herein, this Agreement shall become effective (the "Effective Date") as of the
date of the Demerger provided that you are employed by the Company on such date.
If the Demerger does not occur prior to March 31, 1997 or you are not employed
by the Company on the date of the Demerger for any reason whatsoever, the
provisions of this Agreement (other than this Section 9(a)) shall have no force
or effect and this Agreement shall be null and void.
(b) This Agreement shall be for a term (the "Term") commencing on
the Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change in Control has taken place prior to
termination of this Agreement, this Agreement shall continue in full force and
effect during the Change in Control Protection Period and further provided that
the payment and other obligations hereunder shall survive such termination to
the extent a Change in Control has occurred during the Term, and in any event,
the obligations under Section 6 hereof shall survive the end of the Term with
regard to matters occurring during the Term (even if a claim is made after the
Term).
10. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to
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expressly assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place and this Agreement shall inure to the
benefit of such successor. Any such assignment shall not relieve the Company
from liability hereunder. Reference to the Company herein shall also include any
successor to Quantum Chemical Corporation. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees. If you die while any amount would still by payable to you hereunder if
you had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to the executors,
personal representatives, estate trustees, or administrators of your estate.
This Agreement is personal to you and neither this Agreement nor any rights
hereunder may be assigned by you.
11. Communications. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by registered mail, postage prepaid as follows:
(i) If to the Company or Millennium, to such
entity c/o HM Anglo-American, Ltd. at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Senior Vice President -
Law and Administration.
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(ii) If to you, to the last
shown address on the
books of the Company or
Millennium.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
12. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause, subject to the payment provisions
hereof if such termination is during the Change in Control Protection Period.
You acknowledge that you are aware that you shall have no claim against the
Company hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not specifically satisfy the
requirements hereof. The foregoing shall not affect your rights under any other
agreement with the Company.
13. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by you and such officer as may be
specifically designated by the Company Board (as defined in Part III of Exhibit
A). No waiver by either party hereto at any time of any breach by the other
party hereto
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of, or compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any prior
agreements between the Company and you. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All references to any law shall be deemed also to refer to any successor
provisions to such laws.
14. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and you have been given the opportunity to do so.
15. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
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16. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Virginia
without reference to rules relating to conflicts of law.
Very truly yours,
QUANTUM CHEMICAL CORPORATION
By: /s/ GEORGE H. HEMPSTEAD, III
--------------------------------
Name: George H. Hempstead, III
Title: Vice President
Agreed and Accepted this
1st day of July, 1996:
MILLENNIUM CHEMICALS INC. /s/ RONALD H. YOCUM
(for purposes of Section 6 only) -------------------------------
Ronald H. Yocum
By: /s/ GRAHAM DRANSFIELD
------------------------------------
Name: Graham Dransfield
Title: Vice President and Director
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EXHIBIT A
Part I -- Cause
1. Subject to compliance with the notification provisions in this
Exhibit A, this Agreement shall not prevent the termination of your employment
by the Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause. For purposes of
this Agreement, the term "Cause" shall be limited to your: (i) willful
misconduct with regard to the Company or its affiliates or their businesses
which has a material adverse effect on the Company and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Company Board
provided that the foregoing refusal shall not be "Cause" if in good faith you
believe that such direction is illegal, unethical or immoral and you promptly so
notify the applicable Company Board; (iii) conviction of a felony (other than a
felony involving a motor vehicle) and either (x) exhausting all appeals without
a reversal of the conviction or (y) commencing a term of incarceration in a
house of detention; (iv) breach of any fiduciary duty owed to the Company or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or (v) your material fraud with regard to the Company or any
of its affiliates.
2. A notice of termination for Cause shall mean a notice that
shall set forth in reasonable detail the specific basis, facts and circumstances
which provide for a basis for termination for Cause and shall include a copy of
a resolution duly adopted by at least two-thirds of the directors of the
applicable Company at a meeting which was called for the purpose of considering
such termination and which you and your representative had the right to attend
and address, finding that, in the good faith opinion of the applicable board,
you engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. The date of termination
for a termination for Cause shall be the date indicated in the notice of
termination.
3. Notwithstanding anything to the contrary contained in this
Agreement, if any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a court
not to have been based on the grounds set forth in this Agreement, or not to
have followed the procedures set forth in this Agreement, such purported
termination for Cause shall be deemed a termination by the Company without Cause
and you shall be entitled to the amounts and benefits provided in Section 4 to
the extent, if any, applicable.
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Part II -- Change in Control
1. For purposes of this Agreement, a "Change in Control" shall
mean either a Change in Control of Millennium or a Change in Control of the
Company. Only one (1) Change in Control may occur under this Agreement.
2. Change in Control of Millennium. For purposes of this
Agreement, the term "Change in Control of Millennium" shall mean (i) any
"person" as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 ("Act") (other than Millennium, any trustee or other
fiduciary holding securities under any employee benefit plan of Millennium or
any company owned, directly or indirectly, by the stockholders of Millennium in
substantially the same proportions as their ownership of Common Stock of
Millennium), becoming the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of Millennium representing
twenty-five percent (25%) or more of the combined voting power of Millennium's
then 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 beginning of such period constitute the Board of
Directors of Millennium, and any new director (other than a director designated
by a person who has entered into an agreement with Millennium to effect a
transaction described in clause (i), (iii), or (iv) of this paragraph or a
director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors of Millennium) whose election by the Board of Directors of
Millennium or nomination for election by Millennium'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
Millennium; (iii) the merger or consolidation of Millennium with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Millennium outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Millennium or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Millennium (or similar transaction) in which no person (other than those
covered by the exceptions in (i) above) acquires more than twenty-five percent
(25%) of the combined voting power of Millennium's then outstanding securities
shall not constitute a Change in Control
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of Millennium; or (iv) approval by the stockholders of Millennium of a plan of
complete liquidation of Millennium or the closing of the sale or disposition by
Millennium of all or substantially all of Millennium's assets other than the
sale of all or substantially all of the assets of Millennium to a person or
persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of Millennium at the time of the sale. Notwithstanding the foregoing, the
Demerger will not constitute a Change of Control for purposes of this Agreement.
3. Change in Control of the Company. For purposes of this
Agreement, the term "Change in Control of the Company" shall mean (i) any
"person" as such term is used in Sections 13(d) and 14(d) of the Act (other than
Millennium or a Subsidiary (as defined below) of Millennium) becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company's then outstanding securities
entitled to vote in a general election for directors; or (ii) all or
substantially all of the Company's assets are sold other than to Millennium or a
Subsidiary of Millennium. "Subsidiary" shall have the meaning set forth in
Section 424 of the Code.
4. Change in Control Protection Period. For purposes of this
Agreement, the term "Change in Control Protection Period" shall mean the Pre
Change in Control Period and the Post Change in Control Period as defined below.
5. Pre Change in Control Period. For purposes of this Agreement,
Pre Change in Control Period shall mean the one-hundred and eighty (180) day
period prior to the date of a Change in Control that occurs on or after the
Effective Date.
6. Post Change in Control Period. For purposes of this Agreement,
Post Change in Control Period shall mean the period commencing on the date of a
Change in Control that occurs on or after the Effective Date and ending the day
immediately prior to the second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be
deemed to refer to the Board of Directors of the Company and Millennium.
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Part IV -- Disability
For purposes of this Agreement, the term "Disability" shall mean
your inability to perform your material duties and responsibilities hereunder
due to the same or related physical or mental reasons for more than one hundred
eighty (180) consecutive days in any twelve (12) consecutive month period. A
termination for Disability shall be deemed to occur when you are terminated by
the Company by written notice after you incur a Disability and while you remain
disabled.
Part V -- Good Reason
1. For purposes of this Agreement, a termination for "Good
Reason" shall mean a termination by you effected by a written notice of
termination for Good Reason given within ninety (90) days after the occurrence
of the Good Reason event. Subject to subsection 3 below, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the highest position
held within the Pre Change in Control Period (except in each case in connection
with the termination of your employment for Cause, Disability or as a result of
your death, or in the case of a material diminution of duties or
responsibilities, temporarily as a result of your illness or other absence) or
the assignment to you of duties or responsibilities that are inconsistent with
your aforementioned highest position; (ii) your removal from, or the
nonreelection to, your positions as an officer with the Company held during the
Pre Change in Control Period; (iii) a relocation of the Company's principal
United States executive offices to a location more than twenty-five (25) miles
from where they are at the time of the Change in Control, or a relocation by the
Company of your principal office away from such principal United States
executive offices; (iv) a failure by the Company or Millennium (A) to continue
any bonus plan, program or arrangement in which you were entitled to participate
during the Pre Change in Control Period (the "Bonus Plans"), provided that any
such Bonus Plans may be modified at the Company's discretion from time to time
but shall be deemed terminated if (x) any such plan does not remain
substantially in the form in effect prior to such modification or (y) if plans
providing you with substantially similar benefits are not substituted therefor
("Substitute Plans"), or (B) to continue you as a participant in the Bonus Plans
or Substitute Plans on not less than the same maximum level of award and not
more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in accordance
with the Bonus Plans and the Substitute Plans; (v) any material breach by the
Company or Millennium of any provision of this Agreement; (vi) if on the Board
of Directors of the Company during the Pre Change in Control Period,
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your removal from or failure to be reelected to the board; (vii) a reduction by
the Company of your rate of annual base salary to a level below your highest
rate of base salary within one-hundred and eighty (180) days prior to the Change
in Control; or (viii) failure of any successor of the Company to assume in a
writing delivered to you upon the assignee becoming such, the obligations of the
Company hereunder.
2. A notice of termination for Good Reason shall indicate the
specific basis for termination relied upon and set forth in reasonable detail
the facts and circumstances claimed to provide a basis for a termination for
Good Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any of your rights hereunder or preclude you from
asserting such fact or circumstance in enforcing your rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such notice
of termination for Good Reason is given.
3. In the event that a Direct Pay Letter of Credit is delivered
in accordance with Section 3 of this Agreement at the time of a Change in
Control, the definition of Good Reason shall not include the events set forth in
subsections 1(i), (ii) and (vi) above so long as during such period you are
maintained in a senior advisory capacity (without any line or other staff
responsibilities) to assist in the orderly transition to new management.
Part VI - Retirement
For purposes of this Agreement, the term "Retirement" shall mean
your retirement by the Company at or after your sixty-fifth (65th) birthday to
the extent such termination is specifically permitted as a stated exception from
applicable federal and state age discrimination laws based on position and
retirement benefits.
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EXHIBIT 10.20
SCM Chemicals Inc.
7 St. Paul Street, Suite 1010
Baltimore, Maryland 21202
July 1, 1996
Mr. Donald V. Borst
[Address]
Dear Mr. Borst:
1. Introduction. SCM Chemicals Inc. (the "Company") believes that
the establishment and maintenance of a sound and vital management of the Company
and of Millennium Chemicals Inc., which is intended to become the ultimate
parent corporation of the Company ("Millennium") in connection with the demerger
by Hanson PLC of its chemicals business (the "Demerger"), is essential to the
protection and enhancement of the interests of the Company and Millennium and
their stockholders. The Company also recognizes that the possibility of a Change
in Control of the Company or a Change in Control of Millennium (each as defined
in Part II of Exhibit A), with the attendant uncertainties and risks, might
result in the departure or distraction of key employees of the Company to the
detriment of the Company, Millennium and their stockholders. In light of the
possibility of a Change in Control of the Company or Millennium, which is
intended to become a separate publicly traded company as a result of the
Demerger, the Company has determined that it is appropriate to induce key
employees to remain with the Company, and to
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reinforce and encourage their continued attention and dedication. Accordingly,
subject to Section 9, upon your written acceptance of the terms and conditions
of this agreement (the "Agreement") evidenced by signing below, the Company
intends to provide you the protections set forth herein as of the Effective Date
set forth in Section 9. Capitalized terms not defined in the body of this
Agreement shall have the meanings set forth in Exhibit A hereto, which is
incorporated herein and made a part of this Agreement.
2. Termination Following a Change in Control. If a Change in
Control occurs on or after the Effective Date and your employment is terminated
during the Post Change in Control Period (i) by the Company without Cause or due
to your Disability (ii) by you for Good Reason or, subject to Section 3 below,
without Good Reason (iii) due to your death or (iv) due to your Retirement, then
you shall be entitled to the amounts and benefits provided in Section 4 herein.
Furthermore, if a Change in Control occurs on or after the Effective Date and
your employment was terminated within the Pre Change in Control Period (i) by
the Company without Cause or due to your Disability, (ii) by you for Good Reason
(based on an event that occurred within the Pre Change in Control Period), or
(iii) due to your death, you shall be entitled to the amounts and benefits
provided in Section 4 herein.
3. Direct Pay Letter of Credit. Notwithstanding anything else
herein, your right to voluntarily terminate
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employment without Good Reason after the date of a Change in Control and receive
the amounts due under Section 4 hereof shall be delayed until one-hundred and
eighty (180) days after the Change in Control if, simultaneous with the Change
in Control, the Company or the person or entity triggering the Change in Control
delivers to you an irrevocable direct pay letter of credit (the "Direct Pay
Letter of Credit") satisfying the requirements of this Section 3 and an
indemnity agreement covering in a similar manner the provisions of Section 6
with regard to activities after the Change in Control. The Direct Pay Letter of
Credit shall be in an amount equal to the aggregate amount you would be entitled
to receive under Sections 4(A)(i) and (ii) hereof if you were terminated without
Cause immediately upon the Change in Control and shall have an expiration date
of no less than two (2) years after the date of such Change in Control. You (or,
if applicable, your legal representative) shall be entitled to draw on the
Direct Pay Letter of Credit upon presentation to the issuing bank of a demand
for payment signed by you (or, if applicable, your legal representative) that
states that (i) a Good Reason event has occurred and your employment has
terminated during the Post Change in Control Period, or (ii) one-hundred and
eighty (180) days have expired since the Change in Control and your employment
has terminated during the Post Change in Control Period. There shall be no other
requirements (including no requirement that you first make demand upon the
Company) with regard to payment of the Direct Pay Letter of Credit. To the
extent the Direct Pay Letter of Credit is not
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adequate to cover the amount owed to you under this Agreement, is not submitted
by you or is not paid by the issuing bank, the Company shall remain liable to
you for any amounts owed to you pursuant to the terms of this Agreement. To the
extent any amount is paid under the Direct Pay Letter of Credit it shall be a
credit against any amount the Company then or thereafter would owe to you under
Section 4 of this Agreement. The Direct Pay Letter of Credit shall be issued by
a national money center bank with a rating of at least A by Standard and Poor's.
The Company shall bear the cost of the Direct Pay Letter of Credit.
4. Compensation on Change in Control Termination. If pursuant to
Section 2 you are entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to you: (A) in a lump sum
within five (5) days after such termination (or, if such termination occurred
during the Pre Change in Control Period, within five (5) days after the Change
in Control) (i) three (3) times your highest annual base salary in effect within
one-hundred and eighty (180) days prior to the Change in Control, (ii) three (3)
times the highest annual bonus paid or payable to you for any of the last three
(3) completed years by the Company or its predecessors (which shall in no event
include amounts contributed or allocated by the Company (or its predecessors) on
your behalf or paid to you under any supplemental executive bonus plans
applicable to you, (including, without limitation, the 1993 or 1996 HI Long Term
Incentive Plans, any other plan commonly referred to by the
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Company as a "top-hat" plan or any equity plan such as the Millennium Chemicals
Inc. Long Term Stock Incentive Plan)), (iii) any unreimbursed business expenses
for the period prior to termination payable in accordance with the Company's
policies, and (iv) any base salary, bonus, vacation pay or other deferred
compensation accrued or earned under law or in accordance with the Company's
policies applicable to you but not yet paid; (B) any other amounts or benefits
due under the then applicable employee benefit, equity or incentive plans of the
Company applicable to you as shall be determined and paid in accordance with
such plans; (C) three (3) years of additional service and compensation credit
(at your highest compensation level in the one-hundred and eighty (180) day
period prior to the Change in Control) for pension purposes under any defined
benefit type qualified or nonqualified pension plan or arrangement of the
Company and its affiliates applicable to you, measured from the date of
termination of employment and not credited to the extent that you are otherwise
entitled to such credit during such three (3) year period, which payments shall
be made through and in accordance with the terms of the nonqualified defined
benefit pension plan or arrangement if any then exists, or, if not, in an
actuarially equivalent lump sum (using the actuarial factors then applying in
the Company's or its affiliates' defined benefit plan covering you); (D) an
amount equal to three (3) years of the maximum Company contribution (assuming
you deferred the maximum amount and continued to earn your then current salary),
measured from the date of termination of employment under any type of
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qualified or nonqualified 401(k) plan (payable at the end of each such year and
not payable to the extent otherwise contributed to such plan); and (E) payment
by the Company of the premiums for you (except in the case of your death) and
your dependents' health coverage for three (3) years from the date of
termination of your employment under the Company's health plans which cover the
senior executives of the Company or materially similar benefits (to the extent
not otherwise provided), provided that in the case of termination within
one-hundred and eighty (180) days prior to a Change in Control, the obligations
under this subpart (E) shall only exist to the extent that you or your
dependents, as the case may be, had timely elected or timely elect COBRA
coverage which continued at the time of the Change in Control and the obligation
with regard to the period prior to the Change in Control shall be limited to
reimbursement of the COBRA premiums previously paid or due for such period. Any
amendment or termination of benefits, equity or incentive plans within
one-hundred and eighty (180) days prior to, or after a Change in Control that is
detrimental to you shall be ignored with respect to (C), (D) and (E) above.
Payments under (E) above may, at the discretion of the Company, be made by
continuing your participation in the plan as a terminee, by paying the
applicable COBRA premium for you and your dependents, or by covering you and
your dependents under substitute arrangements, provided that, to the extent you
incur tax that you would not have incurred as an active employee as a result of
the aforementioned coverage or the benefits provided thereunder, you shall
receive from the Company
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an additional payment in the amount necessary so that you will have no
additional cost for receiving such items or any additional payment. Section 6
hereof shall also continue to apply in all instances.
5. Special Tax Provision. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to you (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership covered by Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") or any person affiliated with the Company
or such person) as a result of a change in ownership of Millennium covered by
Code Section 280G(b)(2) (collectively, the "Covered Payments") is or becomes
subject to the excise tax imposed by or under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), and/or any interest or penalties
with respect to such excise tax (such excise tax, together with such interest
and penalties, is hereinafter collectively referred to as the "Excise Tax"), the
Company shall pay to you an additional amount (the "Tax Reimbursement Payment")
such that after payment by you of all taxes (including, without limitation, any
interest or penalties and any Excise Tax imposed on or attributable to the Tax
Reimbursement Payment itself), you retain an amount of the Tax Reimbursement
Payment equal to the sum of (i) the amount of
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the Excise Tax imposed upon the Covered Payments, and (ii) without duplication,
an amount equal to the product of (A) any deductions disallowed for federal,
state or local income tax purposes because of the inclusion of the Tax
Reimbursement Payment in your adjusted gross income, and (B) the highest
applicable marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement Payment is
made or is to be made. The intent of this Section 5 is that after paying your
federal, state and local income tax and any payroll taxes, you will be in the
same position as if you were not subject to the Excise Tax under Section 4999 of
the Code and did not receive the extra payments pursuant to this Section 5 and
this Section 5 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 5(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable to you) appointed by such public accountants (or, if the
public accountants decline such appointment and decline appointing such
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legal counsel, such independent certified public accountants as promptly
mutually agreed on in good faith by the Company and you) (the "Accountant"),
deliver a written opinion to you, reasonably satisfactory to your legal counsel,
that you have a reasonable basis to claim that the Covered Payments (in whole or
in part) (A) do not constitute "parachute payments", (B) represent reasonable
compensation for services actually rendered (within the meaning of Section
280G(b)(4) of the Code) in excess of the "base amount" allocable to such
reasonable compensation, or (C) such "parachute payments" are otherwise not
subject to such Excise Tax (with appropriate legal authority, detailed analysis
and explanation provided therein by the Accountant); and (ii) the value of any
Covered Payments which are non-cash benefits or deferred payments or benefits
shall be determined by the Accountant in accordance with the principles of
Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, you shall be deemed: (i) to pay federal, state and/or
local income taxes at the highest applicable marginal rate of income taxation
for the calendar year in which the Tax Reimbursement Payment is made or is to be
made, and (ii) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed due to the
inclusion of the Tax Reimbursement Payment in your adjusted gross income.
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(d) (i) (A) In the event that prior to the time you have filed
any of your tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatsoever, the correct amount of the Tax Reimbursement Payment
to be less than the amount determined at the time the Tax Reimbursement Payment
was made, you shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Tax Reimbursement Payment being repaid by you, using the assumptions and
methodology utilized to calculate the Tax Reimbursement Payment (unless
manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by you of any of your tax returns for
the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred but prior to one (1) year after the occurrence of such
change in ownership, you shall file at the request of the Company an amended tax
return in accordance with the Accountant's determination, but no portion of the
Tax Reimbursement Payment shall be required to be refunded to the Company until
actual
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refund or credit of such portion has been made to you, and interest payable to
the Company shall not exceed the interest received or credited to you by such
tax authority for the period it held such portion (less any tax you must pay on
such interest and which you are unable to deduct as a result of payment of the
refund).
(C) In the event you receive a refund pursuant to (B) above and
repay such amount to the Company, you shall thereafter file for any refunds or
credits that may be due to you by reason of the repayments to the Company. You
and the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if your claim for such
refund or credit is denied.
(ii) In the event that the Excise Tax is later
determined by the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
(iii) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) under this
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Section 5, subject to the second sentence of subpart (i)(C) above, you shall
permit the Company to control issues related to this Section 5 (at its expense),
provided that such issues do not potentially materially adversely affect you,
but you shall control any other issues. In the event the issues are
interrelated, you and the Company shall in good faith cooperate so as not to
jeopardize resolution of either issue, but if the parties cannot agree you shall
make the final determination with regard to the issues. In the event of any
conference with any taxing authority as to the Excise Tax or associated income
taxes, you shall permit the representative of the Company to accompany you, and
you and your representative shall cooperate with the Company and its
representative.
(iv) With regard to any initial filing for a
refund or any other action required pursuant to this Section 5 (other than by
mutual agreement) or, if not required, agreed to by the Company and you, you
shall cooperate fully with the Company, provided that the foregoing shall not
apply to actions that are provided herein to be at your sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant, and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The Company shall use its best efforts to cause the Accountant to
promptly deliver the initial determination required hereunder
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and, if not delivered, within ninety (90) days after the change in ownership
event covered by Section 280G(b)(2) of the Code, the Company shall pay you the
Tax Reimbursement Payment set forth in an opinion from counsel recognized as
knowledgeable in the relevant areas selected by you, and reasonably acceptable
to the Company, within five (5) days after delivery of such opinion. In
accordance with Section 15, the Company may withhold from the Tax Reimbursement
Payment and deposit into applicable taxing authorities such amounts as they are
required to withhold by applicable law. To the extent that you are required to
pay estimated or other taxes on amounts received by you beyond any withheld
amounts, you shall promptly make such payments. The amount of such payment shall
be subject to later adjustment in accordance with the determination of the
Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by your counsel.
(g) You and the Company shall mutually agree on and promulgate
further guidelines in accordance with this Section 5 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
5(d)(i)(C) hereof.
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6. Indemnification. (a) The Company and Millennium, jointly and
severally, agree that if you are made a party to or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that you are or were a
director or officer of the Company or Millennium, and/or any other affiliate of
any of such companies, or are or were serving at the request of any of such
companies as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, you shall be indemnified and held harmless by the Company and Millennium
to the fullest extent authorized by Virginia law (or, if different, the law
applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by you in connection therewith, and
such indemnification shall continue as to you even if you have ceased to be an
officer, director, member, fiduciary or agent, or are no longer employed by the
company, and shall inure to the benefit of your heirs, executors and
administrators. With respect to the obligations set forth in this Section 6, the
Company and Millennium shall become liable hereunder with respect to any
Proceeding which arises out of or relates to events occurring on or after July
1,
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1996, except to the extent that the liability relates to service with or for
another assignee under Section 10 hereof (in which case such assignee shall be
liable).
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and reasonable costs, reasonable attorneys' fees,
reasonable accountants' fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding
shall be paid by the Company and Millennium in advance upon your request and the
giving by you of any undertakings required by applicable law.
(d) You shall give the Company and Millennium prompt notice of
any claim made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Millennium such
information and cooperation as it may reasonably require and as shall be within
your power and at such times and places as are reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the
Company and Millennium of the commencement thereof: (i) the company will be
entitled to participate therein at its
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own expense; and (ii) except as otherwise provided below, to the extent that it
may wish, the company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof. You also shall have the
right to employ your own counsel in such Proceeding and the fees and expenses of
such counsel shall be at the expense of the company.
(f) The Company and Millennium shall not be liable to indemnify
you under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Millennium shall
settle any Proceeding in any manner which would impose any penalty or limitation
on you without your written consent. Neither the Company, Millennium nor you
will unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which you may have
or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
7. Legal Fees. In the event that a claim for payment or benefits
under this Agreement is disputed as a result of events which occurred after a
Change in Control, or during the Pre Change in Control Period, the Company shall
pay all
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reasonable attorney, accountant and other professional fees and reasonable
expenses incurred by you in pursuing such claim, unless the claim by you is
found to be frivolous by any court or arbitrator.
8. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to you by the Company pursuant
to this Agreement. Further, the amount of any payment or benefit provided for in
this Agreement shall not be reduced by any compensation earned by you or benefit
provided to you as the result of employment by another employer or otherwise.
Except as otherwise provided herein and apart from any disagreement between you
and the Company concerning interpretation of this Agreement or any term or
provision hereof, the Company's obligations to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against you. The amounts due under Section 4 are inclusive, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due hereunder.
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9. Effective Date and Term. (a) Notwithstanding anything else
herein, this Agreement shall become effective (the "Effective Date") as of the
date of the Demerger provided that you are employed by the Company on such date.
If the Demerger does not occur prior to March 31, 1997 or you are not employed
by the Company on the date of the Demerger for any reason whatsoever, the
provisions of this Agreement (other than this Section 9(a)) shall have no force
or effect and this Agreement shall be null and void.
(b) This Agreement shall be for a term (the "Term") commencing on
the Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change in Control has taken place prior to
termination of this Agreement, this Agreement shall continue in full force and
effect during the Change in Control Protection Period and further provided that
the payment and other obligations hereunder shall survive such termination to
the extent a Change in Control has occurred during the Term, and in any event,
the obligations under Section 6 hereof shall survive the end of the Term with
regard to matters occurring during the Term (even if a claim is made after the
Term).
10. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to
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expressly assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place and this Agreement shall inure to the
benefit of such successor. Any such assignment shall not relieve the Company
from liability hereunder. Reference to the Company herein shall also include any
successor to SCM Chemicals Inc. This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If you
die while any amount would still by payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of the Agreement to the executors, personal
representatives, estate trustees, or administrators of your estate. This
Agreement is personal to you and neither this Agreement nor any rights hereunder
may be assigned by you.
11. Communications. Any notice or other communication
required or permitted hereunder shall be in writing and shall be
delivered personally, or sent by registered mail, postage prepaid
as follows:
(i) If to the Company or Millennium, to such
entity c/o HM Anglo-American, Ltd. at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Senior Vice President -
Law and Administration.
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(ii) If to you, to the last
shown address on the
books of the Company or
Millennium.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
12. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause, subject to the payment provisions
hereof if such termination is during the Change in Control Protection Period.
You acknowledge that you are aware that you shall have no claim against the
Company hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not specifically satisfy the
requirements hereof. The foregoing shall not affect your rights under any other
agreement with the Company.
13. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Company Board (as defined in Part III of Exhibit A). No waiver
by either party hereto at any time of any breach by the other party hereto
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of, or compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any prior
agreements between the Company and you. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All references to any law shall be deemed also to refer to any successor
provisions to such laws.
14. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and you have been given the opportunity to do so.
15. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
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16. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware
without reference to rules relating to conflicts of law.
Very truly yours,
SCM CHEMICALS INC.
By: /s/ GEORGE H. HEMPSTEAD, III
---------------------------------
Name: George H. Hempstead, III
Title: Vice President
Agreed and Accepted this
1st day of July, 1996:
MILLENNIUM CHEMICALS INC. /s/ DONALD V. BORST
(for purposes of Section 6 only) -------------------------------
Donald V. Borst
By: /s/ GRAHAM DRANSFIELD
----------------------------------------
Name: Graham Dransfield
Title: Vice President and Director
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EXHIBIT A
Part I -- Cause
1. Subject to compliance with the notification provisions in this
Exhibit A, this Agreement shall not prevent the termination of your employment
by the Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause. For purposes of
this Agreement, the term "Cause" shall be limited to your: (i) willful
misconduct with regard to the Company or its affiliates or their businesses
which has a material adverse effect on the Company and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Company Board
provided that the foregoing refusal shall not be "Cause" if in good faith you
believe that such direction is illegal, unethical or immoral and you promptly so
notify the applicable Company Board; (iii) conviction of a felony (other than a
felony involving a motor vehicle) and either (x) exhausting all appeals without
a reversal of the conviction or (y) commencing a term of incarceration in a
house of detention; (iv) breach of any fiduciary duty owed to the Company or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or (v) your material fraud with regard to the Company or any
of its affiliates.
2. A notice of termination for Cause shall mean a notice that
shall set forth in reasonable detail the specific basis, facts and circumstances
which provide for a basis for termination for Cause and shall include a copy of
a resolution duly adopted by at least two-thirds of the directors of the
applicable Company at a meeting which was called for the purpose of considering
such termination and which you and your representative had the right to attend
and address, finding that, in the good faith opinion of the applicable board,
you engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. The date of termination
for a termination for Cause shall be the date indicated in the notice of
termination.
3. Notwithstanding anything to the contrary contained in this
Agreement, if any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a court
not to have been based on the grounds set forth in this Agreement, or not to
have followed the procedures set forth in this Agreement, such purported
termination for Cause shall be deemed a termination by the Company without Cause
and you shall be entitled to the amounts and benefits provided in Section 4 to
the extent, if any, applicable.
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Part II -- Change in Control
1. For purposes of this Agreement, a "Change in Control" shall
mean either a Change in Control of Millennium or a Change in Control of the
Company. Only one (1) Change in Control may occur under this Agreement.
2. Change in Control of Millennium. For purposes of this
Agreement, the term "Change in Control of Millennium" shall mean (i) any
"person" as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 ("Act") (other than Millennium, any trustee or other
fiduciary holding securities under any employee benefit plan of Millennium or
any company owned, directly or indirectly, by the stockholders of Millennium in
substantially the same proportions as their ownership of Common Stock of
Millennium), becoming the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of Millennium representing
twenty-five percent (25%) or more of the combined voting power of Millennium's
then 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 beginning of such period constitute the Board of
Directors of Millennium, and any new director (other than a director designated
by a person who has entered into an agreement with Millennium to effect a
transaction described in clause (i), (iii), or (iv) of this paragraph or a
director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors of Millennium) whose election by the Board of Directors of
Millennium or nomination for election by Millennium'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
Millennium; (iii) the merger or consolidation of Millennium with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Millennium outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Millennium or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Millennium (or similar transaction) in which no person (other than those
covered by the exceptions in (i) above) acquires more than twenty-five percent
(25%) of the combined voting power of Millennium's then outstanding securities
shall not constitute a Change in Control
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of Millennium; or (iv) approval by the stockholders of Millennium of a plan of
complete liquidation of Millennium or the closing of the sale or disposition by
Millennium of all or substantially all of Millennium's assets other than the
sale of all or substantially all of the assets of Millennium to a person or
persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of Millennium at the time of the sale. Notwithstanding the foregoing, the
Demerger will not constitute a Change of Control for purposes of this Agreement.
3. Change in Control of the Company. For purposes of this
Agreement, the term "Change in Control of the Company" shall mean (i) any
"person" as such term is used in Sections 13(d) and 14(d) of the Act (other than
Millennium or a Subsidiary (as defined below) of Millennium) becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company's then outstanding securities
entitled to vote in a general election for directors; or (ii) all or
substantially all of the Company's assets are sold other than to Millennium or a
Subsidiary of Millennium. "Subsidiary" shall have the meaning set forth in
Section 424 of the Code.
4. Change in Control Protection Period. For purposes of this
Agreement, the term "Change in Control Protection Period" shall mean the Pre
Change in Control Period and the Post Change in Control Period as defined below.
5. Pre Change in Control Period. For purposes of this Agreement,
Pre Change in Control Period shall mean the one-hundred and eighty (180) day
period prior to the date of a Change in Control that occurs on or after the
Effective Date.
6. Post Change in Control Period. For purposes of this Agreement,
Post Change in Control Period shall mean the period commencing on the date of a
Change in Control that occurs on or after the Effective Date and ending the day
immediately prior to the second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be
deemed to refer to the Board of Directors of the Company and Millennium.
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Part IV -- Disability
For purposes of this Agreement, the term "Disability" shall mean
your inability to perform your material duties and responsibilities hereunder
due to the same or related physical or mental reasons for more than one hundred
eighty (180) consecutive days in any twelve (12) consecutive month period. A
termination for Disability shall be deemed to occur when you are terminated by
the Company by written notice after you incur a Disability and while you remain
disabled.
Part V -- Good Reason
1. For purposes of this Agreement, a termination for "Good
Reason" shall mean a termination by you effected by a written notice of
termination for Good Reason given within ninety (90) days after the occurrence
of the Good Reason event. Subject to subsection 3 below, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the highest position
held within the Pre Change in Control Period (except in each case in connection
with the termination of your employment for Cause, Disability or as a result of
your death, or in the case of a material diminution of duties or
responsibilities, temporarily as a result of your illness or other absence) or
the assignment to you of duties or responsibilities that are inconsistent with
your aforementioned highest position; (ii) your removal from, or the
nonreelection to, your positions as an officer with the Company held during the
Pre Change in Control Period; (iii) a relocation of the Company's principal
United States executive offices to a location more than twenty-five (25) miles
from where they are at the time of the Change in Control, or a relocation by the
Company of your principal office away from such principal United States
executive offices; (iv) a failure by the Company or Millennium (A) to continue
any bonus plan, program or arrangement in which you were entitled to participate
during the Pre Change in Control Period (the "Bonus Plans"), provided that any
such Bonus Plans may be modified at the Company's discretion from time to time
but shall be deemed terminated if (x) any such plan does not remain
substantially in the form in effect prior to such modification or (y) if plans
providing you with substantially similar benefits are not substituted therefor
("Substitute Plans"), or (B) to continue you as a participant in the Bonus Plans
or Substitute Plans on not less than the same maximum level of award and not
more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in accordance
with the Bonus Plans and the Substitute Plans; (v) any material breach by the
Company or Millennium of any provision of this Agreement; (vi) if on the Board
of Directors of the Company during the Pre Change in Control Period,
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your removal from or failure to be reelected to the board; (vii) a reduction by
the Company of your rate of annual base salary to a level below your highest
rate of base salary within one-hundred and eighty (180) days prior to the Change
in Control; or (viii) failure of any successor of the Company to assume in a
writing delivered to you upon the assignee becoming such, the obligations of the
Company hereunder.
2. A notice of termination for Good Reason shall indicate the
specific basis for termination relied upon and set forth in reasonable detail
the facts and circumstances claimed to provide a basis for a termination for
Good Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any of your rights hereunder or preclude you from
asserting such fact or circumstance in enforcing your rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such notice
of termination for Good Reason is given.
3. In the event that a Direct Pay Letter of Credit is delivered
in accordance with Section 3 of this Agreement at the time of a Change in
Control, the definition of Good Reason shall not include the events set forth in
subsections 1(i), (ii) and (vi) above so long as during such period you are
maintained in a senior advisory capacity (without any line or other staff
responsibilities) to assist in the orderly transition to new management.
Part VI - Retirement
For purposes of this Agreement, the term "Retirement" shall mean
your retirement by the Company at or after your sixty-fifth (65th) birthday to
the extent such termination is specifically permitted as a stated exception from
applicable federal and state age discrimination laws based on position and
retirement benefits.
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EXHIBIT 10.21
Glidco Inc.
601 Crestwood Street
Building 174
Jacksonville, FL 32201
July 1, 1996
Mr. George W. Robbins
[Address]
Dear Mr. Robbins:
1. Introduction. Glidco Inc. (the "Company") believes that the
establishment and maintenance of a sound and vital management of the Company and
of Millennium Chemicals Inc., which is intended to become the ultimate parent
corporation of the Company ("Millennium") in connection with the demerger by
Hanson PLC of its chemicals business (the "Demerger"), is essential to the
protection and enhancement of the interests of the Company and Millennium and
their stockholders. The Company also recognizes that the possibility of a Change
in Control of the Company or a Change in Control of Millennium (each as defined
in Part II of Exhibit A), with the attendant uncertainties and risks, might
result in the departure or distraction of key employees of the Company to the
detriment of the Company, Millennium and their stockholders. In light of the
possibility of a Change in Control of the Company or Millennium, which is
intended to become a separate publicly traded company as a result of the
Demerger, the Company has determined that it is appropriate to induce key
employees to remain with the Company, and to
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reinforce and encourage their continued attention and dedication. Accordingly,
subject to Section 9, upon your written acceptance of the terms and conditions
of this agreement (the "Agreement") evidenced by signing below, the Company
intends to provide you the protections set forth herein as of the Effective Date
set forth in Section 9. Capitalized terms not defined in the body of this
Agreement shall have the meanings set forth in Exhibit A hereto, which is
incorporated herein and made a part of this Agreement.
2. Termination Following a Change in Control. If a Change in
Control occurs on or after the Effective Date and your employment is terminated
during the Post Change in Control Period (i) by the Company without Cause or due
to your Disability (ii) by you for Good Reason or, subject to Section 3 below,
without Good Reason (iii) due to your death or (iv) due to your Retirement, then
you shall be entitled to the amounts and benefits provided in Section 4 herein.
Furthermore, if a Change in Control occurs on or after the Effective Date and
your employment was terminated within the Pre Change in Control Period (i) by
the Company without Cause or due to your Disability, (ii) by you for Good Reason
(based on an event that occurred within the Pre Change in Control Period), or
(iii) due to your death, you shall be entitled to the amounts and benefits
provided in Section 4 herein.
3. Direct Pay Letter of Credit. Notwithstanding anything else
herein, your right to voluntarily terminate
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employment without Good Reason after the date of a Change in Control and receive
the amounts due under Section 4 hereof shall be delayed until one-hundred and
eighty (180) days after the Change in Control if, simultaneous with the Change
in Control, the Company or the person or entity triggering the Change in Control
delivers to you an irrevocable direct pay letter of credit (the "Direct Pay
Letter of Credit") satisfying the requirements of this Section 3 and an
indemnity agreement covering in a similar manner the provisions of Section 6
with regard to activities after the Change in Control. The Direct Pay Letter of
Credit shall be in an amount equal to the aggregate amount you would be entitled
to receive under Sections 4(A)(i) and (ii) hereof if you were terminated without
Cause immediately upon the Change in Control and shall have an expiration date
of no less than two (2) years after the date of such Change in Control. You (or,
if applicable, your legal representative) shall be entitled to draw on the
Direct Pay Letter of Credit upon presentation to the issuing bank of a demand
for payment signed by you (or, if applicable, your legal representative) that
states that (i) a Good Reason event has occurred and your employment has
terminated during the Post Change in Control Period, or (ii) one-hundred and
eighty (180) days have expired since the Change in Control and your employment
has terminated during the Post Change in Control Period. There shall be no other
requirements (including no requirement that you first make demand upon the
Company) with regard to payment of the Direct Pay Letter of Credit. To the
extent the Direct Pay Letter of Credit is not
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adequate to cover the amount owed to you under this Agreement, is not submitted
by you or is not paid by the issuing bank, the Company shall remain liable to
you for any amounts owed to you pursuant to the terms of this Agreement. To the
extent any amount is paid under the Direct Pay Letter of Credit it shall be a
credit against any amount the Company then or thereafter would owe to you under
Section 4 of this Agreement. The Direct Pay Letter of Credit shall be issued by
a national money center bank with a rating of at least A by Standard and Poor's.
The Company shall bear the cost of the Direct Pay Letter of Credit.
4. Compensation on Change in Control Termination. If pursuant to
Section 2 you are entitled to amounts and benefits under this Section 4, the
Company shall, subject to Section 8, pay and provide to you: (A) in a lump sum
within five (5) days after such termination (or, if such termination occurred
during the Pre Change in Control Period, within five (5) days after the Change
in Control) (i) three (3) times your highest annual base salary in effect within
one-hundred and eighty (180) days prior to the Change in Control, (ii) three (3)
times the highest annual bonus paid or payable to you for any of the last three
(3) completed years by the Company or its predecessors (which shall in no event
include amounts contributed or allocated by the Company (or its predecessors) on
your behalf or paid to you under any supplemental executive bonus plans
applicable to you, (including, without limitation, the 1993 or 1996 HI Long Term
Incentive Plans, any other plan commonly referred to by the
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Company as a "top-hat" plan or any equity plan such as the Millennium Chemicals
Inc. Long Term Stock Incentive Plan)), (iii) any unreimbursed business expenses
for the period prior to termination payable in accordance with the Company's
policies, and (iv) any base salary, bonus, vacation pay or other deferred
compensation accrued or earned under law or in accordance with the Company's
policies applicable to you but not yet paid; (B) any other amounts or benefits
due under the then applicable employee benefit, equity or incentive plans of the
Company applicable to you as shall be determined and paid in accordance with
such plans; (C) three (3) years of additional service and compensation credit
(at your highest compensation level in the one-hundred and eighty (180) day
period prior to the Change in Control) for pension purposes under any defined
benefit type qualified or nonqualified pension plan or arrangement of the
Company and its affiliates applicable to you, measured from the date of
termination of employment and not credited to the extent that you are otherwise
entitled to such credit during such three (3) year period, which payments shall
be made through and in accordance with the terms of the nonqualified defined
benefit pension plan or arrangement if any then exists, or, if not, in an
actuarially equivalent lump sum (using the actuarial factors then applying in
the Company's or its affiliates' defined benefit plan covering you); (D) an
amount equal to three (3) years of the maximum Company contribution (assuming
you deferred the maximum amount and continued to earn your then current salary),
measured from the date of termination of employment under any type of
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qualified or nonqualified 401(k) plan (payable at the end of each such year and
not payable to the extent otherwise contributed to such plan); and (E) payment
by the Company of the premiums for you (except in the case of your death) and
your dependents' health coverage for three (3) years from the date of
termination of your employment under the Company's health plans which cover the
senior executives of the Company or materially similar benefits (to the extent
not otherwise provided), provided that in the case of termination within
one-hundred and eighty (180) days prior to a Change in Control, the obligations
under this subpart (E) shall only exist to the extent that you or your
dependents, as the case may be, had timely elected or timely elect COBRA
coverage which continued at the time of the Change in Control and the obligation
with regard to the period prior to the Change in Control shall be limited to
reimbursement of the COBRA premiums previously paid or due for such period. Any
amendment or termination of benefits, equity or incentive plans within
one-hundred and eighty (180) days prior to, or after a Change in Control that is
detrimental to you shall be ignored with respect to (C), (D) and (E) above.
Payments under (E) above may, at the discretion of the Company, be made by
continuing your participation in the plan as a terminee, by paying the
applicable COBRA premium for you and your dependents, or by covering you and
your dependents under substitute arrangements, provided that, to the extent you
incur tax that you would not have incurred as an active employee as a result of
the aforementioned coverage or the benefits provided thereunder, you shall
receive from the Company
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an additional payment in the amount necessary so that you will have no
additional cost for receiving such items or any additional payment. Section 6
hereof shall also continue to apply in all instances.
5. Special Tax Provision. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to you (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership covered by Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") or any person affiliated with the Company
or such person) as a result of a change in ownership of Millennium covered by
Code Section 280G(b)(2) (collectively, the "Covered Payments") is or becomes
subject to the excise tax imposed by or under Section 4999 of the Code (or any
similar tax that may hereafter be imposed), and/or any interest or penalties
with respect to such excise tax (such excise tax, together with such interest
and penalties, is hereinafter collectively referred to as the "Excise Tax"), the
Company shall pay to you an additional amount (the "Tax Reimbursement Payment")
such that after payment by you of all taxes (including, without limitation, any
interest or penalties and any Excise Tax imposed on or attributable to the Tax
Reimbursement Payment itself), you retain an amount of the Tax Reimbursement
Payment equal to the sum of (i) the amount of
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the Excise Tax imposed upon the Covered Payments, and (ii) without duplication,
an amount equal to the product of (A) any deductions disallowed for federal,
state or local income tax purposes because of the inclusion of the Tax
Reimbursement Payment in your adjusted gross income, and (B) the highest
applicable marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement Payment is
made or is to be made. The intent of this Section 5 is that after paying your
federal, state and local income tax and any payroll taxes, you will be in the
same position as if you were not subject to the Excise Tax under Section 4999 of
the Code and did not receive the extra payments pursuant to this Section 5 and
this Section 5 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 5(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated
as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code)
and such payments in excess of the Code Section 280G(b)(3) "base amount" shall
be treated as subject to the Excise Tax, unless, and except to the extent that,
the Company's independent certified public accountants appointed prior to the
change in ownership covered by Code Section 280G(b)(2) or legal counsel
(reasonably acceptable to you) appointed by such public accountants (or, if the
public accountants decline such appointment and decline appointing such
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legal counsel, such independent certified public accountants as promptly
mutually agreed on in good faith by the Company and you) (the "Accountant"),
deliver a written opinion to you, reasonably satisfactory to your legal counsel,
that you have a reasonable basis to claim that the Covered Payments (in whole or
in part) (A) do not constitute "parachute payments", (B) represent reasonable
compensation for services actually rendered (within the meaning of Section
280G(b)(4) of the Code) in excess of the "base amount" allocable to such
reasonable compensation, or (C) such "parachute payments" are otherwise not
subject to such Excise Tax (with appropriate legal authority, detailed analysis
and explanation provided therein by the Accountant); and (ii) the value of any
Covered Payments which are non-cash benefits or deferred payments or benefits
shall be determined by the Accountant in accordance with the principles of
Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, you shall be deemed: (i) to pay federal, state and/or
local income taxes at the highest applicable marginal rate of income taxation
for the calendar year in which the Tax Reimbursement Payment is made or is to be
made, and (ii) to have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed due to the
inclusion of the Tax Reimbursement Payment in your adjusted gross income.
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(d) (i) (A) In the event that prior to the time you have filed
any of your tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatsoever, the correct amount of the Tax Reimbursement Payment
to be less than the amount determined at the time the Tax Reimbursement Payment
was made, you shall repay to the Company, at the time that the amount of such
reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Tax Reimbursement Payment being repaid by you, using the assumptions and
methodology utilized to calculate the Tax Reimbursement Payment (unless
manifestly erroneous)), plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by you of any of your tax returns for
the calendar year in which the change in ownership event covered by Code Section
280G(b)(2) occurred but prior to one (1) year after the occurrence of such
change in ownership, you shall file at the request of the Company an amended tax
return in accordance with the Accountant's determination, but no portion of the
Tax Reimbursement Payment shall be required to be refunded to the Company until
actual
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refund or credit of such portion has been made to you, and interest payable to
the Company shall not exceed the interest received or credited to you by such
tax authority for the period it held such portion (less any tax you must pay on
such interest and which you are unable to deduct as a result of payment of the
refund).
(C) In the event you receive a refund pursuant to (B) above and
repay such amount to the Company, you shall thereafter file for any refunds or
credits that may be due to you by reason of the repayments to the Company. You
and the Company shall mutually agree upon the course of action, if any, to be
pursued (which shall be at the expense of the Company) if your claim for such
refund or credit is denied.
(ii) In the event that the Excise Tax is later
determined by the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
(iii) In the event of any controversy with the
Internal Revenue Service (or other taxing authority) under this
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Section 5, subject to the second sentence of subpart (i)(C) above, you shall
permit the Company to control issues related to this Section 5 (at its expense),
provided that such issues do not potentially materially adversely affect you,
but you shall control any other issues. In the event the issues are
interrelated, you and the Company shall in good faith cooperate so as not to
jeopardize resolution of either issue, but if the parties cannot agree you shall
make the final determination with regard to the issues. In the event of any
conference with any taxing authority as to the Excise Tax or associated income
taxes, you shall permit the representative of the Company to accompany you, and
you and your representative shall cooperate with the Company and its
representative.
(iv) With regard to any initial filing for a
refund or any other action required pursuant to this Section 5 (other than by
mutual agreement) or, if not required, agreed to by the Company and you, you
shall cooperate fully with the Company, provided that the foregoing shall not
apply to actions that are provided herein to be at your sole discretion.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant, and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The Company shall use its best efforts to cause the Accountant to
promptly deliver the initial determination required hereunder
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and, if not delivered, within ninety (90) days after the change in ownership
event covered by Section 280G(b)(2) of the Code, the Company shall pay you the
Tax Reimbursement Payment set forth in an opinion from counsel recognized as
knowledgeable in the relevant areas selected by you, and reasonably acceptable
to the Company, within five (5) days after delivery of such opinion. In
accordance with Section 15, the Company may withhold from the Tax Reimbursement
Payment and deposit into applicable taxing authorities such amounts as they are
required to withhold by applicable law. To the extent that you are required to
pay estimated or other taxes on amounts received by you beyond any withheld
amounts, you shall promptly make such payments. The amount of such payment shall
be subject to later adjustment in accordance with the determination of the
Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by your counsel.
(g) You and the Company shall mutually agree on and promulgate
further guidelines in accordance with this Section 5 to the extent, if any,
necessary to effect the reversal of excessive or shortfall Tax Reimbursement
Payments. The foregoing shall not in any way be inconsistent with Section
5(d)(i)(C) hereof.
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6. Indemnification. (a) The Company and Millennium, jointly and
severally, agree that if you are made a party to or threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that you are or were a
director or officer of the Company or Millennium, and/or any other affiliate of
any of such companies, or are or were serving at the request of any of such
companies as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, you shall be indemnified and held harmless by the Company and Millennium
to the fullest extent authorized by Virginia law (or, if different, the law
applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by you in connection therewith, and
such indemnification shall continue as to you even if you have ceased to be an
officer, director, member, fiduciary or agent, or are no longer employed by the
company, and shall inure to the benefit of your heirs, executors and
administrators. With respect to the obligations set forth in this Section 6, the
Company and Millennium shall become liable hereunder with respect to any
Proceeding which arises out of or relates to events occurring on or after July
1,
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1996, except to the extent that the liability relates to service with or for
another assignee under Section 10 hereof (in which case such assignee shall be
liable).
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and reasonable costs, reasonable attorneys' fees,
reasonable accountants' fees, and reasonable disbursements and costs of
attachment or similar bonds, investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
(c) Expenses incurred by you in connection with any Proceeding
shall be paid by the Company and Millennium in advance upon your request and the
giving by you of any undertakings required by applicable law.
(d) You shall give the Company and Millennium prompt notice of
any claim made against you for which indemnity will or could be sought under
this Agreement. In addition, you shall give the Company and Millennium such
information and cooperation as it may reasonably require and as shall be within
your power and at such times and places as are reasonably convenient for you.
(e) With respect to any Proceeding as to which you notify the
Company and Millennium of the commencement thereof: (i) the company will be
entitled to participate therein at its
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own expense; and (ii) except as otherwise provided below, to the extent that it
may wish, the company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof. You also shall have the
right to employ your own counsel in such Proceeding and the fees and expenses of
such counsel shall be at the expense of the company.
(f) The Company and Millennium shall not be liable to indemnify
you under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent. Neither the Company nor Millennium shall
settle any Proceeding in any manner which would impose any penalty or limitation
on you without your written consent. Neither the Company, Millennium nor you
will unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which you may have
or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the company, agreement, vote of stockholders or
disinterested directors or otherwise.
7. Legal Fees. In the event that a claim for payment or benefits
under this Agreement is disputed as a result of events which occurred after a
Change in Control, or during the Pre Change in Control Period, the Company shall
pay all
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reasonable attorney, accountant and other professional fees and reasonable
expenses incurred by you in pursuing such claim, unless the claim by you is
found to be frivolous by any court or arbitrator.
8. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to you by the Company pursuant
to this Agreement. Further, the amount of any payment or benefit provided for in
this Agreement shall not be reduced by any compensation earned by you or benefit
provided to you as the result of employment by another employer or otherwise.
Except as otherwise provided herein and apart from any disagreement between you
and the Company concerning interpretation of this Agreement or any term or
provision hereof, the Company's obligations to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against you. The amounts due under Section 4 are inclusive, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due hereunder.
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9. Effective Date and Term. (a) Notwithstanding anything else
herein, this Agreement shall become effective (the "Effective Date") as of the
date of the Demerger provided that you are employed by the Company on such date.
If the Demerger does not occur prior to March 31, 1997 or you are not employed
by the Company on the date of the Demerger for any reason whatsoever, the
provisions of this Agreement (other than this Section 9(a)) shall have no force
or effect and this Agreement shall be null and void.
(b) This Agreement shall be for a term (the "Term") commencing on
the Effective Date and terminating at the end of six (6) years from the
Effective Date, provided that if a Change in Control has taken place prior to
termination of this Agreement, this Agreement shall continue in full force and
effect during the Change in Control Protection Period and further provided that
the payment and other obligations hereunder shall survive such termination to
the extent a Change in Control has occurred during the Term, and in any event,
the obligations under Section 6 hereof shall survive the end of the Term with
regard to matters occurring during the Term (even if a claim is made after the
Term).
10. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to
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expressly assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place and this Agreement shall inure to the
benefit of such successor. Any such assignment shall not relieve the Company
from liability hereunder. Reference to the Company herein shall also include any
successor to Glidco Inc. This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If you
die while any amount would still by payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of the Agreement to the executors, personal
representatives, estate trustees, or administrators of your estate. This
Agreement is personal to you and neither this Agreement nor any rights hereunder
may be assigned by you.
11. Communications. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by registered mail, postage prepaid as follows:
(i) If to the Company or Millennium, to such
entity c/o HM Anglo-American, Ltd. at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Senior Vice President -
Law and Administration.
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(ii) If to you, to the last
shown address on the
books of the Company or
Millennium.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
12. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause, subject to the payment provisions
hereof if such termination is during the Change in Control Protection Period.
You acknowledge that you are aware that you shall have no claim against the
Company hereunder or for deprivation of the right to receive the amounts
hereunder as a result of any termination that does not specifically satisfy the
requirements hereof. The foregoing shall not affect your rights under any other
agreement with the Company.
13. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by you and such officer as may be
specifically designated by the Company Board (as defined in Part III of Exhibit
A). No waiver by either party hereto at any time of any breach by the other
party hereto
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of, or compliance with, any condition or provision shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement constitutes the entire Agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any prior
agreements between the Company and you. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
All references to any law shall be deemed also to refer to any successor
provisions to such laws.
14. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and you have been given the opportunity to do so.
15. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
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16. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware
without reference to rules relating to conflicts of law.
Very truly yours,
GLIDCO INC.
By: /s/ GEORGE H. HEMPSTEAD, III
--------------------------------
Name: George H. Hempstead, III
Title: Vice President
Agreed and Accepted this
1st day of July, 1996:
MILLENNIUM CHEMICALS INC. /s/ GEORGE W. ROBBINS
(for purposes of Section 6 only) -------------------------------
George W. Robbins
By: /s/ GRAHAM DRANSFIELD
------------------------------------
Name: Graham Dransfield
Title: Vice President and Director
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EXHIBIT A
Part I -- Cause
1. Subject to compliance with the notification provisions in this
Exhibit A, this Agreement shall not prevent the termination of your employment
by the Company for Cause. A termination for Cause means a termination by the
Company effected by a written notice of termination for Cause. For purposes of
this Agreement, the term "Cause" shall be limited to your: (i) willful
misconduct with regard to the Company or its affiliates or their businesses
which has a material adverse effect on the Company and its affiliates taken as a
whole; (ii) refusal to follow the proper written direction of the Company Board
provided that the foregoing refusal shall not be "Cause" if in good faith you
believe that such direction is illegal, unethical or immoral and you promptly so
notify the applicable Company Board; (iii) conviction of a felony (other than a
felony involving a motor vehicle) and either (x) exhausting all appeals without
a reversal of the conviction or (y) commencing a term of incarceration in a
house of detention; (iv) breach of any fiduciary duty owed to the Company or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole; or (v) your material fraud with regard to the Company or any
of its affiliates.
2. A notice of termination for Cause shall mean a notice that
shall set forth in reasonable detail the specific basis, facts and circumstances
which provide for a basis for termination for Cause and shall include a copy of
a resolution duly adopted by at least two-thirds of the directors of the
applicable Company at a meeting which was called for the purpose of considering
such termination and which you and your representative had the right to attend
and address, finding that, in the good faith opinion of the applicable board,
you engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. The date of termination
for a termination for Cause shall be the date indicated in the notice of
termination.
3. Notwithstanding anything to the contrary contained in this
Agreement, if any purported termination for Cause within the Change in Control
Protection Period that occurs on or after the Effective Date is held by a court
not to have been based on the grounds set forth in this Agreement, or not to
have followed the procedures set forth in this Agreement, such purported
termination for Cause shall be deemed a termination by the Company without Cause
and you shall be entitled to the amounts and benefits provided in Section 4 to
the extent, if any, applicable.
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Part II -- Change in Control
1. For purposes of this Agreement, a "Change in Control" shall
mean either a Change in Control of Millennium or a Change in Control of the
Company. Only one (1) Change in Control may occur under this Agreement.
2. Change in Control of Millennium. For purposes of this
Agreement, the term "Change in Control of Millennium" shall mean (i) any
"person" as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 ("Act") (other than Millennium, any trustee or other
fiduciary holding securities under any employee benefit plan of Millennium or
any company owned, directly or indirectly, by the stockholders of Millennium in
substantially the same proportions as their ownership of Common Stock of
Millennium), becoming the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of Millennium representing
twenty-five percent (25%) or more of the combined voting power of Millennium's
then 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 beginning of such period constitute the Board of
Directors of Millennium, and any new director (other than a director designated
by a person who has entered into an agreement with Millennium to effect a
transaction described in clause (i), (iii), or (iv) of this paragraph or a
director whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors of Millennium) whose election by the Board of Directors of
Millennium or nomination for election by Millennium'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
Millennium; (iii) the merger or consolidation of Millennium with any other
corporation, other than a merger or consolidation which would result in the
voting securities of Millennium outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of Millennium or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Millennium (or similar transaction) in which no person (other than those
covered by the exceptions in (i) above) acquires more than twenty-five percent
(25%) of the combined voting power of Millennium's then outstanding securities
shall not constitute a Change in Control
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of Millennium; or (iv) approval by the stockholders of Millennium of a plan of
complete liquidation of Millennium or the closing of the sale or disposition by
Millennium of all or substantially all of Millennium's assets other than the
sale of all or substantially all of the assets of Millennium to a person or
persons who beneficially own, directly or indirectly, at least fifty percent
(50%) or more of the combined voting power of the outstanding voting securities
of Millennium at the time of the sale. Notwithstanding the foregoing, the
Demerger will not constitute a Change of Control for purposes of this Agreement.
3. Change in Control of the Company. For purposes of this
Agreement, the term "Change in Control of the Company" shall mean (i) any
"person" as such term is used in Sections 13(d) and 14(d) of the Act (other than
Millennium or a Subsidiary (as defined below) of Millennium) becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company's then outstanding securities
entitled to vote in a general election for directors; or (ii) all or
substantially all of the Company's assets are sold other than to Millennium or a
Subsidiary of Millennium. "Subsidiary" shall have the meaning set forth in
Section 424 of the Code.
4. Change in Control Protection Period. For purposes of this
Agreement, the term "Change in Control Protection Period" shall mean the Pre
Change in Control Period and the Post Change in Control Period as defined below.
5. Pre Change in Control Period. For purposes of this Agreement,
Pre Change in Control Period shall mean the one-hundred and eighty (180) day
period prior to the date of a Change in Control that occurs on or after the
Effective Date.
6. Post Change in Control Period. For purposes of this Agreement,
Post Change in Control Period shall mean the period commencing on the date of a
Change in Control that occurs on or after the Effective Date and ending the day
immediately prior to the second anniversary of the Change in Control.
Part III - Company Board
For purposes of this Agreement, the term "Company Board" shall be
deemed to refer to the Board of Directors of the Company and Millennium.
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Part IV -- Disability
For purposes of this Agreement, the term "Disability" shall mean
your inability to perform your material duties and responsibilities hereunder
due to the same or related physical or mental reasons for more than one hundred
eighty (180) consecutive days in any twelve (12) consecutive month period. A
termination for Disability shall be deemed to occur when you are terminated by
the Company by written notice after you incur a Disability and while you remain
disabled.
Part V -- Good Reason
1. For purposes of this Agreement, a termination for "Good
Reason" shall mean a termination by you effected by a written notice of
termination for Good Reason given within ninety (90) days after the occurrence
of the Good Reason event. Subject to subsection 3 below, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without your express written consent, of (i) any material diminution of your
positions, duties or responsibilities with the Company from the highest position
held within the Pre Change in Control Period (except in each case in connection
with the termination of your employment for Cause, Disability or as a result of
your death, or in the case of a material diminution of duties or
responsibilities, temporarily as a result of your illness or other absence) or
the assignment to you of duties or responsibilities that are inconsistent with
your aforementioned highest position; (ii) your removal from, or the
nonreelection to, your positions as an officer with the Company held during the
Pre Change in Control Period; (iii) a relocation of the Company's principal
United States executive offices to a location more than twenty-five (25) miles
from where they are at the time of the Change in Control, or a relocation by the
Company of your principal office away from such principal United States
executive offices; (iv) a failure by the Company or Millennium (A) to continue
any bonus plan, program or arrangement in which you were entitled to participate
during the Pre Change in Control Period (the "Bonus Plans"), provided that any
such Bonus Plans may be modified at the Company's discretion from time to time
but shall be deemed terminated if (x) any such plan does not remain
substantially in the form in effect prior to such modification or (y) if plans
providing you with substantially similar benefits are not substituted therefor
("Substitute Plans"), or (B) to continue you as a participant in the Bonus Plans
or Substitute Plans on not less than the same maximum level of award and not
more than the same level of difficulty for achievability thereof as was
applicable to you immediately prior to any change in such plans, in accordance
with the Bonus Plans and the Substitute Plans; (v) any material breach by the
Company or Millennium of any provision of this Agreement; (vi) if on the Board
of Directors of the Company during the Pre Change in Control Period,
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your removal from or failure to be reelected to the board; (vii) a reduction by
the Company of your rate of annual base salary to a level below your highest
rate of base salary within one-hundred and eighty (180) days prior to the Change
in Control; or (viii) failure of any successor of the Company to assume in a
writing delivered to you upon the assignee becoming such, the obligations of the
Company hereunder.
2. A notice of termination for Good Reason shall indicate the
specific basis for termination relied upon and set forth in reasonable detail
the facts and circumstances claimed to provide a basis for a termination for
Good Reason. The failure by you to set forth in the notice of termination for
Good Reason any facts or circumstances which contribute to the showing of Good
Reason shall not waive any of your rights hereunder or preclude you from
asserting such fact or circumstance in enforcing your rights hereunder. The
notice of termination for Good Reason shall provide for a date of termination
not less than ten (10) nor more than sixty (60) days after the date such notice
of termination for Good Reason is given.
3. In the event that a Direct Pay Letter of Credit is delivered
in accordance with Section 3 of this Agreement at the time of a Change in
Control, the definition of Good Reason shall not include the events set forth in
subsections 1(i), (ii) and (vi) above so long as during such period you are
maintained in a senior advisory capacity (without any line or other staff
responsibilities) to assist in the orderly transition to new management.
Part VI - Retirement
For purposes of this Agreement, the term "Retirement" shall mean
your retirement by the Company at or after your sixty-fifth (65th) birthday to
the extent such termination is specifically permitted as a stated exception from
applicable federal and state age discrimination laws based on position and
retirement benefits.
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FORM OF CHANGE-IN-CONTROL AGREEMENT
EXHIBIT 10.22
HM Anglo-American, Ltd.
99 Wood Avenue South
Iselin, New Jersey 08830
(908) 603-6600
July 1, 1996
Dear ___________________:
1. Introduction. HM Anglo-American, Ltd. (the "Company") believes
that the establishment and maintenance of a sound and vital management of the
Company and of Millennium Chemicals Inc., which is intended to become the
ultimate parent corporation of the Company (the "Parent") in connection with the
demerger by Hanson PLC of its chemicals business (the "Demerger") is essential
to the protection and enhancement of the interests of the Company, the Parent
and their stockholders. The Company also recognizes that the possibility of a
Change in Control (as defined in Exhibit A) of the Parent, with the attendant
uncertainties and risks, might result in the departure or distraction of key
employees of the Company to the detriment of the Company, the Parent and their
stockholders. In light of the possibility of a Change in Control of the Parent,
which is intended to become a separate publicly traded company as a result of
the Demerger, the Company has determined that it is appropriate to induce key
employees to remain with the Company, and to reinforce and encourage their
continued attention and dedication. Accordingly, subject to Section 2, upon your
written acceptance of the terms of this agreement (the "Agreement") evidenced by
your signing below, the Company intends to provide you the protections set forth
herein as of the Effective Date.
2. Effective Date and Term. Notwithstanding anything else herein,
this Agreement shall become effective (the "Effective Date") as of the date of
the Demerger provided that you are employed by the Company on such date. If the
Demerger does not occur prior to March 31, 1997 or you are not employed by the
Company on the date of the Demerger for any reason whatsoever, the provisions of
this Agreement (other than this Section 2) shall have no force or effect and
this Agreement shall be null and void. This Agreement shall expire on the
earliest of (i) three (3) years from the Effective Date, provided that if a
Change in Control takes place prior to three (3) years from the Effective Date,
the duration of this Agreement shall be until two (2) years after the Change in
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Control; (ii) the date of your death or termination as a result of Disability
(as defined herein), your retirement or other termination of your employment
with the Company prior to a Change in Control (except as otherwise provided in
Section 3 herein), other than by the Company without Cause (as defined in
Section 5 herein) or by you for Good Reason (as defined in Section 4 herein) or
(iii) one hundred and eighty (180) days after the date your employment is
terminated by the Company without Cause or by you for Good Reason.
Notwithstanding anything in this Agreement to the contrary, if the Company
becomes obligated to make any payment or provide any benefit to you pursuant to
the terms hereof at or prior to the expiration of this Agreement, then this
Agreement shall remain in effect for such purposes until all of the Company's
obligations hereunder are fulfilled. Disability for purposes of this Agreement
shall mean your inability to perform your material duties and responsibilities
due to the same or related physical or mental illness for one hundred and eighty
(180) consecutive days. A termination for Disability shall be deemed to occur
when you are terminated by the Company by written notice while you remain
disabled.
3. Termination Following a Change in Control. If a Change in
Control occurs and your employment is terminated by the Company without Cause
other than for Disability or you terminate employment with the Company for Good
Reason, during the period running from the date of the Change in Control to two
(2) years after the date of such Change in Control, then you shall be entitled
to the amounts and benefits provided in Section 6 herein upon such termination.
In addition, notwithstanding the foregoing, in the event you are either
terminated by the Company without Cause other than for Disability or terminate
your employment for Good Reason within one hundred and eighty (180) days prior
to the occurrence of a Change in Control (based on an event that occurred within
such one hundred and eighty (180) day period prior to the occurrence of a Change
in Control), such termination shall, upon the occurrence of a Change in Control
be deemed to be covered under the Agreement and you shall be entitled to the
amounts payable hereunder.
4. Termination for Good Reason. A termination for Good Reason for
purposes of this Agreement shall mean a termination by you effected by a written
notice of termination for Good Reason given within sixty (60) days after the
occurrence of the Good Reason event. "Good Reason" shall mean the occurrence or
failure to cause the occurrence, as the case may be, without your express
written consent, of (i) any material diminution of your positions, duties or
responsibilities with the Company from the highest position held within one
hundred and eighty (180) days prior to a Change in Control (except in connection
with the termination of your employment for Cause, Disability, as a result of
your death, or temporarily as a result of your illness or other absence) or the
assignment to you of duties or responsibilities that are inconsistent with your
aforementioned highest position; (ii) your removal from, or the nonreelection to
your positions with the Company held within one hundred and eighty (180) days
prior to a Change in Control; (iii) a relocation of the Company's principal
United States executive offices to a location more than twenty-five (25) miles
from where they are at the time of the Change in Control, or a relocation by the
Company of your principal office away
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from such principal United States executive offices; or (iv) any breach by the
Company of any material provision of this Agreement, unless the applicable
circumstances under (i) through (iv) are fully corrected prior to the date of
termination specified in the notice of termination for Good Reason. The notice
of termination for Good Reason shall provide for a date of termination not less
than fifteen (15) nor more than sixty (60) days after the date such notice of
termination for Good Reason is given.
5. Termination for Cause. A termination for Cause means a
termination by the Company effected by a written notice of termination for
Cause. The term "Cause" shall be limited to your: (i) willful misconduct with
regard to the Company or its business, assets or employees; (ii) refusal to
follow the proper written direction of the Board of Directors of the Company
(the "Board") or a more senior officer of the Company, provided that the
foregoing refusal shall not be "Cause" if in good faith you believe that such
direction is illegal, unethical or immoral and you promptly so notify the Board
or the more senior officer (whichever is applicable); (iii) conviction of (or
pleading of nolo contendere to) a felony (other than a traffic violation); (iv)
breach of any fiduciary duty owed to the Company or any affiliate; or (vi)
dishonesty, misappropriation or fraud with regard to the Company (other than
good faith expense account disputes). The date of termination for a termination
for Cause shall be the date indicated in the notice of termination.
6. Compensation on Termination. If pursuant to Section 3 you are
entitled to amounts and benefits under this Section 6, subject to Section 10,
the Company shall pay and provide to you: (A) in a lump sum within five (5) days
after such termination (or, if such termination occurred within one hundred and
eighty (180) days prior to a Change in Control, within five (5) days after the
Change in Control) (i) two (2) times your highest annual base salary in effect
within one hundred and eighty (180) days prior to the Change in Control, (ii)
two (2) times the highest annual bonus paid or payable to you for any of the
last two (2) completed years by the Company or its predecessors, (iii) any
unreimbursed business expenses for the period prior to termination payable in
accordance with the Company's policies, and (iv) any base salary, bonus,
vacation pay or other deferred compensation accrued or earned under law or in
accordance with the Company's policies applicable to you but not yet paid; (B)
any other amounts or benefits due under the then applicable employee benefit
incentive or equity plans of the Company applicable to you as shall be
determined and paid in accordance with such plans, except to the extent paid
pursuant to (A) above; (C) two (2) years of additional service and compensation
credit (at your highest compensation level in the one hundred and eighty (180)
day period prior to the Change in Control) for pension purposes under any
defined benefit type qualified or nonqualified pension plan or arrangement of
the Company and its affiliates applicable to you, measured from the date of
termination of employment and not credited to the extent that you are otherwise
entitled to such credit during such two (2) year period, which payments shall be
made through and in accordance with the terms of the nonqualified defined
benefit pension plan or arrangement if any then exists, or, if not, in an
actuarially equivalent lump sum (using the actuarial factors then applying in
the Company's or its affiliates' defined
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benefit plan covering you); (D) an amount equal to two (2) years of the maximum
Company contribution (assuming you deferred the maximum amount and continued to
earn your then current salary) measured from the date of termination of
employment under any type of qualified or nonqualified 401(k) plan (payable at
the end of each such year and not payable to the extent otherwise contributed to
such plan); and (E) payment by the Company of the premiums for you (except in
the case of death) and your dependents' health coverage for two (2) years from
the date of termination of employment under the Company's health plans which
cover the senior executives of the Company or materially similar benefits (to
the extent not otherwise provided), provided that in the case of termination
within one hundred and eighty (180) days prior to a Change in Control, the
obligations under this subpart (E) shall only exist to the extent that you or
your dependents, as the case may be, had timely elected or timely elect COBRA
coverage which continued at the time of the Change in Control and the obligation
with regard to the period prior to the Change in Control shall be limited to
reimbursement of the COBRA premiums previously paid or due for such period. Any
amendment or termination of benefits, equity or incentive plans within one
hundred and eighty (180) days prior to, or after, a Change in Control that is
detrimental to you shall be ignored with respect to (C), (D) and (E) above.
Payments under (E) above may, at the discretion of the Company, be made by
continuing your participation in the plan as a terminee, by paying the
applicable COBRA premium for you and your dependents, or by covering you and
your dependents under substitute arrangements, provided that, to the extent you
incur tax that you would not have incurred as an active employee as a result of
the aforementioned coverage or the benefits provided thereunder, you shall
receive from the Company an additional payment in the amount necessary so that
you will have no additional cost for receiving such items or any additional
payment.
7. Limit. Notwithstanding the foregoing, to the extent you would
be subject to the excise tax under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), on the amounts above and such other amounts or
benefits you receive from the Company, any person whose actions result in a
change of ownership covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person, required to be included in the
calculation of parachute payments for purposes of Sections 280G and 4999 of the
Code, the amounts provided under this Agreement shall be automatically reduced
to an amount one dollar less than that, when combined with such other amounts,
would subject you to such excise tax.
8. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of New York in the State of New York under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to: (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and the statement for reasons for
the decision; and (iv) request the matter to be handled by and in accordance
with the expedited procedures provided for in the Commercial Arbitration
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Rules. The determination of the arbitrators, which shall be based upon a de novo
interpretation of this Agreement, shall be final and binding and judgment may be
entered on the arbitrators' award in any court having jurisdiction. All costs of
the American Arbitration Association and the arbitrator shall be borne as
determined by the arbitrator.
9. Legal Fees. In the event the Company does not make the
payments due hereunder on a timely basis and you collect any part or all of the
payments provided for hereunder or otherwise successfully enforce the terms of
this Agreement by or through a lawyer or lawyers, the Company shall pay all
costs of such collection or enforcement, including reasonable legal fees and
other reasonable fees and expenses which you may incur. The Company shall pay to
you interest at the prime lending rate as announced from time to time by
Citibank, N.A. on all or any part of any amount to be paid to you hereunder that
is not paid when due. The prime rate for each calendar quarter shall be the
prime rate in effect on the first day of the calendar quarter.
10. No Duty to Mitigate/Set-off. The Company agrees that if your
employment with the Company is terminated pursuant to this Agreement during the
term of this Agreement, you shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to you by the Company pursuant
to this Agreement. Further, the amount of any payment or benefit provided for in
this Agreement shall not be reduced by any compensation earned by you or benefit
provided to you as the result of employment by another employer or otherwise.
Except as otherwise provided herein and apart from any disagreement between you
and the Company concerning interpretation of this Agreement or any term or
provision hereof, the Company's obligations to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against you. The amounts due under Section 6 are inclusive, and in lieu of, any
amounts payable under any other salary continuation or cash severance
arrangement of the Company and to the extent paid or provided under any other
such arrangement shall be offset against the amount due hereunder.
11. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. Reference to the Company herein shall also
include any successor to HM Anglo-American, Ltd. This Agreement shall inure to
the benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees. If you die while any amount would still by payable to you hereunder if
you
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had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of the Agreement to the executors, personal
representatives, estate trustees, or administrators of your estate. This
Agreement is personal to you and neither this Agreement nor any rights hereunder
may be assigned by you.
12. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, or
sent by registered mail, postage prepaid as follows:
(i) If to the Company, at:
99 Wood Avenue South
Iselin, New Jersey 08830
Attention: George H. Hempstead, III
Senior Vice President -
Law and Administration.
(ii) If to you, to the last shown
address on the books of the
Company or the Parent.
Any such notice shall be deemed given when so delivered
personally, or, if mailed, five (5) days after the date of deposit (in the form
of registered or certified mail, return receipt requested, postage prepaid) in
the United States postal system. Any party may by notice designate another
address or person for receipt of notices hereunder.
13. Not an Agreement of Employment. This is not an agreement
assuring employment and the Company reserves the right to terminate your
employment at any time with or without Cause, subject to the payment provisions
hereof if such termination is after, or within one hundred and eighty (180) days
prior to, a Change in Control. You acknowledge that you are aware that you shall
have no claim against the Company hereunder or for deprivation of the right to
receive the amounts hereunder as a result of any termination that does not
specifically satisfy the requirements hereof. The foregoing shall not affect
your rights under any other agreement with the Company.
14. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. This Agreement
constitutes the entire Agreement between the parties hereto pertaining to the
subject matter hereof and supersedes any prior agreements between the Company
and you. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which
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are not expressly set forth in this Agreement. All references to any law shall
be deemed also to refer to any successor provisions to such laws.
15. Independent Representation. You acknowledge that you have
been advised by the Company to have the Agreement reviewed by independent
counsel and have been given the opportunity to do so.
16. Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
17. Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware
without reference to rules relating to conflicts of law.
Very truly yours,
HM ANGLO-AMERICAN, LTD.
By:
--------------------------
Name:
Title:
-----------------------------
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EXHIBIT A
Change in Control
For purposes of this Agreement, the term "Change in Control"
shall mean (i) any "person" as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 ("Act") (other than the Parent, any trustee
or other fiduciary holding securities under any employee benefit plan of the
Parent or any company owned, directly or indirectly, by the stockholders of the
Parent in substantially the same proportions as their ownership of Common Stock
of the Parent), becoming the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Parent representing
twenty-five percent (25%) or more of the combined voting power of the Parent's
then outstanding securities; (ii) during any period of two consecutive years
(not including any period prior to the consummation of the Demerger),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director (other than a director designated by a person
who has entered into an agreement with the Parent to effect a transaction
described in clause (i), (iii), or (iv) of this paragraph or a director whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) 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 Parent) whose election by the Board of Directors or
nomination for election by the Parent'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-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; (iii) the merger or
consolidation of the Parent with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Parent
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Parent or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization of the Parent (or
similar transaction) in which no person (other than those covered by the
exceptions in (i) above) acquires more than twenty-five percent (25%) of the
combined voting power of the Parent's then outstanding securities shall not
constitute a Change in Control or (iv) the stockholders of the Parent approve a
plan of complete liquidation of the Parent or the closing of the sale or
disposition by the Parent of all or substantially all of the Parent's assets
other than the sale of all or substantially all of the assets of the Parent to a
person or persons who beneficially own, directly or indirectly, at least fifty
percent (50%) or more of the combined voting power of the outstanding voting
securities of the Parent at the time of the sale. Only one (1) Change in Control
may take place under this Agreement.
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EXHIBIT 10.23
MILLENNIUM CHEMICALS INC.
ANNUAL PERFORMANCE INCENTIVE PLAN
(EFFECTIVE AS OF OCTOBER 1, 1996)
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MILLENNIUM CHEMICALS INC.
ANNUAL PERFORMANCE INCENTIVE PLAN
(EFFECTIVE AS OF OCTOBER 1, 1996)
1. PURPOSE
The purpose of this Plan is to attract, retain and motivate key
employees by providing cash performance awards to designated key employees of
the Company and its Subsidiaries. This Plan is effective for the fourth quarter
of the fiscal year ending on December 31, 1996 and for the fiscal year of the
Company commencing on January 1, 1997 and, subject to approval by the
stockholders of the Company in accordance with the laws of the State of
Delaware, for fiscal years thereafter.
2. DEFINITIONS
Unless the context otherwise requires, the words which follow shall
have the following meaning:
(a) "Award" - shall mean the total annual Performance
Award as determined under the Plan.
(b) "Board" - shall mean the Board of Directors of the
Company.
(c) "Change in Control of the Company" - shall have the
meaning set forth in Exhibit A hereto.
(d) "Code" - shall mean the Internal Revenue Code of
1986, as amended and any successor thereto.
(e) "Code Section 162(m)" - shall mean the exception for
performance-based compensation under Section 162(m)
of the Code or any successor section and the
Treasury regulations promulgated thereunder.
(f) "Company" - shall mean Millennium Chemicals Inc. and
any successor by merger, consolidation or otherwise.
(g) "Committee" - shall mean the Compensation Committee
of the Board or such other Committee of the Board
that is appointed by the Board all of whose members
shall satisfy the
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requirements to be "outside directors," as defined
under Code Section 162(m).
(h) "Individual Target Award" - shall mean the targeted
performance award for a Plan Year specified by the
Committee as provided in Section 5 hereof.
(i) "Participant" - shall mean an employee of the
Company or a Subsidiary selected, in accordance with
Section 4 hereof, to be eligible to receive an Award
in accordance with this Plan.
(j) "Performance Award" - shall mean the amount paid or
payable under Section 6 hereof.
(k) "Plan" - shall mean the Millennium Chemicals Inc.
Annual Performance Incentive Plan.
(l) "Plan Year" - shall mean the fiscal year of the
Company.
(m) "Subsidiary" - shall mean any subsidiary of the
Company within the meaning of Section 424(f) of the
Code.
3. ADMINISTRATION AND INTERPRETATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall
have the exclusive authority and responsibility to: (i) interpret the Plan; (ii)
approve the designation of eligible Participants; (iii) set the performance
criteria for Awards within the Plan guidelines; (iv) certify attainment of
performance goals and other material terms; (v) reduce Awards as provided
herein; (vi) authorize the payment of all benefits and expenses of the Plan as
they become payable under the Plan; (vii) adopt, amend and rescind rules and
regulations relating to the Plan; and (viii) make all other determinations and
take all other actions necessary or desirable for the Plan's administration
including, without limitation, correcting any defect, supplying any omission or
reconciling any inconsistency in this Plan in the manner and to the extent it
shall deem necessary to carry this Plan into effect, but only to the extent any
such action would be permitted under Code Section 162(m).
Decisions of the Committee shall be made by a majority of its members.
All decisions of the Committee on any question concerning the selection of
Participants and the interpretation and administration of the Plan shall be
final, conclusive and binding upon all parties. The Committee may rely on
information, and consider recommendations, provided by the Board or the
executive officers of the Company. The Plan is intended to comply with Code
Section 162(m), and all provisions contained herein shall be limited, construed
and interpreted in a manner to so comply.
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4. ELIGIBILITY AND PARTICIPATION
(a) For each Plan Year, the Committee shall select the
employees of the Company and Subsidiaries who are to
participate in the Plan from among the executive key
employees of the Company and Subsidiaries.
(b) No person shall be entitled to any Award under this
Plan for any Plan Year unless he or she is so
designated as a Participant for that Plan Year. The
Committee may add to or delete individuals from the
list of designated Participants at any time and from
time to time, in its sole discretion, subject to any
limitations required to comply with Code Section
162(m).
5. INDIVIDUAL TARGET AWARD
For each Participant for each Plan Year, the Committee may specify a
targeted performance award. The Individual Target Award may be expressed, at the
Committee's discretion, as a fixed dollar amount, a percentage of base pay, or
an amount determined pursuant to an objective formula or standard. Establishment
of an Individual Target Award for an employee for a Plan Year shall not imply or
require that the same level Individual Target Award (if any such award is
established by the Committee for the relevant employee) be set for any
subsequent Plan Year. At the time the Performance Goals are established (as
provided in subsection 6.2 below), the Committee shall prescribe a formula to
determine the percentages (which may be greater than one-hundred percent (100%))
of the Individual Target Award which may be payable based upon the degree of
attainment of the Performance Goals during the Plan Year. Notwithstanding
anything else herein, the Committee may, in its sole discretion, elect to pay a
Participant an amount that is less than the Participant's Individual Target
Award (or attained percentage thereof) regardless of the degree of attainment of
the Performance Goals; provided that no such discretion to reduce an Award
earned based on achievement of the applicable Performance Goals shall be
permitted for the Plan Year in which a Change in Control of the Company occurs,
or during such Plan Year with regard to the prior Plan Year if the Awards for
the prior Plan Year have not been made by the time of the Change in Control of
the Company, with regard to individuals who were Participants at the time of the
Change in Control of the Company.
6. PERFORMANCE AWARD PROGRAM
6.1 Performance Awards. Subject to Section 7 herein, each Participant
is eligible to receive up to the achieved percentage of their Individual Target
Award for such Plan Year (or, subject to the last sentence of Section 5, such
lesser amount as determined by the Committee in its sole discretion) based upon
the attainment of the objective Performance Goals established pursuant to
subsection 6.2 and the formula established pursuant to Section 5. Except as
specifically provided in Section 7, no Performance Award shall be made to a
Participant for a Plan Year unless the minimum Performance Goals for such Plan
Year are attained.
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6.2 Objective Performance Goals, Formulae or Standards (the
"Performance Goals"). The Committee shall establish the objective performance
goals, formulae or standards and the Individual Target Award (if any) applicable
to each Participant or class of Participants for a Plan Year in writing prior to
the beginning of such Plan Year or at such later date as permitted under Code
Section 162(m) and while the outcome of the Performance Goals are substantially
uncertain. Such Performance Goals may incorporate, if and only to the extent
permitted under Code Section 162(m), provisions for disregarding (or adjusting
for) changes in accounting methods, corporate transactions (including, without
limitation, dispositions and acquisitions) and other similar type events or
circumstances. To the extent any such provision would create impermissible
discretion under Code Section 162(m) or otherwise violate Code Section 162(m),
such provision shall be of no force or effect. These Performance Goals shall be
based on one or more of the following criteria: (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 in any case 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
achievement of a certain level of, reduction of, or other specified objectives
with regard to limiting the level of increase in, all or a portion of, the
Company's bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of such cash balances and/or other offsets and adjustments as may be established
by the Committee; (iv) the attainment of a specified percentage increase in
earnings per share or earnings per share from continuing operations of the
Company (or a subsidiary, division or other operational unit of the Company);
(v) the attainment of certain target levels of, or a specified percentage
increase in, revenues, net income or earnings before income tax of the Company
(or a subsidiary, division, or other operational unit of the Company); (vi) the
attainment of certain target levels of, or a specified increase in return on
capital employed or return on invested capital of the Company (or any
subsidiary, division or other operational unit of the Company); (vii) the
attainment of certain target levels of, or a percentage increase in, after-tax
or pre-tax return on stockholders' equity of the Company (or any subsidiary,
division or other operational unit of the Company); (viii) 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); (ix) the
attainment of certain target levels in the fair market value of the shares of
the Company's Common Stock; and (x) the growth in the value of an investment in
the Company's Common Stock assuming the reinvestment of dividends.
In addition, such Performance Goals may be based upon the attainment of
specified levels of Company (or subsidiary, division or other operational unit
of the Company) performance under one or more of the measures described above
relative to the performance of other corporations. To the extent permitted under
Code Section 162(m), but only to the extent permitted under Code Section 162(m)
(including, without limitation, compliance with any requirements for stockholder
approval), the
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Committee may: (i) designate additional business criteria on which the
Performance Goals may be based or (ii) adjust, modify or amend the
aforementioned business criteria.
6.3 Maximum Nondiscretionary Award. The maximum Performance Award
payable to a Participant for any Plan Year is $3,000,000.
6.4 Payment Date; Committee Certification. The Performance Awards will
be paid as soon as administratively feasible after the Plan Year in which they
are earned, but not before the Committee certifies in writing that the
Performance Goals specified (except to the extent permitted under Code Section
162(m) and provided in Section 7 with regard to death, disability or Change in
Control of the Company or certain other termination situations) pursuant to
subsection 6.2 were, in fact, satisfied. The Committee shall use its best
efforts to make a determination with regard to satisfaction of the Performance
Goals within two and one-half (2 1/2) months after the end of each Plan Year.
7. EMPLOYMENT AT YEAR END GENERALLY REQUIRED FOR AWARD
No Award shall be made to any Participant who is not an active employee
of the Company or one of its subsidiaries or affiliates at the end of the Plan
Year; provided, however, that the Committee, in its sole and absolute
discretion, may make Awards to Participants for a Plan Year in circumstances
that the Committee deems appropriate including, but not limited to, a
Participant's death, disability, retirement or other termination of employment
during such Plan Year and the Committee shall be required to make at least a
pro-rata Award through the date of a Change in Control of the Company to each
Participant who is a Participant at the time of such Change in Control of the
Company. All such Awards shall be based on achievement of the Performance Goals
for the Plan Year, except that, to the extent permitted under Code Section
162(m), in the case of death, disability or Change in Control of the Company
during the Plan Year (or such other termination situations as permitted under
Code Section 162(m)) an amount equal to or less than the Individual Target
Awards may be made by the Committee either during or after the Plan Year without
regard to actual achievement of the Performance Goals. Furthermore, upon a
Change in Control of the Company the Committee may, in its sole discretion but
only to the extent permitted under Code Section 162(m), make an award (payable
immediately) equal to a pro-rata portion (through the date of the Change in
Control of the Company) of the Individual Target Award payable upon achieving,
but not surpassing, the Performance Goals for the relevant Plan Year. Any such
immediate pro-rata payment shall reduce any other Award made for such Plan Year
under this Plan by the amount of the pro-rata payment.
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8. NON-ASSIGNABILITY
No Award under this Plan nor any right or benefit under this Plan shall
be subject to anticipation, alienation, sale, assignment, pledge, encumbrance,
garnishment, execution or levy of any kind or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber and to the extent permitted
by applicable law, charge, garnish, execute upon or levy upon the same shall be
void and shall not be recognized or given effect by the Company.
9. NO RIGHT TO EMPLOYMENT
Nothing in the Plan or in any notice of award pursuant to the Plan
shall confer upon any person the right to continue in the employment of the
Company or one of its subsidiaries or affiliates nor affect the right of the
Company or any of its subsidiaries or affiliates to terminate the employment of
any Participant.
10. AMENDMENT OR TERMINATION
While the Company hopes to continue the Plan indefinitely, it reserves
the right in its Board (or a duly authorized committee thereof) to amend,
suspend or terminate the Plan or to adopt a new plan in place of this Plan at
any time; provided, that no such amendment shall, without the prior approval of
the stockholders of the Company in accordance with the laws of the State of
Delaware to the extent required under Code Section 162(m): (i) materially alter
the Performance Goals as set forth in subsection 6.2; (ii) increase the maximum
amounts set forth in subsection 6.3; (iii) change the class of eligible
employees set forth in Section 4(a); or (iv) implement any change to a provision
of the Plan requiring stockholder approval in order for the Plan to continue to
comply with the requirements of Code Section 162(m). Furthermore, no amendment,
suspension or termination shall, without the consent of the Participant, alter
or impair a Participant's right to receive payment of an Award for a Plan Year
otherwise payable hereunder.
11. SEVERABILITY
In the event that any one or more of the provisions contained in the
Plan shall, for any reason, be held to be invalid, illegal or unenforceable, in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Plan and the Plan shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained therein.
12. WITHHOLDING
The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it may have to withhold
federal, state or local income or other taxes incurred by reason of payments
pursuant to the Plan.
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13. GOVERNING LAW
This Plan and any amendments thereto shall be construed, administered,
and governed in all respects in accordance with the laws of the State of
Delaware (regardless of the law that might otherwise govern under applicable
principles of conflict of laws).
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EXHIBIT A
"Change in Control of the Company" - shall mean that one (1) of the
following has occurred:
(i) any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
Common Stock, $.01 par value per share, of the Company ("Common
Stock")), becoming the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding securities;
(ii) during any period of two (2) consecutive years (not
including any period prior to the date of the consummation of the
spinoff of the Company to shareholders of Hanson PLC pursuant to a
demerger), individuals who at the beginning of such period constitute
the Board, 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 paragraph (i), (iii), or (iv) of this section
or a director whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) 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 Company's Board 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-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;
(iii) the merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity)
more than fifty percent (50%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that
a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person (other than
those covered by the exceptions in (i) above) acquires more than
twenty-five percent (25%) of the combined voting power of the Company's
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then outstanding securities shall not constitute a Change in Control
of the Company; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets other than the sale of all or substantially all of the assets of
the Company to a person or persons who beneficially own, directly or
indirectly, at least fifty percent (50%) or more of the combined voting
power of the outstanding voting securities of the Company at the time
of the sale.
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EXHIBIT 10.24
MILLENIUM CHEMICALS INC.
EXECUTIVE LONG-TERM INCENTIVE PLAN
Section 1. Establishment.
Effective as of October 1, 1995, Hanson Industries, a division of
Tillotson Commercial Motors Limited, established an unfunded deferred
compensation plan known as the "HANSON INDUSTRIES EXECUTIVE LONG-TERM INCENTIVE
PLAN" (the "Hanson Plan"). Effective as of October 1, 1996, Hanson Industries
has assigned to Millenium Chemicals Inc. its interest in and obligations under
the portion of the Hanson Plan that applies to the employees of Millenium
Chemicals Inc. and its affiliates and Millenium Chemicals Inc. has assumed such
obligations and adopted the applicable portion of the Hanson Plan and renamed it
the "MILLENIUM CHEMICALS INC. EXECUTIVE LONG-TERM INCENTIVE PLAN" (the "Plan").
Section 2. Purpose.
The purpose of this Plan is to retain and reward Directors and key
policy making and senior managerial employees for achieving long-term
performance goals designed to enhance stockholder value.
Section 3. Definitions.
Whenever used herein, the following terms shall have the meanings set
forth below:
(a) Account means the account established under Section 6.
(b) Award means an opportunity to earn an amount of incentive
compensation granted in an Award Year to a Participant pursuant
to Section 7.
(c) Award Year means the fiscal year in which an Award is granted.
(d) Beneficiary means the beneficiary or beneficiaries designated by
a Participant, in the manner established by the Compensation
Committee, to exercise the rights of the Participant and receive
all amounts distributable with respect to any Award upon the
death of any Participant.
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(e) Board of Directors means the Board of Directors of the Company,
except as otherwise specifically stated.
(f) Cause means (i) in the case where there is no employment
agreement, change in control agreement or similar agreement
in effect between the Employer and the Participant, or where
there is an employment agreement, change in control agreement or
similar agreement in effect but such agreement either does not
define cause (or words of like import) or a "cause" termination
would not be permitted under such agreement at that time because
other conditions were not satisfied, termination due to a
Participant's dishonesty, fraud, insubordination, willful
misconduct, refusal to perform services (for any reason other
than illness or incapacity) or materially unsatisfactory
performance of his or her duties for the Employer; or (ii) in the
case where there is an employment agreement, change in control
agreement or similar agreement in effect between the Employer and
the Participant that defines cause (or words of like import) and
a "cause" termination would be permitted under such agreement at
that time, termination that is or would be deemed to be for
"cause" (or words of like import) as defined under such
employment agreement.
(g) Company means Millenium Chemicals Inc. In the event any Employer
(or portion thereof) ceases to be a Subsidiary of the Company and
the purchaser and its Ultimate Parent expressly assume the
obligations of this Plan with respect to such Employer (or
portion thereof) and all transferred Participants as contemplated
by Sections 13(c) and (d), the "Company" shall mean with respect
to such Employer (or portion thereof) and such Participants the
Ultimate Parent of such Employer (or portion thereof).
(h) Compensation Committee means the Compensation Committee of the
Board of Directors.
(i) Earned Award means that portion of an Award earned by a
Participant based on his or her Employer's performance as
measured at the end of each Performance Cycle against performance
targets established by the Compensation Committee at the
commencement of each Performance Cycle. In addition, all or a
portion of an Award may be deemed to be an Earned Award in
accordance with Section 13.
(j) Employer means the Company or a Subsidiary by which a Participant
is employed. At the discretion of the Compensation Committee, a
Participant may be deemed for purposes of any Award under this
Plan to be employed by two or more such companies (with such
Committee determining the relevant percentage of employment for
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calculating targets and Earned Awards) or by a company other than
the Participant's actual employer, in which case "Employer" shall
mean such company or companies.
(k) NYSE means the New York Stock Exchange, provided that if the
Stock is no longer traded on such exchange, NYSE shall mean the
primary exchange or market for the trading of the Stock in the
United States and, if there is no such exchange or market in the
United States, then the primary exchange or market for the Stock.
NYSE Composite Tape shall mean the primary system for reporting
the closing prices of the Stock on such exchange or market, as
determined by the Compensation Committee in its sole discretion.
(l) Participant means a Director, executive or senior manager (or a
former Director, executive or senior manager) of an Employer who
has been credited with one or more Awards under this Plan and
whose Account has not been fully depleted by distributions or
forfeitures.
(m) Performance Cycle means a three-year period over which an
Employer's performance shall be measured for purposes of
determining the amount of an Earned Award by a Participant. A new
Performance Cycle shall commence the first day of each new fiscal
year of the Company, or such other date as the Compensation
Committee shall determine.
(n) Qualifying Termination means the termination of a Participant's
employment (a) on or after his or her Retirement Age for any
reason other than for Cause, (b) prior to his or her Retirement
Age due to his or her involuntary termination by his or her
Employer other than for Cause, or (c) at any time on account of
his or her death or Total and Permanent Disability. The transfer
of a Participant from one Employer to another Employer shall not
constitute a termination of employment.
(o) Retirement Age means (i) age sixty-five (65); (ii) age sixty-two
(62) with ten (10) or more years of service with the Company (or
its predecessors) and/or a Subsidiary; or (iii) such age after
age fifty-five (55) as approved by the Compensation Committee
with regard to such Participant.
(p) Shareholder Approval means the approval of grants of Awards in
the form of Stock by the shareholders of the Company or its
successors and assigns under this Plan, or the approval of grants
of Awards in the form of Stock by the shareholders, board of
directors or other governing body of any other Employer or
affiliate of an Employer if the
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Compensation Committee determines that such governing body has
the authority to approve grants of Awards in the form of Stock.
(q) Stock means common stock of the Company as traded on the NYSE or
the ordinary shares of common stock of the Ultimate Parent of an
Employer should such Employer cease to be a Subsidiary.
(r) Subsidiary shall mean any subsidiary of the Company within the
meaning of Section 424(f) of the Code.
(s) Total and Permanent Disability shall mean total and permanent
disability, as defined in Section 22(p)(3) of the Code.
(t) Ultimate Parent means, with respect to any Employer (or portion
thereof) that is no longer a Subsidiary of the Company, the
corporation or other entity that is the ultimate owner, directly
or indirectly, of a majority of the voting stock or partnership
interests of such Employer. Alternatively, if any material
portion of the assets of such Employer has been sold, transferred
or otherwise conveyed by the Company or any of its affiliates,
then, with respect to any Participant whose employment is
transferred with such assets, the "Ultimate Parent" means the
corporation or other entity that is the ultimate owner, directly
or indirectly, of at least a majority of such assets. In the
event of any dispute regarding the identity of the Ultimate
Parent, the Compensation Committee of the company that sold such
Employer or assets shall determine the Ultimate Parent in its
sole discretion.
Section 4. Eligible Executives.
Participation in the Plan shall be limited to Directors of the Company,
key policy-making executives and senior managers of the Employers, as selected
and approved by the Compensation Committee.
Section 5. Period of Participation.
A Director, key executive or senior manager for whom a grant has been
made shall be a Participant under the Plan until his or her entire interest in
the Plan either has been distributed or forfeited.
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Section 6. Account.
The Company shall maintain a bookkeeping Account for each Participant to
which is credited annual Awards and from which is debited distributions of
Earned Awards and forfeitures under the Plan. Each account shall consist of a
sub-account valued in US Dollars (the "cash sub-account") for all Awards or
portions thereof credited in cash and deemed dividends and interest in
accordance with Sections 9 and 10 and, after Shareholder Approval is obtained, a
sub-account valued in shares of Stock for all Awards or portions thereof
credited in Stock. Awards valued or credited in Stock are so valued or credited
for calculation purposes only, it being understood that there shall be no
obligation to hold actual shares of Stock in any Account.
Section 7. Awards.
(a) At the commencement of each Award Year, the Compensation Committee
shall designate the Directors of the Company and the senior executives and
senior managers of each of the Employers who shall receive grants of Awards.
Until Shareholder Approval is obtained, all Awards shall be granted and credited
in cash only. If Shareholder Approval is obtained, Awards granted thereafter
shall consist of grants credited in shares of Stock, calculated in the manner
described in Section 7(d)(C). A Participant shall earn the Award or portion
thereof, based on his or her Employer's attainment of performance targets
established by the Compensation Committee for each Performance Cycle. The
Compensation Committee, at its sole discretion, shall have the right following
Shareholder Approval to convert (for calculation purposes only) Awards
previously credited in cash into Awards credited in Stock. Such conversion shall
be calculated at the closing price of a share of Stock on the conversion date as
reported on the NYSE Composite Tape or, if such price is not so reported on such
date, as determined by the Compensation Committee in its sole discretion.
(b) Performance Levels.
The amount of an Award which can be earned will depend upon the
performance results of a Participant's Employer during the Performance Cycle,
measured against three performance target levels which are referred to as:
(1) "entry" level performance;
(2) "expected" level performance; and
(3) "maximum" level performance.
If the Employer achieves the "entry" level performance target for the
Performance Cycle, a Participant's Earned Award shall equal twenty percent (20%)
of the
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Award granted at the commencement of the Performance Cycle; at the "expected"
level, the Earned Award shall equal sixty percent (60%) of the Award; and at the
"maximum" level, the Earned Award shall equal one hundred percent (100%) of the
Award.
The respective percentages shall be interpolated in one percent intervals
between each level based on the Employer's actual performance against the
established targets. A Participant will not earn any Award if his or her
Employer's performance during the Performance Cycle falls below the "entry"
level. The unearned amount of any Award shall be forfeited and each
Participant's Account shall be adjusted as of the last day of each Performance
Cycle to reflect such forfeitures.
(c) Weighting.
(1) In the case of a Participant who is a Director of the
Company, Awards shall be based on targets determined and
approved by the Compensation Committee.
(2) Unless otherwise specifically provided by the Compensation
Committee, in the case of a Participant who is a member of
the Board of Directors of an Employer and is not a
Director of the Company, Awards shall be based on the
Employer's consolidated value creation targets as
determined and approved by the Compensation Committee of
the Employer.
(3) Unless otherwise specifically provided by the Compensation
Committee, in the case of a Participant who is not a
member of the Board of Directors of an Employer or the
Company, Awards shall be based on the value creation
targets established for the Participant's Employer by the
Compensation Committee.
(d) Calculation. Awards made under the Plan shall be calculated as
follows:
(A) The initial value of each Participant's maximum
potential Award shall be expressed as a dollar value.
This dollar value shall be based upon a percentage of a
Participant's maximum annual bonus potential, as
determined in the sole discretion of the Compensation
Committee with regard to each Participant, at the
commencement of each Performance Cycle (and excluding
any "top hat," special or other incentive arrangements
which may be in existence or adopted subsequent to the
commencement of a Performance Cycle).
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(B) For Awards granted before Shareholder Approval is
obtained, such dollar values shall be credited to each
Participant's cash sub-account as provided in Section 6.
(C) For Awards granted after Shareholder Approval, such dollar
value shall be converted (for calculation purposes only)
to the number of shares of Stock which could be purchased
at the closing price of the Stock on the first business
day following the announcement of the annual financial
results of the Company (or the Ultimate Parent of the
Employer should such Employer cease to be a Subsidiary)
for the fiscal year immediately preceding the commencement
of the Performance Cycle, as such closing price is
reported on the NYSE Composite Tape (or, if such price is
not so reported on such date, in such manner as may be
determined by the Compensation Committee in its sole
discretion). By way of example, if a Participant earning
$100,000 per annum on the first day of the Performance
Cycle had a 37.5% maximum bonus award potential, and the
Compensation Committee had determined his or her Award
would be 100% of that award potential, the initial dollar
value of his or her Award would be $37,500. If the price
of the Stock on December 2 (the day following the release
of the Company's results for the prior fiscal year) was
$15.00 per share, the initial Award would then equal 2,500
shares of Stock.
Section 8. Payment of Awards.
(a) Subject to the provisions herein governing forfeitures, vesting
upon Qualifying Termination and Change in Control (as defined in
Section 13), for each Performance Cycle in which a Participant
earns an Award, he or she shall be paid or distributed 50% of the
Earned Award within ninety (90) days of the end of each such
Performance Cycle; provided that the Participant remains an
active employee of an Employer from the date of grant of the
Earned Award through and including the last day of the
Performance Cycle. Subject to the provisions herein governing
forfeiture, vesting upon Qualifying Termination and Change in
Control (as defined in Section 13), the remaining 50% of the
Earned Award shall be credited to the Participant's Account and
shall be paid or distributed in equal installments over the next
five years within 90 days of each anniversary of the end of such
Performance Cycle; provided that the Participant remains an
active employee of an Employer from the last day of the
Performance Cycle through and including the applicable
anniversary of the end of the Performance Cycle.
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(b) Earned Awards credited in cash shall be payable in cash. Earned
Awards that have been converted (for calculation purposes) into
Stock shall be payable as follows subject to the provisions
herein governing forfeiture, vesting upon Qualifying Termination
and Change in Control (as defined in Sections 13): The Company
shall distribute to the Participant 65% of the payable amount of
any such Earned Award in shares of Stock (either authorized but
unissued shares or shares acquired and held in Treasury). The
remaining 35% of such payable amount shall be reconverted from an
Award credited in Stock into an Award credited in cash and the
Company shall pay such cash to the Participant. Such reconversion
shall be calculated at the closing price of a share of Stock on
the first business day following the announcement of the annual
financial results of the Company for the last year of the
Performance Cycle (or the Ultimate Parent of an Employer should
such Employer have ceased at such time to be a Subsidiary), as
such closing price is reported on the NYSE Composite Tape (or if
such price is not so reported on such day or if such day does not
fall within the 90-day payment period set forth in Section 8(a)
hereof), at the fair market value of a share of Stock as may be
determined by such methods or procedures as shall be established
from time to time by the Compensation Committee.
By way of example, if the Participant in the example set forth in
Section 7(d)(C), above, reached the "expected" level of performance, the
Participant's Account will be credited with an Earned Award of 1,500 shares of
Stock (or 60% of the Award, i.e., the "expected level" percent earned). In this
case, the Participant would receive over the following five years, subject to
the forfeiture, vesting upon Qualifying Termination and Change in Control (as
defined in Section 13) provisions, 975 shares of Stock (65% of the 1,500 shares
of Stock) and the cash value of 525 shares of Stock (35% of the 1500 shares of
Stock), as such cash value changed during such period. Accordingly, the
Participant would receive within 90 days of the end of the Performance Cycle 487
shares of Stock, (50% of 975 shares of Stock), the cash value of the .5
fractional share of Stock, plus the cash value of 262.5 shares of Stock (50% of
525 shares of Stock). Within 90 days of the anniversary of the end of the
Performance Cycle during each of the following five years, the Participant would
receive 97 shares of Stock (10% of 975 shares of Stock), the cash value of the
.5 fractional share of Stock, and the cash value of 52.5 shares of Stock (10% of
525 shares of Stock). In addition, dividend equivalents would be deemed to
accrue on all shares of Stock credited to the Participant's Account from the
last day of the Award Year, and the Participant would receive in cash the amount
of such dividends deemed accrued on Earned Awards denominated in shares of
Stock, as provided in Section 9. Finally, interest would be accrued and paid on
portions of Awards credited in cash as provided in Section 10.
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Section 9. Payment of Dividends.
If a Participant has an Award or a portion of an Award in his or her
Account credited in the form of shares of Stock, then the cash sub-account in
such Participant's Account shall be credited with an amount of cash equal to the
dividends or distributions that would have been paid to the Participant had such
Participant held such shares from the last day of the Award Year until such
shares were distributed to the Participant or the value of such shares were
reconverted into cash and credited to the Participant's cash sub-account. Such
credited amount shall be paid to the Participant as and when such shares are
distributed to the Participant or the cash value thereof is paid to the
Participant. If dividends or distributions are paid on the Stock other than in
cash, the Participant's cash sub-account shall be credited in cash with the fair
market value of such dividend or distributions, as determined by the
Compensation Committee, in its sole discretion. To the extent any portion of any
Award credited in Stock does not become an Earned Award, or any portion of any
Award is forfeited, the cash amounts credited to a Participant's cash
sub-account as a result of dividends or distributions deemed paid on such
unearned or forfeited Award shall be forfeited.
Section 10. Interest.
If a Participant has an Award or a portion of an Award in his or her
Account credited in the form of cash, then simple interest shall be credited on
such Award or portion thereof from and after the last day of the Award Year (or
the date as of which any amount is credited to the Participant's cash
sub-account, if later) until paid at the 4-year US Government Security Rate at
the end of the Award Year. Such credited interest shall be paid to the
Participant as and to the extent the Participant is paid any portion of the
Award on which the interest was credited. To the extent any portion of an Award
does not become an Earned Award, or any portion of any Award is forfeited, the
cash amount credited thereon as interest shall be forfeited.
Section 11. Forfeitures.
In the event that:
(a) the Participant is terminated for Cause, the Participant shall
forfeit any remaining unpaid balance (earned or unearned) in his
or her Account, and nothing shall be payable thereafter to the
Participant or any Beneficiary under the Plan, even if the
Participant has attained his or her Retirement Age; or,
(b) the Participant voluntarily terminates his or her employment
prior to Retirement Age, the Participant shall forfeit any
remaining unpaid balance (earned or unearned) in his or her
Account, and nothing shall
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be payable thereafter to the Participant or any Beneficiary under
the Plan.
Section 12. Vesting upon Qualifying Termination.
(a) If a Participant's employment is terminated due to a Qualifying
Termination, the Participant shall immediately vest in full in
all Earned Awards held in such Participant's Account. Such
Participant (or his or her designated Beneficiary in case of
death) shall be paid the full value of any Earned Awards within
90 days of such Qualifying Termination. An Award is considered an
Earned Award if the Performance Cycle is completed prior to the
date of such Qualifying Termination and the Employer has achieved
at least the "entry" performance level, even if the Company has
not completed its calculation of the amount of the Earned Award.
(b) If a Qualifying Termination occurs after the end of an Award Year
of any Award but prior to the end of the Performance Cycle, the
Participant shall vest in such Award to the extent such Award
becomes an Earned Award upon completion of the Performance Cycle.
Such Participant (or his or her Beneficiary, in case of death)
shall be paid the full amount of such Earned Award within 90 days
after the completion of such Performance Cycle.
(c) If a Qualifying Termination occurs due to the Participant's death
or Total and Permanent Disability during an Award Year of any
Award, the Participant shall vest pro-rata in such Award to the
extent such Award becomes an Earned Award upon the completion of
the Performance Cycle. The pro ration shall compare the total
months of the Performance Cycle to the length of the period from
the commencement of the Performance Cycle to the date of the
Qualifying Termination. The Participant (or his or her
Beneficiary, in case of death) shall be paid such prorated Earned
Award within 90 days after the completion of such Performance
Cycle.
(d) If a Participant's employment with the Company and its affiliates
is terminated, all Awards not vested pursuant to Section 8, this
Section 12 upon a Qualified Termination or pursuant to Section 13
shall be forfeited.
Section 13. Change in Control/Sale of an Employer.
(a) Unless the Board of Directors otherwise directs by resolution
prior to the occurrence of a Change in Control (as hereinafter
defined), in the event of a Change in Control:
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(1) As of the date of the Change in Control, 100% of all
outstanding unearned Awards shall be deemed Earned Awards
at the "maximum" level of performance.
(2) Earned Awards, including unpaid installments of Earned
Awards outstanding prior to the Change in Control, shall
not be subject to forfeiture for any reason as of the date
of the Change in Control.
(3) Earned Awards, including installments of Earned Awards
unpaid prior to the Change in Control and all dividends
and interest accrued on Earned Awards pursuant to Sections
9 and 10 hereof, shall be distributed and paid in full
within 90 days following the Change in Control in one lump
sum with no withholding of future installments.
(4) All Earned Awards credited in Stock shall be reconverted
into cash. Such reconversion shall be calculated at the
average of the closing price of the Stock on the NYSE
Composite Tape during the twenty business days immediately
preceding the date of the Change in Control. If the Stock
is not so quoted, the reconversion shall be calculated at
the fair market value of the Stock during such 20-day
period as determined in good faith by the Compensation
Committee on the advice of a registered investment advisor
(as defined under the Investment Advisors Act of 1940).
(b) For purposes of this Section 13, "Change in Control" shall mean
that one of the following has occurred:
(i) any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under
any employee benefit plan of the Company, or any
Company owned, directly or indirectly, by the
stockholders of the Company in substantially the
same proportions as their ownership of Stock,
becoming the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company
representing twenty-five percent (25%) or more of
the combined voting power of the Company's then
outstanding securities;
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<PAGE>
(ii) during any period of two (2) consecutive years (not
including any period prior to the date of the
consummation of the spinoff of the Company to
shareholders of Hanson PLC pursuant to a demerger),
individuals who at the beginning of such period
constitute the Board, 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 paragraph (i),
(ii), or (iv) of this section or a director whose
initial assumption of office occurs as a result of
either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of the
Regulation 14A promulgated under the Exchange Act)
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 Company's Board of Directors
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-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;
(iii) the merger or consolidation of the Company with any
other corporation, other than a merger or
consolidation which would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) more
than fifty percent (50%) of the combined voting
power of the voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; provided, however,
that a merger or consolidation effected to
implement a recapitalization of the Company (or
similar transaction) in which no person (other than
those covered by the exceptions in (i) above)
acquires more than twenty-five percent (25%) of the
combined voting power of the Company's then
outstanding securities shall not constitute a
Change in Control of the Company; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all
or
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substantially all of the Company's assets other
than the sale of all or substantially all of the
assets of the Company to a person or persons who
beneficially own, directly or indirectly, at least
fifty percent (50%) or more of the combined voting
power of the outstanding voting securities of the
Company at the time of the sale.
(c) In the event (i) any "person" as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company or a
Subsidiary) becoming the "beneficial owner" (as defined Rule
13d-3 under the Exchange Act), directly or indirectly, of
representing more than fifty percent (50%) of the combined voting
power of an Employer's (other than the Company's) then
outstanding securities entitled to vote in a general election for
directors; or (ii) all or substantially all of an Employer's
(other than the Company's) assets are sold other than to the
Company or a Subsidiary and unless the purchaser of such Employer
and the Ultimate Parent of such purchaser expressly assume the
obligations of this Plan with respect to such Employer (or
portion thereof) and such Participants, the Compensation
Committee may determine and credit Awards for such Participants
with respect to the current Performance Cycle(s), concurrent with
such sale, as if it were the last day of such Performance
Cycle(s) equal to the "expected" value of an Award for each such
Participant during such Performance Cycle(s); in which case
(1) All such Participants shall be fully vested in the
"expected" level of outstanding unearned Awards in their
Accounts and with respect to the full amount of any Earned
Awards which have not been distributed;
(2) All such vested Awards and Earned Awards credited in cash
and all interest and dividends deemed accrued on such
vested Awards and Earned Awards shall be paid in cash. All
such vested Awards and Earned Awards credited in Stock
shall be payable as follows: The Company shall distribute
to the Participant 65% of such Awards in shares of Stock.
The remaining 35% of such Awards shall be reconverted into
cash at the price of the Stock during the twenty business
days preceding the date of sale of such Employer
calculated as provided in Section 13(a)(4); and
(3) All such vested Awards and Earned Awards shall be paid in
cash to such Participant not later than 90 days following
the closing of the sale of such Participant's Employer.
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(d) If the purchaser of any Employer (or portion thereof) and the
Ultimate Parent of such purchaser expressly assume the
obligations of this Plan with respect to such Employer (or
portion thereof) and all transferred Participants as contemplated
by Section 13(c), the name of such Ultimate Parent shall be
substituted for the Company for all purposes under this Plan, and
the common stock or partnership interests of such Ultimate Parent
shall be substituted for the Stock, whereupon the Company shall
be released from all obligations hereunder with respect to such
Employer (or portion thereof) and such Participants.
For the avoidance of doubts, the demerger of the Hanson PLC's chemical business
through the Company to Hanson PLC's shareholders shall not be deemed to be a
Change in Control, and such Employer and the new Ultimate Parent of such
Employer shall thereupon be responsible to each Participant of such Employer for
any outstanding Awards or Earned Awards depending on the Employer's performance
for each Performance Cycle in accordance with the provisions of this Plan.
Section 14. Source of Payment.
Payments under this Plan shall be made out of the Employer's general
assets.
Section 15. Unsecured Interest.
No Participant or Beneficiary shall have any interest whatsoever in any
specific asset of the Employer or the Company as a result of Plan participation.
The right to receive payments under the Plan shall be no greater than the right
of any unsecured creditor of the Employer or the Company.
Section 16. Employment.
Nothing in the Plan or any notice of Award pursuant to the Plan shall
confer upon any person the right to continue in the employment of the Company or
an Employer nor affect the right of the Company or the Employer to terminate the
employment of any Participant at any time.
Section 17. Nontransferability.
In no event shall the Company make any payment under the Plan to any
assignee or creditor of a Participant or Beneficiary and no Participant or
Beneficiary shall have the right to alienate, anticipate or otherwise dispose of
any interest under the Plan, except, in each case, by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title 1
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of the Employee Retirement Income Security Act of 1974, as amended from time to
time, or the rules and regulations under such Code and Act.
Section 18. Transfer from Employer to Employer.
In the event a Participant transfers his or her employment from one
Employer to another Employer during the Performance Cycle of any Award, then,
notwithstanding the limitations of Section 23 hereof, the Compensation Committee
shall have the authority to amend the Award so the performance targets for such
Award are based solely on the new Employer's performance targets, or on a pro-
ration between the new and old Employers' performance targets.
Section 19. Administration.
The Plan shall be administered by the Compensation Committee who shall
have the authority and responsibility to: (i) establish rules for the
administration and interpretation of the Plan; (ii) interpret the Plan; (iii)
approve the designation of eligible Participants; (iv) set performance criteria
for Awards within Plan guidelines; (v) authorize the payment of all benefits and
expenses of the Plan as they become payable under the Plan; and (vi) make all
other determinations and take all other actions necessary or desirable for the
Plan's administration. The determination of the Compensation Committee on all
questions of interpretation, construction or administration shall be final,
binding and conclusive on all persons.
Section 20. Applicable Law.
The Plan shall be governed and construed in accordance with the laws of
the State of New Jersey (regardless of the law that might otherwise govern under
applicable principles of conflicts of laws).
Section 21. Withholding.
The Company and the Employer shall have the right to deduct from any
payments from the Plan, or to require any Participant to pay to the Company or
the Employer prior to the payment or distribution of any Award, the amount of
any federal, state or local taxes which, in the Company's sole determination,
should be withheld.
Section 22. Adjustments.
In the event that the Compensation Committee shall determine that any
dividend or other distribution (whether in the form of cash, Stock, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Stock or other securities of the Company or the
Ultimate Parent, issuance of
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warrants or other rights to purchase Stock or other securities of the Company or
the Ultimate Parent or other similar corporate transaction or event affects the
Stock such that an adjustment is determined by the Compensation Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Compensation Committee shall, in such manner as it may deem equitable, adjust
any or all of (i) the number and type of Stock (or other securities or other
property) which thereafter may be made the subject of Awards, and (ii) the
number and type of Stock (or other securities or other property) subject to
outstanding Awards; provided, however, that the number of shares of Stock
covered by any Award or to which such Award relates shall always be a whole
number. In addition, the Compensation Committee shall determine, prior to the
consummation of any sale of Stock or assets, spinoff or other event that would
result in the substitution pursuant to Section 13(d) hereof of Stock of another
entity for the Stock of the Company, the adjustments to each Participant's
Account as are appropriate equitably to reflect such substitution so the value
of each Participant's Account prior to such substitution is equivalent to the
value immediately thereafter.
Section 23. Amendment and Termination.
The Company expects the Plan to continue, but since future conditions
affecting the Company and Participants cannot be foreseen, the Board of
Directors of the Company necessarily must and does hereby reserve the right to
amend, modify or terminate the Plan at any time by action of the Board of
Directors; provided, however, that no such amendment, modification, or
termination shall impair or adversely affect any Earned Awards theretofore
granted under the Plan, except with the consent of the Participant. To the
extent necessary under Section 16(b) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder or other
applicable law, no amendment shall be effective unless approved by shareholders
as required by such applicable laws and regulations. Notice of such amendment,
modification or termination shall be given in writing to each Participant.
16
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Exhibit 10.26
HANSON INDUSTRIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Supplemental Executive Retirement Plan is designed to provide a select
group of key employees a specific floor of replacement income at retirement.
Unless specifically indicated to the contrary, the provisions of the Hanson
Industries Retirement Plan will also apply to this Plan.
December 1992
<PAGE>
<PAGE>
INTRODUCTION
This Supplemental Executive Retirement Plan is effective October 1, 1992.
It is intended that the plan be a non-qualified, unfunded, deferred
compensation plan for 'a select group of management or highly compensated
employees' as that term is used in the Employee Retirement Income Security Act
of 1974.
The purpose of the Plan is to provide a minimum level of retirement income
from the Company, in addition to other sources of capital accumulation.
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Section 1
DEFINITIONS
The following words and phrases as used herein have the following
meanings unless a different meaning is plainly required by the context:
<TABLE>
<S> <C>
1.1 'Average Final Compensation' means the highest average annual Base Compensation for any 5 calender years in
the final 10 years of employment with the Company or, if greater, the average annual Base Compensation for
the 60 month period immediately preceding his or her Retirement Date.
1.2 'Base Compensation' means, with respect to any period, the base rate of pay paid to the Participant for
such period and the amount of any 'salary deferral contributions' made on such Participant's behalf to the
Hanson Industries Retirement Savings and Investment Plan; but exclusive of bonuses, termination or
severance pay, prizes, awards, grievance settlements, living allowances, relocation allowances, mortgage
assistance, executive perquisites, stock options, distributions under any performance or incentive
compensation plans, and such other extraordinary items of remuneration as the Committee shall determine
from time to time.
1.3 'Company' means Hanson Industries and/or HM Anglo American Ltd.
1.4 'Committee' means the HI Compensation Committee.
1.5 'Credited Service' means a Participant's period (or periods) of employment with the Company subject to a
maximum of 25 years. Credited Service shall be computed in years and full months.
1.6 'Deferred Retirement Date' means the first day of the month coincident with or immediately following the
date a Participant actually retires after his or her Normal Retirement Date pursuant to the provisions of
Section 3.2 (Deferred Retirement Date).
1.7 'Early Retirement Date' means the first day of the month coincident with or immediately following the date
a Participant retires prior to his or her Normal Retirement Date pursuant to the provisions of Section 3.3
(Early Retirement Date).
1.8 'Executive Officer' means each Vice President, each Group Vice President, the Chief Executive Officer, the
Chief Operating Officer, the Treasurer and the Controller of the Company.
1.9 'HI Plan' means the Hanson Industries Pension Plan or any other tax-qualified defined benefit pension plan
sponsored by the Company.
</TABLE>
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<TABLE>
<S> <C>
1.10 'Normal Retirement Date' means the first day of the month next following the date on which a Participant
attains his or her 65th birthday.
1.11 'Participant' means a person who is included in the Plan as provided in Section 2 (Participant).
1.12 'Pension Offset' means the annual amount of pension that a Participant is entitled to receive, in the form
of a straight life annuity, determined as of the Retirement Date payable at Normal Retirement Date, from
the HI Plan.
1.13 'Plan' means the Hanson Industries Supplemental Executive Retirement Plan.
1.14 'Retirement Date' means the Early Retirement Date, the Normal Retirement Date or the Deferred Retirement
Date, whichever is applicable.
</TABLE>
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Section 2
PARTICIPATION
2.1 Participation:
Participants will be limited to Executive Officers.
2.2 Continuation of Participation:
(a) A person who has become a Participant in accordance with Section 2.1
shall, except as provided in (b) below, continue as a Participant as
long as he continues in the employment of the Company and thereafter as
long as he is entitled to benefits under the Plan.
(b) The Committee may, in its sole discretion, remove a Participant from
active participation in the Plan if the Participant is no longer an
Executive Officer. In this event, any benefits accrued under this Plan
will be vested and payable at the Participant's Retirement Date in
accordance with Section 6. Notwithstanding anything herein to the
contrary, if a Participant's employment is terminated for cause or
mismanagement, as determined by the Committee, or if the Participant is
convicted of a felony, or if the Participant's employment terminates
prior to retirement as provided in Section 6.1, all rights under this
Plan shall be forfeited.
(c) After a Participant commences retirement benefits in accordance with
Section 4, the Committee, in its sole discretion, may cease payment of
benefits under this Plan if the Committee determines that the
Participant is acting in bad faith against the Company or has filed any
legal suits, complaints or grievances against the Company in any court
of law, tribunal or with any federal, state or municipal agency.
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SECTION 3
RETIREMENT DATE
3.1 Normal Retirement Date:
A Participant who retires on his or her Normal Retirement Date shall be
entitled to a benefit as determined in accordance with Section 4.1 (Normal
Retirement Benefits).
3.2 Deferred Retirement Date:
A Participant whose employment with the Company continues beyond his or her
Normal Retirement Date and whose entitlement to benefits under the Plan has
not been forfeited in accordance with (b) of Section 2.2 (Continuation of
Participation), shall retire on a Deferred Retirement Date and shall be
entitled to a benefit in accordance with Section 4.2 (Deferred Retirement
Benefit).
3.3 Early Retirement Date:
A Participant who has attained age 60 and accrued 5 or more years of
Credited Service, may retire at an Early Retirement Date. In such case, the
Participant shall be entitled to a benefit as determined with Section 4.3
(Early Retirement Benefit).
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SECTION 4
RETIREMENT BENEFITS
4.1 Normal Retirement Benefit:
The annual amount of benefit for a Participant retiring on his or her
Normal Retirement Date shall be equal to (a) less (b), times (c), less (d)
as follows:
(a) 66 2/3% of his or her Average Final Compensation,
(b) less 50% of his or her Primary Social Security Benefit,
(c) years of Credited Service (maximum 25), divided by 25,
(d) the Pension Offset.
4.2 Deferred Retirement Benefit:
If a Participant remains in employment after his or her Normal Retirement
Date and is entitled to a benefit in accordance with Section 3.2 (Deferred
Retirement Date), benefit payments shall be postponed until the
Participant's actual retirement on the Deferred Retirement Date. At such
Deferred Retirement Date, the Participant shall be entitled to the benefit
computed under Section 4.1 based on Credited Service to the Deferred
Retirement Date.
4.3 Early Retirement Date:
A Participant retiring prior to his or her Normal Retirement Date, as
provided in Section 3.3 (Early Retirement Date), shall be entitled to
receive a benefit, commencing on such Normal Retirement Date, equal to the
amount computed under 4.1 based on his or her Average Final Compensation
and Credited Service, and each determined on such Early Retirement Date.
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In lieu of such benefit commencing on the Normal Retirement Date, the
Participant may elect to have such benefit commence on his or her Early
Retirement Date. In such case, the Participant's benefit shall be reduced
by 1/2% per month by which such Early Retirement Date precedes his or her
Normal Retirement Date.
4.4 Adjusted Age and Credited Service:
The Committee may, in its sole discretion, determine an adjusted Credited
Service and/or an adjusted age for the Participant. The adjusted Credited
Service may be 1, 2, 3, 4 or 5 years more than the actual Credited Service
(subject to the 25 years maximum for Credited Service). The adjusted age
may be 1, 2, 3, 4 or 5 years more than his or her actual age.
In determining the amount of pension in accordance with Section 4, a
Participant's adjusted age and adjusted Credited Service shall be used as
if they were his or her actual age and Credited Service.
8
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SECTION 5
DEATH BENEFITS
<TABLE>
<C> <S>
5.1 Prior to Retirement:
Upon the death of a Participant while an active employee, his or her surviving spouse, if any, shall be
entitled to a benefit commencing on the first day of the month following the Participant's date of death and
continuing thereafter for the lifetime of the surviving spouse. The amount of the benefit payable to the
surviving spouse shall be equal to the benefit determined under Section 4.1 (Normal Retirement Benefit),
based on such Participant's Average Final Compensation and Credited Service, each determined as of the date
of death, multiplied by an Early Commencement Percentage based on the Participant's age at date of death in
accordance with the table below and further reduced to reflect the actuarial equivalent charge for the
election of a 100% joint and survivor option pursuant to the option factors under the HI Plan.
</TABLE>
<TABLE>
<CAPTION>
Deceased Employee's Early Commencement
Age at Date of Birth Percentage
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
60 64
61 70
62 76
63 82
64 94
65 100%
</TABLE>
<TABLE>
<C> <S>
If at any time on or after the Participant's death there is no surviving spouse but there are one or more
dependent children under age 19 or, if a full-time college student, age 23, the benefit which would have
been paid to a surviving spouse shall be paid in equal shares to the dependent children as long as each
shall qualify, until such ages 19 or 23.
Benefit payments to a dependent child shall cease upon the earlier of (a) the last day of the month in which
such child reaches such ages 19 or 23, or (b) the last day of the month preceding the month in which such
child dies. The share payable in respect of any such child shall subsequently increase by reason of the
subsequent cessation of payments in respect of any other such child.
</TABLE>
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<TABLE>
<C> <S>
For the purposes of determining dependency, a child shall be deemed dependent if the Participant provided
one-half or more of such child's support during the year immediately prior to such Participant's death. The
Committee shall determine on a uniform and non-discriminatory basis the dependence of any person to whom a
benefit may be payable under Section 5.1, and such determination shall be final and conclusive.
5.2 After Retirement:
There is no benefit payable under the Plan in the event of the Participant's death after his or her
retirement benefit has commenced unless an option is in effect in accordance with Section 7.2 (Optional
Forms of Benefits).
</TABLE>
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<PAGE>
SECTION 6
IN EVENT OF TERMINATION OF EMPLOYMENT
<TABLE>
<C> <S>
6.1 Termination Prior to Retirement:
If a Participant's employment with the Company ceases for any reason and he is not eligible for a benefit
under the provisions of Section 3 (Retirement Date), or Section 6 (Death Benefits), no benefits shall become
payable to such Participant under this Plan.
6.2 Termination after Eligibility for Retirement:
A Participant whose employment with the Company ceases for any reason other than death and who is eligible
to retire under the provisions of Section 3 (Retirement Date), shall be deemed to have retired or to have
been retired by the Company and he shall be entitled to the appropriate benefits, subject to any possible
forfeiture of benefits pursuant to Section 2.2.
</TABLE>
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SECTION 7
TIME AND FORM OF BENEFIT PAYMENT
<TABLE>
<C> <S>
7.1 Normal Form of Benefit:
Except as otherwise provided in Section 7.2, the retirement benefit shall be payable as a monthly annuity as
of the last day of each calender month for the life of the Participant with benefits ceasing upon the
Participant's death.
7.2 Optional Forms of Benefit:
If a Participant is entitled to a benefit from the HI Plan, the benefit under this Plan may be paid in the
same form as the HI Plan's benefit is payable so long as Committee approval is secured. If such form of
payment is other than a straight life annuity, the amount of pension otherwise payable under this Plan shall
be adjusted in the same manner that benefits are to be adjusted under the HI Plan.
</TABLE>
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SECTION 8
PROVISION OF BENEFITS
<TABLE>
<C> <S>
8.1 Participant Contributions:
Participants shall make no contributions under the Plan.
8.2 Funding:
Benefit payments from the Plan will be made from the general assets of the Company in accordance with such
arrangements as the Company may deem necessary and proper to fulfill its agreement hereunder.
</TABLE>
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SECTION 9
ADMINISTRATION OF THE PLAN
<TABLE>
<C> <S>
9.1 Powers and Duties of the Committee
The Committee, in addition to all the powers and duties specified in the various provisions of the Plan,
shall have the exclusive right to interpret the Plan and to decide any matter arising in connection with the
administration of the Plan.
</TABLE>
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<PAGE>
SECTION 10
MISCELLANEOUS
10.1 Prohibition Against Encumbrance:
Except in the case of a court order which meets the requirements of a
'qualified domestic relations order' as defined in Section 414(p) of the
Internal Revenue code of 1986, no benefit under the Plan shall be
alienated, assigned, disposed of, or in any manner encumbered while in
the possession and control of the Company. If the interest of any
Participant or Participant's beneficiary would, but for this Section
10.1, cease in whole or in part to be enjoyed by such individual, the
Committee, in its sole discretion, may direct that the funds
constituting such interest be withheld or it may expend from such funds
for the direct maintenance and support of the Participant, such
Participant's spouse, children or their dependents as, in the
Committee's sole discretion, it deems fit and proper.
10.2 Right of Participant:
Neither the adoption of the Plan nor its operation shall in any way
affect the right and power of the Company to dismiss or otherwise
terminate the employment, or change the terms of employment, or amount
of compensation, of any Participant at any time for any reason.
10.3 Change in Control
The Plan will terminate effective on the close of business 30 days
following a Change in Control, hereinafter defined. Upon such Change in
Control, Section 11.1 shall become inoperative. Additionally, each
Participant will be deemed retired pursuant to Section 4.1, based on
Credited Service through such Plan termination date. A lump sum payment
equivalent to the present value of each Participant's benefit payable
under this Plan, utilizing the lesser of the prime rate of interest at
Citibank as of the date of Change in Control or 8%, whichever is less,
as the discount rate to determine the present value of accrued benefits,
shall be paid as soon as practical following such date of Change in
Control, but in no event later than 90 days. All other actuarial
assumptions to be utilized shall be those in effect as at the last
actuarial valuation of the HI Plan prior to such Change in Control.
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For purposes of this Section 10.3 'Change in Control' means that:
(a) 30% or more of the Common Stock of Hanson PLC has been acquired
by any person (as defined by Section 3(a)(9) of the Securities
Exchange Act of 1934) other than directly from Hanson PLC; or
(b) the stockholders of Hanson PLC approve a merger or consolidation
of Hanson PLC with any other corporation, other than a merger or
consolidation which would result in the voting securities of
Hanson PLC outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 70% of
the combined voting power of the voting securities of Hanson PLC
or such surviving entity outstanding immediately after such
merger or consolidation; except that a merger or consolidation
effected to implement a recapitalization of Hanson PLC (or
similar transaction) in which no 'person' (as hereinabove
defined) acquires more than 30% of the combined voting power of
Hanson PLC's then outstanding securities shall not constitute a
change in control of Hanson PLC; or
(c) 20% or more of the directors elected by stockholders to the
Board of Directors of Hanson PLC are persons who were not
nominated or elected at the most recent annual meeting of the
shareholders of Hanson PLC; or
(d) the stockholders of Hanson PLC approve a plan of complete
liquidation of Hanson PLC or an agreement for the sale or
disposition by Hanson PLC or all or substantially all of the
Company's or Hanson PLC's assets.
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SECTION 11
AMENDMENT OR TERMINATION OF THE PLAN
11.1 Amendment:
The Board of Directors reserves the right at any time and from time to
time, to modify or amend, in whole or in part, any or all of the
provisions of the Plan but no such amendment shall adversely affect any
Participant's or Participant's beneficiary's rights to benefits accrued
under the Plan prior to the effective date of the amendment.
11.2 Termination:
The Board of Directors shall have the right to terminate the Plan at any
time provided that such action shall not adversely affect any
Participant's or Participant's beneficiary's rights to benefits accrued
under the Plan prior to such action.
17
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<PAGE>
Exhibit 10.27
QUANTUM CHEMICAL COMPANY
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
(EFFECTIVE AS OF OCTOBER 1, 1994)
<PAGE>
<PAGE>
QUANTUM CHEMICAL COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
- ---------------------------------------------------------------------
SECTION PAGE
ARTICLE I. THE PLAN
1.1 Establishment of the Plan 1
1.2 Purpose 1
ARTICLE II. DEFINITIONS
2.1 Average Final Compensation 1
2.2 Board of Directors 1
2.3 Committee 1
2.4 Company 1
2.5 Compensation 2
2.6 Deferred Retirement Date 2
2.7 Early Retirement Date 2
2.8 Employer 2
2.9 Normal Retirement Date 2
2.10 Participant 2
2.11 Pension Offset 2
2.12 Plan 2
2.13 Qualified Plan 2
2.14 Retirement Date 2
ARTICLE III. PARTICIPATION
3.1 Participation 3
3.2 Continuation of Participation 3
ARTICLE IV. RETIREMENT DATE
4.1 Normal Retirement Date 3
4.2 Deferred Retirement Date 3
4.3 Early Retirement Date 4
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QUANTUM CHEMICAL COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
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SECTION PAGE
ARTICLE V. RETIREMENT BENEFITS
5.1 Normal Retirement Benefits 4
5.2 Deferred Retirement Benefit 4
5.3 Early Retirement Benefit 4
5.4 Disability Retirement Benefit 5
5.5 Adjusted Age and Benefit Service 5
ARTICLE VI. DEATH BENEFITS
6.1 Prior to Retirement 6
6.2 After Retirement 6
ARTICLE VII. IN EVENT OF TERMINATION OF EMPLOYMENT
7.1 Termination Prior to Retirement 6
7.2 Termination after Eligibility for Retirement 6
ARTICLE VIII. TIME AND FORM OF BENEFIT PAYMENT
8.1 Normal Form of Benefit 6
8.2 Optional Forms of Benefit 7
ARTICLE IX. PROVISION OF BENEFITS
9.1 Participant Contributions 7
9.2 Funding 7
ARTICLE X. ADMINISTRATION OF THE PLAN
10.1 Powers and Duties of the Committee 7
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QUANTUM CHEMICAL COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
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SECTION PAGE
ARTICLE XI. MISCELLANEOUS
11.1 Prohibition Against Encumbrance 7
11.2 Right of Participant 8
11.3 Change in Control 8
ARTICLE XII. AMENDMENT OR TERMINATION OF THE PLAN
12.1 Amendment 9
12.2 Termination 9
SCHEDULE A Employees Eligible to Participate 10
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ARTICLE I. THE PLAN
1.1 ESTABLISHMENT OF THE PLAN
Hanson Industries, a Division of Tillotson Commercial Motors, Ltd. ("Hanson
Industries") hereby establishes an unfunded supplemental retirement plan for
select employees ("Participants") of Quantum Chemical Company, which plan shall
be known as the "Quantum Chemical Company Supplemental Executive Retirement
Plan" (the "Plan"). The Plan is effective as of October 1, 1994.
1.2 PURPOSE
The purpose of the Plan is to provide Participants with a minimum level of
retirement income from the Employer, in addition to other sources of capital
accumulation. The plan is intended to be a non-qualified, deferred compensation
plan for a "select group of management or highly compensated employees" as that
term is used in the Employee Retirement Income Security Act of 1974, as amended.
This Plan incorporates and replaces any agreement between the Participant and
the Company with regard to non-qualified supplemental retirement benefits that
may be in existence prior to the effective date herein.
ARTICLE II. DEFINITIONS
Except as otherwise defined herein, each capitalized term shall have the meaning
set forth in the Pension Plan for Eligible Salaried and Non-Represented
Employees of Quantum Chemical Corporation.
2.1 "AVERAGE FINAL COMPENSATION" shall mean the highest average annual
Compensation for the 60 consecutive months in the last 120 months of Benefit
Service affording the highest such average, or during all months of Benefit
Service if less than 60. Any administrative procedure adopted relative to the
calculation of Average Final Compensation for the Qualified Plan shall apply to
this Plan.
2.2 "BOARD OF DIRECTORS" shall mean the Board of Directors of Hanson Industries
except as otherwise specifically stated.
2.3 "COMMITTEE" shall mean Compensation Committee of the Board of Directors of
Hanson Industries.
2.4 "COMPANY" shall mean Hanson Industries.
2.5 "COMPENSATION" shall have the same meaning as in the Qualified Plan, except
that Compensation shall be determined without regard to the dollar limitations
on the
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amount of pay taken into account, which limitations are set forth in section
1.14 of the Qualified Plan.
2.6 "DEFERRED RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the date a Participant retires after his or her
Normal Retirement Date pursuant to the provisions of section 4.2 (Deferred
Retirement Date).
2.7 "EARLY RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the date a Participant retires prior to his or her
Normal Retirement Date pursuant to the provisions of section 4.3 (Early
Retirement Date).
2.8 "EMPLOYER" shall mean Quantum Chemical Company.
2.9 "NORMAL RETIREMENT DATE" shall mean the first day of the month immediately
following the later of :
(a) the Participant's sixty-fifth (65th) birthday
or
(b) the fifth (5th) anniversary of the date the Participant
becomes a Member of the Qualified Plan.
2.10 "PARTICIPANT" shall mean a person who has become a participant in this Plan
pursuant to section 3.1, who is entitled to benefits hereunder. Participants
shall be limited to a "select group of management or highly compensated
employees" as that term is used in the Employee Retirement Income Security Act
of 1974, as amended.
2.11 "PENSION OFFSET" shall mean the amount of the monthly Accrued Benefit
payable as of the determination date (reduced to reflect commencement of the
benefit payable hereunder prior to Normal Retirement Date) to the Participant
under the Qualified Plan in the form of a Single Life Annuity, multiplied by
twelve. Pension Offset shall also include any other pension benefits, calculated
in the same manner and form as stated above, required to be offset under the
Qualified Plan.
2.12 "PLAN" shall mean the Quantum Chemical Supplemental Executive Retirement
Plan.
2.13 "QUALIFIED PLAN" shall mean the Pension Plan for Eligible Salaried and
Non-Represented Employees of Quantum Chemical Corporation.
2.14 "RETIREMENT DATE" shall mean the Early Retirement Date, the Normal
Retirement Date, or the Deferred Retirement Date, whichever is applicable.
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ARTICLE III. PARTICIPATION
3.1 PARTICIPATION
Participants will be limited to individuals who, on or after October 1, 1994 are
listed in Schedule A hereto.
3.2 CONTINUATION OF PARTICIPATION
(a) A person who has become a Participant in accordance with section 3.1
shall, except as provided in subsection (b) below continue as a
Participant as long as he or she continues in the employment of the
Employer and thereafter as long as he or she is entitled to benefits
under the Plan.
(b) Subject to the provisions of section 11.3 (Change in Control), the
Committee may, in its sole discretion, remove a Participant from active
participation in the Plan. In this event, any benefits accrued under
this Plan will be vested and payable at the Participant's Retirement
Date in accordance with Article IV. Notwithstanding anything herein to
the contrary, if a Participant's employment is terminated for cause or
mismanagement, as determined by the Committee, or if the Participant is
convicted of a felony, or if the Participant's employment terminates
prior to retirement as provided in section 7.1, all rights under this
Plan shall be forfeited.
(c) Subject to the provisions of section 11.3 (Change in Control), after
a Participant commences retirement benefits in accordance with Article
V, the Committee, in its sole discretion, may cease payment of benefits
under this Plan if the Committee determines that the Participant is
acting in bad faith against the Company or the Employer, works for a
competitor of the Company or the Employer, or has filed any legal
suits, complaints, or grievances against the Company or the Employer in
any court of law, tribunal, or with any federal, state, or municipal
agency.
ARTICLE IV. RETIREMENT DATE
4.1 NORMAL RETIREMENT DATE
A Participant who retires on his or her Normal Retirement Date shall be entitled
to a benefit as determined in accordance with section 5.1 (Normal Retirement
Benefits).
4.2 DEFERRED RETIREMENT DATE
A Participant whose employment with the Employer continues beyond his or her
Normal Retirement Date and whose entitlement to benefits under the Plan has not
been
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forfeited in accordance with subsection (b) of section 3.2 (Continuation of
Participation), shall retire on a Deferred Retirement Date and shall be entitled
to a benefit in accordance with section 5.2 (Deferred Retirement Benefit).
4.3 EARLY RETIREMENT DATE
A Participant who has attained age 55 and is credited with 10 or more years of
Eligibility Service may retire at an Early Retirement Date. In such case, the
Participant shall be entitled to a benefit as determined under section 5.3
(Early Retirement Benefit).
ARTICLE V. RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT BENEFIT
The annual amount of the Normal Retirement Benefit payable hereunder shall be
equal to:
(a) 1.4% of his or her Average Final Compensation not in excess of 125% of
Covered Compensation; plus
(b) 1.75% of his or her Average Final Compensation in excess of 125% of
Covered Compensation; times
(c) his or her years of Benefit Service (not to exceed 35) ; minus
(d) the Pension Offset.
A Participant's Normal Retirement Benefit shall commence on his or her Normal
Retirement Date provided his or her Qualified Plan Benefit commences on such
date.
Notwithstanding the foregoing, a Participant's benefit under the Qualified Plan
and the benefit under this Plan shall not exceed fifty-percent (50%) of his or
her final year's Compensation.
5.2 DEFERRED RETIREMENT BENEFIT
If a Participant remains in employment after his or her Normal Retirement Date
and is entitled to a benefit in accordance with section 4.2 (Deferred Retirement
Date), benefit payments shall be postponed until the Participant's actual
retirement on the Deferred Retirement Date. At such Deferred Retirement Date,
and provided the Qualified Plan Benefit then commences, the Participant shall be
entitled to the benefit determined under section 5.1 based on Benefit Service to
the Deferred Retirement Date.
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5.3 EARLY RETIREMENT BENEFIT
A Participant retiring prior to his or her Normal Retirement Date, as provided
in section 4.3 (Early Retirement Date), shall be entitled to receive a benefit,
commencing on such Normal Retirement Date, equal to the amount determined under
5.1 based on his or her Average Final Compensation and Benefit Service, with
each determined on such Early Retirement Date.
In lieu of such benefit commencing on the Normal Retirement Date, the
Participant may elect to have such benefit commence on the first day of any
month following his or her Early Retirement Date, provided he or she elects to
commence the Qualified Plan Benefit on the same date. In such case, the
Participant's benefit shall be reduced by 5/12 of one percent for each month by
which such commencement date precedes the first day of the calendar month
following his or her 62nd birthday.
5.4 DISABILITY RETIREMENT BENEFIT
A Participant who is entitled to a disability pension under section 4.05 of the
Qualified Plan, shall continue to be credited with Eligibility Service and
Benefit Service hereunder. Upon attaining his or her Normal Retirement Date,
such Participant shall be entitled to a benefit calculated in accordance with
section 5.1 hereunder, based on his or her Average Final Compensation at the
time he or she ceases to receive salary continuation payments on account of
disability.
A Participant who is receiving disability benefits under the long-term
disability plan and satisfies the requirements for an Early Retirement Benefit
in accordance with section 5.3 hereunder, shall be entitled to commence payment
of his or her Disability Retirement Benefit prior to Normal Retirement Date in
accordance with section 5.3, provided the Participant elects to commence his or
her Qualified Plan Benefit on such date. For purposes of the preceding sentence,
the benefit amount shall be determined on the basis of the Participant's Average
Final Compensation and Benefit Service on the date prior to the date benefits
commence.
If the Participant's benefits under the Employer's long-term disability plan are
discontinued prior to Normal Retirement Date and the Participant does not return
to service with the Employer or an Affiliate, he or she will be entitled to
receive an Early Retirement Benefit calculated in accordance with section 5.3,
provided he or she then satisfies the eligibility requirements for such benefit
and provided the Participant elects to commence his or her Qualified Plan
Benefit on such date.
5.5 ADJUSTED AGE AND BENEFIT SERVICE
The Committee may, in its sole discretion, determine an adjusted Benefit Service
and/or an adjusted age for the Participant. The adjusted Benefit Service may be
1, 2, 3, 4, or 5 years more than the actual Benefit Service (subject to the 35
years maximum for Benefit Service). The adjusted age may be 1, 2, 3, 4, or 5
years more
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than his or her actual age.
In determining the amount of pension in accordance with this Article V, a
Participant's adjusted age and adjusted Benefit Service shall be used as if they
were his or her actual age and Benefit Service. However, under no circumstances
shall benefits commence under this Plan prior to commencement of benefits under
the Qualified Plan.
ARTICLE VI. DEATH BENEFITS
6.1 PRIOR TO RETIREMENT
Upon the death of a Participant prior to retirement, his or her surviving
spouse, if any, shall be entitled to a benefit hereunder if such surviving
spouse is entitled to a benefit under the Qualified Plan. The amount and form
(including commencement date) of the benefit payable to the surviving spouse
shall be calculated in the same manner as the Spouse's Pension provided for in
section 4.6 of the Qualified Plan, however, on the basis of the formula set
forth in section 5.1 herein.
6.2 AFTER RETIREMENT
There is no benefit payable under the Plan in the Event of the Participant's
death after his or her retirement benefit has commenced unless an option is in
effect in accordance with section 8.2 (Optional Forms of Benefits).
ARTICLE VII. IN EVENT OF TERMINATION OF EMPLOYMENT
7.1 TERMINATION PRIOR TO RETIREMENT
If a Participant's employment with the Company ceases for any reason and he is
not eligible for a benefit under the provisions of Article IV (Retirement Date),
or Article VI (Death Benefits), or section 5.4 (Disability Benefits) no benefits
shall become payable to such Participant under this plan.
7.2 TERMINATION AFTER ELIGIBILITY FOR RETIREMENT
A Participant whose employment with the Company ceases for any reason other than
death and who is eligible to retire under the provisions of Article IV
(Retirement Date), shall be deemed to have retired or to have been retired by
the Company and shall be entitled to the appropriate benefits, subject to any
possible forfeiture of benefits pursuant to section 3.2.
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ARTICLE VIII. TIME AND FORM OF BENEFIT PAYMENT
8.1 NORMAL FORM OF BENEFIT
Except as otherwise provided in section 8.2, the retirement benefit shall be
payable as a monthly annuity as of the first day of each calendar month for the
life of the Participant with benefits ceasing upon the Participant's death.
8.2 OPTIONAL FORMS OF BENEFIT
The benefit under this Plan will be paid in the same form as the Qualified
Plan's benefit is payable so long as the Committee approval is secured. If such
form of payment is other than a Single Life Annuity, the amount of pension
otherwise payable under this Plan shall be adjusted in the same manner that
benefits are to be adjusted under the Qualified Plan.
Notwithstanding the above, if a Participant elects to receive his or her
Qualified Plan Benefit in the form of a lump sum distribution, said distribution
will be paid out of this Plan in three (3) annual equal installments commencing
on the Participant's Retirement Date and continuing on the first and second
anniversary thereof.
ARTICLE IX. PROVISION OF BENEFITS
9.1 PARTICIPANT CONTRIBUTIONS
Participants shall make no contributions under the Plan.
9.2 FUNDING
Benefit payments from the Plan will be made from the general assets of the
Company in accordance with such arrangements as the Company may deem necessary
and proper to fulfill its agreement hereunder.
ARTICLE X. ADMINISTRATION OF THE PLAN
10.1 POWERS AND DUTIES OF THE COMMITTEE
The Committee, in addition to all the powers and duties specified in the various
provisions of the Plan, shall have the exclusive right to interpret the Plan and
to decide any matter arising in connection with the administration of the Plan.
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ARTICLE XI. MISCELLANEOUS
11.1 PROHIBITION AGAINST ENCUMBRANCE
Except in the case of a court order which meets the requirements of a "qualified
domestic relations order" as defined in section 414(p) of the Internal Revenue
Code of 1986, no benefit under the Plan shall be alienated, assigned, disposed
of, or in any manner encumbered while in the possession and control of the
Company or the Employer. If the interest of any Participant or Participant's
beneficiary would, but for this section 11.1, cease in whole or in part to be
enjoyed by such individual, the Committee, in its sole discretion, may direct
that the funds constituting such interest be withheld or it may expend from such
funds for the direct maintenance and support of the Participant, such
Participant's spouse, children, or their dependents as, in the Committee's sole
discretion, it deems fit and proper.
11.2 RIGHT OF PARTICIPANT
Neither the adoption of the Plan nor its operation shall in any way affect the
right and power of the Company or the Employer to dismiss or otherwise terminate
the employment, or change the terms of employment, or amount of compensation, of
any Participant at any time for any reason.
11.3 CHANGE IN CONTROL
The Plan will terminate effective on the close of business 30 days following a
Change in Control, hereinafter defined. Upon such Change in Control, section
12.1 shall become inoperative. Additionally, each Participant will be deemed
retired pursuant to section 5.1, based on Benefit Service through such Plan
termination date. A lump sum payment equivalent to the present value of each
Participant's benefit payable under this Plan, utilizing the lesser of the prime
rate of interest at Citibank as of the date of a Change in Control or 8%,
whichever is less, as the discount rate to determine the present value of
accrued benefits, shall be paid as soon as practical following such date of a
Change in Control, but in no event later than 90 days. All other actuarial
assumptions and calculation methodology to be utilized shall be those in effect
as at the last actuarial valuation of the Qualified Plan and based on the
Qualified Plan document prior to such Change in Control.
For purposes of this section 11.3 "Change in Control" means that:
(a) 30% or more of the Common Stock of Hanson PLC has been acquired by
any person (as defined by section 3(a)(9) of the Securities Exchange Act
of 1934) other than directly from Hanson PLC; or
(b) the stockholders of Hanson PLC approve a merger or consolidation of
Hanson PLC with any other corporation, other than a merger or
consolidation which
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would result in the voting securities of Hanson PLC outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 70% of the combined voting power of the
voting securities of Hanson PLC or such surviving entity outstanding
immediately after such merger or consolidation; except that a merger or
consolidation effected to implement a recapitalization of Hanson PLC (or
similar transaction) in which no "person" (as hereinabove defined)
acquires more than 30% of the combined voting power of Hanson PLC's then
outstanding securities shall not constitute a change in control of
Hanson PLC; or
(c) 20% or more of the directors elected by stockholders to the Board of
Directors of Hanson PLC are persons who were not nominated or elected at
the most recent three annual meetings of the shareholders of Hanson PLC;
(d) the stockholders of Hanson PLC approve a plan of complete
liquidation of Hanson PLC or an agreement for the sale or disposition by
Hanson PLC of all or substantially all of the Company's or Hanson PLC's
assets; or
For the avoidance of doubt, in the event that the stock of any Employer shall be
distributed, directly or indirectly, by way of dividend, a distribution or
otherwise to Hanson PLC's shareholders, such event shall not be deemed to be
Change-in-Control, and the Employer shall thereupon be responsible to each
Participant of such Employer for any benefits in accordance with the provisions
of this plan; provided however, in the event of any such spin off, the name of
the new ultimate parent entity of the Employer shall be substituted for Hanson
PLC in the above provisions.
ARTICLE XII. AMENDMENT OR TERMINATION OF THE PLAN
12.1 AMENDMENT
The Board of Directors reserves the right at any time and from time to time, to
modify or amend, in whole or in part, any or all of the provisions of the Plan
but no such amendment shall adversely affect any Participant's or Participant's
beneficiary's rights to benefits accrued under the Plan prior to the effective
date of the amendment.
12.2 TERMINATION
The Board of Directors shall have the right to terminate the Plan at any time
provided that such action shall not adversely affect any Participant's or
Participant's beneficiary rights to benefits accrued under the Plan prior to
such action.
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SCHEDULE A
QUANTUM CHEMICAL COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EMPLOYEES ELIGIBLE TO PARTICIPATE
Ronald H. Yocum Chairman, President & CEO
Eugene R. Allspach Group Vice President-
Technology & Manufacturing
Dale H. Spiess Group Vice President-
Polyethylene
Charles F. Daly Vice President and
Chief Financial Officer
Albert P. Flaim Group Vice President-Chemicals &
Specialties
Alan Houlton Vice President-Manufacturing
Henley R. Webb Vice President and General Counsel
Bernie Sander General Manager-LaPorte & Port Arthur
Michael J. Baldwin Vice President-Responsible Care &
Technology
John G. Van Ohlen Business Director, Acetyls
Jerry W. Parker Business Director, HDPE
John M. Holtz Business Director,
LLDPE/LDPE
Tim Dowdle General Manager-Tuscola
Pete P. Hanik Vice President-IS & Quality
Performance
Myra J. Perkinson Vice President-Human Resources &
Communications
B. Roger Crose Business Director, Ethylene
John Eisenhauer Plant Manager, Clinton
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Exhibit 10.28
SCM CHEMICALS, INC.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
(EFFECTIVE AS OF OCTOBER 1, 1994)
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SCM CHEMICALS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
- ---------------------------------------------------------------------
SECTION PAGE
ARTICLE I. THE PLAN
1.1 Establishment of the Plan 1
1.2 Purpose 1
ARTICLE II. DEFINITIONS
2.1 Annual Earnings 1
2.2 Board of Directors 1
2.3 Committee 1
2.4 Company 1
2.5 Deferred Retirement Date 2
2.6 Early Retirement Date 2
2.7 Employer 2
2.8 Final Average Earnings 2
2.9 Normal Retirement Date 2
2.10 Participant 2
2.11 Pension Offset 2
2.12 Plan 2
2.13 Qualified Plan 2
2.14 Retirement Date 2
ARTICLE III. PARTICIPATION
3.1 Participation 3
3.2 Continuation of Participation 3
ARTICLE IV. RETIREMENT DATE
4.1 Normal Retirement Date 3
4.2 Deferred Retirement Date 4
4.3 Early Retirement Date 4
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SCM CHEMICALS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
- ---------------------------------------------------------------------
SECTION PAGE
ARTICLE V. RETIREMENT BENEFITS
5.1 Normal Retirement Benefits 4
5.2 Deferred Retirement Benefit 4
5.3 Early Retirement Benefit 4
5.4 Disability 5
5.5 Adjusted Age and Benefit Service 5
ARTICLE VI. DEATH BENEFITS
6.1 Prior to Retirement 5
6.2 After Retirement 6
ARTICLE VII. IN EVENT OF TERMINATION OF EMPLOYMENT
7.1 Termination Prior to Retirement 6
7.2 Termination after Eligibility for Retirement 6
ARTICLE VIII. TIME AND FORM OF BENEFIT PAYMENT
8.1 Normal Form of Benefit 6
8.2 Optional Forms of Benefit 6
ARTICLE IX. PROVISION OF BENEFITS
9.1 Participant Contributions 7
9.2 Funding 7
ARTICLE X. ADMINISTRATION OF THE PLAN
10.1 Powers and Duties of the Committee 7
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SCM CHEMICALS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
- ---------------------------------------------------------------------
SECTION PAGE
ARTICLE XI. MISCELLANEOUS
11.1 Prohibition Against Encumbrance 7
11.2 Right of Participant 8
11.3 Change in Control 8
ARTICLE XII. AMENDMENT OR TERMINATION OF THE PLAN
12.1 Amendment 9
12.2 Termination 9
SCHEDULE A Employees Eligible to Participate 10
SCHEDULE B Agreement between Donald V. Borst and
SCM Chemicals, Inc. dated December 30, 1992 11
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ARTICLE I. THE PLAN
1.1 ESTABLISHMENT OF THE PLAN
Hanson Industries, a division of Tillotson Commercial Motors Ltd. ("Hanson
Industries"), hereby establishes an unfunded supplemental retirement plan for
select employees ("Participants") of SCM Chemicals, Inc., which plan shall be
known as the "SCM Chemicals, Inc. Supplemental Executive Retirement Plan" (the
"Plan"). The Plan is effective as of October 1, 1994.
1.2 PURPOSE
The purpose of the Plan is to provide Participants with a minimum level of
retirement income from the Employer, in addition to other sources of capital
accumulation. The plan is intended to be a non-qualified, deferred compensation
plan for a "select group of management or highly compensated employees" as that
term is used in the Employee Retirement Income Security Act of 1974, as amended.
This Plan incorporates and replaces any agreement between the Participant and
the Company with regard to non-qualified supplemental retirement benefits that
may be in existence prior to the effective date herein.
ARTICLE II. DEFINITIONS
Except as otherwise defined herein, each capitalized term shall have the meaning
set forth in the SCM Chemicals, Inc. Salaried Employees Retirement Plan.
2.1 "ANNUAL EARNINGS" shall have the same meaning as in the Qualified Plan
except Annual Earnings shall be determined without regard to the dollar
limitation on the amount of pay taken into account, which limitations are set
forth in section 2.6 of the Qualified Plan.
2.2 "BOARD OF DIRECTORS" shall mean the Board of Directors of Hanson Industries
except as otherwise specified.
2.3 "COMMITTEE" shall mean the Compensation Committee of the Board of Directors
of Hanson Industries.
2.4 "COMPANY" shall mean Hanson Industries.
2.5 "DEFERRED RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the date a Participant retires after his or her
Normal Retirement Date pursuant to the provisions of section 4.2 (Deferred
Retirement Date).
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2.6 "EARLY RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the date a Participant retires prior to his or her
Normal Retirement Date pursuant to the provisions of section 4.3 (Early
Retirement Date).
2.7 "EMPLOYER" shall mean SCM Chemicals, Inc.
2.8 "FINAL AVERAGE EARNINGS" shall mean the highest average Annual Earnings for
any five calendar years in the final ten years of employment with the Employer.
2.9 "NORMAL RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the later of:
(a) the Participant's sixty-fifth (65th) birthday
or
(b) the date the Participant completes five (5) Years of Service.
2.10 "PARTICIPANT" shall mean a person who has become a participant in this Plan
pursuant to section 3.1, who is entitled to benefits hereunder. Participants
shall be limited to a "select group of management or highly compensated
employees" as that term is used in the Employee Retirement Income Security Act
of 1974, as amended.
2.11 "PENSION OFFSET" shall mean the amount of the monthly Accrued Benefit
payable as of the determination date (reduced to reflect commencement of the
benefit payable hereunder prior to Normal Retirement Date) to the Participant
under the Qualified Plan in the form of a Single Life Annuity, multiplied by
twelve.
2.12 "PLAN" shall mean the SCM Chemicals, Inc. Supplemental Executive
Retirement Plan.
2.13 "QUALIFIED PLAN" shall mean the SCM Chemicals, Inc. Salaried Employees
Retirement Plan.
2.14 "RETIREMENT DATE" shall mean the Early Retirement Date, the Normal
Retirement Date, or the Deferred Retirement Date, whichever is applicable.
ARTICLE III. PARTICIPATION
3.1 PARTICIPATION
Participants will be limited to individuals who, on or after October 1, 1994 are
listed in Schedule A attached hereto.
3.2 CONTINUATION OF PARTICIPATION
(a) A person who has become a Participant in accordance with section
3.1 shall,
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except as provided in subsection (b) below continue as a Participant as
long as he or she continues in the employment of the Employer and
thereafter as long as he or she is entitled to benefits under the Plan.
(b) Subject to the provisions of section 11.3 (Change in Control), the
Committee may, in its sole discretion, remove a Participant from active
participation in the Plan. In this event, any benefits accrued under
this Plan will be vested and payable at the Participant's Retirement
Date in accordance with Article IV. Notwithstanding anything herein to
the contrary, if a Participant's employment is terminated for cause or
mismanagement, as determined by the Committee, or if the Participant is
convicted of a felony, or if the Participant's employment terminates
prior to retirement as provided in section 7.1, all rights under this
Plan shall be forfeited.
(c) Subject to the provisions of section 11.3 (Change in Control), after
a Participant commences retirement benefits in accordance with Article
V, the Committee, in its sole discretion, may cease payment of benefits
under this Plan if the Committee determines that the Participant is
acting in bad faith against the Company or the Employer or has filed any
legal suits, complaints, or grievances against the Company or the
Employer in any court of law, tribunal, or with any federal, state, or
municipal agency.
ARTICLE IV. RETIREMENT DATE
4.1 NORMAL RETIREMENT DATE
A Participant who retires on his or her Normal Retirement Date shall be entitled
to a benefit as determined in accordance with section 5.1 (Normal Retirement
Benefits).
4.2 DEFERRED RETIREMENT DATE
A Participant whose employment with the Employer continues beyond his or her
Normal Retirement Date and whose entitlement to benefits under the Plan has not
been forfeited in accordance with subsection (b) of section 3.2 (Continuation of
Participation), shall retire on a Deferred Retirement Date and shall be entitled
to a benefit in accordance with section 5.2 (Deferred Retirement Benefit).
4.3 EARLY RETIREMENT DATE
A Participant who has attained age 50 and is credited with 15 or more Years of
Service or who has attained age 60, regardless of Years of Service if earlier,
may retire at an Early Retirement Date. In such case, the Participant shall be
entitled to a benefit as determined under section 5.3 (Early Retirement
Benefit).
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ARTICLE V. RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT BENEFIT
The annual amount of the Normal Retirement Benefit payable hereunder shall be
equal to:
(a) 1.5% of his or her Final Average Earnings; minus
(b) 1/60th of his or her Social Security Benefit; times
(c) his or her years of Credited Service (not to exceed 30); minus
(d) the Pension Offset.
A Participant's Normal Retirement Benefit shall commence on his or her Normal
Retirement Date provided his or her Qualified Plan benefit commences on such
date.
5.2 DEFERRED RETIREMENT BENEFIT
If a Participant remains in employment after his or her Normal Retirement Date
and is entitled to a benefit in accordance with section 4.2 (Deferred Retirement
Date), benefit payments shall be postponed until the Participant's actual
retirement on the Deferred Retirement Date. At such Deferred Retirement Date
and, provided that the Qualified Plan benefit then commences, the Participant
shall be entitled to the benefit determined under section 5.1 based on Credited
Service to the Deferred Retirement Date.
5.3 EARLY RETIREMENT BENEFIT
A Participant retiring prior to his or her Normal Retirement Date, as provided
in section 4.3 (Early Retirement Date), shall be entitled to receive a benefit,
commencing on such Normal Retirement Date, equal to the amount determined under
5.1 based on his or her Final Average Earnings and Years of Credited Service,
with each determined on such Early Retirement Date.
In lieu of such benefit commencing on the Normal Retirement Date, the
Participant may elect to have such benefit commence on his or her Early
Retirement Date provided he or she elects to commence the Qualified Plan benefit
on the same date. In such case, the Participant's benefit shall be reduced by:
(a) 0.417 of one percent for each of the first 24 months, and
(b) 0.333 of one percent for each additional full month such Early Retirement
Date precedes the first day of the calendar month following his or her 62nd
birthday.
5.4 DISABILITY RETIREMENT BENEFIT
A Participant who is entitled to a disability pension under section 5.3 of the
Qualified
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Plan, shall continue to accrue Credited Service hereunder. Upon attaining his or
her Normal Retirement Date, such Participant shall be entitled to a benefit
calculated in accordance with section 5.1 hereunder, based on his or her Final
Average Earnings and Social Security Benefit as of the date the Total and
Permanent Disability began. Any Participant so disabled, may elect to receive an
Early Retirement Benefit calculated in accordance with section 4.3 at any time
after attaining age 50, provided he or she elects to commence his or her
Qualified Plan benefit on such date.
5.5 ADJUSTED AGE AND CREDITED SERVICE
The Committee may, in its sole discretion, determine an adjusted Credited
Service and/or an adjusted age for the Participant. The adjusted Credited
Service may be 1, 2, 3, 4, or 5 years more than the actual Credited Service
(subject to the 30 years maximum for Credited Service). The adjusted age may be
1, 2, 3, 4, or 5 years more than his or her actual age.
In determining the amount of pension in accordance with this Article V, a
Participant's adjusted age and adjusted Credited Service shall be used as if
they were his or her actual age and Credited Service. However, under no
circumstances, shall benefits commence under this plan prior to commencement of
benefits under the Qualified Plan.
ARTICLE VI. DEATH BENEFITS
6.1 PRIOR TO RETIREMENT
Upon the death of a Participant while an active employee, his or her surviving
spouse and eligible dependent children shall be entitled to a benefit commencing
on the first day of the month following the Participant's death. The amount and
duration of the benefits payable to the surviving spouse and eligible dependent
children shall be equal to the benefits described in Article VIII of the
Qualified Plan, however, calculated on the basis of the formula set forth in
section 5.1 herein.
6.2 AFTER RETIREMENT
There is no benefit payable under the Plan in the Event of the Participant's
death after his or her retirement benefit has commenced unless an option is in
effect in accordance with section 8.2 (Optional Forms of Benefits).
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ARTICLE VII. IN EVENT OF TERMINATION OF EMPLOYMENT
7.1 TERMINATION PRIOR TO RETIREMENT
If a Participant's employment with the Company ceases for any reason and he is
not eligible for a benefit under the provisions of Article IV (Retirement Date),
or Article VI (Death Benefits), or section 5.4 (Disability Benefits) no benefits
shall become payable to such Participant under this plan.
7.2 TERMINATION AFTER ELIGIBILITY FOR RETIREMENT
A Participant whose employment with the Company ceases for any reason other than
death and who is eligible to retire under the provisions of Article IV
(Retirement Date), shall be deemed to have retired or to have been retired by
the Company and shall be entitled to the appropriate benefits, subject to any
possible forfeiture of benefits pursuant to section 3.2.
ARTICLE VIII. TIME AND FORM OF BENEFIT PAYMENT
8.1 NORMAL FORM OF BENEFIT
Except as otherwise provided in section 8.2, the retirement benefit shall be
payable as a monthly annuity as of the last day of each calendar month for the
life of the Participant with benefits ceasing upon the Participant's death.
8.2 OPTIONAL FORMS OF BENEFIT
If a Participant is entitled to a benefit from the Qualified Plan, the benefit
under this Plan may be paid in the same form as the Qualified Plan's benefit is
payable so long as the Committee approval is secured. If such form of payment is
other than a Single Life Annuity, the amount of pension otherwise payable under
this Plan shall be adjusted in the same manner that benefits are to be adjusted
under the Qualified Plan.
ARTICLE IX. PROVISION OF BENEFITS
9.1 PARTICIPANT CONTRIBUTIONS
Participants shall make no contributions under the Plan.
9.2 FUNDING
Benefit payments from the Plan will be made from the general assets of the
Company in accordance with such arrangements as the Company may deem necessary
and
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proper to fulfill its agreement hereunder.
ARTICLE X. ADMINISTRATION OF THE PLAN
10.1 POWERS AND DUTIES OF THE COMMITTEE
The Committee, in addition to all the powers and duties specified in the various
provisions of the Plan, shall have the exclusive right to interpret the Plan and
to decide any matter arising in connection with the administration of the Plan.
ARTICLE XI. MISCELLANEOUS
11.1 PROHIBITION AGAINST ENCUMBRANCE
Except in the case of a court order which meets the requirements of a "qualified
domestic relations order" as defined in section 414(p) of the Internal Revenue
Code of 1986, no benefit under the Plan shall be alienated, assigned, disposed
of, or in any manner encumbered while in the possession and control of the
Company or the Employer. If the interest of any Participant or Participant's
beneficiary would, but for this section 11.1, cease, in whole or in part, to be
enjoyed by such individual, the Committee, in its sole discretion, may direct
that the funds constituting such interest be withheld or it may expend from such
funds for the direct maintenance and support of the Participant, such
Participant's spouse, children, or their dependents as, in the Committee's sole
discretion, it deems fit and proper.
11.2 RIGHT OF PARTICIPANT
Neither the adoption of the Plan nor its operation shall in any way affect the
right and power of the Company or the Employer to dismiss or otherwise terminate
the employment, or change the terms of employment, or amount of compensation, of
any Participant at any time for any reason.
11.3 CHANGE IN CONTROL
The Plan will terminate effective on the close of business 30 days following a
Change in Control, as hereinafter defined. Upon such Change in Control, section
12.1 shall become inoperative. Additionally, each Participant will be deemed
retired pursuant to section 5.1, based on Benefit Service through such Plan
termination date. A lump sum payment equivalent to the present value of each
Participant's benefit payable under this Plan, utilizing the lesser of the prime
rate of interest at Citibank as of the date of a Change in Control or 8%,
whichever is less, as the discount rate to determine the present value of
accrued benefits, shall be paid as soon as practical following such date of
Change in Control, but in no event later than 90 days. All
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other actuarial assumptions and calculation methodology to be utilized shall be
those in effect as at the last actuarial valuation of the Qualified Plan and
based on the Qualified Plan document in effect prior to such Change in Control.
For purposes of this section 11.3 "Change in Control" means that:
(a) 30% or more of the Common Stock of Hanson PLC has been acquired by
any person (as defined by section 3(a)(9) of the Securities Exchange Act
of 1934) other than directly from Hanson PLC; or
(b) the stockholders of Hanson PLC approve a merger or consolidation of
Hanson PLC with any other corporation, other than a merger or
consolidation which would result in the voting securities of Hanson PLC
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity) more than 70% of the combined voting power of the
voting securities of Hanson PLC or such surviving entity outstanding
immediately after such merger or consolidation; except that a merger or
consolidation effected to implement a recapitalization of Hanson PLC (or
similar transaction) in which no "person" (as herein above defined)
acquires more than 30% of the combined voting power of Hanson PLC's then
outstanding securities shall not constitute a change in control of
Hanson PLC; or
(c) 20% or more of the directors elected by stockholders to the Board of
Directors of Hanson PLC are persons who were not nominated or elected at
the most recent three annual meetings of the shareholders of Hanson PLC;
(d) the stockholders of Hanson PLC approve a plan of complete
liquidation of Hanson PLC or an agreement for the sale or disposition by
Hanson PLC of all or substantially all of the Company's or Hanson PLC's
assets.
For the avoidance of doubt, in the event that the stock of any Employer shall be
distributed, directly or indirectly, by way of dividend, a distribution or
otherwise to Hanson PLC's shareholders, such event shall not be deemed to be
Change-in-Control, and the Employer shall thereupon be responsible to each
Participant of such Employer for any benefits in accordance with the provisions
of this plan; provided however, in the event of any such spin off, the name of
the new ultimate parent entity of the Employer shall be substituted for Hanson
PLC in the above provisions.
ARTICLE XII. AMENDMENT OR TERMINATION OF THE PLAN
12.1 AMENDMENT
The Board of Directors reserves the right at any time and from time to time, to
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modify or amend, in whole or in part, any or all of the provisions of the Plan
but no such amendment shall adversely affect any Participant's or Participant's
beneficiary's rights to benefits accrued under the Plan prior the effective date
of the amendment.
12.2 TERMINATION
The Board of Directors shall have the right to terminate the Plan at any time
provided that such action shall not adversely affect any Participant's or
Participant's beneficiary rights to benefits accrued under the Plan prior to
such action.
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SCHEDULE A
YSCM CHEMICALS, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EMPLOYEES ELIGIBLE TO PARTICIPATE
D.V. Borst Chairman, President and Chief Executive Officer
D.C. Abbott Senior Vice President and Chief Operating Officer
J.W. Brooks General Manager-Colors and Silica
R.L. Cartlidge Vice President-Finance and Chief
Financial Officer
S.J. Friedman Vice President and General Counsel
W.S. Gohn Vice President-Employee and Community Relations
T.F.P. Hely Vice President-Materials
D.E. Knapp Vice President-Research and Technology
R.L. Pike Vice President-Engineering and Development
D.L. Vercollone Vice President and General Manager-Americas
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SCHEDULE B
AGREEMENT BETWEEN DONALD V. BORST AND SCM CHEMICALS, INC.
DATED DECEMBER 30, 1992
Upon termination of the separate agreement between Donald V. Borst (the
"Participant") and SCM Chemicals, Inc. (the "Employer") dated December 30, 1992
with regard to supplemental pension benefits, certain terms of such agreement
are adopted and incorporated herein as follows:
(A) Upon retirement from the Company at age 62 or thereafter, (provided,
however, that employment with the Employer continues until such Retirement Date
except as set forth in paragraph (B) below), the Participant will be provided an
annual benefit calculated as follows:
<TABLE>
<CAPTION>
Up to the Following
Percent of Pay (multiplied Maximum Annual
Retirement Age by Pay at Retirement Date) Benefit
-------------- -------------------------- --------
<S> <C> <C>
62 25 $129,200
63 30 $203,500
64 35 $243,600
65, or later 50 $300,000
</TABLE>
Such benefit shall be offset by any benefits that are payable to the Participant
from any qualified or non-qualified defined benefit pension plan (including
benefits payable under Article V of this Plan) maintained by the Employer or an
Affiliate (as defined in the SCM Chemicals, Inc. Salaried Employees' Retirement
Plan). For purposes of this Schedule B, "pay" has the same meaning as "Annual
Earnings" in the SCM Chemicals, Inc. Salaried Employees' Retirement Plan,
without regard to any limits imposed on said pay by the Internal Revenue
Service.
(B) Should a Change-in-Control (as defined in section 11.3 herein) occur prior
to the Participant attaining age 62, and the Participant's employment with the
Company or its Affiliates is involuntarily terminated subsequent to such
Change-in-Control, the Participant shall become fully vested in a benefit equal
to 25% of pay up to a maximum of $129,200 per year, commencing as of date of
termination without reduction for early commencement before age 62.
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Exhibit 10.29
SCM GLIDCO ORGANICS CORP.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
(EFFECTIVE AS OF OCTOBER 1, 1994)
<PAGE>
<PAGE>
SCM GLIDCO ORGANICS CORP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
- ------------------------------------------------------------------------
SECTION PAGE
ARTICLE I. THE PLAN
1.1 Establishment of the Plan 1
1.2 Purpose 1
ARTICLE II. DEFINITIONS
2.1 Annual Earnings 1
2.2 Board of Directors 1
2.3 Committee 1
2.4 Company 1
2.5 Deferred Retirement Date 2
2.6 Early Retirement Date 2
2.7 Employer 2
2.8 Final Average Earnings 2
2.9 Normal Retirement Date 2
2.10 Participant 2
2.11 Pension Offset 2
2.12 Plan 2
2.13 Qualified Plan 2
2.14 Retirement Date 2
ARTICLE III. PARTICIPATION
3.1 Participation 3
3.2 Continuation of Participation 3
ARTICLE IV. RETIREMENT DATE
4.1 Normal Retirement Date 3
4.2 Deferred Retirement Date 4
4.3 Early Retirement Date 4
i
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SCM GLIDCO ORGANICS CORP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
- ---------------------------------------------------------------------
SECTION PAGE
ARTICLE V. RETIREMENT BENEFITS
5.1 Normal Retirement Benefits 4
5.2 Deferred Retirement Benefit 4
5.3 Early Retirement Benefit 4
5.4 Disability 5
5.5 Adjusted Age and Benefit Service 5
ARTICLE VI. DEATH BENEFITS
6.1 Prior to Retirement 5
6.2 After Retirement 6
ARTICLE VII. IN EVENT OF TERMINATION OF EMPLOYMENT
7.1 Termination Prior to Retirement 6
7.2 Termination after Eligibility for Retirement 6
ARTICLE VIII. TIME AND FORM OF BENEFIT PAYMENT
8.1 Normal Form of Benefit 6
8.2 Optional Forms of Benefit 6
ARTICLE IX. PROVISION OF BENEFITS
9.1 Participant Contributions 7
9.2 Funding 7
ARTICLE X. ADMINISTRATION OF THE PLAN
10.1 Powers and Duties of the Committee 7
ii
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<PAGE>
SCM GLIDCO ORGANICS CORP.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of October 1, 1994)
CONTENTS
- ---------------------------------------------------------------------
SECTION PAGE
ARTICLE XI. MISCELLANEOUS
11.1 Prohibition Against Encumbrance 7
11.2 Right of Participant 8
11.3 Change in Control 8
ARTICLE XII. AMENDMENT OR TERMINATION OF THE PLAN
12.1 Amendment 9
12.2 Termination 9
SCHEDULE A Employees Eligible to Participate 10
iii
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ARTICLE I. THE PLAN
1.1 ESTABLISHMENT OF THE PLAN
Hanson Industries, a division of Tillotson Commercial Motors Ltd. ("Hanson
Industries"), hereby establishes an unfunded supplemental retirement plan for
select employees ("Participants") of SCM Glidco Organics Corp., which plan shall
be known as the "SCM Glidco Organics Corp. Supplemental Executive Retirement
Plan" (the "Plan"). The Plan is effective as of October 1, 1994.
1.2 PURPOSE
The purpose of the Plan is to provide Participants with a minimum level of
retirement income from the Employer, in addition to other sources of capital
accumulation. The plan is intended to be a non-qualified, deferred compensation
plan for a "select group of management or highly compensated employees" as that
term is used in the Employee Retirement Income Security Act of 1974, as amended.
This Plan incorporates and replaces any agreement between the Participant and
the Company with regard to non-qualified supplemental retirement benefits that
may be in existence prior to the effective date herein.
ARTICLE II. DEFINITIONS
Except as otherwise defined herein, each capitalized term shall have the meaning
set forth in the Retirement Plan for Eligible Employees of SCM Glidco Organics
Corp.
2.1 "ANNUAL EARNINGS" shall have the same meaning as in the Qualified Plan
except Annual Earnings shall be determined without regard to the dollar
limitation on the amount of pay taken into account, which limitations are set
forth in section 2.6 of the Qualified Plan.
2.2 "BOARD OF DIRECTORS" shall mean the Board of Directors of Hanson Industries
except as otherwise specified.
2.3 "COMMITTEE" shall mean the Compensation Committee of the Board of Directors
of Hanson Industries.
2.4 "COMPANY" shall mean Hanson Industries.
2.5 "DEFERRED RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the date a Participant retires after his or her
Normal Retirement Date pursuant to the provisions of section 4.2 (Deferred
Retirement Date).
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2.6 "EARLY RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the date a Participant retires prior to his or her
Normal Retirement Date pursuant to the provisions of section 4.3 (Early
Retirement Date).
2.7 "EMPLOYER" shall mean SCM Glidco Organics Corp.
2.8 "FINAL AVERAGE EARNINGS" shall mean the highest average Annual Earnings for
any five calendar years in the final ten years of employment with the Employer.
2.9 "NORMAL RETIREMENT DATE" shall mean the first day of the month coincident
with or immediately following the later of:
(a) the Participant's sixty-fifth (65th) birthday
or
(b) the date the Participant completes five (5) Years of Service.
2.10 "PARTICIPANT" shall mean a person who has become a participant in this Plan
pursuant to section 3.1, who is entitled to benefits hereunder. Participants
shall be limited to a "select group of management or highly compensated
employees" as that term is used in the Employee Retirement Income Security Act
of 1974, as amended.
2.11 "PENSION OFFSET" shall mean the amount of the monthly Accrued Benefit
payable as of the determination date (reduced to reflect commencement of the
benefit payable hereunder prior to Normal Retirement Date) to the Participant
under the Qualified Plan in the form of a Single Life Annuity, multiplied by
twelve.
2.12 "PLAN" shall mean the SCM Glidco Organics Corp. Supplemental Executive
Retirement Plan.
2.13 "QUALIFIED PLAN" shall mean the Retirement Plan for Eligible Employees of
SCM Glidco Organics Corp.
2.14 "RETIREMENT DATE" shall mean the Early Retirement Date, the Normal
Retirement Date, or the Deferred Retirement Date, whichever is applicable.
ARTICLE III. PARTICIPATION
3.1 PARTICIPATION
Participants will be limited to individuals who, on or after October 1, 1994 are
listed in Schedule A attached hereto.
3.2 CONTINUATION OF PARTICIPATION
(a) A person who has become a Participant in accordance with section 3.1 shall,
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except as provided in subsection (b) below continue as a Participant as
long as he or she continues in the employment of the Employer and
thereafter as long as he or she is entitled to benefits under the Plan.
(b) Subject to the provisions of section 11.3 (Change in Control), the
Committee may, in its sole discretion, remove a Participant from active
participation in the Plan. In this event, any benefits accrued under this
Plan will be vested and payable at the Participant's Retirement Date in
accordance with Article IV. Notwithstanding anything herein to the
contrary, if a Participant's employment is terminated for cause or
mismanagement, as determined by the Committee, or if the Participant is
convicted of a felony, or if the Participant's employment terminates prior
to retirement as provided in section 7.1, all rights under this Plan shall
be forfeited.
(c) Subject to the provisions of section 11.3 (Change in Control), after a
Participant commences retirement benefits in accordance with Article V, the
Committee, in its sole discretion, may cease payment of benefits under this
Plan if the Committee determines that the Participant is acting in bad
faith against the Company or the Employer or has filed any legal suits,
complaints, or grievances against the Company or the Employer in any court
of law, tribunal, or with any federal, state, or municipal agency.
ARTICLE IV. RETIREMENT DATE
4.1 NORMAL RETIREMENT DATE
A Participant who retires on his or her Normal Retirement Date shall be entitled
to a benefit as determined in accordance with section 5.1 (Normal Retirement
Benefits).
4.2 DEFERRED RETIREMENT DATE
A Participant whose employment with the Employer continues beyond his or her
Normal Retirement Date and whose entitlement to benefits under the Plan has not
been forfeited in accordance with subsection (b) of section 3.2 (Continuation of
Participation), shall retire on a Deferred Retirement Date and shall be entitled
to a benefit in accordance with section 5.2 (Deferred Retirement Benefit).
4.3 EARLY RETIREMENT DATE
A Participant who has attained age 50 and is credited with 15 or more Years of
Service or who has attained age 60, regardless of Years of Service if earlier,
may retire at an Early Retirement Date. In such case, the Participant shall be
entitled to a benefit as determined under section 5.3 (Early Retirement
Benefit).
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ARTICLE V. RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT BENEFIT
The annual amount of the Normal Retirement Benefit payable hereunder shall be
equal to:
(a) 1.5% of his or her Final Average Earnings; minus
(b) 1/60th of his or her Social Security Benefit; times
(c) his or her years of Credited Service (not to exceed 30); minus
(d) the Pension Offset.
A Participant's Normal Retirement Benefit shall commence on his or her Normal
Retirement Date provided his or her Qualified Plan benefit commences on such
date.
5.2 DEFERRED RETIREMENT BENEFIT
If a Participant remains in employment after his or her Normal Retirement Date
and is entitled to a benefit in accordance with section 4.2 (Deferred Retirement
Date), benefit payments shall be postponed until the Participant's actual
retirement on the Deferred Retirement Date. At such Deferred Retirement Date
and, provided that the Qualified Plan benefit then commences, the Participant
shall be entitled to the benefit determined under section 5.1 based on Credited
Service to the Deferred Retirement Date.
5.3 EARLY RETIREMENT BENEFIT
A Participant retiring prior to his or her Normal Retirement Date, as provided
in section 4.3 (Early Retirement Date), shall be entitled to receive a benefit,
commencing on such Normal Retirement Date, equal to the amount determined under
5.1 based on his or her Final Average Earnings and Years of Credited Service,
with each determined on such Early Retirement Date.
In lieu of such benefit commencing on the Normal Retirement Date, the
Participant may elect to have such benefit commence on his or her Early
Retirement Date provided he or she elects to commence the Qualified Plan benefit
on the same date. In such case, the Participant's benefit shall be reduced by:
(a) 0.417 of one percent for each of the first 24 months, and
(b) 0.333 of one percent for each additional full month such Early Retirement
Date precedes the first day of the calendar month following his or her 62nd
birthday.
5.4 DISABILITY RETIREMENT BENEFIT
A Participant who is entitled to a disability pension under section 5.3 of the
Qualified
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Plan, shall continue to accrue Credited Service hereunder. Upon attaining his or
her Normal Retirement Date, such Participant shall be entitled to a benefit
calculated in accordance with section 5.1 hereunder, based on his or her Final
Average Earnings and Social Security Benefit as of the date the Total and
Permanent Disability began. Any Participant so disabled, may elect to receive an
Early Retirement Benefit calculated in accordance with section 4.3 at any time
after attaining age 50, provided he or she elects to commence his or her
Qualified Plan benefit on such date.
5.5 ADJUSTED AGE AND CREDITED SERVICE
The Committee may, in its sole discretion, determine an adjusted Credited
Service and/or an adjusted age for the Participant. The adjusted Credited
Service may be 1, 2, 3, 4, or 5 years more than the actual Credited Service
(subject to the 30 years maximum for Credited Service). The adjusted age may be
1, 2, 3, 4, or 5 years more than his or her actual age.
In determining the amount of pension in accordance with this Article V, a
Participant's adjusted age and adjusted Credited Service shall be used as if
they were his or her actual age and Credited Service. However, under no
circumstances, shall benefits commence under this plan prior to commencement of
benefits under the Qualified Plan.
ARTICLE VI. DEATH BENEFITS
6.1 PRIOR TO RETIREMENT
Upon the death of a Participant while an active employee, his or her surviving
spouse and eligible dependent children shall be entitled to a benefit commencing
on the first day of the month following the Participant's death. The amount and
duration of the benefits payable to the surviving spouse and eligible dependent
children shall be equal to the benefits described in Article VIII of the
Qualified Plan, however, calculated on the basis of the formula set forth in
section 5.1 herein.
6.2 AFTER RETIREMENT
There is no benefit payable under the Plan in the Event of the Participant's
death after his or her retirement benefit has commenced unless an option is in
effect in accordance with section 8.2 (Optional Forms of Benefits).
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ARTICLE VII. IN EVENT OF TERMINATION OF EMPLOYMENT
7.1 TERMINATION PRIOR TO RETIREMENT
If a Participant's employment with the Company ceases for any reason and he is
not eligible for a benefit under the provisions of Article IV (Retirement Date),
or Article VI (Death Benefits), or section 5.4 (Disability Benefits) no benefits
shall become payable to such Participant under this plan.
7.2 TERMINATION AFTER ELIGIBILITY FOR RETIREMENT
A Participant whose employment with the Company ceases for any reason other than
death and who is eligible to retire under the provisions of Article IV
(Retirement Date), shall be deemed to have retired or to have been retired by
the Company and shall be entitled to the appropriate benefits, subject to any
possible forfeiture of benefits pursuant to section 3.2.
ARTICLE VIII. TIME AND FORM OF BENEFIT PAYMENT
8.1 NORMAL FORM OF BENEFIT
Except as otherwise provided in section 8.2, the retirement benefit shall be
payable as a monthly annuity as of the last day of each calendar month for the
life of the Participant with benefits ceasing upon the Participant's death.
8.2 OPTIONAL FORMS OF BENEFIT
If a Participant is entitled to a benefit from the Qualified Plan, the benefit
under this Plan may be paid in the same form as the Qualified Plan's benefit is
payable so long as the Committee approval is secured. If such form of payment is
other than a Single Life Annuity, the amount of pension otherwise payable under
this Plan shall be adjusted in the same manner that benefits are to be adjusted
under the Qualified Plan.
ARTICLE IX. PROVISION OF BENEFITS
9.1 PARTICIPANT CONTRIBUTIONS
Participants shall make no contributions under the Plan.
9.2 FUNDING
Benefit payments from the Plan will be made from the general assets of the
Company in accordance with such arrangements as the Company may deem necessary
and
6
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proper to fulfill its agreement hereunder.
ARTICLE X. ADMINISTRATION OF THE PLAN
10.1 POWERS AND DUTIES OF THE COMMITTEE
The Committee, in addition to all the powers and duties specified in the various
provisions of the Plan, shall have the exclusive right to interpret the Plan and
to decide any matter arising in connection with the administration of the Plan.
ARTICLE XI. MISCELLANEOUS
11.1 PROHIBITION AGAINST ENCUMBRANCE
Except in the case of a court order which meets the requirements of a "qualified
domestic relations order" as defined in section 414(p) of the Internal Revenue
Code of 1986, no benefit under the Plan shall be alienated, assigned, disposed
of, or in any manner encumbered while in the possession and control of the
Company or the Employer. If the interest of any Participant or Participant's
beneficiary would, but for this section 11.1, cease, in whole or in part, to be
enjoyed by such individual, the Committee, in its sole discretion, may direct
that the funds constituting such interest be withheld or it may expend from such
funds for the direct maintenance and support of the Participant, such
Participant's spouse, children, or their dependents as, in the Committee's sole
discretion, it deems fit and proper.
11.2 RIGHT OF PARTICIPANT
Neither the adoption of the Plan nor its operation shall in any way affect the
right and power of the Company or the Employer to dismiss or otherwise terminate
the employment, or change the terms of employment, or amount of compensation, of
any Participant at any time for any reason.
11.3 CHANGE IN CONTROL
The Plan will terminate effective on the close of business 30 days following a
Change in Control, as hereinafter defined. Upon such Change in Control, section
12.1 shall become inoperative. Additionally, each Participant will be deemed
retired pursuant to section 5.1, based on Benefit Service through such Plan
termination date. A lump sum payment equivalent to the present value of each
Participant's benefit payable under this Plan, utilizing the lesser of the prime
rate of interest at Citibank as of the date of a Change in Control or 8%,
whichever is less, as the discount rate to determine the present value of
accrued benefits, shall be paid as soon as practical following such date of
Change in Control, but in no event later than 90 days. All
7
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other actuarial assumptions and calculation methodology to be utilized shall be
those in effect as at the last actuarial valuation of the Qualified Plan and
based on the Qualified Plan document in effect prior to such Change in Control.
For purposes of this section 11.3 "Change in Control" means that:
(a) 30% or more of the Common Stock of Hanson PLC has been acquired by any
person (as defined by section 3(a)(9) of the Securities Exchange Act of
1934) other than directly from Hanson PLC; or
(b) the stockholders of Hanson PLC approve a merger or consolidation of Hanson
PLC with any other corporation, other than a merger or consolidation which
would result in the voting securities of Hanson PLC outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more
than 70% of the combined voting power of the voting securities of Hanson
PLC or such surviving entity outstanding immediately after such merger or
consolidation; except that a merger or consolidation effected to implement
a recapitalization of Hanson PLC (or similar transaction) in which no
"person" (as herein above defined) acquires more than 30% of the combined
voting power of Hanson PLC's then outstanding securities shall not
constitute a change in control of Hanson PLC; or
(c) 20% or more of the directors elected by stockholders to the Board of
Directors of Hanson PLC are persons who were not nominated or elected at
the most recent three annual meetings of the shareholders of Hanson PLC;
(d) the stockholders of Hanson PLC approve a plan of complete liquidation of
Hanson PLC or an agreement for the sale or disposition by Hanson PLC of all
or substantially all of the Company's or Hanson PLC's assets.
For the avoidance of doubt, in the event that the stock of any Employer shall be
distributed, directly or indirectly, by way of dividend, a distribution or
otherwise to Hanson PLC's shareholders, such event shall not be deemed to be
Change-in-Control, and the Employer shall thereupon be responsible to each
Participant of such Employer for any benefits in accordance with the provisions
of this plan; provided however, in the event of any such spin off, the name of
the new ultimate parent entity of the Employer shall be substituted for Hanson
PLC in the above provisions.
ARTICLE XII. AMENDMENT OR TERMINATION OF THE PLAN
12.1 AMENDMENT
The Board of Directors reserves the right at any time and from time to time, to
8
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modify or amend, in whole or in part, any or all of the provisions of the Plan
but no such amendment shall adversely affect any Participant's or Participant's
beneficiary's rights to benefits accrued under the Plan prior the effective date
of the amendment.
12.2 TERMINATION
The Board of Directors shall have the right to terminate the Plan at any time
provided that such action shall not adversely affect any Participant's or
Participant's beneficiary rights to benefits accrued under the Plan prior to
such action.
9
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SCHEDULE A
SCM GLIDCO ORGANICS CORP SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EMPLOYEES ELIGIBLE TO PARTICIPATE
George W. Robbins President
John M. Heijmans Chief Financial Officer
Michael B Wimberly Vice President-Sales and Marketing
Carlos G. Cardenas Vice President-Technology
Richard P. Chatham Vice President-Manufacturing
D. Michael Gurkin Vice President-Procurement
Benard J. Kane Principal Scientist
10
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EXHIBIT 11.1
Computation of per share earnings from continuing operations:
<TABLE>
<S> <C>
Shares of Common Stock assumed outstanding based on actual Hanson
ordinary shares and ADSs outstanding and stock dividend ratio
of one for every 70.......................................... 74,391,400
Non performance based portion of restricted shares assumed to
be issued to executive officers and key employees............ 472,400
Shares assumed to be issued to the Company's non employee
directors.................................................... 2,700
----------
Shares outstanding............................................. 74,866,500
----------
----------
YEAR ENDED DECEMBER 31, 1995
Pro forma income from continuing operations 386,000,000
=5.15
----------
Shares Outstanding 74,866,500
SIX MONTHS ENDED JUNE 30, 1996
Pro forma income from continuing operations 123,000,000
=1.64
----------
Shares outstanding 74,866,500
</TABLE>
Historical earnings per share were not presented because the Company was
comprised of direct or indirect subsidiaries of Hanson PLC.
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Exhibit 21.1
SIGNIFICANT SUBSIDIARIES
At the time of this filing,
Millennium Chemicals Inc. had no
subsidiaries. A list of subsidiaries
will be provided promptly after
the Demerger.
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[FORM OF OPINION TO BE RENDERED BY
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
AUGUST [ ], 1996
HANSON PLC
1 GROSVENOR PLACE
LONDON SW1X 7JH ENGLAND
RE: U.S. FEDERAL INCOME TAX OPINION
Dear Sirs:
You have requested our opinion as to whether the transactions
(collectively, the "Stock Dividend") whereby Hanson PLC ("Hanson") will transfer
all the outstanding stock in Hanson Overseas Holdings Limited ("HOH") to
Millennium Chemicals Inc. ("Millennium") in exchange for Millennium issuing all
of its then outstanding Common Stock to the shareholders of Hanson on a pro rata
basis, will qualify as a tax-free distribution under Section 355 of the United
States Internal Revenue Code of 1986, as presently in force (the "Code"). Our
opinion addresses only this issue. We have not been requested to render, and are
not rendering, any opinion regarding (i) the tax consequences of the Stock
Dividend under the tax laws of the several states of the United States or the
political subdivisions thereof, or under the tax laws of any foreign country,
(ii) any other tax consequences of the Stock Dividend, or (iii) the tax
consequences of any other transactions.
All capitalized terms used but not defined in this opinion shall have the
meanings assigned to them in the Information Statement of Millennium dated
August [ ], 1996 (the "Information Statement").
In reaching our opinion, we have reviewed and have relied upon the
following (collectively, the "Documents"): (i) the Information Statement; (ii)
the Officers' Certificate, dated August [ ], 1996, executed by officers of
Hanson, HM Anglo American, Ltd. ("Anglo"), and Millennium (the "Certificate");
(iii) the August [ ], 1996 draft of the Hanson Shareholder Circular relating to
the Stock Dividend; (iv) the forms of agreements filed as Exhibits 3.3 and 10.1
through 10.12 to the Registration Statement on Form 10 filed by Millennium with
the Securities and Exchange Commission, and declared effective, on August [ ],
1996; and (v) additional information (including organization charts) provided to
us by or on behalf of Hanson and its affiliates. We have also relied upon
information obtained in our consultations with officers, employees, and
representatives of Hanson, Anglo, Millennium and their affiliates (the
"Information"). With your permission, all assumptions and statements of reliance
herein have been made without any independent investigation or
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Hanson PLC
August [ ], 1996
Page 2
verification on our part, and we express no opinion with respect to the subject
matter or accuracy of such assumptions or statements relied upon.
Our opinion is based solely upon our review of the Documents, the
representations in the Certificate, and the Information. Our opinion cannot be
relied upon if any of the statements in the Documents, any of the
representations in the Certificate, or any of the Information is, or later
becomes, inaccurate. Similarly, our opinion cannot be relied upon if, subsequent
to the date of this letter, any transaction described in the Documents is
modified, any term of any of the relevant agreements is modified, or any party
to any of the relevant agreements takes action inconsistent with the terms of
such agreement.
Subject to the foregoing, it is our opinion that the Stock Dividend will
qualify as a tax-free distribution under Section 355 of the Code.
Our opinion represents our best legal judgment on the matter set forth
above based upon our review of existing authorities, the facts as they exist on
the date hereof, and the assumptions set forth above. The opinion is based upon
existing statutory, regulatory, administrative, and judicial authority, any of
which may be changed at any time with retroactive effect. Our opinion does not
bind the Internal Revenue Service, any other entity, or any court. Accordingly,
the Internal Revenue Service or a court considering the issue addressed in our
opinion could reach a conclusion contrary to our opinion.
We assume no obligation to modify or supplement this opinion if any
applicable laws, regulations, or Internal Revenue Service positions change after
the date hereof or if, after the payment of the Stock Dividend, we become aware
of any facts that might change this opinion.
Finally, our opinion is solely for the benefit of Hanson PLC and may not be
relied upon in any manner or for any purpose by any other person or entity and
may not be quoted in whole or in part without our prior written consent.
Very truly yours,
Fried, Frank, Harris, Shriver & Jacobson
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Exhibit 99.2
FORM OF U.K. INLAND REVENUE LETTER AGREEMENT
DRAFT
July 3, 1996
Inland Revenue
SPI (Company Taxation)
Room 28
New Wing
Somerset House
London
WC2R 1LB
Dear Sirs,
Hanson PLC and subsidiaries
Millennium Chemicals Inc ("Millennium")
Section 215(1) and (2) ICTA 1988
In connection with the demerger clearance application dated 10 April 1996 under
the abovementioned provisions, you have asked us to make the following
representations to the Board of Inland Revenue:
(a) Millennium was formed on April 18, 1996 and at the time of the demerger
distribution will have engaged in no business activities other than those
connected with its formation and the demerger;
(b) at the time of the demerger distribution, Millennium will be resident for
tax purposes in the UK and will give notice of liability to corporation tax
in respect of the period comprising the demerger in accordance with section
10 TMA 1970; and
(c) Millennium will continue to be centrally managed and controlled in the UK
for a period of at least five years (the first such year beginning on the
date of the demerger distribution) and will comply with its statutory
obligations as regards any chargeable payments (as defined in section
214(2)ICTA 1988) made.
For these purposes, we have agreed that the factors for determining where
Millennium's central management and control is being exercised are as summarised
in Inland Revenue SP1/90 (as in force at the date hereof) and we further
represent to the Board of Inland Revenue that:
(i) up to and including the time of the demerger, any Board Meetings of
Millennium (and, in particular, the Board Meetings authorising the
corporate actions necessary for the demerger itself and setting the
sub-group's initial strategy thereafter) will be held in the UK and the
Board will not have delegated its strategic control and policy
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2
making powers to anyone else so that it will be the medium through which
central management and control is expected to be exercised;
(ii) following the demerger, the members of the Board (and their respective
countries of residence) will be William M. Landuyt (US), Robert E. Lee
(US), Worley H. Clark (US), David J.P. Meachin (US), Martin G. Taylor
(UK), The Right Honourable Kenneth Baker CHMP (UK) and The Right
Honourable Lord Simon Glenarthur (UK). It is also intended to designate
an additional non-executive director resident in the US prior to, or
shortly following, the demerger;
(iii) although, as an independent company, Millennium may change the
composition of its Board from time to time after the demerger, it will
continue to be centrally managed and controlled in the UK for at least
the five year period thereafter by arranging for Board Meetings to be
held there almost invariably and also by ensuring that the Board
continues to be the only medium through which strategic control and
policy making powers are exercised. In particular, the Board will not
delegate such control or powers to any person or persons resident
outside the UK during that period (but this will not preclude the
creation of any committee comprising non-residents provided its actions
do not remove central management and control from the UK); and
(iv) at the time of the demerger Millennium's by-laws will contain
appropriate restrictions preventing the Board from acting otherwise than
in accordance with paragraph (iii) above for the relevant period.
For these purposes we have agreed with you that there is a distinction to be
drawn between the matters which will fall to be dealt with by Millennium as a
listed group holding company (responsible for overall group strategy, dividend
policy and other matters affecting shareholders) and those which may fall to be
dealt with by the management of individual operating companies or any
intermediate holding company or companies.
The Millennium Board will be responsible for approving annual budgets/profit
targets for the group as a whole. The Board will also be exclusively responsible
for any major acquisition/disposal strategy but it would not then necessarily be
involved in the implementation of particular transactions which did not require
its involvement.
In particular, we have agreed with you that the Board will be involved in all
matters relating to group strategy especially in the decision making process.
Such strategy includes (but is not confined to) acquisitions, disposals,
dividend policy and the review and approval of decisions over funding issues.
The directors will be provided with detailed information about each item on the
agenda of all Board Meetings in advance of each meeting, although it is
recognised that in exceptional circumstances a Board Meeting may have to be
called at such short notice that this is not possible. Board minutes will record
sufficient of the discussion/comment to evidence the decision-making processes.
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3
We have also agreed that there may be circumstances in which Board Meetings or
committee meetings may have to be held outside the UK or important management
decisions may have to be taken outside the UK, but these may not disturb the
overall pattern of central management and control being exercised in the UK
during the required period in accordance with the above representations. Such
activity will need to be evaluated to ascertain what impact it has on the
central management and control of Millennium generally. A majority of
substantive Board Meetings held outside the UK in any accounting period or
successive meetings of the Board (whether attended by all directors or not) at a
venue outside the UK will be prima facie evidence that central management and
control of Millennium is not exercised within the UK.
We confirm that as part of the demerger process we will be creating
documentation between Hanson PLC and Millennium which will require Millennium to
conform with the above representations.
So long as UK tax residence status of the US incorporated company continues to
be determined by the location of its central management and control and so long
as Millennium continues to be centrally managed and controlled in the UK, it
will be tax resident here and will be subject to normal UK tax reporting
requirements (City C LBO being agreed to be the responsible district). On
enquiry Millennium will co-operate with any reasonable request from the Inland
Revenue and in particular provide all relevant information (including
documentary evidence) to support the fact that it is centrally managed and
controlled in the UK. This may include (but is not confined to) minutes of Board
Meetings of both Millennium and any holding company within the group, internal
memoranda, documents circulated to directors, minutes/papers etc passed between
directors and or passed from directors to other group personnel. This does not
constitute a waiver of privilege in relation to any document or class of
documents. If agreement on the place of central management and control cannot be
reached the question is ultimately one of fact which may have to be determined
at a hearing before the Commissioners at which Millennium may be represented.
The above representations are given to you specifically for the purposes of the
Millennium demerger clearance applications under section 215(1) and (2) ICTA
1988 and on the basis that they may be relied upon by the Board in giving the
clearances requested.
If at any time (if appropriate following a Commissioners' hearing), the
representations prove not to be correct we have agreed that the consequences of
that shall be as follows:-
(1) as regards Hanson PLC the Millennium demerger distribution will no
longer be regarded as fully exempt from ACT under section 213 ICTA 1988
(although the clearance will continue to be treated as valid as regards
shareholders);
(2) for purposes of calculating any notional ACT liability therefrom, the
amount of the distribution shall be calculated using the average of the
closing prices for Millennium's common stock on the New York Stock
Exchange for the first ten business days following its initial listing
on the demerger taking effect;
(3) the amount of such distribution shall be expressed in US dollars and
shall not be converted into sterling at any time (so that any
calculations and payments thereunder will be made in US dollars);
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4
(4) the amount of such distribution shall be treated as having been reduced
by one fifth for each complete twelve month period, beginning with the
date of the demerger distribution, that has elapsed between the date of
such deemed distribution and the first date on which Millennium ceased
to be centrally managed and controlled in the UK; and
(5) an amount equivalent to ACT (at the rate in force on the date of the
distribution) on the amount of such distribution (reduced as appropriate
under (4) above) shall be payable by Hanson PLC to the Inland Revenue
(together with interest thereon at the rate from time to time applicable
to overdue ACT from the date when it would originally have been due and
payable to the date of such payment) as soon as it has been established,
whether by agreement or by Commissioners' hearing, that Millennium has
ceased to be centrally managed and controlled in the UK (as described
above) within the required five year period. Such amount may be
collected as a debt due to the Inland Revenue.
We have further agreed that such notional ACT will not be treated as actual ACT
for any of the purposes of the Taxes Acts unless we have previously agreed with
you to calculate the amount payable without making any reduction under paragraph
(4) above.
Finally, we have agreed that nothing in this letter will, in any circumstances,
preclude the Board of Inland Revenue from invoking the provisions of section
215(8) ICTA 1988 in circumstances extending beyond failure to comply with the
representation in (c) above.
This letter is intended to create binding obligations on Hanson PLC (which
may, of course, be varied by agreement from time to time) and is written in
consideration of the Board of Inland Revenue's agreement to give the clearances
we have requested under section 215(1) and (2) ICTA 1988. Any claim against
Hanson PLC under this letter can be made as a simple contractual claim and need
not be made through the issue of a formal tax assessment.
We trust the above satisfactorily summarises the position agreed between us. If
it does, we would be grateful to have written confirmation of that at the time
the clearances are issued.
Yours faithfully,
Director Director
Hanson PLC Millennium Chemicals Inc.
