<PAGE> 1
REGISTRATION NO. 333-58919
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OCTEL DEVELOPMENTS PLC
OCTEL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
ENGLAND AND WALES NONE
DELAWARE 2800 98-0181725
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>
------------------------
P.O. BOX 17, OIL SITES ROAD
ELLESMERE PORT, SOUTH WIRRAL
TELEPHONE: 011-44-151-355-3611
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
------------------------
CT CORPORATION
1633 BROADWAY
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 246-5070
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPY TO:
STUART L. MILLS
KIRKLAND & ELLIS INTERNATIONAL
INTERNATIONAL FINANCIAL CENTRE
OLD BROAD STREET
LONDON EC2N 1HQ
TELEPHONE: 011-44-171-816-8700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
<C> <C> <S> <C>
A. Information about the Transaction
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front Cover Page; Outside Back
Cover Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Prospectus Summary; Risk Factors; Pro
Forma Financial Data; Selected
Historical Combined Financial Data;
Interim Unaudited Combined Financial
Data
4. Terms of the Transaction.................. Outside Front Cover Page; Prospectus
Summary; Certain Relationships and
Related Transactions; Description of
Credit Facility; Description of the
Notes; Description of the Note
Depositary Agreement; Certain U.S.
Federal Income Tax Consequences; Certain
United Kingdom Tax Consequences
5. Pro Forma Financial Information........... Pro Forma Financial Data; Selected
Historical Combined Financial Data
6. Material Contracts with the Company Being
Acquired................................ Inapplicable
7. Additional Information Required........... Inapplicable
8. Interests of Named Experts and Counsel.... Inapplicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Inapplicable
B. Information about the Registrant
10. Information with Respect to S-3
Registrants............................. Inapplicable
11. Incorporation of Certain Information by
Reference............................... Inapplicable
12. Information with Respect to S-3 or S-2
Registrants............................. Inapplicable
13. Incorporation of Certain Information by
Reference............................... Inapplicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
<C> <C> <S> <C>
14. Information with Respect to Registrants
other than S-3 or S-2 Registrants....... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Use of Proceeds;
Capitalization; Pro Forma Financial
Data; Selected Historical Combined
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Security Ownership of
Certain Beneficial Owners; Beneficial
Ownership of Management; Certain
Relationships and Related Transactions;
Description of Credit Facility;
Description of the Notes; Description of
the Note Depositary Agreement
C. Information about the Company Being Acquired
15. Information with Respect to S-3
Companies............................... Inapplicable
16. Information with Respect to S-3 or S-2
Companies............................... Inapplicable
17. Information with Respect to Companies
Other than S-3 or S-2 Companies......... Inapplicable
D. Voting and Management Information
18. Information if Proxies, Consents or
Authorizations are to be Solicited...... Inapplicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................. Management; Security Ownership of Certain
Beneficial Owners; Beneficial Ownership
of Management
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1998
PRELIMINARY PROSPECTUS
, 1998
<TABLE>
<S> <C> <C>
OCTEL DEVELOPMENTS PLC
OFFER TO EXCHANGE ITS 10% SENIOR NOTES DUE 2006
[Octel Logo] WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(AS AMENDED) FOR ANY AND ALL OF ITS OUTSTANDING 10% SENIOR
NOTES DUE 2006
</TABLE>
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
Octel Developments PLC, a company formed under the laws of England and Wales
(the "Issuer") hereby offers (the "Exchange Offer"), upon the terms and
conditions set forth in this Prospectus (the "Prospectus") and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000
principal amount of its 10% Senior Notes due 2006, (the "Exchange Notes"),
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which this prospectus is a part, for
each $1,000 principal amount of its outstanding 10% Senior Notes due 2006 (the
"Old Notes"), of which $150,000,000 principal amount is outstanding. The form
and terms of the Exchange Notes are the same as the form and term of the Old
Notes except that (i) the Exchange Notes will have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof and (ii) holders of the Exchange Notes will not be entitled to certain
rights of holders of Old Notes under the Registration Rights Agreement (as
defined). The Old Notes and the Exchange Notes are sometimes referred to herein
collectively as the "Notes." The Exchange Notes will evidence the same debt as
the Old Notes (which they replace) and will be issued under and be entitled to
the benefits of the Indenture dated as of May 1, 1998 (the "Indenture") by and
among the Issuer, Octel Corp., a Delaware Corporation (the "Parent" or the
"Guarantor") and IBJ Schroder Bank & Trust Company ("Trustee"), as trustee,
governing the Notes. See "The Exchange Offer" and "Description of Exchange
Notes."
The Issuer will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on , 1998,
unless extended by the Issuer in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
The Old Notes were sold by the Issuer on May 5, 1998 (the "Issue Date") to
Goldman, Sachs & Co., Lehman Brothers, and Merrill Lynch & Co. (the "Initial
Purchasers") in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act (the "Initial Offering").
The Initial Purchasers subsequently placed the Old Notes with, (i) qualified
institutional buyers in reliance upon Rule 144A under the Securities Act, and
(ii) qualified buyers outside the United States in reliance upon Regulation S
under the Securities Act. Accordingly, the Old Notes may not be reoffered,
resold or otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of the Issuer and the
Guarantor under the Registration Rights Agreement entered into by the Issuer,
the Guarantor and the Initial Purchasers in connection with the Initial Offering
(the "Registration Rights Agreement"). See "The Exchange Offer."
Interest on the Notes will be payable semiannually in arrears on May 1 and
November 1 of each year, commencing on November 1, 1998. The Notes will be
redeemable at the option of the Issuer, in whole or in part, at any time on or
after May 1, 2002 at the redemption prices set forth herein, plus accrued and
unpaid interest and additional interest, if any, thereon to the date of
repurchase. Prior to May 1, 2002, the Notes will be redeemable, in whole or in
part, at the option of the Issuer on any date, at a redemption price equal to
the greater of (i) 100% of the principal amount of the Notes to be redeemed and
(ii) the sum of the present values of (A) the redemption price of such Notes at
May 1, 2002 and (B) the remaining scheduled payments of principal and interest
thereon to May 1, 2002 (exclusive of interest accrued to such redemption date)
discounted to such redemption date on a semiannual basis (assuming, a 360-day
year consisting of twelve 30-day months) at the Treasury Rate (as defined
herein) plus 50 basis points, plus, in either case, accrued and unpaid interest
on the principal amount being redeemed to such redemption date. The Issuer is
required to redeem $37.5 million principal amount of the Notes on each of May 1,
2003, May 1, 2004 and May 1, 2005, in each case at a redemption price equal to
100% of the principal amount thereof, plus accrued interest to the redemption
date, subject to the Issuer's right to credit against any such redemption Notes
acquired by it otherwise than through such redemption. Such redemptions are
calculated to retire approximately 75% of the principal amount of the Notes
prior to maturity. Upon the occurrence of a Change of Control (as defined), each
holder of Notes may require the Issuer to repurchase all or a portion of such
holder's Notes at 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest and additional interest, if any, to the date of repurchase.
See "Description of the Notes." The Issuer is a wholly-owned indirect subsidiary
of Parent. The Notes will be unconditionally guaranteed as to the payment of
principal, interest and any other amounts due thereon (the "Note Guarantee") by
Parent.
Application has been made to list the Old Notes and the Exchange Notes on
the Luxembourg Stock Exchange.
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS
TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<PAGE> 5
(Continued from previous page)
The Notes and the Note Guarantee will be unsecured senior indebtedness of
the Issuer and Parent, respectively, will rank pari passu in right of payment
with all existing and future unsecured indebtedness of the Issuer and Parent,
respectively, other than Subordinated Obligations (as defined) and will be
senior in right of payment to all existing and future Subordinated Obligations,
except that the lenders under the Credit Facility (as defined) will have certain
rights under the Indenture (as defined) to prohibit payments on the Notes and
the Note Guarantee under certain circumstances and may not have similar rights
with respect to other indebtedness of the Issuer or Parent. The Notes and the
Note Guarantee will be effectively subordinated to any secured indebtedness of
the Issuer and Parent, respectively, to the extent of the value of the assets
securing such indebtedness and to all liabilities of their direct and indirect
subsidiaries (other than, in the case of Parent, the Issuer). The Issuer and
Parent are holding companies that conduct all of their business through
subsidiaries. As of December 31, 1997, after giving pro forma effect to the
Transactions (as defined), Parent's subsidiaries (other than the Issuer) had
approximately $390.4 million of liabilities outstanding (including $280.0
million of indebtedness), and the Issuer had approximately $430.0 million of
liabilities consisting of the Notes and the Issuer's guarantee of indebtedness
under the Credit Facility. The Notes and the Note Guarantee will be subject to
limited payment blockage provisions exercisable by the lenders under the Credit
Facility in the event of certain defaults under the Credit Facility. See
"Description of the Notes."
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Issuer believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder that
is an "affiliate" of the Issuer within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer--Resale of the Exchange Notes."
Holders of Old Notes wishing to accept the Exchange Offer must represent to the
Issuer, as required by the Registration Rights Agreement, that such conditions
have been met. Each broker-dealer (a "Participating Broker-Dealer") that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired by
such Participating Broker-Dealer as a result of market-making activities or
other trading activities. The Issuer has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution."
The Issuer will not receive any proceeds from the Exchange Offer. The Issuer
has agreed to bear the expenses of the Exchange Offer. No underwriter is being
used in connection with the Exchange Offer.
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Issuer will
pay all the expenses incurred by it incident to the Exchange Offer. See "The
Exchange Offer."
There has not previously been any public market for the Old Notes or the
Exchange Notes. There can be no assurance that an active market for the Exchange
Notes will develop. See "Risk Factors--Absence of a Public Market Could
Adversely Affect the Value of Exchange Notes." Moreover, to the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUER OR THE GUARANTOR. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM," THE ISSUER EXPECTS
THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTE (AS DEFINED), WHICH WILL BE DEPOSITED WITH, OR ON
BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME OR IN
THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE
REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE
INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN CERTIFICATED FORM WILL BE ISSUED
IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN
THE INDENTURE. SEE "BOOK-ENTRY; DELIVERY AND FORM."
THE CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS
OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN ATTORNEY,
BUSINESS ADVISOR AND TAX ADVISOR AS TO LEGAL, BUSINESS AND TAX ADVICE. NEITHER
THE ISSUER OR THE GUARANTOR IS MAKING ANY REPRESENTATION TO ANY PROSPECTIVE
INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN INVESTMENT THEREIN
BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS.
THE ISSUER AND THE GUARANTOR ACCEPT RESPONSIBILITY FOR THE INFORMATION
CONTAINED IN THIS PROSPECTUS. TO THE BEST KNOWLEDGE AND BELIEF OF THE ISSUER AND
THE GUARANTOR (WHICH HAVE TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE
CASE), THE INFORMATION CONTAINED IN THIS PROSPECTUS IS IN ACCORDANCE WITH THE
FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH
INFORMATION.
<PAGE> 6
AVAILABLE INFORMATION
The Issuer and the Guarantor have filed with the Commission a Registration
Statement on Form S-4 (the "Exchange Offer Registration Statement," which term
shall encompass all amendments, exhibits, annexes and schedules thereto)
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the Exchange Notes being offered hereby. This Prospectus
does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Issuer, the
Guarantor and the Exchange Offer, reference is made to the Exchange Offer
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Exchange Offer Registration Statement, reference is made to
the exhibit for a more complete description of the document or matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. In addition, the Guarantor files periodic reporting and other
information requirements of the Exchange Act. The Exchange Offer Registration
Statement, including the exhibits thereto, and periodic reports and other
information filed by the Issuer and the Guarantor with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at
its regional offices located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such materials can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such site is http://www.sec.com.
Notwithstanding that the Guarantor may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Guarantor shall
file with the SEC and provide the Trustee and Securityholders with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and reports to be so filed
and provided at the times specified for the filing of such information,
documents and reports under such Sections. Guarantor also shall comply with the
other provisions of Trust Indenture Act of 1939 sec. 314(a).
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Graham M. Leathes, Company Secretary of Octel Corp., telephone:
011-44-151-356-6192 or 0151-356-6192. Mr. Leathes may be contacted via mail at:
Octel Corp., P.O. Box 17, Oil Sites Road, Ellesmere Port, South Wirral L65 4HF
United Kingdom. In order to ensure timely delivery of the documents, any request
should be made by , 1998 (ten business days prior to the Expiration
Date).
The Issuer, a company organized under the laws of England and Wales, has
its principal executive offices located at P.O. Box 17, Oil Sites Road,
Ellesmere Port, South Wirral, L65 4HF; its telephone number is 0151-356-6192.
------------------------
NOTICE FOR NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER
CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR
THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE
i
<PAGE> 7
FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN
ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL
TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
------------------------
ENFORCEABILITY OF CIVIL LIABILITIES
The Issuer is incorporated under the laws of England and Wales, most of its
directors and executive officers are residents of England and a significant
portion of the assets of the Issuer and such persons are located outside of the
United States. As a result, it may be difficult or impossible for U.S. investors
to effect service of process within the United States upon the Issuer or its
directors and officers under the Federal securities laws of the United States or
the securities or blue sky laws of any state within the United States. In
addition, investors should not assume that the courts of England (i) would
enforce judgments of U.S. courts obtained in actions against the Issuer or such
persons predicated upon the civil liability provisions of the U.S. Federal
securities laws or the securities or blue sky laws of any state within the
United States or (ii) would enforce, in original actions, liabilities against
the Issuer or such persons predicated upon the U.S. Federal securities laws or
any such state securities or blue sky laws.
ii
<PAGE> 8
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified by, the
more detailed information set forth in this Prospectus, which should be read in
its entirety. Unless the context otherwise requires, (i) references in this
Prospectus to the Issuer are to Octel Developments PLC, a company formed under
the laws of England and Wales and the issuer of the Exchange Notes offered
hereby, (ii) references in this Prospectus to Parent or Guarantor are to Octel
Corp., a Delaware corporation, (iii) references in this Prospectus to the
Company are to Parent and each of its subsidiaries (including the Issuer) and
(iv) references in this Prospectus to the Company prior to the Distribution are
to the Company's businesses (the "Octel Businesses") operated as part of the
Petroleum Additives Business Unit of Great Lakes Chemical Corporation, a
Delaware corporation.
THE COMPANY
The Company is an international chemical company specializing in the
manufacture, distribution and marketing of fuel additives. The Company is
comprised of three primary operating businesses: Lead Alkyls, Petroleum
Specialties and Performance Chemicals. The Lead Alkyls business, which accounted
for 82% of the Company's 1997 sales, is the world's leading producer of
tetraethyl lead antiknock compounds, or "TEL," that are used by oil refineries
worldwide to boost the octane levels in gasoline, allowing fuel to burn more
efficiently and preventing engine knock during the combustion cycle. The Company
manufactures approximately 80% of TEL used worldwide. The Petroleum Specialties
business, which accounted for 12% of the Company's 1997 sales, supplies a broad
range of petroleum additives, including combustion improvers, fuel detergents
and functional performance products (such as corrosion inhibitors and
conductivity improvers). The Performance Chemicals business, which accounted for
6% of the Company's 1997 sales, manufactures and distributes a range of
chemicals including sodium, chlor-alkali and Octaquest(R), a biodegradable
chelating agent supplied to Procter & Gamble, which is used in several European
laundry products. In 1997, the Company had net sales of $539.1 million and pro
forma EBITDA of $240.8 million.
INDUSTRY OVERVIEW
Worldwide use of TEL has declined since 1973 following the enactment of the
U.S. Clean Air Act in 1970 and increasing health and environmental concerns and
political pressures to increase the usage of unleaded gasoline and reduce the
lead content of leaded fuels. While usage of TEL is expected to continue to
decline, the Company believes there are a number of factors which may prolong
the use of leaded gasoline, and therefore the market for TEL. First, it is
costly for refineries to switch their gasoline production process to unleaded
gasoline. Studies undertaken by the World Bank and others estimate that
upgrading an average refinery to nonleaded gasoline production would require
approximately $100 million in capital expenditures, which equals approximately
$.03-.08 per gallon. Because upgrading some refineries may not be economically
justifiable, these refineries may decide to continue operating until reduced
demand for leaded gasoline forces their closure. Second, there are significant
costs and delays in converting automobiles and gasoline stations to accommodate
the increased use of unleaded fuels.
The Company believes these factors may slow the rate of decline in the
consumption of leaded gasoline, especially in the Middle East, Southeast Asia
and Africa where the proportion of unleaded gasoline to leaded gasoline is very
low and where TEL phaseout legislation has not generally been introduced.
Moreover, even in Western Europe, where legislation mandating a leaded gasoline
phaseout by year 2000 exists, extensions have been applied for by Italy, Greece,
Spain and Portugal.
1
<PAGE> 9
BUSINESS STRATEGY
The Company's corporate objective is to optimize the cash flows from sales
of TEL to pay down debt and return value to its stockholders by (i) the
repurchase of stock and/or the payment of cash dividends and (ii) the
development of its Petroleum Specialties and Performance Chemicals businesses.
To achieve its corporate objective, the Company's strategy is to: (i) manage
profitably the decline of the TEL market through the implementation of cost
control initiatives and the provision of additional technical and environmental
support for customers; (ii) expand the Petroleum Specialties and Performance
Chemical businesses through the development of core competencies, product
innovation and enhanced focus on satisfying customers and market needs; (iii)
efficiently manage its operations and manufacturing sites consistent with the
decline of TEL demand and the growth of specialty and performance products, and
(iv) seek, where feasible, synergistic opportunities through joint ventures,
alliances, collaborative arrangements or acquisitions.
Since January 1, 1996, the Company has assembled an experienced senior
management team (see "Management--Executive Officers") which in the period ended
December 31, 1997 has effectively implemented a number of cost-reduction
measures focused on maintaining profit margins of TEL, including (i) a 29%
reduction of the work force in the U.K., resulting in estimated annual labor
savings of $25 million, (ii) the closure of two foreign manufacturing facilities
and (iii) an improved safety record evidenced by a 40% reduction in lost time
accidents.
The Company has its administrative headquarters and principal manufacturing
site in Ellesmere Port (Cheshire, U.K.) with subsidiaries in Europe, Africa and
North America. The Company employed 1,419 employees worldwide as of December 31,
1997. The Issuer is a recently formed, indirect, wholly owned subsidiary of
Parent. The principal executive offices of the Issuer are located in the United
Kingdom at Oil Sites Road, Ellsmere Port, South Wirral L65 4HF, and its
telephone number is 011-44-151-355-3611. The Issuer does not conduct any
operations except through its subsidiaries.
THE TRANSACTIONS
THE DISTRIBUTION
On April 24, 1998, Great Lakes Chemical Corporation ("Great Lakes") and the
Company entered into a Transfer and Distribution Agreement (the "Distribution
Agreement"). Pursuant to the terms of the Distribution Agreement, all the shares
of the common stock of Parent were issued to the shareholders of Great Lakes,
thereby creating an independent public company. The Issuer is an indirect wholly
owned subsidiary of Parent.
THE FINANCINGS
On April 27, 1998, certain subsidiaries of Parent entered into a $300.0
million senior credit facility, consisting of a secured revolving credit
facility of $20.0 million (the "Revolving Facility") and a secured term loan
facility of $280.0 million (the "Term Facility" and, together with the Revolving
Facility, the "Credit Facility"). Proceeds from the Credit Facility and the Old
Notes (collectively, the "Financings"), together with available cash, were used
to make the Special Payments (as defined) to Great Lakes and to pay
approximately $16.0 million of expenses incurred by the Company in connection
with the Distribution and the Financings (together with the Distribution and the
Special Payments, the "Transactions"). The $20.0 million Revolving Facility will
be available to the Company for working capital and general corporate purposes.
Prior to the date of the Distribution (the "Distribution Date"), the
Company used the proceeds of the Financings, together with approximately $53.7
million of available cash at December 31, 1997 and cash generated by Parent
between January 1, 1998 and the Distribution Date, to make a $467.7 million
payment to Great Lakes, consisting of $116.8 million for the repayment of a loan
used to purchase the 10.65% interest in subsidiaries of the Company held by
Chevron Chemical Company
2
<PAGE> 10
("Chevron") and $350.9 million as a special dividend (the "Special Dividend"
and, collectively, the "Special Payments"). In addition, the Company used a
portion of the proceeds of the Financings to pay certain fees and expenses
associated with the Transactions.
The proceeds from the sale of the Old Notes, together with proceeds from
the Credit Facility and available cash, were used as follows:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS
Credit Facility(1)........................................ $280.0
Old Notes................................................. 150.0
Cash(2)................................................... 53.7
------
Total sources of funds................................. $483.7
======
USES OF FUNDS
Repay indebtedness(3)..................................... $116.8
Special Dividend.......................................... 350.9
Fees and expenses(4)...................................... 16.0
------
Total uses of funds.................................... $483.7
======
</TABLE>
- ---------------
(1) The Credit Facility provides for up to $300.0 million of borrowings,
consisting of a Term Facility of $280.0 million and a Revolving Facility of
$20.0 million that is available to the Company for working capital and
general corporate purposes.
(2) Between January 1, 1998 and the Distribution Date, the Company generated
approximately $50.0 million in cash, $24.0 million of which, together with
$29.7 million of available cash as of December 31, 1997, was utilized to
partially fund the Special Dividend. The balance of cash is available to the
Company.
(3) Approximately $116.8 million was used for the repayment to Great Lakes of a
loan used to acquire Chevron's 10.65% interest in subsidiaries of Parent.
(4) Includes $12.0 million of transaction fees associated with the Distribution
and the Financings and $4.0 million of associated costs for certain interest
rate swaps related to the Financings.
RECENT DEVELOPMENTS
Management expects TEL sales volumes to decrease for the full year 1998,
and TEL sales volumes in the first half of 1998 declined approximately 8.0% from
the first half of 1997. Operating income for the first half of 1998 was $76.9
million, which was 14.3% below the $89.7 million of the first half of 1997 due
to a reduction in wholesale TEL sales volumes. Retail selling prices in the
first half of 1998 declined slightly as compared to the first half of 1997.
3
<PAGE> 11
THE INITIAL OFFERING
Old Notes..................... The Old Notes were sold by the Issuer on May 5,
1998 to the Initial Purchasers pursuant to a
purchase agreement by and among the Initial
Purchasers, the Issuer and the Guarantor dated
April 30, 1998 (the "Purchase Agreement"). The
Initial Purchasers subsequently resold the Old
Notes to (i) qualified institutional buyers
pursuant to Rule 144A under the Securities Act
and (ii) qualified buyers outside the United
States in reliance upon Regulation S under the
Securities Act.
Registration Rights
Agreement..................... Pursuant to the Purchase Agreement, the Issuer,
the Guarantor and the Initial Purchasers
entered into an Exchange Registration Rights
Agreement dated as of April 30, 1998 (the
"Registration Rights Agreement"), which grants
the holder of the Old Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such exchange rights which
terminate upon the consummation of the Exchange
Offer. Upon consummation of the Exchange Offer,
the Issuer and the Guarantor will have no
further obligation under the Registration
Rights Agreement to register Old Notes except
in limited circumstances in which the Issuer
has agreed to file a Shelf Registration
Statement.
THE EXCHANGE OFFER
Securities Offered............ $150,000,000 aggregate principal amount of 10%
Senior Notes due 2006, of the Issuer (the
"Exchange Notes").
The Exchange Offer............ $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof, $150,000,000
aggregate principal amount of Old Notes are
outstanding. The Issuer will issue the Exchange
Notes to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no action letters
issued to third parties, the Issuer believes
that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than
any such holder which is an "affiliate" of the
Issuer within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and that such
holder does not intend to participate and has
no arrangement or understanding with any person
to participate in the distribution of such
Exchange Notes.
Any Participating Broker-Dealer that acquired
Old Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to
the Exchange Offer must
4
<PAGE> 12
acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes
received in exchange for Old Notes where such
Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The
Issuer has agreed that, for a period of 180
days after the Expiration Date, they will make
this Prospectus available to any Participating
Broker-Dealer for use in connection with any
such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the Exchange Notes could not rely on the
position of the staff of the Commission
enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Issuer.
Expiration Date............... 5:00 p.m., New York City time, on
, 1998 unless the Exchange Offer
is extended, in which case the term "Expiration
Date" means the latest date and time to which
the Exchange Offer is extended.
Accrued Interest on the
Exchange Notes and the
Old Notes..................... Each Exchange Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the Exchange Notes. Such
interest will be paid with the first interest
payment on the Exchange Notes. Interest on the
Old Notes accepted for exchange will cease to
accrue upon issuance of the Exchange Notes.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Issuer. See "The Exchange
Offer--Conditions."
Procedures for Tendering
Old Notes..................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof (or, in the case of a
book-entry transfer, delivering an Agent's
Message (as defined) in lieu thereof) in
accordance with the instructions
5
<PAGE> 13
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile (or, in the case of a
book-entry transfer, deliver an Agent's Message
(as defined) in lieu thereof) (or, in the case
of a book-entry transfer, delivering an Agent's
Message in lieu thereof), together with the Old
Notes and any other required documentation to
the Exchange Agent (as defined) at the address
set forth herein. By executing the Letter of
Transmittal (or, in the case of a book-entry
transfer, delivering an Agent's Message (as
defined) in lieu thereof) each holder will
represent to the Issuer that, among other
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, that neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act,
of the Issuer. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer" and
"--Procedures for Tendering."
Untendered Old Notes.......... Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange rights
and such Old Notes will continue to be subject
to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
Consequences of Failure
to Exchange................... The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Issuer, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act
or pursuant to some other exemption under the
Securities Act, (iii) outside the United States
to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act, or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer--Consequences of
Failure to Exchange."
Shelf Registration
Statement..................... If (i) the Exchange Offer is prohibited by
applicable law (ii) or any holder of the Old
Notes (other than any such holder which is an
"affiliate" of the Issuer or the Guarantor
within the meaning of Rule 405 under the
Securities Act) notifies the Issuer that (A) it
is prohibited by law or policy from
participating in the Exchange Offer, (B) that
it may not resell the Exchange Notes acquired
by it in the Exchange Offer to the public
without delivering a prospectus and the
prospectus contained in the Exchange Offer
Registration Statement is not appropriate or
available for such resales or (C) that it is a
broker-dealer and holds Notes acquired directly
from the Issuer or an affiliate of the Issuer,
the Issuer
6
<PAGE> 14
has agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration
Statement"). If the Issuer fails to satisfy
these registration obligations, it will be
required to pay liquidated damages ("Liquidated
Damages") to holders of Notes under certain
circumstances.
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal (or in the case of a
book-entry transfer, delivering an Agent's
Message in lieu thereof) and delivering its Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time. The Issuer will keep the
Exchange Offer open for not less than twenty
business days in order to provide for the
transfer of registered ownership.
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal (or,
in the case of a book-entry transfer,
delivering an Agent's Message in lieu thereof)
or any other documents required by the Letter
of Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Notes and
Delivery of Exchange Notes.... The Issuer will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ IBJ Schroder Bank and Trust Company
7
<PAGE> 15
EXCHANGE NOTES
General....................... The form and terms of the Exchange Notes are
the same as the form and terms of the Old Notes
(which they replace) except that the Exchange
Notes have been registered under the Securities
Act and, therefore, will not bear legends
restricting the transfer thereof, and the
holders of Exchange Notes will not be entitled
to certain rights under the Registration Rights
Agreement, including the provisions providing
for Liquidated Damages on the Old Notes in
certain circumstances relating to the timing of
the Exchange Offer, which rights will terminate
when the Exchange Offer is consummated. See
"The Exchange Offer--Purpose and Effect of the
Exchange Offer." The Exchange Notes will
evidence the same debt as the Old Notes and
will be entitled to the benefits of the
Indenture. See "Description of Exchange Notes."
The Old Notes and the Exchange Notes are
referred to herein collectively as the "Notes."
Issuer........................ Octel Developments PLC.
Parent Guarantee.............. Octel Corp., the parent of the Issuer, will
fully and unconditionally guarantee the payment
of principal and interest on the Notes.
Securities Offered............ $150,000,000 aggregate principal amount of 10%
Senior Notes due 2006.
Maturity Date................. May 1, 2006.
Interest Payment Dates........ May 1 and November 1 of each year, commencing
November 1, 1998.
Optional Redemption........... Prior to May 1, 2002, the Notes will be
redeemable, in whole or in part, at the option
of the Issuer on any date, at a redemption
price equal to the greater of (i) 100% of the
principal amount of the Notes to be redeemed
and (ii) the sum of the present values of (A)
the redemption price of such Notes at May 1,
2002 and (B) the remaining scheduled payments
of principal and interest thereon to May 1,
2002 (exclusive of interest accrued to such
redemption date) discounted to such redemption
date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the
Treasury Rate plus 50 basis points, plus, in
either case, accrued and unpaid interest on the
principal amount being redeemed to such
redemption date. From and after May 1, 2002 the
Notes will be subject to redemption at the
option of the Issuer in whole or in part, at
the redemption prices set forth herein, plus
accrued and unpaid interest and additional
interest, if any, to the date of redemption.
See "Description of the Exchange
Notes--Optional Redemption."
Mandatory Redemption.......... The Issuer is required to redeem $37.5 million
principal aggregate amount of Notes on each of
May 1, 2003; May 1, 2004; and May 1, 2005; in
each case at a redemption price equal to 100%
of the principal amount thereof, plus accrued
8
<PAGE> 16
interest and additional interest, if any, to
the date of redemption, subject to the Issuer's
right to credit against any such redemption
Notes acquired by it otherwise than through
such redemption. See "Description of the
Exchange Notes--Mandatory Redemption."
Additional Amounts;
Tax Redemption................ Payments made by the Issuer or Parent on or
with respect to the Notes or the Note Guarantee
will be made without withholding or deduction
for taxes imposed by any Tax Authority (as
defined) unless required by law. If withholding
is required by law, the Issuer or Parent, as
the case may be, will pay, subject to certain
exceptions, Additional Amounts (as defined) as
may be necessary so that net payments will be
no less than the amounts provided for in the
Notes. In the event that (i) the Issuer or
Parent has become or will become obligated to
pay any Additional Amounts as a result of (A) a
change to current law or the interpretation or
administration thereof or (B) in certain
circumstances, the issuance of Definitive Notes
(as defined) and (ii) the Issuer or Parent, as
the case may be, is unable to avoid such
obligation to pay Additional Amounts by taking
reasonable measures available to it, then the
Issuer may redeem all, but not less than all,
of the Notes at any time at the principal
amount thereof, together with accrued and
unpaid interest thereon, if any, to the
redemption date and all Additional Amounts, if
any. See "Description of the Exchange Notes--
Withholding Taxes" and "--Redemption for
Taxation Reasons."
Change of Control............. Upon the occurrence of a Change of Control,
each Holder of Notes may require the Issuer to
repurchase all or a portion of such Holder's
Notes at 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and
Additional Interest, if any, to the date of
repurchase. See "Description of the Exchange
Notes--Certain Covenants--Repurchase of Notes
Upon a Change of Control."
Ranking....................... The Exchange Notes and the Note Guarantee will
be unsecured senior indebtedness of the Issuer
and Parent, respectively, will rank pari passu
in right of payment with all existing and
future unsecured indebtedness of the Issuer and
Parent, respectively, other than Subordinated
Obligations and will be senior in right of
payment to all existing and future Subordinated
Obligations, except that the lenders under the
Credit Facility will have certain rights under
the Indenture to prohibit payments on the
Exchange Notes and the Note Guarantee under
certain circumstances and may not have similar
rights with respect to other indebtedness of
the Issuer or Parent. The Exchange Notes and
the Note Guarantee will be effectively
subordinated to any secured indebtedness of the
Issuer and the Parent, respectively, to the
extent of the value of the assets securing such
indebtedness and to all liabilities of their
direct and indirect subsidiar-
9
<PAGE> 17
ies (other than, in the case of Parent, the
Issuer). The Issuer and Parent are holding
companies that conduct all of their business
through subsidiaries. As of December 31, 1997,
after giving pro forma effect to the
Transactions, Parent's subsidiaries (other than
the Issuer) would have had approximately $390.4
million of liabilities outstanding (including
$280.0 million of indebtedness), and the Issuer
would have had approximately $430.0 million of
liabilities consisting of the Notes and the
Issuer's guarantee of indebtedness under the
Credit Facility. The Exchange Notes and the
Note Guarantee are subject to limited payment
blockage provisions exercisable by the lenders
under the Credit Facility in the event of
certain defaults under the Credit Facility. See
"Description of the Exchange Notes."
Restrictive Covenants......... The indenture governing the Notes (the
"Indenture") contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries (as
defined) to incur additional indebtedness and
issue capital stock of a Restricted Subsidiary,
pay dividends or distributions or make
investments or make certain transactions with
affiliates, dispose of certain assets, incur
liens and engage in mergers and consolidations.
See "Description of the Exchange Notes."
Use of Proceeds............... The Company used the proceeds of the Initial
Offering, together with the proceeds of the
Credit Facility and available cash to make the
Special Payments. See "The Transactions." There
will be no proceeds to the Company or the
Issuer from the exchange made pursuant to the
Exchange Offer.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Old Notes in exchange for Exchange Notes. These risk
factors are generally applicable to the Old Notes as well as the Exchange Notes.
10
<PAGE> 18
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth summary historical statement of income data
and balance sheet data and corresponding pro forma data for the Company. The
historical financial data for the three years ended December 31, 1997 are
derived from the audited Combined Financial Statements of the Company included
elsewhere in this Prospectus. These historical financial data relate to the
Octel Businesses as they were operated as part of the Petroleum Additives
Business Unit of Great Lakes and have been adjusted for those parts of the
Petroleum Additives Business Unit which are to remain under Great Lakes'
ownership and management after the Distribution. The consolidated financial data
for the Company as of June 30, 1997 and 1998 have been derived from the
unaudited interim consolidated financial statements of the Company included
elsewhere in this Prospectus and, in the opinion of the management, include all
adjustments necessary for the fair presentation of such data. The results of
operations for the interim period presented is not necessarily indicative of the
results that may be expected for a full financial year.
The pro forma financial data were derived from the "Pro Forma Financial
Statements" that give pro forma effect to the Transactions. The pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable. The pro forma statement of income data for
the year ended December 31, 1997 give effect to the Transactions as if they had
occurred as of January 1, 1997. The pro forma balance sheet data give effect to
the Transactions as if they had occurred as of December 31, 1997. The pro forma
financial data do not purport to represent what the financial position or
results of operations of the Company would actually have been had the
Transactions in fact occurred on the assumed dates or to project the financial
position or results of operations of the Company for any future period or date.
These tables should be read in conjunction with "Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Combined Financial Statements of the Company included
elsewhere herein.
11
<PAGE> 19
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------- -------------------------------------------------------------
HISTORICAL PRO FORMA HISTORICAL
--------------- ----------- -----------------------------------------------
1998 1997 1997 1997 1996 1995 1994 1993
------ ------ ----------- ------ ------ ------ ------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN MILLIONS, EXCEPT RATIOS AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................... $238.8 $258.1 $539.1 $539.1 $597.4 $628.3 $603.1 $569.9
Cost of goods sold...................... 123.7 133.4 274.4 274.4 298.8 307.0 296.0 260.5
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............................ 115.1 124.7 264.7 264.7 298.6 321.3 307.1 309.4
Selling, general and administrative..... 17.8 19.9 41.6 38.6 40.2 42.1 37.5 38.1
Research and development................ 1.6 1.7 3.8 3.8 5.6 5.6 6.7 9.6
Amortization of intangible assets....... 18.8 13.4 37.2 27.6 26.7 19.0 16.7 15.0
------ ------ ------ ------ ------ ------ ------ ------
Operating income........................ 76.9 89.7 182.1 194.7 226.1 254.6 246.2 246.7
Interest expense(1)..................... 9.6 0.8 34.8 2.2 1.6 10.3 12.5 17.4
Other expenses.......................... 1.1 -- 5.6 5.6 7.5 4.4 (1.4) 3.4
Interest income......................... (1.3) (2.0) (0.1) (3.9) (3.5) (5.1) (4.2) (5.8)
Other income............................ -- (5.0) (7.9) (7.9) (1.2) (4.1) (7.9) (3.3)
------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes and minority
interest.............................. 67.5 82.3 149.7 198.7 221.7 249.1 247.2 235.0
Minority interest....................... -- 13.6 -- 24.3 29.6 32.3 32.4 31.1
------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes.............. 67.5 95.9 149.7 174.4 192.1 216.8 214.8 203.9
Income taxes............................ 25.3 28.2 48.9 56.7 63.8 71.7 72.4 40.0
------ ------ ------ ------ ------ ------ ------ ------
Net income.............................. $ 42.2 $ 54.1 $100.8 $117.7 $128.3 $145.1 $142.4 $163.9
====== ====== ====== ====== ====== ====== ====== ======
BALANCE SHEET DATA (AT END OF PERIOD):
Total working capital................... $198.4 $ -- $206.2 $179.9 $216.1 $175.8 $190.8 $154.5
Property, plant and equipment, net...... 105.4 -- 106.0 106.0 113.4 107.3 84.0 67.1
Total assets............................ 806.8 -- 819.2 832.9 841.0 798.4 732.6 643.3
Total debt(1)........................... 390.0 -- 430.0 -- -- -- -- --
Total liabilities....................... 519.5 -- 540.4 180.1 256.4 267.6 244.2 226.7
Total equity............................ 287.3 -- 278.8 652.8 584.6 530.8 488.4 416.6
STATEMENT OF CASH FLOW DATA:
EBITDA(2)............................... $104.8 $117.4 $240.8 $243.8 $262.7 $287.0 $285.1 $272.5
Depreciation............................ 10.2 9.3 19.2 19.2 16.2 13.7 12.9 10.8
Net cash provided by operating
activities............................ 114.8 104.2 -- 167.5 127.8 175.8 161.9 180.4
Capital expenditures.................... (8.1) (4.8) -- 17.8 20.6 31.5 22.6 11.7
Business combinations net of cash
acquired.............................. -- -- -- 130.8(3) 17.0 18.8 66.7 20.8
Other investing activities.............. (7.3) 6.8 -- (1.6) 14.9 31.1 (2.1) 13.3
------ ------ ------ ------ ------ ------ ------ ------
Net cash used in investing activities... (15.4) 2.0 -- 147.0 52.5 81.4 87.2 45.8
Net cash paid to Great Lakes............ (468.5) (109.1) -- 31.4 103.0 104.6 83.0 140.9
SELECTED RATIOS:
Pro forma EBITDA to interest expense.... -- -- 6.9x -- -- -- -- --
Pro forma total debt to EBITDA.......... -- -- 1.8x -- -- -- -- --
Ratio of earnings to fixed charges(4)... 7.4x 96.9x 5.1x 68.1x 102.1x 21.5x 17.9x 12.6x
</TABLE>
- ---------------
(1) Historical interest expense includes interest on intercompany indebtedness
between the Company and Great Lakes. Historical intercompany indebtedness
between the Company and Great Lakes is included in historical total equity.
(2) EBITDA represents income before income taxes and minority interest plus
depreciation, amortization of intangible assets and interest expense, less
interest income. EBITDA is not a substitute for operating income, net
earnings and cash flow from operating activities as determined in accordance
with generally accepted accounting principles as a measure of profitability
or liquidity. EBITDA is presented as additional information because
management believes it to be a useful indicator of the Company's ability to
service and/or incur indebtedness. EBITDA amounts may not be fully available
for management's discretionary use, due to certain requirements to conserve
funds for capital replacement, debt service and other commitments.
(3) Includes $116.8 million for the purchase of Chevron's 10.65% interest in
subsidiaries of Parent. See "The Transactions."
(4) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents net income before income taxes plus fixed charges,
less capitalized interest. "Fixed charges" consists of interest expense,
including amortization of debt discount and financing costs, capitalized
interest and the portion of rental expense which the Company believes is
representative of the interest component of rental expense.
12
<PAGE> 20
RISK FACTORS
Holders of Old Notes should consider carefully the following factors as
well as the other information and data included in this Offering Circular prior
to tendering Old Notes in exchange for Exchange Notes. The risk factors set
forth below are generally applicable to the Old Notes as well as the Exchange
Notes.
CONTRACTING DEMAND FOR TEL PRODUCTS
In 1997, approximately 82% of the Company's revenues were derived from the
sale of TEL antiknock compounds, a specialized commodity utilized primarily as
an octane enhancer for automobile gasoline. The Company's Lead Alkyls business
operates in a gasoline market characterized by contracting demand for TEL
products. The market for TEL products is contracting primarily as a result of
health and environmental concerns and political pressures to increase the usage
of unleaded gasoline and reduce the lead content of leaded fuels. Global demand
for TEL has decreased and is expected to continue to decrease as a result of
various regulatory initiatives around the world to phase out the use of gasoline
containing TEL ("leaded gasoline"). From 1990 to 1997, total annual sales volume
in the global TEL market decreased from approximately 230,000 metric tons to
approximately 100,000 metric tons as many industrialized countries either banned
TEL or limited allowable TEL levels in gasoline in response to concerns over
health-related issues surrounding TEL. Demand for TEL has also been depressed by
the incompatibility of leaded gasoline and catalytic converters, which have been
increasingly used to minimize automobile exhaust emissions. The Company believes
that the rate of TEL volume decline over the next four to five years will be
between 10% and 15% per year; however, there can be no assurance that such rate
of decline will not be more than the Company's current estimates. The United
States began phasing out the use of TEL in the early 1970s and the use of leaded
gasoline in the United States is now restricted to piston-engined aircraft and
certain other vehicles. Similarly, other industrialized countries, including,
among others, Germany, Switzerland, South Korea, Sweden and New Zealand, have
banned the use of leaded gasoline. In addition, some other countries have
limited the level of TEL in gasoline and are considering initiatives to phase
out the use of leaded gasoline completely.
As a result of contracting world demand for TEL, the Company's primary
product, the Company intends to develop new sources of revenue and growth
through the internal development of new products or through acquisitions, joint
ventures or other collaborative arrangements. The Company does not believe that
the revenues from sales of new products will fully offset the decline in TEL
sales and earnings in the foreseeable future. There can be no assurance that the
Company will be successful in developing and marketing new products that achieve
market acceptance or that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
such new products. Further, there can be no assurance that the Company's
competitors will not succeed in developing or marketing products that are more
effective or commercially attractive than any that are being developed by the
Company or that such competitors will not succeed in obtaining any required
regulatory approvals for introducing or commercializing any such products before
the Company is able to do so. Additionally, there can be no assurance that the
Company will be able to identify and successfully consummate any acquisitions,
joint ventures or collaborative arrangements or that revenues, if any, from such
acquisitions, joint ventures or other collaborative arrangements would offset
the decline in TEL sales and earnings in the foreseeable future.
COMPETITION
The Company's Lead Alkyls business operates in a contracting market. See
"--Contracting Demand for TEL Products." The Company competes in the sale of TEL
primarily with Alcor Chemie Vertriebs AG ("Alcor"), Ethyl Corporation ("Ethyl")
and Syntez. See "Business--Lead Alkyls Business--Competition." In recent years,
competition has intensified as the demand for TEL has declined, price increases
have slowed and existing competitors have aggressively engaged in price
13
<PAGE> 21
competition. Although the Company currently has a worldwide TEL market share of
approximately 60% with respect to retail TEL sales, there can be no assurance
that it will be able to maintain such market share or its current level of gross
margins and profitability as the market for TEL products continues to contract
and/or its competitors continue to compete aggressively based on price. In
addition to the above retail sales, the Company supplies Ethyl with substantial
quantities of TEL under two long-term wholesale agreements, which also limit the
Company's ability to improve gross margins. See "Business--Lead Alkyls
Business--Ethyl Agreements."
The Company's Petroleum Specialties and Performance Chemicals businesses
operate in highly competitive markets, with many competitors which are larger
than the Company in terms of resources and market share. The Company's ability
to compete effectively in those markets in the future will depend upon, among
other things, its ability to continue to finance research and development of new
products and technologies and its ability to improve existing products and
technologies. See "Business."
SUBSTANTIAL LEVERAGE AND RESTRICTIVE COVENANTS
As of June 30, 1998, the Company has $390 million of long-term debt and
total common stockholders equity of $287.3 million. See "Capitalization." The
degree to which the Company is leveraged could have important consequences to
the holders of the Notes, including the following: (i) the Company will have
significant cash interest expense and principal repayment obligations with
respect to outstanding indebtedness, including the Credit Facility and the
Notes, with the result that a substantial portion of the Company's cash flow
from operations will be required to meet these obligations, thereby reducing
funds available to the Company for other purposes, (ii) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions or other purposes could be adversely affected and (iii) the
Company's substantial degree of leverage could hinder its flexibility in
planning for or reacting to changes in market conditions. In addition, pursuant
to the terms of the Credit Facility and the Indenture, the ability of the
Company to sell assets will be restricted. See "Description of Credit Facility"
and "Description of the Exchange Notes."
The U.K. has enacted legislation (contained within the 1996 Finance Act)
altering the rules concerning the deductibility of interest for corporate tax
purposes. Under this new legislation the U.K. tax authorities may disallow the
deductibility of interest for tax purposes with respect to any loan that is
found not to have been entered into for a business purpose. The Company believes
that the Financings are being entered into for a valid business purpose.
Moreover, the Company has received advice from its tax advisers that the U.K.
tax authorities are unlikely to seek to apply this legislation to the
Financings. However, limited experience and precedent are available to determine
how such legislation might impact on the deductibility of interest incurred in
connection with the Financings. If the legislation was found to limit the
deductibility of interest incurred in connection with the Financings, it could
have an adverse effect on the Company's cash flow and its ability to pay its
debts.
The Credit Facility requires the Company to, among other things, achieve
and maintain certain financial ratios. In addition, the Credit Facility contains
financial and operating covenants, including restrictions on the ability of the
Company to incur indebtedness, merge, consolidate or transfer all or
substantially all of its assets, to make certain sales of assets, to create,
incur or permit the existence of certain liens and to pay dividends. The failure
to maintain the required ratios or to comply with the covenants would result in
a default under the Credit Facility and permit the lenders under the Credit
Facility to accelerate the maturity of the indebtedness governed by such
instrument. See "Description of Credit Facility." The Indenture also contains
restrictive covenants. See "Description of the Exchange Notes."
14
<PAGE> 22
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION; PAYMENT BLOCKAGE RIGHTS
The Issuer and Parent are holding companies that conduct all of their
business through their direct and indirect subsidiaries. Therefore, the Issuer's
and Parent's cash flow and ability to service their debts are dependent upon the
earnings of their respective subsidiaries and such subsidiaries' ability to
distribute funds to the Issuer and Parent, respectively, in the form of payment
of debt service, declaration of dividends or otherwise, or the ability of the
Issuer or Parent to otherwise obtain cash from their equity interests in these
subsidiaries. Their subsidiaries (other than the Issuer itself) have no
obligation, contingent or otherwise, to pay amounts due pursuant to the Exchange
Notes or the Note Guarantee or to make funds available therefor, whether in the
form of loans, dividends or otherwise. The ability of these subsidiaries to make
payments to the Issuer and Parent will be subject to, among other things, the
availability of funds and the terms of such subsidiaries' indebtedness,
including the terms of the Credit Facility. The Credit Facility prohibits the
payment of dividends, the making of any distribution or other transfer of monies
to the Issuer or Parent other than, among other things, payments made in
connection with the Distribution and the payment of amounts required by the
Issuer to meet payments of interest and other amounts (but not principal) due
under the Exchange Notes so long as no payment blockage is then in effect. See
"Description of the Credit Facility." Applicable corporate laws also limit the
amount of dividends payable by these subsidiaries. Accordingly, there can be no
assurance that the Issuer or Parent will receive timely payments from their
subsidiaries, if at all, or other cash benefits from their equity interests in
their subsidiaries, in order to make payments on their indebtedness, including
the Exchange Notes and the Note Guarantee, or to otherwise satisfy their cash
flow needs.
The Exchange Notes and the Note Guarantee will be effectively subordinated
to the claims of creditors and holders of preferred stock of the subsidiaries of
the Issuer and Parent, respectively. Any right of the Issuer or Parent to
participate in the assets of any of their subsidiaries upon liquidation or
administration will be subject to the prior claims of the creditors of such
subsidiaries, including the lenders under the Credit Facility and trade
creditors. In addition, the ability of the Issuer's and Parent's creditors,
including the holders of the Notes, to participate in distributions to the
Issuer and Parent of assets of their subsidiaries will be limited to the extent
that the outstanding shares of any of such subsidiaries are either pledged to
secure creditors or are not owned by the Issuer or Parent. As of December 31,
1997, after giving pro forma effect to the Transactions, Parent's subsidiaries
(other than the Issuer) would have had approximately $390.4 million of
liabilities outstanding (including $280.0 million of indebtedness). The
Indenture limits, but does not prohibit, the incurrence of additional
indebtedness by these subsidiaries.
During the continuance of any default with respect to the Credit Facility
pursuant to which the maturity thereof may be accelerated immediately without
further notice, the Indenture will not permit the Issuer to pay the principal
of, or premium, if any, or interest on, the Exchange Notes (except for payments
made from the trusts described under "Description of the Exchange
Notes--Defeasance") or to make any deposit with respect to legal defeasance or
covenant defeasance and to purchase, redeem or (except for Notes credited
against the Issuer's mandatory redemption requirement as described under
"Description of the Exchange Notes--Mandatory Redemption") otherwise retire the
Exchange Notes pursuant to a Change of Control, an Asset Sale or otherwise
(collectively, "pay the Notes") for a period (a "Payment Blockage Period")
commencing upon the receipt by the Issuer and the trustee under the Indenture
(the "Trustee") of written notice (a "Payment Blockage Notice") of such default
from the Representative under the Credit Facility specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (unless earlier
terminated (i) by written notice to the Trustee and the Issuer from the
Representative that submitted such Payment Blockage Notice or (ii) because such
default is no longer continuing or (iii) because the Bank Indebtedness (as
defined) has been paid in full in cash and any outstanding letters of credit,
bonds and guarantees under the Credit Facility and any Hedging Obligations (as
defined) incurred in connection with the Credit Facility have been fully cash
collateralized). Notwithstanding the provisions described in the immediately
preceding sentence provided that the
15
<PAGE> 23
Notes have not become immediately due and repayable, the Issuer may cure any
Event of Default in relation to the Notes and resume payments on the Notes after
the end of such Payment Blockage Period. Not more than one Payment Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to the Bank Indebtedness during such period. See
"Description of the Exchange Notes--Payment Blockage."
ABSENCE OF GREAT LAKES FINANCIAL SUPPORT
As a result of the Distribution, the Company is now responsible for
obtaining its own financing and is experiencing a higher cost of capital than
was historically available to the Company as a subsidiary of Great Lakes. In
addition, the Company is no longer able to draw upon the resources, financial or
otherwise, generally available to it prior to the Distribution as a subsidiary
of Great Lakes. See "Description of Credit Facility."
ENVIRONMENTAL MATTERS AND PLANT CLOSURES
The Company is subject to laws, regulations and legal requirements relating
to the use, storage, handling, generation, transportation, emission, discharge,
disposal and remediation of, and exposure to, hazardous and non-hazardous
substances and wastes in all of the countries in which it does business. The
nature of the Company's existing and historical operations exposes it to the
risk of liabilities or claims with respect to environmental matters, including
on- and off-site releases and emissions of hazardous and non-hazardous
substances and wastes. Such liabilities or claims include costs associated with
environmental investigations and remediation activities, as well as plant
closure and restoration projects, at closed manufacturing sites in France, Italy
and Germany, and, ultimately, at the Company's existing manufacturing facility
in Ellesmere Port, U.K. (the "Ellesmere Port Facility"). Such liabilities or
claims also include capital and other costs associated with environmental
compliance matters at the Ellesmere Port Facility.
There can be no assurance that material costs will not be incurred in
connection with such liabilities or claims. Changes in existing laws or
regulations, or the discovery of additional environmental liabilities associated
with the Company's existing or historical operations, could require the Company
to incur material costs or could otherwise have a material adverse effect on the
Company's business, results of operations, or financial condition. See
"--Contracting Demand for TEL Products," "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Environmental Matters and
Plant Closures" and "Business--Health, Safety and Environmental Matters."
INTERNATIONAL OPERATIONS
Approximately 94% of the Company's sales in 1997 were derived from
operations outside the United States. A substantial portion of the Company's
international sales is to developing nations in which the TEL market is expected
to decline at a slower rate than in developed countries. See "Business--Lead
Alkyls Business--Industry Overview." Sales outside of the United States,
particularly sales to these developing nations, may be subject to various risks
which are not present in the United States market, including political and
economic instability, governmental embargoes and foreign exchange risks. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Derivative and Other Financial Instruments" for a more detailed
discussion of the Company's exposure to foreign currency fluctuations.
OPERATING HISTORY AND FUTURE PROSPECTS; TRANSITION TO AN INDEPENDENT PUBLIC
COMPANY
The Company does not have any operating history as an independent company.
Accordingly, the financial statements included herein may not necessarily
reflect the results of operations, financial condition and cash flows that would
have been achieved had the Octel Businesses been operated independently during
the periods presented. Such information has also been adjusted for the parts of
16
<PAGE> 24
Great Lakes' Petroleum Additives Business Unit that will remain under Great
Lakes ownership and management following the Distribution. The Company has
historically provided substantially all of its own corporate services. However,
as a result of the Distribution, the Company is now responsible for the
additional costs associated with being an independent public company, including
costs related to corporate governance, listed and registered securities and
investor relations issues.
The financial statements included herein do not reflect many changes that
may occur in the operations of the Company as a result of the Company's future
business strategies. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview" and "Business." The Company
believes that these changes, when implemented, will make a positive contribution
to the results of operations of the Company. However, there can be no assurance
as to the timing or amount of any positive contribution which may be realized or
that these changes might not result in material adverse consequences.
The Company's future results of operations will depend upon a number of
factors and events, including the following: (i) the levels of demand for the
Company's existing products, the Company's ability to develop new products and
to adapt existing products to new uses to offset declining TEL sales, the
Company's ability to maintain acceptable margins on product sales and the
Company's ability to control its costs and repay its indebtedness (see
"--Contracting Market for TEL Products," "--Competition" and "--Substantial
Leverage and Restrictive Covenants"); (ii) the substantial competition
encountered by the Company in all of its lines of business (see
"--Competition"); (iii) the effect of future regulatory changes; (iv) the
Company's transition to an independent company and the costs associated
therewith; and (v) possible changes in economic and political conditions
affecting foreign sales (see "--International Operations"). The Company does not
believe that sales attributable to newly developed products and other
operational changes will be sufficient to offset the decline in TEL sales and
earnings for the foreseeable future.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success will depend to a significant extent
upon the abilities and continued efforts of its senior management to execute its
business strategy. The loss of the services of any of such individuals could
have a material adverse effect upon the Company's business, results of
operations and financial condition. See "Management--Executive Officers."
FTC INVESTIGATION
In December 1997, the Company, Great Lakes and the United States Federal
Trade Commission ("FTC") staff reached an agreement with respect to a consent
decree governing sales of TEL by the Company to Ethyl for resale in the United
States. The agreement was provisionally approved by the FTC on March 30, 1998,
and received final approval on June 24, 1998. The Company has taken steps to
comply with its provisions by negotiating and putting into effect a new long
term supply contract with Ethyl governing the supply of TEL to Ethyl for resale
in the U.S. market. It should be noted that the entire U.S. TEL market is
relatively small (approximately 1,500 metric tons per annum) and only a small
portion of the Company's sales to Ethyl are directed at the U.S. market. Neither
the terms of the consent decree nor the execution of the new contract with Ethyl
is expected to have a material adverse effect on the Company's business, results
of operation or financial condition. See "Business--Legal Proceedings."
FRAUDULENT TRANSFER STATUTES; INSOLVENCY LAW
Fraudulent conveyance, financial assistance and similar laws have been
enacted for the protection of creditors in a number of jurisdictions. Under
applicable provisions of federal bankruptcy law or comparable provisions of New
York fraudulent transfer law, if, among other things, the Issuer or Parent, at
the time it incurred the indebtedness evidenced by the Notes and the Note
Guarantee, respectively, (i) (a) was or is insolvent or rendered insolvent by
reason of such
17
<PAGE> 25
incurrence or (b) was or is engaged in a business or transactions for which the
assets remaining with the Issuer or Parent, as applicable, constituted
unreasonably small capital or (c) intended or intends to incur, or believed or
believes that it would incur debts beyond its ability to pay such debts as they
mature, and (ii) received or receives less than reasonably equivalent value or
fair consideration for the incurrence of such indebtedness, then the Notes and
the Note Guarantee could be voided, or claims in respect of the Notes could be
subordinated to all other debts of the Issuer and Parent, as the case may be. In
addition, the payment of interest and principal with respect to the Notes could
be voided and required to be returned to the person making such payment, or to a
fund for the benefit of the creditors of the Issuer or Parent, as the case may
be.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, under U.S. law, a company would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a fair valuation or if
the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Issuer and Parent believe that, after giving effect to
the indebtedness incurred in connection with the Transactions, neither the
Issuer nor Parent will be insolvent, will have unreasonably small capital for
the business in which it is engaged or will incur debts beyond its ability to
pay such debts as they mature. There can be no assurance, however, as to what
standard a court would apply in making such determinations or that a court would
agree with the Issuer's or Parent's conclusions in this regard.
Although the Indenture is governed by New York law, such law (or the U.S.
federal bankruptcy law) may not apply to fraudulent conveyance or other claims
by creditors.
The Issuer is organized under the laws of England and Wales and a
substantial portion of the Company's operations are located in the U.K. Further,
the Credit Facility is governed by English law. The procedural and substantive
provisions of United Kingdom insolvency and administrative laws generally are
more favorable to secured creditors than comparable provisions of United States
law and afford debtors and unsecured creditors only limited protection from the
rights of secured creditors. As a result, the ability of the holders of the
Notes to protect their interests in the Issuer and Parent may be more limited
than under U.S. laws. Under U.K. insolvency law, the liabilities of the Issuer
and Parent in respect of the Notes and the Note Guarantee, respectively, will be
paid in the event of a liquidation or similar proceeding after payment of all
secured indebtedness of the Issuer and Parent (including the Issuer's and
Parent's secured obligations as guarantors of indebtedness under the Credit
Facility) and certain other creditors which are entitled to priority under U.K.
law which may include (i) amounts owed to United Kingdom Inland Revenue, (ii)
amounts owed to United Kingdom Customs and Excise, (iii) amounts owed in respect
of U.K. social security contributions, (iv) amounts owed in respect of
occupational pension schemes and (v) certain amounts owed to employees. Under
U.K. insolvency law, the liquidator or administrator of a company may apply to
the court to rescind a transaction entered into by such company at less than
fair value, if such company was insolvent at the time of, or immediately after,
the transaction and enters into a formal insolvency process within two years of
the completion of the transaction. A transaction might be so challenged if it
involved a gift by the company or the company received consideration of
significantly less value than the benefit given by such company. A court
generally will not intervene, however, if the company entered the transaction in
good faith for the purposes of carrying on its business and there were
reasonable grounds for believing the transaction would benefit the company. The
Issuer and Parent believe that the Exchange Notes and the Note Guarantee will
not be issued on terms which would amount to a transaction at less than fair
value and further that such issues are undertaken in good faith for the purposes
of carrying on the Issuer's and Parent's business. There can be no assurance,
however, that the issuance of the Exchange Notes and the Note Guarantee will not
be challenged by a liquidator or administrator of the Issuer or Parent,
respectively.
18
<PAGE> 26
LIMITATIONS ON CHANGE OF CONTROL
Upon a Change of Control, the Issuer will be required to offer to
repurchase all outstanding Notes at 101% of the principal amount thereof plus
accrued and unpaid interest and additional interest, if any, to the date of
repurchase. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required repurchases
of Exchange Notes tendered or that restrictions in the Credit Facility will
allow the Issuer or Parent to make such required repurchases. Notwithstanding
these provisions, the Company could enter into certain transactions, including
certain recapitalizations, that would not constitute a Change of Control but
would increase the amount of debt outstanding at such time. See "Description of
the Exchange Notes--Repurchase at the Option of Holders."
ENFORCEABILITY OF JUDGMENTS
Since substantially all of the operating assets of the Company (including
the Issuer) are located outside the United States, any judgment obtained in the
United States against the Company, including judgments with respect to the
payment of principal, premium, if any, interest, Additional Amounts, if any,
Additional Interest, if any, redemption price and any purchase price with
respect to the Exchange Notes, may not be collectible within the United States.
See "Description of the Exchange Notes--Enforceability of Judgments."
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Issuer believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange Offer,
there has not been any public market for the Old Notes. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for Exchange Notes by
holders who are entitled to participate in this Exchange Offer. After
consummation of the Exchange Offer, the market for Old Notes not tendered or
exchanged (or tendered but not accepted for exchange) in the Exchange Offer will
be even more limited than their existing market. The holders of Old Notes (other
than any such holder that is an "affiliate" of the Issuer within the meaning of
Rule 405 under the Securities Act) who are not eligible to participate in the
Exchange Offer are entitled to certain registration rights, and the Issuer is
required to file a Shelf Registration Statement with respect to such Old Notes.
The Exchange Notes will constitute a new issue of securities with no established
trading market. The Issuer does not intend to list the Exchange Notes on any
national securities exchange or seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation System. The
Initial Purchasers have advised the Issuer that they currently intend to make a
market in the Exchange Notes, but they are not obligated to do so and may
discontinue such market making at any time. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer and the pendency of
the Shelf Registration Statement. Accordingly, no assurance can be given that an
active public or other market will develop for the Exchange Notes or as to the
liquidity of the trading market for the Exchange Notes. If a trading market does
not develop or is not maintained, holders of the Exchange Notes may experience
difficulty in reselling the Exchange Notes or may be unable to sell them at all.
If a market for the Exchange Notes develops, any such market may be discontinued
at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Issuer and the Guarantor, the Exchange Notes may
trade at a discount from their principal amount.
19
<PAGE> 27
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Issuer of
such Old Notes, a properly completed and duly executed Letter of Transmittal
(or, in the case of a book-entry transfer, an Agent's Message in lieu thereof)
and all other required documents. Therefore, holders of the Old Notes desiring
to tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Issuer is under no duty to give notification
of defects or irregularities with respect to the tenders of Old Notes for
exchange. Old Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof, and, upon consummation of the
Exchange Offer certain registration rights under the Registration Rights
Agreement will terminate. In addition, any holder of Old Notes who tenders in
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities, and if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
20
<PAGE> 28
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Issuer's
obligations under the Registration Rights Agreement. The Issuer will not receive
any cash proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes contemplated in this Prospectus,
the Issuer will receive Old Notes in like principal amount, the form and terms
of which are the same as the forms and terms of the Exchange Notes (which
replace the Old Notes), except as otherwise described herein. The Old Notes
surrendered in exchange for Exchange Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of Exchange Notes will not result in
any increase or decrease in the indebtedness of the Issuer or the Company. As
such, no effect has been given to the Exchange Offer in the pro forma combined
financial data or capitalization tables.
The net proceeds to the Issuer from the sale of the Old Notes in the
Initial Offering (after deducting discounts and estimated fees and expenses)
together with the Credit Facility and available cash were utilized to make a
$467.7 million payment to Great Lakes, consisting of $116.8 million for the
repayment of a loan used to repurchase the 10.65% interest in the subsidiaries
of the Company held by Chevron Chemical Company and a $350.9 million special
dividend. See "The Transactions" and "The Financings."
21
<PAGE> 29
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1997 on a historical basis and on a pro forma basis after giving
effect to the Transactions. See "Pro Forma Financial Data."
<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1998
---------------------------------------- -------------
PRO FORMA PRO FORMA HISTORICAL
HISTORICAL ADJUSTMENTS (UNAUDITED) (UNAUDITED)
---------- ----------- ----------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Total debt:
Credit Facility(1)................... $ -- $ 280.0(2) $280.0 $240.0(4)
Senior Notes......................... -- 150.0(2) 150.0 150.0
------ ------- ------ ------
Total debt........................... -- 430.0(2) 430.0 390.0
Total equity......................... 652.8 (374.0)(3) 278.8 287.3
------ ------- ------ ------
Total capitalization................. $652.8 $ 56.0 $708.8 $677.3
====== ======= ====== ======
</TABLE>
- ---------------
(1) As of the Distribution Date $20.0 million will be available to the Company
under the Revolving Facility. In addition, between January 1, 1998, and the
Distribution Date, the Company generated approximately $50.0 million of
cash, $24.0 million of which was utilized for partial payment of the Special
Dividend, with the balance available to the Company.
(2) Reflects an estimated $430.0 million of debt the Company incurred on or
before the date of the Distribution. Approximately $116.8 million of the
$430.0 million to be borrowed was used for the repayment to Great Lakes of a
loan used to acquire Chevron's 10.65% interest in subsidiaries of the
Company. Approximately $16.0 million was used to pay $12.0 million in
transaction fees associated with the Distribution and the Financings and
$4.0 million of associated costs for certain interest rate swaps related to
the Financings. The balance of the borrowing, together with $29.7 million of
available cash as of December 31, 1997, was used to fund $326.9 million of
the Special Dividend to Great Lakes. The remaining $24.0 million of the
$350.9 million Special Dividend was funded out of cash generated by the
Company between January 1, 1998 and the Distribution Date.
(3) Reflects (i) payments to Great Lakes including $116.8 million for the
repayment of a loan used to acquire Chevron's 10.65% interest in
subsidiaries of Parent and $326.9 million to partially fund the Special
Dividend and (ii) $69.7 million of income tax liabilities transferred by the
Company to Great Lakes.
(4) Reflects a $40 million repayment on June 30, 1998 of the secured term loan.
See "The Financings".
22
<PAGE> 30
PRO FORMA FINANCIAL DATA
The Company was formed by Great Lakes in connection with the Distribution
and has no operating history as a separate, independent company. The historical
financial statements of the Company reflect periods during which the Company did
not operate as a separate, independent company, and certain assumptions were
made in preparing such financial statements. Therefore, such historical
financial statements may not reflect the results of operations or financial
position that would have been achieved had the Company been a separate,
independent company.
The following unaudited pro forma combined financial statements (the "Pro
Forma Financial Statements") are based on the historical financial statements of
the Company for and as of the year ended December 31, 1997 included elsewhere in
this Prospectus adjusted to give effect to the Transactions. The Pro Forma
Statement of Income for the year ended December 31, 1997 gives effect to the
Transactions as if they had occurred as of January 1, 1997 and the Pro Forma
Balance Sheet gives effect to the Transactions as if they had occurred as of
December 31, 1997. The Transactions and the related adjustments are described in
the accompanying notes. The Pro Forma Financial Statements are based upon
available information and certain assumptions that management believes are
reasonable. The Pro Forma Financial Statements do not purport to represent what
the Company's results of operations or financial condition would actually have
been had the Transactions in fact occurred on such dates or to project the
Company's results of operations or financial condition for any future period or
date. The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Company included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Pro Forma Financial Statements assume the completion of the
transactions to be entered into in connection with the Distribution including
the completion of all the asset transfers and contract assignments contemplated
thereby. Assumptions regarding the number of shares of common stock, par value
$0.01 per share, of Parent ("Octel Common Stock") may not reflect the actual
numbers at the Distribution Date.
23
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholder
Octel Corp.
We have examined the pro forma adjustments reflecting the transactions
described in the notes and the introduction to the Pro Forma Financial Data and
the applications of those adjustments to the historical amounts in the
accompanying pro forma combined balance sheet of Octel Corp. as of December 31,
1997, and the pro forma combined statement of income for the year then ended.
The historical combined financial statements are derived from the historical
financial statements of Octel Corp., which were audited by us, appearing
elsewhere herein. Such pro forma adjustments are based on management's
assumptions described in the notes and the introduction to the Pro Forma
Financial Data. Our examination was made in accordance with standards
established by the American Institute of Certified Public Accountants and,
accordingly, included such procedures as we considered necessary in the
circumstances.
The objective of this pro forma financial data is to show what the
significant effects on the historical financial information might have been had
the transactions occurred at an earlier date. However, the pro forma combined
financial statements are not necessarily indicative of the results of operations
or related effects on financial position that would have been attained had the
above-mentioned transactions actually occurred earlier.
In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the above-mentioned
transactions described in the notes and the introduction to the Pro Forma
Financial Data, the related pro forma adjustments give appropriate effect to
those assumptions, and the pro forma column reflects the proper application of
those adjustments to the historical financial statement amounts in the pro forma
combined balance sheet as of December 31, 1997, and the pro forma combined
statement of income for the year then ended.
ERNST & YOUNG LLP
Indianapolis, Indiana
April 30, 1998
24
<PAGE> 32
PRO FORMA STATEMENT OF INCOME
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS (UNAUDITED)
---------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................ $539.1 $ -- $539.1
Cost of goods sold................................... 274.4 -- 274.4
------ ------ ------
Gross profit....................................... 264.7 -- 264.7
Operating expenses:
Selling, general and administrative................ 38.6 3.0(1) 41.6
Research and development........................... 3.8 -- 3.8
------ ------ ------
42.4 3.0 45.4
Amortization of intangible assets.................... 27.6 8.1(2) 37.2
1.5(3)
------ ------ ------
Operating income..................................... 194.7 (12.6) 182.1
Interest expense..................................... 2.2 32.6(4) 34.8
Other expenses....................................... 5.6 -- 5.6
Interest income...................................... (3.9) 3.8(5) (0.1)
Other income......................................... (7.9) -- (7.9)
------ ------ ------
Income before income taxes and minority interest... 198.7 (49.0) 149.7
Minority interest.................................... 24.3 (24.3)(2) --
------ ------ ------
Income before income taxes......................... 174.4 (24.7) 149.7
Income taxes......................................... 56.7 (7.8)(6) 48.9
------ ------ ------
Net income......................................... $117.7 $(16.9) $100.8
====== ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
25
<PAGE> 33
NOTES TO PRO FORMA STATEMENTS OF INCOME
(1) Represents an estimate of the additional annual costs to be
incurred by the Company with respect to U.S. corporate governance and
securities-related issues, including issues relating to publicly-traded
stock, Board of Directors' responsibilities, and other related costs.
(2) Represents the following effects of the Company's purchase of
Chevron's interest in subsidiaries of Parent: (i) amortization of $81.1
million over 10 years and (ii) elimination of Chevron's minority interest
in the earnings of such subsidiaries.
(3) Represents the additional amortization of the estimated $12.0
million transaction fees relating to the Distribution and the Financings,
amortized over eight years.
(4) Represents the estimated interest expense the Company would have
experienced during the periods with respect to the $280.0 million
outstanding under the Credit Facility and the $150.0 million of Notes. The
interest rates assumed were 8.6% and 10.0% with respect to the Credit
Facility and the Notes, respectively, for both periods. Interest previously
paid to Great Lakes on borrowings is replaced by the Credit Facility and
the Notes. In determining the pro forma interest expense, the Company has
assumed a $112.0 million repayment of the Credit Facility from available
cash flows.
(5) Represents the estimated reduction in interest income due to
reduced cash balances.
(6) Represents the adjustments to the income tax provision to reflect
the additional expenses and the elimination of the minority interest.
26
<PAGE> 34
PRO FORMA BALANCE SHEET
(AS OF DECEMBER 31, 1997)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS (UNAUDITED)
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Current assets
Cash and cash items................................. $ 29.7 $ 430.0(1) $ --
(12.0)(2)
(443.7)(3)
(4.0)(4)
Accounts receivable................................. 169.8 -- 169.8
Inventories......................................... 78.8 -- 78.8
Prepaid expenses.................................... 4.4 -- 4.4
------ ------- ------
Total current assets................................ 282.7 (29.7) 253.0
Property, plant and equipment......................... 106.0 106.0
Goodwill and other intangible assets.................. 379.3 12.0(2) 395.3
4.0(4)
Other assets.......................................... 64.9 -- 64.9
------ ------- ------
Total assets.......................................... $832.9 $ (13.7) $819.2
====== ======= ======
LIABILITIES AND EQUITY:
Current liabilities
Accounts payable.................................... $ 40.0 $ -- $ 40.0
Accrued expenses.................................... 9.0 -- 9.0
Accrued income taxes................................ 53.8 (56.0)(5) (2.2)
------ ------- ------
Total current liabilities........................... 102.8 (56.0) 46.8
Other liabilities..................................... 57.2 -- 57.2
Deferred income taxes................................. 20.1 (13.7)(5) 6.4
Long-term debt
Credit Facility..................................... -- 280.0(1) 280.0
Notes............................................... -- 150.0(1) 150.0
------ ------- ------
Total debt....................................... -- 430.0(1) 430.0
Equity
Great Lakes investment.............................. 652.8 (443.7)(3) --
69.7(5)
(278.8)(6)
Common stock........................................ -- 0.1(6) 0.1
Additional paid-in capital.......................... -- 278.7(6) 278.7
------ ------- ------
Total equity........................................ 652.8 (374.0) 278.8
------ ------- ------
Total liabilities and equity........................ $832.9 $ (13.7) $819.2
====== ======= ======
</TABLE>
The accompanying notes are an integral part of this statement.
27
<PAGE> 35
NOTES TO PRO FORMA BALANCE SHEET
(1) Approximately $116.8 million of the $430.0 million to be borrowed
was used for the repayment to Great Lakes of a loan used to acquire
Chevron's 10.65% interest in subsidiaries of Parent. An additional $16.0
million was used to pay approximately $12.0 million in transaction fees
associated with the Distribution and the Financings and $4.0 million of
associated costs for certain interest rate swaps related to the Financings.
The balance of the borrowing, together with $29.7 million of available cash
at December 31, 1997, was used to fund $326.9 million of the Special
Dividend to Great Lakes. The remaining $24.0 million of the $350.9 million
Special Dividend was funded out of cash generated by the Company between
January 1, 1998 and the Distribution Date.
(2) Estimated transaction fees associated with the Financings.
Transaction fees will be amortized over the term of the borrowings, eight
years.
(3) Payment to Great Lakes consisting of $116.8 million for the
repayment of a loan used to acquire Chevron's 10.65% interest in
subsidiaries of Parent and $326.9 million to partially fund the Special
Dividend.
(4) Reflects the cost of interest rate swaps arranged to fix a portion
of the interest rate on the borrowing described in (1) above.
(5) Transfer of the income tax liabilities to the Great Lakes
investment.
(6) Reflects the issuance of an estimated 14.7 million shares of Octel
Common Stock. This is based on approximately 58.9 million shares of common
stock of Great Lakes, par value $1.00 per share ("Great Lakes Common
Stock"), outstanding at December 31, 1997 and an assumed distribution of
one share of Octel Common Stock for every four shares of Great Lakes Common
Stock outstanding. Additional paid-in capital represents the excess of the
historical carrying values of the Company's net assets at the Distribution
Date over the amount reflected as Octel Common Stock.
28
<PAGE> 36
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following selected historical financial data of the Company should be
read in conjunction with the historical financial statements and notes thereto
included elsewhere in this Prospectus. The selected historical financial data
relates to the Octel Businesses as they were operated as part of the Petroleum
Additives Business Unit of Great Lakes and as described in Note 1 to the
Combined Financial Statements. The following selected historical financial data
are derived from the historical financial statements of the Company. The annual
historical financial information has been adjusted for those parts of the
Petroleum Additives Business Unit which are to remain under Great Lakes
ownership and management after the Distribution. The selected historical
financial data that relate to the four year period ended December 31, 1997 have
been derived from the historical financial statements audited by Ernst & Young
L.L.P., independent auditors. The selected historical financial data for the
year 1993 has been derived from unaudited historical financial statements. In
the opinion of management, the unaudited historical financial statements reflect
all normal recurring adjustments necessary to present fairly the financial
position of the Company for 1993.
The historical financial data of the Company may not reflect the results of
operations or financial position that would have been achieved had the Company
been a separate, independent Company for the years presented.
29
<PAGE> 37
SELECTED HISTORICAL COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -----------
(UNAUDITED)
(IN MILLIONS, EXCEPT RATIOS AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................................... $539.1 $597.4 $628.3 $603.1 $569.9
Cost of goods sold.............................. 274.4 298.8 307.0 296.0 260.5
------ ------ ------ ------ ------
Gross profit.................................... 264.7 298.6 321.3 307.1 309.4
Selling, general and administrative............. 38.6 40.2 42.1 37.5 38.1
Research and development........................ 3.8 5.6 5.6 6.7 9.6
Amortization of intangible assets............... 27.6 26.7 19.0 16.7 15.0
------ ------ ------ ------ ------
Operating income................................ 194.7 226.1 254.6 246.2 246.7
Interest expense(1)............................. 2.2 1.6 10.3 12.5 17.4
Other expenses.................................. 5.6 7.5 4.4 (1.4) 3.4
Interest income................................. (3.9) (3.5) (5.1) (4.2) (5.8)
Other income.................................... (7.9) (1.2) (4.1) (7.9) (3.3)
------ ------ ------ ------ ------
Income before income taxes and minority
interest...................................... 198.7 221.7 249.1 247.2 235.0
Minority interest............................... 24.3 29.6 32.3 32.4 31.1
------ ------ ------ ------ ------
Income before income taxes...................... 174.4 192.1 216.8 214.8 203.9
Income taxes.................................... 56.7 63.8 71.7 72.4 40.0
------ ------ ------ ------ ------
Net income...................................... $117.7 $128.3 $145.1 $142.4 $163.9
====== ====== ====== ====== ======
BALANCE SHEET DATA (AT END OF PERIOD):
Total working capital........................... $179.9 $216.1 $175.8 $190.8 $154.5
Property, plant and equipment, net.............. 106.0 113.4 107.3 84.0 67.1
Total assets.................................... 832.9 841.0 798.4 732.6 643.3
Total debt(1)................................... -- -- -- -- --
Total liabilities............................... 180.1 256.4 267.6 244.2 226.7
Total equity.................................... 652.8 584.6 530.8 488.4 416.6
STATEMENT OF CASH FLOW DATA:
EBITDA(2)....................................... $243.8 $262.7 $287.0 $285.1 $272.5
Depreciation.................................... 19.2 16.2 13.7 12.9 10.8
Net cash provided by operating activities....... 167.5 127.8 175.8 161.9 180.4
Capital expenditures............................ 17.8 20.6 31.5 22.6 11.7
Business combinations net of cash acquired...... 130.8(3) 17.0 18.8 66.7 20.8
Other investing activities...................... (1.6) 14.9 31.1 (2.1) 13.3
------ ------ ------ ------ ------
Net cash used in investing activities........... 147.0 52.5 81.4 87.2 45.8
Net cash paid to Great Lakes.................... 31.4 103.0 104.6 83.0 140.9
SELECTED RATIO:
Ratio of earnings to fixed charges(4)........... 68.1x 102.1x 21.5x 17.9x 12.6x
</TABLE>
- ---------------
(1) Interest expense includes interest on intercompany indebtedness between the
Company and Great Lakes. Intercompany indebtedness between the Company and
Great Lakes is included in total equity.
(2)EBITDA represents income before income taxes and minority interest plus
depreciation, amortization of intangible assets and interest expense, less
interest income. EBITDA is not a substitute for operating income, net
earnings and cash flow from operating activities as determined in accordance
with generally accepted accounting principles as a measure of profitability
or liquidity. EBITDA is presented as additional information because
management believes it to be a useful indicator of the Company's ability to
service and/or incur indebtedness. EBITDA amounts may not be fully available
for management's discretionary use, due to certain requirements to conserve
funds for capital replacement, debt service and other commitments.
(3)Includes $116.8 million for the purchase of Chevron's 10.65% interest in
subsidiaries of Parent.
(4) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents net income before income taxes plus fixed charges,
less capitalized interest. "Fixed charges" consists of interest expense,
including amortization of debt discount and financing costs, capitalized
interest and the portion of rental expense which the Company believes is
representative of the interest component of rental expense.
30
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the Combined Financial Statements of
the Company included elsewhere in this Prospectus. Interim financial results are
discussed separately. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition for the Six Months Ended June 30, 1998."
OVERVIEW
The following discussion is based upon the separate financial statements of
the Company, which present the Company's results of operations, financial
position and cash flows. These financial statements include the assets,
liabilities, income and expenses that were related to the Octel Businesses as
they were operated as a part of the Petroleum Additives Business Unit of Great
Lakes, and the Company's statement of income includes all the related costs of
doing business, including charges for the use of facilities and for employee
benefits. The financial information included herein, however, may not
necessarily reflect the results of operations, financial position and cash flows
of the Company as it will operate in the future or the results of operations,
financial position and cash flows that would have been achieved if the Company
had been an independent company during the periods presented. The historical
financial information included herein also does not reflect the changes in the
Company's operations that may occur following the Distribution.
The Company has three businesses--Lead Alkyls (TEL), Petroleum Specialties
and Performance Chemicals. TEL is the Company's principal product, and the
Company is the world's leading manufacturer of TEL. Over the last few years,
approximately 70% of the Company's TEL production has been sold on a retail
basis to oil refineries, and the remaining 30% has been sold to distributors,
principally Ethyl, under long-term wholesale contracts. Pricing to distributor
customers is substantially below pricing to retail refinery customers. See
"Description of Business."
From 1989 to 1995, the Company was able to substantially offset the
financial effects of the declining demand for TEL through higher TEL pricing.
The magnitude of these price increases reflected the cost effectiveness of TEL
as an octane enhancer as well as the high cost of converting refineries to
produce higher octane grades of fuel. More recently, however, as the optimum TEL
levels in gasoline have been reached, and as competition has intensified due to
the decline in demand for TEL, it has been increasingly difficult for the
Company to secure general price increases. The Company expects that this trend
will continue in the foreseeable future.
As world demand for TEL has declined, the Company has been reducing its
cost base in an attempt to maintain its margins. In 1989, the Company closed its
German manufacturing facility. In 1996, the Company ceased production at its
Italian and French manufacturing facilities. The closure of the Italian and
French facilities has reduced the Company's workforce by 166 employees as of
December 31, 1997 and will result in a further reduction of 59 employees upon
substantial completion of site remediation activities in France. All of the
Company's current TEL requirements are now produced at its sole remaining TEL
manufacturing facility which is located in Ellesmere Port in the United Kingdom.
Since 1996, the Company's cost reduction efforts and operating improvement
programs in the U.K. have reduced the workforce by 525 people resulting in
annual payroll savings of approximately $25 million which have been used to
maintain margins. The Company will continue to downsize its manufacturing and
operating cost base and restructure its operations as the TEL market continues
to decline. See "--Future Outlook."
31
<PAGE> 39
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Company's statement
of income:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0%
Cost of goods sold........................................ 50.9 50.0 48.9
------ ------ ------
Gross profit.............................................. 49.1 50.0 51.1
Operating expenses
Selling, general and administrative expenses............ 7.2 6.7 6.7
Research and development................................ 0.7 1.0 0.9
------ ------ ------
Total operating expenses.................................. 7.9 7.7 7.6
Amortization of intangible assets......................... 5.1 4.5 3.0
------ ------ ------
Operating income.......................................... 36.1 37.8 40.5
Interest and other expenses............................... 1.4 1.5 2.3
Other income.............................................. (2.2) (0.8) (1.5)
------ ------ ------
Income before income taxes and minority interests......... 36.9 37.1 39.7
Minority interests........................................ 4.5 4.9 5.2
------ ------ ------
Income before income taxes................................ 32.4 32.2 34.5
Income taxes.............................................. 10.6 10.7 11.4
------ ------ ------
Net income................................................ 21.8% 21.5% 23.1%
====== ====== ======
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales decreased $58.3 million (or 10%) in 1997 to $539.1 million from
$597.4 million in 1996. Net sales by business are set forth in the following
table (dollars in millions):
<TABLE>
<CAPTION>
INCREASE
1997 1996 (DECREASE)
------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
TEL............................................ $442.0 82% $505.1 85% (12)%
Petroleum Specialties.......................... 62.6 12 70.9 12 (12)
Performance Chemicals.......................... 34.5 6 21.4 3 61
------ --- ------ ---
Total........................................ $539.1 100% $597.4 100% (10)%
====== === ====== ===
</TABLE>
This total decrease was primarily attributable to a decline in sales volume
of $67.9 million which was partly offset by a price increase of $8.7 million and
foreign exchange gains of $0.9 million. In 1997 the retail volume of TEL sold
was 55.8 thousand metric tons as compared 63.8 thousand metric tons in 1996, a
decline of approximately 12%, which was slightly improved from the 13% annual
volume decline experienced in 1996. Reduced retail sales in Western Europe, the
Middle East and Australia were partly offset by increases in Eastern Europe and
Central America, but the Company believes it maintained its share of the
worldwide retail TEL market during this period. Retail sales prices of TEL
increased by approximately 2% in 1997 as compared to 1996. Product pricing
reflects (i) the Company's strategy to extend the life of TEL by reducing or
foregoing price increases, (ii) changing refinery economics related to achieving
octane ratings by using different production processes, (iii) a changing mix of
customers and regions of the world where TEL is sold (e.g., TEL demand in higher
priced regions declined at a faster rate than in other regions), and (iv)
aggressive pricing by competitors. Sales of TEL on a wholesale basis decreased
by approximately 20% in 1997 as compared to 1996, declining from 30.2 thousand
metric tons in 1996 to 24.2 thousand metric tons in
32
<PAGE> 40
1997. This higher than normal rate of decline mainly resulted from a Mexican
phase out of leaded gasoline, which market had been supplied by E.I. du Pont de
Nemours & Company ("DuPont") with TEL purchased from the Company. The ratio of
the Company's retail TEL sales to wholesale TEL sales was 70/30 in 1997 as
compared to 68/32 in 1996. Net sales of Petroleum Specialties declined 12% in
1997 as compared to 1996 because of the loss of a major customer, while net
sales of Performance Chemicals increased 61% in 1997 as compared to 1996 because
of increased demand for Octaquest(R), a biodegradable chelating agent used in
laundry products.
Gross profit decreased $33.9 million (or 11%) in 1997 to $264.7 million
from $298.6 million in 1996 because lower TEL volumes and adverse currency
effects offset selling price gains and cost improvements. As a percentage of net
sales, gross profit decreased to 49.1% in 1997 as compared to 50% in 1996. This
decrease also reflects TEL being a lower percentage of total sales in 1997.
Operating expenses decreased $3.4 million (or 7%) in 1997 to $42.4 million
from $45.8 million in 1996 primarily as a result of cost reduction programs,
including a decrease in research and development expenses of $1.8 million, net
of unfavorable currency translations. As a percentage of net sales, operating
expense increased slightly in 1997 to 7.9% as compared to 7.7% in 1996.
Other income increased $6.7 million to $7.9 million in 1997 from $1.2
million in 1996 mainly due to foreign currency gains of $6.8 million.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales decreased $30.9 million (or 4.9%) in 1996 to $597.4 million from
$628.3 million in 1995. Net sales by business are set forth in the following
table (dollars in millions):
<TABLE>
<CAPTION>
INCREASE
1996 1995 (DECREASE)
------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
TEL............................................. $505.1 85% $547.1 87% (8)%
Petroleum Specialities.......................... 70.9 12 65.0 10 9
Performance Chemicals........................... 21.4 3 16.2 3 32
------ --- ------ ---
Total........................................... $597.4 100% $628.3 100% (5)%
====== === ====== ===
</TABLE>
This decrease was primarily attributable to a decline in sales volumes of
$47.6 million, which was partly offset by a price increase of $19.4 million. In
addition, foreign exchange losses totaled $2.7 million. In 1996, the retail
volume of TEL sold was 63.8 thousand metric tons as compared to 73.5 thousand
metric tons in 1995, a decline of approximately 13%, which was higher than the
average 8% to 10% decline experienced over the previous four years. No single
factor accounted for the decline, and the Company believes it maintained its
share of the worldwide retail TEL market during this period. Retail sales prices
of TEL increased by approximately 4% in 1996 as compared to 1995, which is lower
than the rate of increase in 1995. Product pricing reflects (i) the Company's
strategy to extend the life of TEL by reducing or foregoing price increases,
(ii) changing refinery economics related to achieving octane ratings by using
different production processes, (iii) a changing mix of customers and regions of
the world where TEL is sold (e.g.,TEL demand in higher priced regions declined
at a faster rate than in other regions), and (iv) aggressive pricing by
competitors. Sales of TEL on a wholesale basis increased approximately 5% in
1996 as compared to 1995, growing from 28.7 thousand metric tons in 1995 to 30.2
thousand metric tons in 1996. The ratio between the Company's retail TEL sales
and wholesale TEL sales was 68/32 in 1996 as compared to 72/28 in 1995. Finally,
net sales of Petroleum Specialties increased 9% in 1996 because of a 7% increase
in sales quantities combined with an improvement in the average prices of
detergent formulations. Net sales of Performance Chemicals increased 32% in 1996
because of the successful introduction of Octaquest(R) during 1996, which was
offset in part by lower sales of chlor-alkali products.
33
<PAGE> 41
Gross profit decreased $22.7 million (or 7%) in 1996 to $298.6 million from
$321.3 million in 1995 because lower TEL volumes were only partially offset by
increased sales prices. As a percentage of net sales, gross profit decreased in
1996 to 50% as compared to 51.1% in 1995. The decline was also attributable to
an increase of approximately $10 million in the provision for the future closure
of TEL manufacturing plants and an increase in raw materials prices, especially
lead and ethylene. No benefits from plant closures or the staff reductions in
the United Kingdom are reflected in this period.
Operating expenses decreased $1.9 million (or 4%) in 1996 to $45.8 million
from $47.7 million in 1995 primarily as a result of cost reduction programs and
foreign exchange gains. Research and development expenses in 1996 remained
unchanged from 1995 at $5.6 million. As a percentage of net sales, operating
expense increased slightly in 1996 to 7.7% as compared to 7.6% in 1995.
Interest and other expenses in the aggregate decreased $5.6 million in 1996
to $9.1 million from $14.7 million in 1995 as loans from Great Lakes were
repaid. This gain was partially offset by unrealized foreign exchange losses.
Amortization of intangible assets increased $7.7 million to $26.7 million
in 1996 from $19 million in 1995 as the Company accelerated amortization in line
with the anticipated decline of the TEL business.
FINANCIAL CONDITION AND LIQUIDITY
Historically, the Company has not required financing and has transferred
significant amounts of cash to Great Lakes as described in Note 6 to the
Combined Financial Statements. Cash provided by operating activities was $167.5
million in 1997, $127.8 million in 1996 and $175.8 million in 1995. The $39.7
million increase in 1997 compared to 1996 was primarily attributable to reduced
working capital requirements, offset in part by lower net income and increased
spending on plant closure costs. The $48.0 million decrease in 1996 compared to
1995 was primarily attributable to lower income, increased investment in working
capital and higher spending on plant closures, which were partially offset by
increased non-cash charges for depreciation and amortization.
Accounts receivable at December 31, 1997 decreased $26.6 million to $169.8
million from $196.4 million at December 31, 1996. This reduction was
attributable to lower sales in 1997 compared to 1996 and a weaker pound sterling
vis-a-vis the U.S. dollar. Days sales outstanding were 109 at the end of 1997, a
slight increase from 107 days in 1996. Accounts receivable at December 31, 1996
increased $1.8 million to $196.4 million from $194.6 million at December 31,
1995. This slight increase resulted from a $7.5 million increase in trade
accounts receivable and a $5.7 million decrease in other receivables because of
the recovery of insurance claims. In addition, days sales outstanding were 107
days at the end of 1996 compared to 98 days in 1995. The increase in days sales
outstanding reflected the greater number of large bulk customers that received
extended payment terms.
Inventories at December 31, 1997 were $78.8 million, a decrease of $5.2
million from December 31, 1996. Approximately $3.4 million of this decrease was
attributable to currency translation, with the balance attributable to lower
lead costs offset by quantity increases. Inventory turnover for 1997 was 3.5
times, which was consistent with 1996 at 3.6 times. Inventories as at December
31, 1996 were $84 million, an increase of $21.9 million from December 31, 1995.
Approximately $6.5 million of this increase was attributable to currency
translation with the balance attributable to increased lead costs and stocking
levels. Inventory turnover for 1996 was 3.6 times, down from 4.9 times the prior
year, reflecting the build-up of raw materials.
Investing activities include capital expenditures and acquisitions. Capital
expenditures decreased $2.8 million to $17.8 million in 1997 compared to $20.6
million in 1996. Capital spending in 1997 was primarily for capacity
maintenance, whereas in 1996 and 1995 capital expenditures also included the
construction of facilities for the production of Octaquest(R). Capital spending
for
34
<PAGE> 42
environmental projects in 1997, 1996 and 1995 was $0.6 million, $1 million and
$0.8 million, respectively. Capital expenditures for 1998 and 1999 are expected
to be approximately $20 million in each year, including approximately $8
million, in the aggregate, for environmental compliance. In 1997, the Company
completed the acquisition of the outstanding minority interest in the Company's
subsidiaries previously owned by Chevron Chemical Company for $116.8 million.
The remainder of investment spending for 1997, and all of the spending for 1996
and 1995, was related to the payment of profit participation payments required
to be made as part of the 1989 acquisition of a majority interest in Octel
Associates. See Note 4 to the Combined Financial Statements.
Total current liabilities have varied with the volume of business. There is
a reduction of approximately $8 million in accrued expenses from 1996 to 1997
following the determination of the profit participation payments in 1997 as
described in Note 4 to the Combined Financial Statements.
Other noncurrent liabilities in 1997 represented a reserve of $57.2 million
for expected future plant closures and related personnel reductions and
decontamination costs at the Company's TEL plants in the U.K., France, Italy and
Germany as demand for TEL diminishes. Approximately $35 million was spent in
1997, as compared to $20 million in 1996. The closures, coupled with staff
reductions in the U.K., were primarily responsible for the increased spending
levels in 1997. Management believes that production at the U.K. plant should
continue well into the next century based on the current rate of market decline.
As part of the Distribution, the Company incurred approximately $430.0
million of indebtedness, $116.8 million of the borrowings was used to repay the
loan from Great Lakes utilized to acquire the Chevron interest and approximately
$16.0 million was used to pay $12.0 million in fees and expenses related to the
Distribution and the Financings and $4.0 million of associated costs for certain
interest rate swaps related to the Financings. The remainder of the borrowing,
together with $29.7 million of available cash at December 31, 1997 and
additional cash generated by the Company between January 1, 1998 and the date of
the Distribution, was distributed to Great Lakes in the form of the Special
Payment.
The Company believes that cash generated by operating activities and funds
available to it through the Revolving Facility of $20 million provided under the
Credit Facility will be sufficient to meet the Company's anticipated funding
requirements. The Company is required by the terms of the Financings to utilize
approximately $175 million of the Company's cash flow over the next two years to
repay debt. The first such $40 million repayment was made on June 30, 1998.
Under the terms of the Financings, the Company is permitted, subject to certain
conditions, to use up to $15 million per year for dividends and/or share
repurchases. The balance of the Company's cash flow will be used for general
corporate purposes.
DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS
Between 50% and 60% of the Company's sales are in U.S. dollars. Foreign
currency sales, primarily in U.K. pounds sterling, offset most of the Company's
costs, which are also in U.K. pounds sterling. To the extent required by the
Company, dollars are sold forward to cover local currency needs. The instruments
utilized by the Company in its hedging activities are considered risk management
tools, and are not used for trading or speculative purposes. The Company
diversifies the counterparties used and monitors the concentration of risk to
limit its counterparty exposure.
Historically, management of foreign currency exposures has been coordinated
by Great Lakes. The Company forecasts foreign currency denominated cash flow for
12-month periods and aggregates these flows by currency to determine the amount
of exposure. Hedging decisions are made based on the amount of exposure and the
near-term outlook for each currency. Hedges are set to mature coincident with
the estimated timing of the underlying transactions. The Company does not hedge
foreign currency net asset positions currently. Considering the Company's
operating profile, a uniform 10% change in the value of the dollar from December
31, 1997 would result in approximately a $6 million change in annual net income.
This calculation assumes that each
35
<PAGE> 43
exchange rate would change in the same direction relative to the U.S. dollar,
and does not factor in any potential changes in sales levels or local currency
prices which may result from changes in exchange rates.
FUTURE OUTLOOK
The Company is, and for the next several years is likely to remain, highly
dependent on its principal product, TEL. Over the last three years, TEL has
represented more than 80% of the Company's net sales and has provided
essentially all the Company's profits and cash flow. The Company expects that
its strong, although declining, cash flow in the foreseeable future will be
adequate to fund the Company's future capital and operating needs. In addition,
the Company will have access to the $20 million Revolving Facility.
World demand for TEL has been in decline since the 1970s, and this trend is
expected to continue. Through the mid-1990's the Company was able, in part, to
offset the effects of declining volumes with selling price increases. More
recently, however, the Company has reduced or forgone price increases in order
to extend the life of the product and to remain competitive with other TEL
marketers and alternate methods of achieving higher octane levels in gasoline.
The Company expects a competitive pricing environment to continue which will
increasingly limit the ability of the Company to partially offset the effects of
future declines in TEL volumes with price increases.
The Company has and will continue to downsize and restructure its
operations consistent with declining demand for TEL. The recent cessation of TEL
production in France and Italy and the restructuring of the U.K. operations have
reduced total employment by 691 employees between January 1, 1996 and December
31, 1997 and reduced the cost base to maintain operating margins.
Notwithstanding the Company's continuing downsizing and productivity improvement
programs, management expects the fixed cost per ton of TEL, which currently
represents 27% of total cost per ton, to increase in the future as cost
reductions are not expected to keep pace with declining TEL sales volume.
The Company entered an agreement dated September 29, 1998 to take effect
October 1, 1998 with Ethyl to market and sell TEL (the "TEL Marketing
Agreement"). Under the TEL Marketing Agreement, Ethyl will be responsible for
marketing, sales and bulk distribution services. The TEL Marketing Agreement
covers certain world areas except North America and the European Union. The
Company believes that significant cost savings can be realized through more
efficient marketing, sales and distribution of TEL in certain areas of the
world.
Raw materials, particularly lead, ethylene and salt, account for a
substantial portion of total manufacturing costs of TEL. These materials are
commodities and are subject to significant price fluctuations over time. While
the Company may or may not be able to pass through to its customers the impact
of any such fluctuations in raw material prices in the future, management does
not believe any such fluctuations will have a material effect on the Company's
results of operations.
A strong, although declining, cash flow is expected in future years. The
Company does not anticipate any significant capital expenditures, other than
maintenance and environmental compliance costs in the foreseeable future. See
"--Environmental Matters and Plant Closures." Capital expenditures were $17.8
million in 1997, $20.6 million in 1996, and $31.5 million in 1995.
Although the Company anticipates significant sales growth from the
Petroleum Specialties business and the Performance Chemicals business in the
future, earnings from these businesses will not be sufficient to fully offset
the projected decline in TEL sales and earnings at least over the next several
years.
Management has considered the current economic conditions in the
Asia-Pacific region and does not believe that they will have a material impact
on the Company or its operations.
36
<PAGE> 44
ENVIRONMENTAL MATTERS AND PLANT CLOSURES
The Company is subject to laws, regulations and legal requirements relating
to the use, storage, handling, generation, transportation, emission, discharge,
disposal and remediation of, and exposure to, hazardous and non-hazardous
substances and wastes ("Environmental Laws") in all of the countries in which it
does business. Under certain Environmental Laws, the Company is responsible for
the remediation of hazardous substances or wastes at currently or formerly owned
or operated properties. Although the Company believes that it is in material
compliance with all applicable Environmental Laws, there can be no assurance
that the Company will not incur costs in the future relating to Environmental
Laws that will have a material adverse effect on the Company's business, results
of operations or financial condition.
The manufacturing operations of the Company have been conducted entirely
outside the United States and, therefore, any liability of the Company
pertaining to the investigation and remediation of contaminated properties is
likely to be determined under non-U.S. law.
The Company is conducting environmental and remediation activities to
address soil and groundwater contamination at its manufacturing facility in
Ellesmere Port, U.K. (the "Ellesmere Port Facility"), and at its closed
manufacturing sites in France, Italy and Germany (the "Remediation Projects").
Although the Company has developed estimates for the costs of the Remediation
Projects which management believes to be reasonable (based upon its internal
review and its review of the reports of recognized independent experts), there
can be no assurance that the actual costs will not materially exceed the
Company's estimates. The Company incurred costs of approximately $0.6 million in
1997, $0.1 million in 1996 and a negligible amount in 1995 relating to the
Remediation Projects, and anticipates that it will incur costs of approximately
$3 million and $3.6 million in 1998 and 1999, respectively, in connection with
the Remediation Projects.
Management believes (based upon its internal review and its review of the
reports of recognized independent experts) that the Company is in material
compliance with all applicable Environmental Laws. The Company makes capital
expenditures and incurs other expenses at the Ellesmere Port Facility to
maintain compliance with Environmental Law, and the Company expects that it will
be required to continue to incur such costs and expenses in the future. The
Company made environmental capital expenditures of $0.6 million in 1997, $1
million in 1996 and $0.8 million in 1995 and other expenditures of approximately
$9.8 million in 1997, approximately $9.7 million in 1996 and approximately $8.2
million in 1995. The Company estimates that other expenses related to these
matters will amount to approximately $10 million in 1998 and approximately $10
million in 1999 and environmental capital expenditures are estimated to be none
in 1998 and $7.6 million in 1999. There can be no assurance, however, that these
estimates will prove accurate or that the Company will not incur costs
materially in excess of these estimates. Additionally, there can be no assurance
that changes in existing laws or regulations, or the discovery of additional
environmental liabilities associated with the Company's current or historical
operations, will not require the Company to incur material costs or will not
otherwise materially and adversely affect the Company's business, results of
operations, or financial condition.
The Health and Safety Executive and the Environment Agency in the U.K. are
investigating a July 1997 bromine emission from the Company's bromine
manufacturing facility in Amlwch, U.K., which facility is being transferred to
Great Lakes in connection with the Distribution. Although neither agency has
indicated whether enforcement action will be initiated against the Company, such
an action could result in monetary penalties being imposed upon the Company
which are not likely to exceed $100,000. Although it cannot predict the severity
of any such penalties, management believes that the release was accidental and
therefore that the Company is not likely to incur material penalties or costs in
connection with this matter.
In addition to the Remediation Projects, the Company is engaged in plant
closure and restoration programs to dismantle and decontaminate process
equipment, perform building demolition, and generally decommission (the
"Decontamination and Decommissioning Projects") closed
37
<PAGE> 45
manufacturing facilities in France, Italy, and Germany. The Decontamination and
Decommissioning Projects are necessary to facilitate the ultimate disposition of
these sites.
The Company has also developed a two-phase Decontamination and
Decommissioning Project for the Ellesmere Port Facility. The first phase of the
Ellesmere Port Decontamination and Decommissioning Project involves the
dismantling, decontamination, and removal of TEL process equipment over time as
volumes of TEL decline. The second phase of the Ellesmere Port Decontamination
and Decommissioning Project will involve dismantling and decontamination of
process equipment, building demolition, and general decommissioning of the
Ellesmere Port Facility if, and when, all manufacturing operations there cease.
The Company estimates that the Decontamination and Decommissioning Projects
(both at the closed sites in France, Italy and Germany and at the Ellesmere Port
Facility) will cost approximately $52 million. This amount includes
approximately $33 million, the estimated cost of phase two of the Company's
Decontamination and Decommissioning Project at Ellesmere Port (final
dismantling, building demolition, and general decommissioning), which will not
be incurred until and unless all manufacturing operations at Ellesmere Port
cease. The Company incurred costs associated with the Decontamination and
Decommissioning Projects at the closed sites in France, Italy and Germany of
approximately $12.4 million in 1997, $2.8 million in 1996 and $2.8 million in
1995. To date, the Company has incurred costs at the Ellesmere Port Facility,
mainly related to the decommissioning of bulk ships, totaling approximately $0.4
million in 1997, $0.9 million in 1996 and $1.8 million in 1995. The Company does
not anticipate making any material expenditures in 1998 or 1999 on the first
phase of the Ellesmere Port Decontamination and Decommissioning Project.
During the process of reducing production capacity, the Company has also
significantly reduced the number of personnel employed. The costs of personnel
severance were approximately $21.8 million in 1997, $16 million in 1996, and
$0.8 million in 1995. The Company estimates further costs of this nature of
approximately $7.6 million in 1998 and $2.3 million in 1999.
The Company estimates a total cost of $124 million for Environmental
Matters and Plant Closures consisting of Remediation Projects ($17 million),
Decontamination and Decommissioning Projects ($52 million), site management
during the final closure phase ($5 million) and personnel severance ($50
million) plus a $20 million capital expenditure relating to compliance matters.
As of December 31, 1997, the Company had accrued $57.2 million on the balance
sheet for such costs and is providing for the difference over the remaining life
of the TEL business. These estimates do not take into account future inflation
and have not been reduced to present value. The Company estimates that the total
spending on Environmental Matters and Plant Closures will be approximately $15
million in 1998 and $9 million in 1999.
INFLATION
Inflation has not been a significant factor for the Company over the last
several years. Management believes that inflation will continue to be moderate
over the next several years.
YEAR 2000
The Company is aware of the computer systems issues associated with the
transition of dates from 1999 to 2000. The Company has retained consultants to
assist in the evaluation of the impact of these issues on the Company's
operations in order to ensure that all issues are addressed in a timely manner.
On the basis of its preliminary evaluation, the Company does not believe that
the transition to the Year 2000 or the cost of addressing this transition will
have a material impact on its results of operations.
SINGLE EUROPEAN CURRENCY
In 1999, certain European countries will begin the transition to the Euro.
The transition to the Euro will have both internal recordkeeping and external
commercial aspects, neither of which are expected to have a material effect on
the Company's business, results of operations or financial condition.
38
<PAGE> 46
INTERIM UNAUDITED COMBINED FINANCIAL DATA
The following interim unaudited combined financial data should be read in
conjunction with the pro forma financial statements and notes thereto, the
historical financial information and notes thereto and the unaudited interim
consolidated financial statements and notes thereto included elsewhere in this
Prospectus. The unaudited combined financial data for the six month periods
ended June 30, 1998 and 1997 have been derived from the unaudited consolidated
financial statements of the Company. The interim unaudited consolidated
financial were prepared in accordance with generally accepted accounting
principles and Article 10 of Regulation S-X. Accordingly, they do not include
all the information and footnotes necessary for a comprehensive presentation of
financial position and results of operations. It is management's opinion,
however, that all material adjustments (consisting of normal recurring accruals)
have been made which are necessary for a fair financial statement presentation.
The results for the interim period are not necessarily indicative of the results
to be expected for the year due to the level of borrowings incurred by the
Company in connection with the Spin Off. See "The Distribution" and "The
Financings."
39
<PAGE> 47
INTERIM UNAUDITED COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------
1998 1997
--------- ---------
(IN MILLIONS, EXCEPT
RATIOS AND STATISTICAL
DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Net Sales................................................... $238.8 $258.1
Cost of goods sold.......................................... 123.7 133.4
------ ------
Gross profit................................................ 115.1 124.7
Selling, general and administrative......................... 17.8 19.9
Research and development.................................... 1.6 1.7
Amortization of intangible assets........................... 18.8 13.4
------ ------
Operating income............................................ 76.9 89.7
Interest expense............................................ 9.6 0.8
Other expenses.............................................. 1.1 --
Interest income............................................. (1.3) (2.0)
Other income................................................ -- (5.0)
------ ------
Income before income taxes and minority interest............ 67.5 95.9
Minority interest........................................... -- 13.6
------ ------
Income before income taxes.................................. 67.5 82.3
Income taxes................................................ 25.3 28.2
------ ------
Net income.................................................. 42.2 54.1
====== ======
BALANCE SHEET DATA (AT END OF PERIOD):
Total working capital....................................... 198.4 --
Property, plant and equipment, net.......................... 105.4 --
Total assets................................................ 806.8 --
Total debt.................................................. 390.0 --
Total liabilities........................................... 519.5 --
Total equity................................................ 287.3 --
STATEMENT OF CASH FLOW DATA:
EBITDA(1)................................................... 104.8 117.4
Depreciation................................................ 10.2 9.3
Net cash provided by operating activities................... 114.8 104.2
Capital expenditures........................................ (8.1) (4.8)
Other investing activities.................................. (7.3) 6.8
------ ------
Net cash used in investing activities....................... (15.4) 2.0
Net cash paid to Great Lakes................................ (468.5) (109.1)
SELECTED RATIO:
Ratio of earnings to fixed charges(2)....................... 7.4x 96.9x
</TABLE>
- ---------------
(1) EBITDA represents income before income taxes and minority interest plus
depreciation, amortization of intangible assets and interest expense, less
interest income. EBITDA is not a substitute for operating income, net
earnings and cash flow from operating activities as determined in accordance
with generally accepted accounting principles as a measure of profitability
or liquidity. EBITDA is presented as additional information because
management believes it to be a useful indicator of the Company's ability to
service and/or incur indebtedness. EBITDA amounts may not be fully available
for management's discretionary use, due to certain requirements to conserve
funds for capital replacement, debt service and other commitments.
(2) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents net income before income taxes plus fixed charges,
less capitalized interest. "Fixed charges" consists of interest expense,
including amortization of debt discount and financing costs, capitalized
interest and the portion of rental expense which the Company believes is
representative of the interest component of rental expense.
40
<PAGE> 48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE SIX MONTHS ENDED JUNE 30, 1998
Some of the information presented in the following discussion constitutes
forward-looking comments within the meaning of the Private Litigation Reform Act
of 1995. Although the Company believes its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results will not differ materially from
its expectations. Factors which could cause actual results to differ from
expectations include, without limitation, the timing of orders received from
customers, the gain or loss of significant customers, competition from other
manufacturers and changes in the demand for the Company's products, including
the rate of the decline in demand for TEL. In addition, increases in the cost of
the product, changes in the market in general and significant changes in new
product introduction could result in actual results varying from expectations.
RESULTS OF OPERATIONS
Second quarter sales of $115.6 million were $19.0 million lower than the
$134.6 recorded in 1997.
Six month sales of $238.8 million declined $19.3 million from the $258.1
million reported in 1997, a reduction of 7% due predominantly to the continued
decline in demand for tetraethyl lead (TEL). Net income for the period was $42.2
million, or $2.86 per share, down $11.9 million from 1997. Comparative sales by
business are shown in the following table (millions):
<TABLE>
<CAPTION>
SECOND QUARTER YEAR TO DATE
------------------------ ------------------------
1998 1997 CHANGE 1998 1997 CHANGE
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
TEL................................ $ 92.3 $110.6 (17)% $191.6 $208.0 (8)%
Petroleum Specialities............. 16.3 15.2 7% 31.8 32.2 (1)%
Performance Chemicals.............. 7.0 8.8 (20)% 15.4 17.9 (14)%
------ ------ --- ------ ------ ---
Total......................... $115.6 $134.6 (14)% $238.8 $258.1 (7)%
====== ====== === ====== ====== ===
</TABLE>
TEL sales in the six months ended June 30, 1998, decreased by $16.4 million
(8%) from the same period last year, attributable mainly to a reduction in sales
volumes (particularly wholesale) of $13.2 million and a reduction in average
prices of $3.6 million, partly offset by a foreign exchange gain of $0.4
million. Retail sales volumes in the first half year decreased 1% to 25.6
thousand metric tons from last year with increased sales to the Middle East,
South America and South Africa, offset by reductions in Eastern Europe, Asia,
the rest of Africa and Western Europe. Average retail sales prices of TEL
reduced by 2% from last year, mainly as a result of changes in customer mix.
Sales volumes of TEL on a wholesale basis in the six month period were 33% below
1997, due partly to reduced off-take by Ethyl Corporation and also due to the
phase-out of leaded gasoline in the Mexican market in mid-1997, which DuPont had
supplied with TEL purchased from the Company.
Petroleum Specialities (non-lead fuel additives) net sales of $31.8 million
for the six months to June declined $0.4 million (1%) from the same period in
1997. Second quarter sales at $16.3 million have improved by 7% from last year
offsetting the first quarter's decline (due to the loss of a major customer in
early 1997).
Performance Chemicals net sales of $15.4 million for the first half year
were $2.5 million below 1997, mainly resulting from reduced sales of
Octaquest(R) due to a maintenance shutdown of the plant in preparation for the
expansion of the plant. Second half year sales are expected to improve following
maintenance of the plant.
Gross profit in the first half 1998 of $115.1 million was $9.6 million (8%)
below the same period last year. This reduction reflects the decline in TEL
wholesale sales and average retail sales price.
41
<PAGE> 49
As a percentage of sales, gross profit in the first half 1998 was maintained at
48.2%, similar to last year's 48.3%. Both periods contained a plant closure
charge of approximately $7 million and the second half of 1998 will contain a
similar level of charge consistent with previous years.
Selling, general and administrative expenses were $17.8 million for the
first six months of 1998, a reduction of 10.6% from the same period in 1997.
Research spending was maintained at $1.6 million for the half year. Since the
beginning of the year, the Company has reduced the head count by 115, an 8%
reduction of the workforce, giving annual payroll savings of $6 million.
Amortization of intangible assets of $18.8 million for the half year has
increased by $5.4 million due to an increase in goodwill following the
acquisition of the Chevron minority interest in the Company at the end of 1997.
The increased amortization resulted in income from operations reducing from 35%
of sales to 32% in 1998. Operating income prior to amortization was maintained
at 40% of sales.
Interest expenses at $9.6 million for the first half year 1998 is increased
from $0.8 million in 1997. Interest on the senior debt and notes effectively
commenced on May 1 resulting in a charge of $6 million to date. The remainder of
the interest in the first half was paid to Great Lakes on an inter-company loan
to fund the acquisition of the Chevron minority interest.
Interest income in the first half year decreased to $1.3 million from $2.0
million in 1997.
Other expense and income decreased from an income of $5.0 million in 1997
to an expense of $1.1 million in the first half year 1998. This change was due
to the inclusion of a $4.8 million profit on exchange at the beginning of 1997
and a $1.1 million loss on exchange in the first quarter 1998. Second quarter
1998 is similar to 1997.
The minority interest in the Company has been acquired from Chevron during
fourth quarter 1997, resulting in an improvement of $13.6 million in profit
attributable to the Company in the first half year of 1998 compared with last
year.
LIQUIDITY AND FINANCIAL CONDITION
Cash provided from operating activities during the first half of 1998
amounted to $114.8 million, $10.6 million more than the prior year amount. This
improvement was mainly due to a lower level of cash spending on rationalization
costs of $14.6 million during the first half year 1998, compared with $23.2
million during the same period last year, due to both personnel and plant
closure costs being lower.
Working capital levels were reduced significantly during the first half
year of 1998, particularly accounts receivable, which were $37.8 million lower
than December 1997 due to lower sales in the second quarter and normal
fluctuation in customer sales patterns. Days outstanding of total accounts
receivable at June 30, 1998 were reduced to 104 days, compared with 109 days at
December 31, 1997, reflecting these fluctuations. Total inventory levels were
virtually unchanged from the position at December 1997, but the level of raw
materials inventories was reduced by $9.1 million (28%) since the year-end.
Finished products inventory levels, which are affected by bulk ships sailing
patterns and fluctuate accordingly, were increased from December 1997.
RECENT DEVELOPMENTS
The Company entered an agreement dated September 29, 1998 to take effect
October 1, 1998 with Ethyl to market and sell TEL (the "TEL Marketing
Agreement"). Under the TEL Marketing Agreement, Ethyl will be responsible for
marketing, sales and bulk distribution services. The TEL Marketing Agreement
covers certain world areas except North America and the European Union. The
Company believes that significant cost savings can be realized through more
efficient marketing, sales and distribution of TEL in certain areas of the
world.
42
<PAGE> 50
In order to diversify and expand its non-TEL product line, on June 30,
1998, the Company entered into an agreement in principle with Veba Oel AG for
the acquisition of its petroleum specialities subsidiary, Chemische Betriebe
Pluto GmbH ("Pluto"). Based in Herne, Germany, Pluto manufactures and sells fuel
additives mainly based on ferrocene, an iron-based metal organic product used as
a combustion improver and octane enhancer. Pluto has annual sales of
approximately $18 million. The Company and Pluto had already entered into a
joint marketing arrangement in 1997.
Management believes that both the above initiatives are compatible with the
Company's strategy for rationalizing the declining TEL market and diversifying
into speciality chemicals.
The Company's Board of Directors have approved a stock buy-back program,
authorizing the repurchase of up to $15 million of its stock, as allowed under
its debt covenants.
43
<PAGE> 51
BUSINESS
DESCRIPTION OF THE COMPANY
The Associated Octel Company Limited ("AOC"), the Company's principal
subsidiary, was formed in 1938 to manufacture and market TEL as an antiknock
additive for gasoline. The Company is an international chemical company
specializing in the manufacture, distribution and marketing of fuel additives.
The Company is comprised of three primary operating businesses: Lead Alkyls,
Petroleum Specialties and Performance Chemicals. The Lead Alkyls business, which
accounted for approximately 82% of the Company's 1997 sales, is the world's
leading producer of TEL that is used by oil refineries worldwide to boost the
octane levels in gasoline which allows fuel to burn more efficiently and
prevents engine knock during the combustion cycle. The Company manufactures
approximately 80% of TEL used worldwide. The Petroleum Specialties business,
which accounted for approximately 12% of the Company's 1997 sales, supplies a
broad range of petroleum additives, including combustion improvers, fuel
detergents and functional performance products (such as corrosion inhibitors and
conductivity improvers). The Performance Chemicals business, which accounted for
approximately 6% of the Company's 1997 sales, manufactures and distributes a
range of chemicals including sodium, chlor-alkali and Octaquest(R), a
biodegradable chelating agent supplied to Procter & Gamble, which is used in
several European laundry products. In 1997, the Company had net sales of $539.1
million and pro forma EBITDA of $240.8 million. The Company has its
administrative headquarters and principal manufacturing site in Ellesmere Port
(Cheshire, U.K.) with subsidiaries in Europe, Africa and North America. The
Company employed 1,419 employees worldwide as of December 31, 1997.
Worldwide use of TEL has declined since 1973 following the enactment of the
U.S. Clean Air Act in 1970 and similar legislation in other countries and
increasing pressure from legislators and environmental groups. Usage of TEL is
expected to continue to decline and the Company's corporate objective is to
optimize the cash flows from sales of TEL in order to repay debt and return
value to its stockholders by (i) the repurchase of stock and/or the payment of
cash dividends and (ii) the development of its Petroleum Specialties and
Performance Chemicals businesses. To achieve its corporate objective, the
Company's strategy is to: (i) manage profitably the decline of the TEL market
through the implementation of cost control initiatives and the provision of
additional technical and environmental support for customers; (ii) expand the
Petroleum Specialties and Performance Chemical businesses through the
development of core competencies, product innovation and enhanced focus on
satisfying customers and market needs; (iii) efficiently manage its operations
and manufacturing sites consistent with the decline of TEL demand and the growth
of petroleum specialty and performance chemicals products, and (iv) seek, where
feasible, synergistic opportunities through joint ventures, alliances,
collaborative arrangements or acquisitions.
REASONS FOR THE DISTRIBUTION
In July 1997, Great Lakes announced its intention to spin off its Petroleum
Additives Business Unit to its stockholders, thereby creating Parent as a new
independent public company. The Issuer is an indirect wholly owned subsidiary of
Parent.
Management believes that, as an independent company, the Company will be
able to anticipate and respond to its market conditions faster and more
effectively and will also be able to better motivate its employees to execute
its business strategies by more closely aligning its compensation and incentive
programs with the unique opportunities and challenges presented by its business.
Consequently, it is believed that the Company's management team will be better
able to develop and implement a plan to maximize cash flow and earnings from the
TEL business and also to grow the non-TEL portions of the Company.
44
<PAGE> 52
COST REDUCTION INITIATIVES
Since January 1, 1996, the Company has assembled an experienced senior
management team (see "Management--Executive Officers") which has effectively
implemented a number of cost-reduction measures focused on maintaining profit
margins of TEL, including (i) a 29% reduction of the work force in the U.K.
resulting in estimated annual payroll savings of $25 million, (ii) the closure
of two foreign manufacturing facilities and (iii) an improved safety record
evidenced by a 40% reduction in lost time accidents.
The Company has developed a plan for downsizing manufacturing capacity at
its Ellesmere Port facility as demand for TEL continues to decline. The TEL
manufacturing plant consists of multiple parallel autoclaves housed in three
discrete buildings. This design lends itself to the sequential shutdown of
operating plants and the progressive reduction of fixed costs as demand
declines. The shutdown plan capitalizes on the experience gained by management
from prior plant closures.
LEAD ALKYLS BUSINESS
INDUSTRY OVERVIEW
TEL, the most significant of the Company's products, accounted for
approximately 82% (or $442 million) of the Company's 1997 sales. TEL was first
developed in 1928 and introduced into the European market for internal
combustion engines to boost octane levels in gasoline allowing it to burn more
efficiently and eliminating engine knock. TEL remains the most cost-effective
octane enhancer for motor gasoline and has the added benefit of acting as a
lubricity aid, reducing engine wear. This product is supplied to customers in
various blends. TEL is used as a gasoline additive in various concentrations,
usually between 0.1 and 0.4 gPb/liter dosage, depending on the intrinsic nature
of the base fuel and the targeted octane number.
While TEL remains the most cost-effective and energy-efficient additive
from an octane-boosting perspective, management expects a steady decline in
worldwide demand for TEL on the basis of increasing pressure from regulators and
environmental groups regarding the alleged harmful effects on human health of
leaded gasoline. Additionally, leaded gasoline undermines the effectiveness of
catalytic converters, which are increasingly being used to reduce automobile
exhaust emissions. Environmental agencies and the World Bank are also advocating
the elimination of TEL in automotive gasoline. As a result, many countries have
passed legislation which has resulted in either the complete phaseout of leaded
automotive gasoline or the establishment of a timetable for its phaseout. An
exception to the overall declining consumption of TEL is for piston engine
aviation gasoline, where only TEL provides the necessary performance levels for
this small market.
The following chart sets forth estimated annual worldwide use of gasoline
and leaded gasoline, respectively, for the periods noted based on an analysis by
a recognized industry expert (in millions of metric tons):
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Gasoline Demand............ 739 741 737 745 751 768 784 805
Leaded Gasoline.................. 317 300 271 249 228 209 183 166
TEL equivalent usage............. 0.23 0.20 0.18 0.17 0.14 0.13 0.11 0.10
</TABLE>
- ---------------
Source: Chem Systems, Ltd.
Despite regulatory pressures to reduce the use of TEL, the Company believes
there are a number of factors which may prolong the use of leaded gasoline, and
therefore the market for TEL. First, it is costly for refineries to switch their
gasoline production process to unleaded gasoline. Studies undertaken by the
World Bank and others estimate that upgrading an average refinery to nonleaded
gasoline production would require approximately $100 million in capital
expenditures,
45
<PAGE> 53
which equals approximately $.03-.08 per gallon. Because upgrading some
refineries may not be economically justifiable, these refineries may decide to
continue operating until reduced demand for leaded gasoline forces their
closure. Second, there are significant costs and delays in converting
automobiles and gasoline stations to accommodate the increased use of unleaded
fuels.
The Company believes these factors may slow the rate of decline in the
consumption of leaded gasoline, especially in the Middle East, Southeast Asia
and Africa where the proportion of unleaded gasoline to leaded gasoline is very
low and where TEL phaseout legislation has not generally been introduced.
Moreover, even in Western Europe, where legislation mandating a leaded gasoline
phaseout by year 2000 exists, extensions have been applied for by Italy, Greece,
Spain and Portugal.
The following chart shows the decline of leaded gasoline sales as a
percentage of total automobile gasoline sales by region from 1990 to 1996:
<TABLE>
<CAPTION>
ESTIMATE OF LEADED
GASOLINE SALES
AS PERCENTAGE OF
TOTAL GASOLINE SALES
--------------------
1990 1996
----- -----
<S> <C> <C>
Europe...................................................... 80% 41%
Latin America............................................... 71 35
Asia........................................................ 53 30
Africa...................................................... 100 93
Middle East................................................. 100 94
</TABLE>
- ---------------
Source: Chem Systems, Ltd.
The decline in TEL volume since 1990 has averaged approximately 12% per
annum, and management believes that TEL volume will continue to decline at a
rate of between 10% and 15% per year, although, because of the uncertain
regulatory environment surrounding TEL, the Company is unable to estimate with
any degree of certainty the rate at which TEL is likely to decline in the
future.
While management believes that TEL is the most cost-effective octane
enhancer, the Company is currently exploring, both through its own research
efforts and in collaborative ventures, other octane enhancing additives for
motor gasoline. Although these alternatives, to date, have proven less effective
and more expensive than TEL, they do not present the environmental problems
associated with TEL.
COMPETITION
The Company has three primary competitors. Alcor and Syntez also
manufacture TEL, while Ethyl purchases its requirements, principally from the
Company pursuant to two long-term wholesale supply contracts. See "--Ethyl
Agreements." Management estimates the market shares of the Company and its
principal competitors in 1997 were as follows:
<TABLE>
<CAPTION>
SALES TO REFINERIES TEL MANUFACTURE
------------------- ---------------
<S> <C> <C>
Octel............................................ 59% 80%
Ethyl............................................ 21 --
Alcor............................................ 11 11
Syntez........................................... 9 9
</TABLE>
Factors influencing TEL customers' purchasing decisions include price,
quality, reliability and service. While the Company competes on each factor,
management believes the Company has the following advantages: (i) the Company is
the only manufacturer of TEL which markets and
46
<PAGE> 54
distributes on a global basis (e.g., the Company can supply in bulk, ISO
containers and drums globally), which is important for multisited global oil
companies, (ii) the Company has a full set of support and auxiliary services for
environmental, decommissioning and refinery assistance, which is not offered by
all of its competitors, and (iii) the Company provides technical support to oil
companies and individual refineries evaluating the economics of dosage levels of
TEL and alternative octane enhancers tied to specific refinery streams and
blends.
CUSTOMERS
Sales of TEL by the Company are made either to the retail refinery market
or to Ethyl pursuant to two long-term wholesale supply agreements. In 1997, 70%
of Octel's sales volume was directed to retail refinery customers, with the
remaining 30% of its sales being made to Ethyl. The Company's retail customers
consist of approximately 200 independent, state or major oil company-owned
refineries located throughout the world. Within the retail market, refineries
owned or managed by British Petroleum, Mobil Oil and Texaco Oil, three former
partners in Octel Associates and former shareholders of AOC (the "Vendor
Partners"), are entitled to profit-participation payments under the terms of the
Octel Sale and Purchase Agreement, dated February 21, 1989, based upon their
ongoing purchases of TEL from the Company. See Note 4 to Combined Financial
Statements. Selling prices to other refineries are principally negotiated under
long-term supply agreements, with varying prices and terms of payment.
ETHYL AGREEMENTS
The Company supplies Ethyl on a wholesale basis with substantial quantities
of TEL for resale to customers under two separate long-term supply agreements at
prices adjusted annually through agreed formulas. Under one of these agreements
(the "U.S. TEL Supply Agreement"), effective January 1, 1998, Ethyl purchases
its requirements for resale to its customers in the United States from the
Company. In the other agreement, dated December 22, 1993, Ethyl purchases TEL
for resale to customers located outside the United States. The maximum
quantities of TEL Ethyl can purchase under the non-U.S. agreement is 35,000
metric tons per year through 1998 and, thereafter, is set at a fixed percentage
of the Company's annual production capacity. Pursuant to a Bulk Transportation
Agreement, dated March 25, 1994, Ethyl supplies the Company with all of its bulk
transportation requirements for TEL. The Company, Ethyl and Great Lakes recently
reached an agreement with FTC staff with respect to the terms of a consent
decree governing sales of TEL by the Company to Ethyl for resale in the United
States market. The agreement was provisionally approved by the FTC on March 30,
1998, and received final approval on June 24, 1998. The Company has taken steps
to comply with its provisions by negotiating and putting into effect a new long
term supply contract with Ethyl governing the supply of TEL to Ethyl for resale
in the U.S. market. It should be noted that the entire U.S. TEL market is
relatively small (approximately 1,500 metric tons per annum) and only a small
portion of the Company's sales to Ethyl are directed at the U.S. market. Neither
the terms of the proposed consent decree nor the execution of the new contract
with Ethyl is expected to have a material adverse effect on the Company's
business, results of operation or financial condition. See "Risk Factors--FTC
Proceeding" and "--Legal Proceedings."
The Company entered an agreement dated September 29, 1998 to take effect
October 1, 1998 with Ethyl to market and sell TEL (the "TEL Marketing
Agreement"). Under the TEL Marketing Agreement, Ethyl will be responsible for
marketing, sales and bulk distribution services. The TEL Marketing Agreement
covers certain world areas except North America and the European Union. The
Company believes that significant cost savings can be realized through more
efficient marketing, sales and distribution of TEL in certain areas of the
world.
47
<PAGE> 55
PETROLEUM SPECIALTIES BUSINESS
The Company's Petroleum Specialties business, with revenues in 1997 of
$62.6 million, develops, produces and markets a range of specialty products used
as fuel additives. These fuel additives fall into three main product groups
within the Petroleum Specialties business. Diesel octane improvers aid the
efficient combustion of fuel in diesel engines. Detergent-based packages for
both gasoline and diesel fuels inhibit formation of deposits in engines,
improving engine efficiency. Functional products, such as corrosion inhibitors,
improve the physical and/or chemical properties of fuels allowing refineries to
be operated safely and efficiently and fuel marketers to meet market
specifications.
The global market for fuel additives (excluding TEL) is approximately $1
billion. Usage of fuel additives is expected to grow over the next five to ten
years driven primarily by legislation placing increasingly stringent limitations
on exhaust emissions. The Company's strategy is to grow this business over time,
utilizing its global sales and distribution network, its strong technical
development capability and its knowledge of current and future customer needs.
The customers of the Petroleum Specialties business are comprised of
multinational oil companies and fuel retailers. Traditionally, a large portion
of the total market was captive to oil companies which had fuel additives
divisions providing supplies directly to their respective refinery customers. As
a result of recent corporate restructurings and various mergers, joint ventures
and other collaborative arrangements involving downstream refining and marketing
operations, the tied supply arrangements between oil companies and their captive
fuel additive divisions have been weakened and many refineries are increasingly
looking to purchase their fuel additive requirements on the open market. This
trend is creating new opportunities for independent additive marketers such as
the Company.
The business operates in a competitive environment with its main
competitors being large oil and chemical companies, such as Lubrizol, Ethyl,
BASF, Chevron and Exxon. No one Company holds a dominant overall market share.
The Company considers its competitive strengths are in its strong technical
development capability, independence from the major oil companies and its
strong, long-term relationships with refinery customers in the TEL market which
provide synergies with the Petroleum Additives business.
PERFORMANCE CHEMICALS BUSINESS
The Company's Performance Chemicals business, with 1997 sales of $34.5
million, is comprised of the following two distinct product lines:
INDUSTRIAL AND INTERMEDIATE CHEMICALS, which accounted for approximately
35% of total Performance Chemical sales in 1997, consists of a small range of
industrial chemicals comprising metallic sodium and chlorine derivatives
(caustic liquor, chlorine, sodium hypochlorite). These products are either
precursors or by-products of the TEL manufacture and are expected to be phased
down consistent with the phase down of TEL. The Company's strategy with respect
to these industrial chemicals is to optimize profits consistent with maximizing
overall corporate financial performance at its Ellesmere Port facility.
SPECIALTY CHEMICALS, which accounted for approximately 65% of total sales
of Performance Chemicals in 1997, is currently comprised of Octaquest(R). The
Company, in conjunction with Proctor & Gamble, its primary customer, has
developed and patented a manufacturing process for Octaquest(R), a biodegradable
chelating agent developed for use in laundry products. The Company believes that
Octaquest(R) has potential for wider application in pulp and paper, cosmetics,
personal care, photographic and other industries. The Company is seeking to
expand its Specialty Chemicals business and is currently evaluating
opportunities to implement this strategy. Growth will be sought from a
combination of internal and external sources, including the in-house development
of new products through research and development, exploitation of current
products into new markets,
48
<PAGE> 56
licensing agreements, custom synthesis of specialty products and acquisitions of
products and/or businesses.
RAW MATERIALS
The Company's major purchased raw materials are lead, ethylene and salt,
all of which are commodities that can be readily obtained from a number of
different sources. While changes in the prices of raw materials will have an
impact on the Company's costs, which the Company may or may not be able to
reflect fully in its pricing structure, they are unlikely to have a significant
impact on the profitability of operations.
TECHNOLOGY
The Company's research and development facilities are located at Ellesmere
Port, U.K., while its advanced fuel testing facility to support the Lead Alkyls
and Petroleum Specialties businesses is located at Bletchley, U.K. The Company's
research and development activity has been, and will continue to be, focused
primarily on development of new products and formulations for the Petroleum
Specialties and the Performance Chemicals businesses. Technical customer support
is also provided for the TEL business. Expenditures to support research,
product/application development and technical support services to customers were
$3.8 million, $5.6 million and $5.6 million in 1997, 1996 and 1995,
respectively. The Company considers that its strong technical capability
provides it with a significant competitive advantage. In the last three years,
the Petroleum Specialties business has developed new detergent, lubricity and
combustion improver products, in addition to the introduction of several new
cost effective fuel additive packages. A new patented process for manufacturing
Octaquest(R) has enabled the Company to enter into a new market in the
performance chemicals area.
PATENTS AND INTELLECTUAL PROPERTY
The Company has a portfolio of trademarks and patents, granted and in the
application stage, covering products and processes. These trademarks and patents
relate primarily to the Petroleum Specialties and the Performance Chemicals
businesses, in which intellectual property forms a significant part of the
Company's competitive strength. The majority of these patents were developed by
the Company. Most patents have more than ten years life remaining. The Company
also holds a license for the manufacture of fuel detergents. The Company has
trademark registrations for the use of the name "Octel(R)" and for the Octagon
device in Classes 1 and 4 of the "International Classification of Goods and
Services for the Purposes of the Registration of Marks" in all countries in
which its has a significant market presence except for the U.S. in respect of
which the appropriate applications have been made. Octel also has trademark
registrations for Octaquest(R).
Octel America Inc., a subsidiary of the Company, has trademarks for
Stadis(R), an aviation and ground fuel conductivity improver, Ortholeum(R), a
lube oil additive antioxidant and metal deactivator, Ocenol(R), an antifoam for
refinery use, and Valve Master(R), a valve seat recession additive. The Company
does not consider its business as a whole to be dependent on any one trademark,
patent or license.
HEALTH, SAFETY AND ENVIRONMENTAL MATTERS
The Company is subject to Environmental Laws in all of the countries in
which it does business. The principal Environmental Laws to which the Company is
subject in the U.K. are the Environmental Protection Act 1990, the Water
Resources Act 1991, the Health and Safety at Work Act 1974 and regulations and
amendments thereto. Management believes that the Company is in material
compliance with all applicable Environmental Laws, and does not anticipate that
the continued costs of compliance with Environmental Laws will be material.
Nevertheless, there can be no assurance
49
<PAGE> 57
that changes in existing Environmental Laws, or the discovery of additional
liabilities associated with the Company's current or former operations, will not
have a material adverse effect on the Company's business, results of operations
or financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Environmental Matters and Plant Closures."
HUMAN RESOURCES
The Company's workforce at December 31, 1997 consisted of 1,419 employees,
of which 1,279 were in the U.K. Approximately half of the Company's employees in
the U.K. are represented by unions, including the Transport and General Workers
Union and the Amalgamated Engineering and Electrical Union.
The Company has a major employee communication program to help its
employees understand the business issues surrounding the Company, the TEL
business and the corporate downsizing program that has been implemented to
respond to declining TEL demand. Regular monthly briefings are conducted by line
managers where Company-wide and departmental issues are discussed. More formal
communication takes place with the trade unions which the Company recognizes for
negotiating and consultative purposes.
Management believes that the communication program has been highly
successful and has contributed to maintaining maximum output at Ellesmere Port
while at the same time achieving a reduction of 525 employees in the Company's
U.K. workforce since January 1, 1996. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Environmental Matters and
Plant Closures." The Company has implemented an extensive retraining program
which will enable further improvements in the productivity and flexibility of
the Company's U.K. workforce. A major change in working practices was introduced
during 1996 whereby the workforce began an annualized hours contract, monthly
pay and staff status. This program reflects the cooperative employee relations
climate which exists at Ellesmere Port. A further example of the positive
working relationship is the signing of a two-year salary contract on January 1,
1998, which fixes wage rates and gives predictability of employment costs
through January 1, 2000.
PROPERTIES
A summary of the Company's principal facilities is shown in the following
table. Each of these properties is owned by the Company, except where otherwise
noted:
<TABLE>
<CAPTION>
LOCATION PRINCIPAL OPERATIONS
-------- --------------------
<S> <C>
Newark, Delaware, U.S.(1)...... Octel Corp. Headquarters; Petroleum Specialties regional office
London, U.K.(1)................ Sales & Marketing
Ellesmere Port, U.K............ AOC Headquarters; Business Teams;
Manufacturing; Research & Development;
Administration
Bletchley, U.K................. Fuel Technology Center
</TABLE>
- ---------------
(1) Leased property
The Ellesmere Port facility, which includes 94 acres of land houses the
administrative headquarters and offices for AOC, Research and Development
laboratories and all the Company's manufacturing facilities. These manufacturing
facilities consist of a chlorine plant (capacity-40,000 metric tons per annum),
a sodium plant (capacity-24,000 metric tons per annum), an ethyl chloride plant
(capacity-44,000 metric tons per annum), an EDDS plant for the manufacture of
Octaquest(R) (capacity-2,200 metric tons per annum), a detergents plant for the
Petroleum Specialties business (capacity-5,000 metric tons per annum) and Lead
Alkyls plants for the manufacture of TEL (capacity-90,000 metric tons per
annum).
50
<PAGE> 58
LEGAL PROCEEDINGS
In December 1997, the Company, Great Lakes and the FTC staff reached an
agreement with respect to the terms of a consent decree governing sales of TEL
by the Company to Ethyl for resale in the United States market, which agreement
was provisionally approved by the FTC on March 30, 1998, and received final
approval on June 24, 1998. The consent decree does not constitute an admission
of wrongdoing on Great Lakes' or the Company's part and provides, among other
things, that the Company will continue to supply Ethyl with its requirements of
TEL for resale in the United States market in accordance with the U.S. TEL
Supply Agreement, effective January 1, 1998. Under the order, both the Company
and Ethyl are required to provide prior notice to the FTC with respect to any
changes or modifications to the U.S. TEL Supply Agreement, as well as with
respect to certain transactions. The Company has taken steps to comply with the
order's provisions by negotiating and putting into effect a new long term supply
contract with Ethyl governing the supply of TEL to Ethyl for resale in the U.S.
market. It should be noted that the entire U.S. TEL market is relatively small
(approximately 1,500 metric tons per annum) and only a small portion of the
Company's sales to Ethyl are directed at the U.S. market. Neither the terms of
the consent decree nor the execution of the new contract with Ethyl is expected
to have a material adverse effect on the Company's business, results of
operation or financial condition. See "--Lead Alkyls Business--Ethyl Agreements"
and "Risk Factors--FTC Investigation."
Other than the above-referenced FTC investigation, the Company is not party
to any legal proceedings or administrative actions. In the opinion of the
Company's management, there are no legal proceedings, pending or threatened,
which could have any material adverse effect on the results of operations or
financial condition of the Company or its ability to conduct its operations as
presently conducted.
CORPORATE STRUCTURE
The following diagram presents a summary of the Company's corporate
structure. The Issuer and the Guarantor are holding companies that conduct all
of their business through their direct and indirect subsidiaries. The Company's
principal operating subsidiary is the Octel Associates partnership which held
approximately 42% of the total assets of the Company as of June 30, 1998.
51
<PAGE> 59
MANAGEMENT
DIRECTORS
The Board of Directors of the Issuer consists of two persons, Dennis J.
Kerrison and Alan G. Jarvis, each of whom has been elected for a term expiring
at the 1999 Annual Meeting of Stockholders and until his successor shall have
been elected and qualified.
The Board of Directors of Parent consists of seven persons, each of whom
will be elected for a term expiring at the annual meeting of stockholders
indicated below and until his successor shall have been elected and qualified.
Each of the persons not currently on Board have agreed to serve as directors of
the Parent, effective as of the Distribution Date. The following table sets
forth information concerning the individuals who are serving as directors of
Parent following the Distribution:
<TABLE>
<CAPTION>
TERM EXPIRES AT
NAME AGE ANNUAL MEETING IN
---- --- -----------------
<S> <C> <C>
Dr. Robert E. Bew.......................................... 61 2001
Dennis J. Kerrison......................................... 53 2001
Martin M. Hale............................................. 57 2001
Thomas M. Fulton........................................... 64 1999
James Puckridge............................................ 62 2000
Dr. Benito Fiore........................................... 60 2000
Charles M. Hale............................................ 62 1999
</TABLE>
- ---------------
Set forth below is a brief description of the present and past business
experience of each of the persons who will serve as directors of Parent:
DR. ROBERT E. BEW serves as Non-Executive Chairman of Octel Corp. He is
currently Chairman of both European Process Industries Competitiveness Centre
Ltd., an organization specializing in increasing competitiveness in process
industries and The Teesside Chemical Initiative (TCI) Ltd., which focuses on
building and improving investment and competitiveness of the Chemical sector in
the region. He spent 35 years with ICI most recently as CEO of ICI's Chemicals &
Polymer division in Teeside, U.K. Previously he served as head of Corporate
Planning and between 1995 and 1997 was Chairman of Phillips Imperial Petroleum
Ltd., a refinery JV between ICI and Phillips.
DENNIS J. KERRISON serves as President and Chief Executive Officer of Octel
Corp. and Managing Director, AOC. Mr. Kerrison also serves as a Managing
Director of the Issuer. From May 1996 to the Distribution Date, Mr. Kerrison was
the Managing Director of AOC and a Group Vice President and Officer of Great
Lakes. Between 1992 and 1996 he was a Director and Officer of Hickson
International plc, latterly as Chief Executive Officer. Prior to this he worked
in senior management roles for Specialty Chemical Companies, in Europe and the
United States notably, Rhone Poulenc, Rohm & Haas and RTZ Chemicals.
MARTIN M. HALE has been the Executive Vice President and Director of
Hellman, Jordan Management Co., Inc., a registered investment advisor
specializing in asset management and a wholly owned subsidiary of United Asset
Management Company since 1983. Prior to 1983, he was President and Chief
Executive Officer of Marsh & McClennan Asset Management Company. He also serves
as a Director of the Student Conservation Association; as Chairman of the Board
of Governors of the School of The Museum of Fine Arts, Boston; and as a Trustee
of The Museum of Fine Arts. Mr. Hale has been Chairman of the Board of Directors
of Great Lakes since 1995 and has served on the Great Lakes Board of Directors
since 1978.
THOMAS M. FULTON serves as President and Chief Executive Officer of
Landauer, Inc., a provider of radiation monitoring services. Prior to joining
Landauer in 1978, his career included various management positions at Union
Carbide Corporation, BASF Corporation and ICN Pharmaceuticals,
52
<PAGE> 60
Inc. Mr. Fulton serves on the Boards of The Advocate South Suburban Hospital and
the Bethel Community Facility and as Chairman of the Board of Directors of the
Chicago Theological Seminary. Mr. Fulton is currently a Director of Great Lakes
and has served on the Great Lakes Board of Directors since 1995.
JAMES PUCKRIDGE is Chairman of Elf Atochem U.K. Ltd., a position he assumed
in 1990. Prior to that he was Managing Director of the same organization. He is
also Chairman of Ato Findley U.K. Limited and Non-Executive Director of Thomas
Swan & Co. Ltd., a U.K. specialty chemical company. He serves as a Member of
Council for both the British Plastic Federation and the Chemical Industry
Association where he is Chairman of the General Purpose and Finance Committee.
DR. BENITO FIORE is a Director of A.T. Kearney, the consultancy company
specializing in the chemical industry. Between 1990 and 1995 he was Chief
Executive Officer of Enichem U.K. Ltd. Prior to this he held a number of
directorships in the Montedison Group working in Denmark, Canada, Italy and the
U.S. He is a Member of Council of the Italian Chamber of Commerce and a member
of the Accademia Italian della Cucina.
CHARLES M. HALE is Chairman of Donaldson, Lufkin & Jenrette International,
the London based subsidiary of Donaldson, Lufkin & Jenrette Inc., a major New
York based investment bank. Prior to 1984, he was a general partner of Lehman
Brothers Kuhn Leob and Managing Director of A.G. Becker International. Mr. Hale
is a graduate of Stanford University and Harvard Business School.
A brief description of the present and past business experience of Alan G.
Jarvis is set forth below under the heading "-- Executive Officers."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Parent currently intends to establish an
Executive Committee, an Audit Committee, a Finance Committee, a Compensation
Committee and an Environmental, Safety and Health Committee.
The Executive Committee will have all the powers and authority of the Board
of Directors except those powers specifically reserved to the Board of Directors
by Delaware law, the Certificate of Incorporation or the By-laws of Parent.
The Audit Committee will, among other things, recommend independent
certified public accountants; review the scope of the audit examination,
including fees and staffing; review the independence of the auditors; review and
approve non-audit services provided by the auditors; review findings and
recommendations of auditors and management's response; review the internal audit
and control function; and review compliance with the Company's ethical business
practices policy.
The Finance Committee will review and assess the financial affairs of the
Company and present recommendations for action to the Board of Directors.
The Compensation Committee will review management compensation programs,
approve compensation changes for senior executive officers, review compensation
changes for senior management, and administer management stock plans.
The Environmental, Safety and Health Committee will assess the Company's
environmental, safety and health policies and performance, and will make
recommendations to the Board of Directors regarding the promotion and
maintenance of standards of compliance and performance.
COMPENSATION OF DIRECTORS
Non-employee directors of Parent receive an annual fee of $23,000. The
Chairman of the Board, who is not employed by the Company, receives an annual
fee of $110,500. A Committee
53
<PAGE> 61
Chairman, not employed by the Company, receives an additional fee of $5,000 per
year. Non-employee directors are paid $1,650 for attendance at each meeting of
the Board of Directors and $825 for attendance at each committee meeting. A
percentage of the annual fee may be paid in the form of a stock grant, as
established by the Compensation Committee. No directors' fees is paid to
directors who are also employees of the Company. All of the directors of the
Issuer are employed by Parent and do not receive additional compensation for
serving as directors. Directors will also be reimbursed for all reasonable
travel and other expenses of attending meetings of the Board or a Committee
thereof.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the persons
who are serving as executive officers of Parent and the Issuer. Each such person
was elected to the indicated office with Parent or the Issuer on or prior to the
closing of the Initial Offering and serves at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
Dennis J. Kerrison................... 53 President and Chief Executive Officer, Octel Corp.
and Managing Director of AOC and the Issuer
Alan G. Jarvis....................... 48 Chief Financial Officer, Octel Corp. and Finance
Director of AOC and the Issuer
Graham M. Leathes.................... 48 Company Secretary and General Counsel, Octel Corp.,
AOC and the Issuer
Steve W. Williams.................... 42 Operations Director, AOC
Robert A. Lee........................ 50 Commercial Director, Lead Alkyls, AOC
Geoff J. Hignett..................... 47 Commercial Director, Speciality Chemicals, AOC
H. Alan Hanslip...................... 50 Human Resources Director, AOC
Richard T. Shone..................... 49 Safety, Health & Environment Director, AOC
</TABLE>
Set forth below is a description of the position presently held with the
Company by each executive officer as well as positions held prior to the
Distribution.
DENNIS J. KERRISON--See description above under the heading "--Directors."
ALAN G. JARVIS serves as Chief Financial Officer of Octel Corp. and Finance
Director of AOC and the Issuer. From October 1997 until the Distribution Date,
Mr. Jarvis served as Finance Director for AOC. Prior to his tenure with AOC, Mr.
Jarvis served from 1995 to 1997 as Group Finance Director of the Power Plant
Group of GEC Alsthom, an Anglo-French joint venture in the power generation
business worldwide. From 1987 to 1994, Mr. Jarvis served at different times as
Property Director, Group Finance Director and Group Financial Controller for
Simon Engineering PLC, a British engineering company specializing in hydraulic
platforms, process plant contracting and chemical storage.
GRAHAM M. LEATHES serves as Corporate Secretary and General Counsel for
Octel Corp., AOC and the Issuer. From July 1989 until the Distribution Date, Mr.
Leathes served in this position for AOC.
STEVE W. WILLIAMS serves as Operations Director of AOC. From November 1995
to the Distribution Date, Mr. Williams served as Director of Manufacturing for
AOC. Prior to his tenure with AOC, Mr. Williams served for 18 years at the
Fawley Oil Refinery of Exxon/Esso, most recently as Operations Manager.
H. ALAN HANSLIP serves as Human Resources Director of AOC. From November
1996 to the Distribution Date, Mr. Hanslip served as Director, Human Resources,
for AOC. Prior to his tenure with AOC, Mr. Hanslip served from 1991 to 1996 as
Director of Human Resources for British Nuclear Fuels, plc.
54
<PAGE> 62
ROBERT A. LEE serves as Commercial Director, Lead Alkyls of AOC. From
February 1997 to the Distribution Date, Mr. Lee served as Director, Supply
Chain, for AOC. Prior to his tenure with AOC, Mr. Lee spent 27 years with Dow
Chemical Corporation, a multinational chemical and petrochemical manufacturer
most recently as Marketing and Sales Director of its worldwide hydrocarbon
business based in Zurich, Switzerland.
GEOFF J. HIGNETT serves as Commercial Director, Specialty Chemicals of AOC.
From February 1997 to the Distribution Date, Dr. Hignett served as
Director--Petroleum Specialties and Acting Director--Corporate Development for
AOC. Prior to his tenure with AOC, Dr. Hignett served from 1992 to 1997 as
Director of Technology & Business and Director of Water Additives for the
Process Additives Division of FMC Corporation, a multinational engineering,
manufacturing and chemicals concern.
RICHARD T. SHONE serves as Safety, Health & Environment Director of AOC.
From May 1997 until the Distribution Date, Mr. Shone served in this position for
AOC. Prior to his tenure with AOC, Mr. Shone was employed from 1986 to 1997 by
Laporte PLC, an international speciality chemicals company where he served as
General Manager--Group Safety, Hazards & Environment.
COMPENSATION OF EXECUTIVE OFFICERS
All of the information set forth in the following tables reflects
compensation earned based upon services rendered to Great Lakes by the Company's
Chief Executive Officer and the four other most highly paid executive officers
of the Company. The services rendered by such individuals to Great Lakes were,
in some instances, in capacities not equivalent to those positions in which they
will serve for the Company. Therefore, these tables do not reflect the
compensation which will be paid to the executive officers of Parent. The
following tabulation shows compensation for services rendered in all capacities
to the Petroleum Additives Business Unit of Great Lakes and its subsidiaries
during 1997 by the Chief Executive Officer and the next four highest paid
executive officers (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
------------------------------ OTHER ANNUAL OPTIONS GRANTED
NAME AND SALARY PROFIT SHARING COMPENSATION (# NUMBER
PRINCIPAL POSITION (1) CASH (BONUS)(1)(2) (3) OF SHARES)
------------------ -------- ------------------ ------------ ---------------
<S> <C> <C> <C> <C>
Dennis J. Kerrison........ $287,966 $129,665 -- 10,000
Steve W. Williams......... 152,212 44,848 -- 2,000
Geoff J. Hignett.......... 137,264 31,598 46,897(4) 1,200
Graham M. Leathes......... 130,106 25,299 -- 1,000
Robert A. Lee............. 114,090 26,534 -- 1,000
</TABLE>
- ---------------
(1) Converted from pounds sterling to U.S. dollars based on an exchange rate of
$1.6455:L1.00 on December 31, 1997.
(2) Bonus paid in 1998 for services rendered in 1997.
(3) Amounts paid do not exceed $50,000 or 10% of salary plus bonus for any of
the Named Executive Officers, except Mr. Hignett.
(4) Payment of starting bonus.
55
<PAGE> 63
STOCK OPTIONS TABLE
The following table shows for the Named Executive Officers the specified
information with respect to grants of options to purchase Great Lakes Common
Stock ("Great Lakes Options") during 1997.
OPTION GRANTS IN 1997(1)
<TABLE>
<CAPTION>
INDIVIDUAL POTENTIAL REALIZABLE
GRANTS % OF VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF
OPTIONS GRANTED TO EXERCISE OR STOCK PRICE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION APPRECIATION FOR
NAME (#)(2) FISCAL YEAR ($/SH)(3) DATE OPTION TERM(4)(5)
---- ------- ------------- ----------- ---------- ---------------------
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Dennis J. Kerrison............. 10,000 2.18% $42.50 2/10/07 267,750 675,750
Steve W. Williams.............. 2,000 .44% 42.50 2/10/07 53,550 135,150
Geoff J. Hignett............... 1,200 .26% 42.50 2/10/07 32,130 81,090
Graham M. Leathes.............. 1,000 .22% 42.50 2/10/07 26,775 67,575
Robert A. Lee.................. 1,000 .22% 42.50 2/10/07 26,775 67,575
</TABLE>
- ---------------
(1) See "Treatment of Great Lakes Employee Stock Options in the Distribution"
for a description of the effect of the Distribution on such options.
(2) All options were granted pursuant to the 1993 Great Lakes Employee Stock
Compensation Plan and have a term of 10 years. Each Named Executive Officer
received one option grant in 1997. These options vest and become exercisable
in cumulative 33% installments commencing no less than one year from date of
grant, with full vesting occurring on the earlier of the third anniversary
date or on the retirement of an employee over 62 years of age.
(3) The exercise price may be paid for by remitting cash or already owned shares
of common stock of Great Lakes, or by a combination thereof.
(4) The potential realizable value portion of the foregoing table indicates the
value that might be realized upon exercise of options immediately prior to
the expiration of their term, assuming the specified amount of compounded
rates of appreciation on Great Lakes Common Stock over the term of the
options. This calculation does not take into account that any shortfall
between the current stock price and the option exercise price will have to
be made up before any value can be realized.
(5) Absent an appreciation in stock price over the option exercise price, the
optionee will not realize any gain. A 0% increase in stock price will result
in an option value of $0.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table shows for each Named Executive Officer the specified
information with respect to exercises of Great Lakes Options during 1997 and the
value of unexercised options at the end of 1997.
AGGREGATED GREAT LAKES OPTION EXERCISES DURING 1997
AND 1997 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED OPTIONS
SHARES UNDERLYING UNEXERCISED IN THE-MONEY AT
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END($)
ON REALIZED --------------------------- ---------------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
---- -------- -------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dennis J. Kerrison... -- -- -- 17,000 -- $23,750
Steve W. Williams.... -- -- -- 3,600 -- $ 4,750
Geoff J. Hignett..... -- -- -- 1,200 -- $ 2,850
Graham M. Leathes.... -- -- 1,370 1,760 -- $ 2,375
Robert A. Lee........ -- -- -- 1,000 -- $ 2,375
</TABLE>
- ---------------
(1) Based on a closing price of $44.875 as reported on the NYSE on December 31,
1997 and after deduction of the exercise price of each such option
multiplied by the number of shares covered by each such option.
56
<PAGE> 64
EMPLOYMENT AGREEMENTS
Currently, each of the Named Executive Officers is party to a contract of
employment between such officer and AOC. The contracts provide for salary,
holidays and vacations and perquisites. Each of the Named Executive Officers is
entitled to 30 days of annual vacation, private health insurance, permanent
health insurance and a car. Additionally, other than with respect to Mr.
Kerrison, each agreement provides that in the event of a takeover or fundamental
restructuring of the business which results in a loss of the officer's position,
such officer is entitled to two years' salary plus 25% plus approximately
U.S.$49,365. In the event of a qualifying termination following a change of
control, Messrs. Williams, Hignett, Leathes and Lee would be entitled to receive
$616,200, $572,600, $440,171 and $594,400, respectively, pursuant to such
agreements.
COMPENSATION UNDER RETIREMENT PLANS
The following table sets forth the estimated annual benefits payable upon
retirement to Messrs. Williams, Hignett, Leathes and Lee, for the specified
compensation and years of service classifications, under the combined formulas
of the Octel Pension Plan, the Octel Top Hat and the Octel Funded Unapproved
Retirement Benefit Plan. The pension benefits are calculated based upon years of
service and "Final Earnings," which is calculated as final base salary or, if
higher, the average base salary for the last three years of service. Mr.
Kerrison's benefits payable under such plans are calculated on the same basis,
but at a 33% higher rate. The amounts shown have been converted from pounds
sterling to U.S. dollars based on an exchange rate of $1.6455:L1.00 on December
31, 1997.
<TABLE>
<CAPTION>
FINAL EARNINGS 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS
-------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$164,550.......................... $20,569 $ 41,138 $ 61,706 $ 82,275 $102,844
246,825.......................... 30,853 61,706 92,971 123,413 154,266
329,100.......................... 41,138 82,275 123,413 164,550 205,688
411,375.......................... 51,422 102,844 154,266 205,688 257,109
493,650.......................... 61,706 123,413 185,119 246,825 308,531
</TABLE>
As of January 1, 1998, the final base salary (converted to U.S. dollars
using the same exchange rate as specified above) and the eligible years of
credited service for each of the Named Executive Officers were as follows: Mr.
Kerrison, $287,963--1 year; Mr. Williams, $162,485--1 year; Mr. Hignett,
$156,745--0 years; Mr. Leathes, $135,309--8 years; and Mr. Lee, $137,240--0
years.
STOCK PLAN
The Company had adopted (i) the Octel Corp. Approved Company Share Option
Plan, (ii) the Octel Corp. Performance Related Stock Option Plan, (iii) the
Octel Corp. Time Restricted Stock Option Plan, (iv) the Octel Corp. Savings
Related Share Option Scheme and (v) the Octel Corp. Profit Sharing Share Scheme
(collectively, the "Stock Plans"), which provides for the grant of various types
of equity-based compensation to employees of the Company. The Stock Plans were
approved by Great Lakes, as sole stockholder of the Company, prior to the
Distribution Date. The Stock Plans are designed to promote the success of the
Company's business by more closely aligning the interests of management and the
Company's stockholders through the provision of equity-based incentives to those
individuals who are or will be responsible for such success.
The total number of shares of Common Stock that may be issued or awarded
under the Stock Plans may not exceed 1,175,000 in the aggregate, subject to
adjustment as described below.
The Stock Plans provide for the granting of options, including "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified stock options, and the
granting of other stock-based awards (collectively,
57
<PAGE> 65
"Awards"). All Awards will be evidenced by an award agreement setting forth the
terms and conditions applicable thereto.
Awards may generally be granted to individuals who are (a) executive
officers, (b) other key employees (including those who are also directors) or
(c) non-employee directors, in each case of the Parent or any of its
subsidiaries.
The Stock Plans are administered by the Board of Directors of the Company,
which may act through its Compensation Committee (such Board of Directors or
committee is referred to herein as the "Plan Administrator"). Eligibility
criteria, the number of participants, and the number of shares subject to Awards
and all other terms and conditions of Awards are determined by the Plan
Administrator.
The following table sets forth the estimated number of restricted stock
units to be granted to certain employees under the Stock Plans within six (6)
months of the Distribution:
<TABLE>
<CAPTION>
NUMBER OF RESTRICTED
NAME STOCK UNITS
---- --------------------
<S> <C>
Dennis J. Kerrison.......................................... 115,071
Alan G. Jarvis.............................................. 50,873
Steve W. Williams........................................... 44,090
Geoff J. Hignett............................................ 40,699
Robert A. Lee............................................... 42,394
H. Alan Hanslip............................................. 32,559
Richard T. Shone............................................ 30,396
Graham M. Leathes........................................... 30,396
All executive officers as a group (8 persons)............... 386,478
All other employees......................................... 46,851
</TABLE>
The restricted stock grant described above has been estimated, based on a
multiple the proposed salaries to be paid to such persons following the
Distribution Date, which salaries will be reviewed and approved by the Board of
Directors of Parent at the time of the Distribution. The actual number of
restricted stock units granted will change depending upon the price of Octel
Common Stock at the time of such grant.
58
<PAGE> 66
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of the outstanding capital stock of the Issuer is owned by Octel
International Ltd., an indirect wholly owned subsidiary of Parent.
Based on information which has been obtained from Great Lakes' records and
a review of statements filed with the Securities and Exchange Commission
pursuant to Sections 13(d) and 13(g) of the Exchange Act with respect to Great
Lakes Common Stock, the following persons are the beneficial owner of more than
5% of the outstanding voting securities of any class of Parent.
<TABLE>
<CAPTION>
PERCENT OF
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES OUTSTANDING
------------------------------------ ---------------- ------------
<S> <C> <C>
T. Rowe Price Associates, Inc.(1)
100 East Pratt Street
Baltimore, Maryland 21202................................... 1,478,245 10.2%
State Farm Mutual Automobile Insurance
Company and Related Entities(2)
One State Farm Plaza
Bloomington, Illinois 61710-0001............................ 1,135,900 7.6%
Jeffrey S. Halis and Related Entities(3)
500 Park Avenue
Fifth Floor
New York, New York 10022.................................... 1,635,600 11.1%
Fidelity Management & Research Company(4)
82 Devonshire Street
Boston, Massachusetts 02109................................. 1,863,985 12.65%
</TABLE>
- ---------------
(1) Based on a Schedule 13G, dated June 10, 1998, filed with the Securities and
Exchange Commission by T. Rowe Price Associates, Inc. ("Price Associates").
These securities are owned by various individual and institutional investors
for which Price Associates serves as investment advisor with power to direct
investments and/or sole power to vote the securities. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities.
(2) Based on a Schedule 13G, dated January 22, 1998, filed with the Securities
and Exchange Commission by State Farm Mutual Automobile Insurance Company.
Each of the following State Farm entities has reported sole voting power and
sole disposition power and disclaims "beneficial ownership" as to all shares
as to which each has no right to receive the proceeds of sale of the
security and disclaims that it is part of a group: State Farm Mutual
Automobile Insurance Company; State Farm Life Insurance Company; State Farm
Investment Management Corporation; and State Farm Insurance Companies
Savings and Thrift Plan for U.S. Employees. State Farm Life Insurance
Company is a wholly owned subsidiary of State Farm Mutual Automobile
Insurance Company. State Farm Investment Management Corporation is a wholly
owned subsidiary of State Farm Fire and Casualty Company which, in turn, is
a wholly owned subsidiary of State Farm Life Insurance Company.
(3) Based on a Schedule 13D dated July 28, 1998 filed with the Securities and
Exchange Commission by Jeffrey S. Halis. As of May 28, 1998, the following
entities controlled by Jeffrey Halis owned securities: Tyndall Partners,
L.P.; Tyndall Institutional Partners, L.P.; Madison Avenue Partners, L.P.;
and Halo International, Ltd. Jeffrey Halis possesses sole power to vote and
direct the disposition of all shares of Octel Corp. owned by each of these
entities.
(4) Based on a Schedule 13G, dated August 10, 1998, filed with the Securities
and Exchange Commission by FMR Corp. These securities are owned by various
individuals and institutional investors for which Fidelity Management &
Research serves as investment advisor with power to direct investments
and/or sole power to vote the securities.
BENEFICIAL OWNERSHIP OF MANAGEMENT
Based upon their respective holdings of Great Lakes Common Stock as of
April 1, 1998, and excluding restricted stock to be granted in connection with
the Distribution, no director or officer of Parent or the Issuer will own
beneficially, as of the Distribution Date, any shares of Octel Common Stock at
such date and all directors and executive officers as a group will beneficially
own less than 1% of the Octel Common Stock outstanding at such date.
59
<PAGE> 67
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For purposes of facilitating an orderly transition on the Distribution Date
to the status of two separate independent companies, Great Lakes, and certain of
its subsidiaries, and Parent, and certain of its subsidiaries, have entered or
will enter into various agreements and relationships, including those described
in this section.
DISTRIBUTION AGREEMENT
Prior to the Distribution, Great Lakes and the Company entered into the
Transfer and Distribution Agreement (the "Distribution Agreement"), which
provides for, among other things, the amount of Octel Common Stock to be issued
in connection with the Distribution, the transfer to the Company of the Octel
Businesses, the transfer to Great Lakes of the Company's Amlwch and Palmer
Research Laboratories facilities, the allocation between Great Lakes and the
Company of certain obligations and liabilities relating to the Octel Businesses
and the businesses being retained by or transferred to Great Lakes and the
execution of certain other agreements governing the relationship between Great
Lakes and the Company following the Distribution. The Distribution Agreement
generally provides for the transfer by Great Lakes to the Company of the assets
used in the Octel Businesses, and for the assumption by the Company of
substantially all of the liabilities relating to the Octel Businesses for
periods before, on or after the Distribution Date. The Company will also remain
responsible, up to a maximum aggregate amount of $5 million, for liabilities
relating to the Amlwch and Palmer Research Laboratories facilities to be
transferred to Great Lakes in connection with the Distribution to the extent
that such liabilities arise from acts or omissions occurring on or prior to
January 1, 1998.
TAX DISAFFILIATION AGREEMENT
Great Lakes and the Company have entered into a Tax Disaffiliation
Agreement (the "Tax Disaffiliation Agreement"), detailing their respective
obligations concerning various tax liabilities. The Tax Disaffiliation Agreement
generally requires Great Lakes to pay, and indemnify the Company against, all
federal, state, local and foreign taxes relating to the businesses conducted by
Great Lakes or its subsidiaries for any taxable period, other than the following
taxes which will be paid by the Company and against which the Company will
indemnify Great Lakes:
(i) taxes relating to the Company and its U.S. subsidiaries for
periods after the Distribution Date;
(ii) taxes relating to the Company's non-U.S. subsidiaries or any
predecessor or successor thereof for all periods before and after the
Distribution Date (other than with respect to certain restructuring
transactions incident to the Distribution);
(iii) taxes arising out of certain actions taken by, or in respect of,
the Company or any of its subsidiaries that adversely affect the tax
consequences to Great Lakes, the Company or their respective subsidiaries
with respect to the Distribution or the transactions related thereto,
provided, however, that under certain limited circumstances the Company's
indemnification obligation described in this paragraph (iii) may be
reduced; and
(iv) taxes due and payable by Great Lakes or its subsidiaries with
respect to their interests in Octel Associates for the period from January
1, 1998 to the Distribution Date.
The Tax Disaffiliation Agreement further provides for cooperation with respect
to certain tax matters, the exchange of information and retention of records
which may affect the tax liability of either party. In addition, the Tax
Disaffiliation Agreement requires that the Company refrain from certain actions
during the two-year period commencing on the day after the Distribution Date,
unless it obtains a supplemental ruling from the Internal Revenue Service,
reasonably satisfactory to Great Lakes in form and content, that such actions
will not adversely affect the qualification of the Distribution as a tax-free
distribution under Section 355 of the Code. These actions include (i) a
60
<PAGE> 68
discontinuation of any material portion of the Company's or its subsidiaries'
business and (ii) participation in any transaction within such two-year period
which results in one or more persons owning 50% or more of the stock of the
Company or any of its subsidiaries.
CORPORATE SERVICES TRANSITION AGREEMENT
Great Lakes and the Company entered into a Corporate Services Transition
Agreement pursuant to which the Company will agree to provide to Great Lakes
certain services for a transitional period following the Distribution Date. The
services to be provided by the Company include accounting, payroll, treasury,
management information systems, engineering, regulatory and medical. The
services will be provided for varying periods of time, provided that no services
will be undertaken after December 31, 1999. The Company will be compensated by
Great Lakes on an arm's length basis for the provision of such services.
SUPPLY AND TOLL MANUFACTURING AGREEMENTS
Great Lakes and the Company entered into agreements (the "Supply and Toll
Manufacturing Agreements") providing for the supply by Great Lakes to the
Company of dibromoethane ("DBE"), hydrogen bromide ("HBR") and the toll
manufacture by Great Lakes for the Company of Stadis(R) products and the supply
by the Company to Great Lakes of caustic soda.
Each of the Supply and Toll Manufacturing Agreements contains
representations, warranties, covenants and agreements and are on terms that are
customary for similar agreements in the chemical industry. The Supply and Toll
Manufacturing Agreements provide for, among other things, the following:
(i) Great Lakes will supply certain specified quantities of DBE to the
Company for three years. The Company has the right to extend the agreement
for two additional one year periods. Pursuant to the agreement, Great Lakes
has certain rights to acquire the Company's chlorine membrane plant if the
Company decides to either sell or shutdown the plant. During the first
eighteen months of the agreement, Great Lakes has agreed to make certain
payments to subsidize the Company's operation of the chlorine membrane
plant;
(ii) Subject only to the Company's obligation to purchase certain
minimum quantities based upon the Company's forecasts, Great Lakes is
required to supply HBR to the Company in quantities determined by the
Company. The agreement has an initial four year term with automatic renewal
for subsequent one year periods until canceled by either party with one
year's prior notice;
(iii) The Company will supply caustic soda to Great Lakes on an
ongoing basis, subject to either party's right to terminate the agreement
on six months' prior notice or, at Great Lakes' option, at any time subject
only to an obligation for Great Lakes to acquire all then existing
inventory and work-in-process; and
(iv) Great Lakes will toll manufacture Stadis(R) 425 and Stadis(R) 450
(Enhanced) for the Company. The agreement may be terminated by either party
after December 31, 2001 on one year's prior notice. The Company is
obligated, subject to certain exceptions, to purchase certain specified
minimum amounts of Stadis(R) products from Great Lakes.
Except as referred to above, Great Lakes and the Company ceased to have any
material contractual or other material relationships with each other.
61
<PAGE> 69
DESCRIPTION OF CREDIT FACILITY
The Credit Facility provides for (i) a senior secured Term Facility of up
to $280.0 million and (ii) a senior secured Revolving Facility of up to $20.0
million to certain subsidiaries of Parent (the "Borrowers").
The following summary of the Credit Facility does not purport to be
complete and is qualified in its entirety by reference to the definitive
documentation for the Credit Facility.
The obligations of the Borrowers under the Credit Facility are
unconditionally guaranteed by Parent and certain subsidiaries of Parent
(including the Issuer). The Credit Facility and the guarantees are secured by
substantially all of the assets of the Borrowers and certain U.K. subsidiaries
and certain holding companies of the Borrowers, including real property not
subject to other mortgages and personal property (including inventory), and also
are secured by the capital stock of the Borrowers and certain U.K. subsidiaries
and holding companies of the Borrower (but not the Company). The obligations of
the Borrowers are also secured by an interest, granted by Parent, in the
benefits of the agreements entered into in connection with the Distribution.
The Credit Facility will mature on December 31, 2001, and the Term Facility
will amortize in quarterly installments commencing on June 30, 1998. The Company
will be required to repay $115.0 million, $60.0 million, $60.0 million and $45.0
million in 1998, 1999, 2000 and 2001, respectively. In addition, the Company
will be required to prepay the Credit Facility with 50% of surplus cash flow on
a quarterly basis.
The loans under the Credit Facility will bear interest at LIBOR (as defined
in the Credit Facility), plus additional costs, plus 1.75%, subject to
adjustment under certain circumstances. The margin on the interest rate, under
certain circumstances, will adjust to 1.25% over LIBOR when the outstanding
balance under Tranche A of the Credit Facility has been reduced to $140.0
million. Following the occurrence and during the continuance of a default under
the Credit Facility, the overdue amount will bear interest at LIBOR, plus
additional costs, plus 2.75%.
The Credit Facility contains a number of covenants that, among other
things, restrict the ability of Parent and its subsidiaries (including the
Company) to engage in amalgamations, mergers or consolidations, engage in
certain transactions with subsidiaries and affiliates, amend or waive terms of
the agreements entered into in connection with the Distribution, dispose of
assets, create liens on assets, incur additional indebtedness, incur guarantee
obligations, make loans, enter into leases, make investments, issue or acquire
its shares, pay dividends or make capital distributions and otherwise restrict
corporate activities. In addition, the Credit Facility requires compliance with
certain financial covenants, including (i) an EBITDA to net interest ratio
(commencing at 4.5 to 1.0, increasing to 6.5 to 1.0), (ii) a fixed charge
coverage ratio (1.05 to 1.0) and (iii) a total debt to EBITDA ratio (commencing
at 2.0 to 1.0, decreasing to 1.25 to 1.0).
The Credit Facility contains customary events of default including the
failure to pay principal when due or any interest or other amount that becomes
due within one business day after the due date, a default in the performance of
certain covenants, any representation or warranty being incorrect, invalidity of
any guaranty or security document, certain insolvency events, cross default and
certain change of control events.
62
<PAGE> 70
DESCRIPTION OF THE NOTES
GENERAL
The Exchange Notes offered hereby are to be issued under the Indenture,
dated as of May 1, 1998, (the "Indenture"), between the Issuer and IBJ Schroder
Bank & Trust Company, as Trustee (the "Trustee"). The form and terms of the
Exchange Notes are the same as the form and terms of the Old Notes (which they
replace) except that (i) the Exchange Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, and (ii) the holders of Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Old Notes in certain
circumstances relating to the timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated.
The following is a summary of certain provisions of the Indenture and the
Exchange Notes, a copy of which Indenture and the form of Exchange Notes is
available upon request to the Issuer at the address set forth under "Available
Information." Any Old Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part thereof by the Trust Indenture Act of 1939, as
amended.
For purposes of this "Description of the Exchange Notes", the term
"Company" refers solely to the Issuer.
BOOK-ENTRY DEPOSITARY INTERESTS
The Notes will be represented initially by a single global note in bearer
form without coupons (the "Global Note"). The Global Note will be issued in a
denomination equal to the outstanding Notes represented thereby and will be held
by The Industrial Bank of Japan (Luxembourg) S.A., as the book-entry depositary
(the "Book-Entry Depositary"). The Global Note will be deposited with the
Book-Entry Depositary pursuant to the Note Depositary Agreement (the "Note
Depositary Agreement") between the Company and the Book-Entry Depositary. For a
description of the Note Depositary Agreement, see "Description of the Note
Depositary Agreement."
The Book-Entry Depositary will issue a single certificateless depositary
interest representing a 100% interest in the underlying Global Note to DTC by
recording such interest in the Book-Entry Depositary's books and records in the
name of Cede & Co., as a nominee for DTC. Beneficial interests in the Global
Note will be shown on, and transfers thereof will be effected only through,
records maintained in book-entry form by DTC (with respect to participants'
interests) and its participants, including, as applicable, the Euroclear
Operator and Cedel. Such beneficial interests in the Exchange Notes are referred
to as "Book-Entry Interests". Book-Entry Interests in the Global Note (and any
Notes issued in exchange therefor) will be subject to certain restrictions on
transfer. See "Description of the Note Depositary Agreement -- Transfers and
Transfer Restrictions."
Holders of Book-Entry Interests will be entitled to receive definitive
Notes in registered form ("Definitive Notes") in exchange for their holdings of
Book-Entry Interests only in the limited circumstances set forth in "Description
of the Note Depositary Agreement -- Issuance of Definitive Notes." In no event
will definitive Notes in bearer form be issued.
The Company has applied to list the Old Notes and the Exchange Notes on the
Luxembourg Stock Exchange.
The Exchange Notes will be payable as to principal, interest and Additional
Amounts (as defined), if any, either (i) to the Book-Entry Depositary (as Holder
of the Global Note) against presentation and surrender (or, in the case of
partial payment, endorsement) of the Global Note at the office of any agent of
the Company (the "Paying Agent") maintained for such purpose outside the United
Kingdom or (ii) in the event that Definitive Notes are issued as described under
63
<PAGE> 71
"Description of the Note Depositary Agreement -- Issuance of Definitive Notes"
at an office of the Paying Agent maintained for such purpose within the City and
State of New York; provided, however, that with respect to any payment of
principal or interest on Definitive Notes with an aggregate principal amount in
excess of $1,000,000 held by any Holder or group of Holders, such payment will
be made, at the written request of such Holder or Holders (which shall be a
single request with appropriate wire transfer instructions) received by the
Paying Agent 15 days before the applicable payment date, by wire transfer of
immediately available funds to the Paying Agent, who in turn will wire such
funds to such single account as such Holder or Holders may in writing to the
Paying Agent direct. Until otherwise designated by the Company, the office of
the Paying Agent in New York will be the Corporate Trust Office of the Trustee
maintained for such purpose. The Notes will be issued in minimum denominations
of $1,000 principal amount and integral multiples thereof, and Definitive Notes,
if issued, will only be issued in registered form. In all circumstances, the
Company shall ensure that (i) at least one Paying Agent is located outside the
United Kingdom and (ii) if and so long as the Exchange Notes are listed on any
securities exchange, any requirement of such securities exchange as to Paying
Agents are satisfied.
TERMS OF THE NOTES
The Exchange Notes will be unsecured senior obligations of the Company,
limited to $150.0 million aggregate principal amount, and will mature on May 1,
2006. The Exchange Notes will bear interest at the rate per annum shown on the
cover page hereof from May 5, 1998 or from the most recent date to which
interest has been paid or provided for, payable semiannually to Holders of
record at the close of business on the April 15 or October 15 immediately
preceding the interest payment date on May 1 and November 1 of each year,
commencing November 1, 1998. The Company will pay interest on overdue principal
at 1% per annum in excess of such rate, and it will pay interest on overdue
installments of interest at such higher rate to the extent lawful.
OPTIONAL REDEMPTION
Except as set forth under "-- Redemption for Changes in U.K. Withholding
Taxes," the Exchange Notes will only be redeemable at the option of the Company
as follows.
Prior to May 1, 2002, the Exchange Notes will be redeemable, in whole or
from time to time in part, at the option of the Company on any date, upon not
less than 30 nor more than 60 days' prior notice, at a redemption price equal to
the greater of (i) 100% of the principal amount of the Exchange Notes to be
redeemed and (ii) the sum of the present values of (A) the redemption price of
such Exchange Note at May 1, 2002 (as set forth in the table below), and (B) the
remaining scheduled payments of interest thereon to May 1, 2002 (exclusive of
interest accrued to such redemption date) discounted to such redemption date on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus 50 basis points, plus, in either case, accrued and
unpaid interest on the principal amount being redeemed to such redemption date;
provided that installments of interest on Exchange Notes which are due and
payable on an interest payment date falling on or prior to the relevant
redemption date shall be payable to the Holders of such Exchange Notes at the
close of business on the relevant regular record date according to their terms
and the provisions of the Indenture.
On and after May 1, 2002, the Exchange Notes will be redeemable, at the
Company's option, in whole or in part, at any time or from time to time, upon
not less than 30 nor more than 60 days' prior notice, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
interest to the redemption date (subject to the right of Holders on the relevant
record date
64
<PAGE> 72
to receive interest due on the relevant interest payment date), if redeemed
during the 12-month period commencing on May 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2002........................................................ 105.000%
2003........................................................ 103.333%
2004........................................................ 101.667%
2005 and thereafter......................................... 100.000%
</TABLE>
MANDATORY REDEMPTION
The Indenture requires the Company to provide for the retirement, by
redemption, of $37.5 million principal amount of the Notes on each of May 1 ,
2003, May 1, 2004 and May 1, 2005, in each case at a redemption price equal to
100% of the principal amount thereof, plus accrued interest to the redemption
date. Such redemptions are calculated to retire approximately 75% of the
principal amount of the Notes prior to maturity. The Company may, at its option,
receive credits against such mandatory redemptions for the principal amount of
Notes acquired or redeemed (other than through this mandatory redemption
provision) by the Company and surrendered to the Trustee for cancelation.
SELECTION AND NOTICE OF REDEMPTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the Luxembourg Stock Exchange (for so long as the Notes are listed thereon) or
such other stock exchange on which the Notes are listed or, if such Notes are
not so listed or such exchange prescribes no method of selection, on a pro rata
basis, by lot or by such other method as the Trustee in its sole discretion
shall deem to be fair and appropriate, although no Note may be redeemed except
in integral multiples of $1,000 in original principal amount. Notice of
redemption shall, so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall so require, be published in
a newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort) and, in the case of Definitive Notes, shall also be mailed
by first-class mail to each Holder of Notes to be redeemed at its address
appearing in the register of Holders, in each case at least 30 but not more than
60 days before the redemption date. For so long as any Notes are represented by
the Global Notes, notices to Holders shall (in addition to publication as
described above) also be given by delivery of the relevant notice to DTC,
Euroclear and/or Cedel Bank (as the case may be) for communication to the
relative Holders of the Book-Entry Interests. If any Note is to be redeemed in
part only, the notice of redemption relating to such Note shall state the
portion of the principal amount thereof to be redeemed. A Global Note redeemed
in part will be surrendered to the Trustee who will make a notation thereon to
reduce the principal amount of such Global Note to an amount equal to the
unredeemed portion and, in the case of Definitive Notes, a new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancelation of the original Note.
WITHHOLDING TAXES
All payments made by or on behalf of the Company on or with respect to the
Notes (whether or not in the form of Definitive Notes (as defined)), and all
payments made by or on behalf of Parent under or with respect to the Note
Guarantee, will be made without withholding or deduction for, or on account of,
any present or future taxes, duties, assessments or governmental charges of
whatever nature (collectively, "Taxes") imposed or levied by or on behalf of the
United Kingdom (or the jurisdiction of incorporation of any Successor Company
(as defined below)) or any political subdivision thereof or any authority having
power to tax therein (each a "Tax Authority"), unless the withholding or
deduction of such Taxes is then required by law. If any deduction or withholding
65
<PAGE> 73
for, or on account of, any Taxes of any Tax Authority shall at any time be
required on any payments made by the Company (or Successor Company) on or with
respect to the Notes or by Parent (or Successor Company) under or with respect
to the Note Guarantee, including payments of principal, redemption price,
interest, additional interest or premium, the Company or Parent, as the case may
be, will pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of such payments by
the Holders of the Notes (including Additional Amounts) or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would have been received in respect of such payments in the absence of
such withholding or deduction; except that no such Additional Amounts will be
payable with respect to:
(i) in the case of Notes listed on a Recognized Stock Exchange at the
time such Additional Amounts would be payable, any payments on a Note held
by or on behalf of a Holder or a beneficial owner who is liable for such
Taxes in respect of such Note by reason of the Holder or beneficial owner
having some connection with the United Kingdom or the jurisdiction of
incorporation of any Successor Company (including being a citizen or
resident or national of, or carrying on a business or maintaining a
permanent establishment in, or being physically present in, the United
Kingdom or the jurisdiction of incorporation of any Successor Company)
other than by the mere holding of such Note or enforcement of rights
thereunder or the receipt of payments in respect thereof;
(ii) in the case of Notes listed on a Recognized Stock Exchange at the
time such Additional Amounts would be payable, any Taxes that are imposed
or withheld as a result of a change in law after the Issue Date where such
withholding or imposition is by reason of the failure of the Holder or
beneficial owner of the Note to comply with any reasonable request by the
Company to provide information concerning the nationality, residence or
identity of such Holder or beneficial owner or to make any declaration or
similar claim or satisfy any information or reporting requirement, (A) if
such compliance is required or imposed by a statute, treaty, regulation or
administrative practice of the taxing jurisdiction as a precondition to
exemption from all or part of such Taxes, (B) such Holder may legally
comply with such requirements and (C) at least 30 days prior to the date on
which the Company shall apply this clause (ii), the Company shall have
notified such Holders of such requirements;
(iii) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the United
Kingdom or the jurisdiction of incorporation of any Successor Company
(unless presentment could not have been made elsewhere); or
(iv) any Note presented for payment (where Notes are in the form of
Definitive Notes and presentation is required) more than 30 days after the
relevant payment is first made available for payment to the Holder (except
to the extent that the Holder would have been entitled to Additional
Amounts had the Note been presented on any day (including the last day)
within such 30 day period).
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, it would not have been entitled
to payment of Additional Amounts by reason of any of clauses (i) to (iv)
inclusive above.
Where required by applicable law, the Company, Parent or any Paying Agent,
as the case may be, will also (a) make any required withholding or deduction in
respect of any Taxes and (b) remit the full amount deducted or withheld to the
relevant Tax Authority in accordance with applicable law. The Company or Parent,
as the case may be, will furnish or cause to be furnished to the Trustee, within
30 days after the date of the payment of any Taxes due pursuant to applicable
law, certified copies of tax receipts satisfactory to the Trustee evidencing
such payment by the Company or Parent, as the case may be. Copies of such
receipts will be made available to Holders of Notes that are outstanding on the
date of such withholding or deduction for or on account of Taxes upon request.
Further, the Company or Parent, as the case may be, will indemnify and hold
harmless each
66
<PAGE> 74
Holder of Notes (other than a Holder described in clauses (i)-(iv) above) and
upon written request will promptly reimburse each such Holder for the amount of
(1) any Taxes levied or imposed and paid by such Holder as a result of payments
made on or with respect to the Notes or under or with respect to the Parent
Guarantee, (2) any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto and (3) any Taxes imposed with respect
to any reimbursement under (1) or (2), but excluding any Taxes based on a
Holder's net income.
Whenever in the Indenture there is mentioned, in any context, (a) the
payment of principal, (b) purchase prices in connection with a purchase of
Notes, (c) interest or (d) any other amount payable on or with respect to any of
the Notes or under or with respect to the Note Guarantee, such mention shall be
deemed to include mention of the payment of Additional Amounts provided for in
this section to the extent that, in such context, Additional Amounts are, were
or would be payable in respect thereof.
The foregoing obligations shall survive any termination, defeasance or
discharge of the Indenture.
The Company or Parent, as the case may be, will pay any present or future
stamp, court or documentary taxes, or any other excise or property taxes,
charges or similar levies which arise in any jurisdiction from the execution,
delivery or registration of the Notes, the Note Guarantee or any other document
or instrument referred to therein, or the receipt of any payments on or with
respect to the Notes or under or with respect to the Note Guarantee, excluding
any such taxes, charges or similar levies imposed by any jurisdiction outside of
the United Kingdom, the United States of America or any jurisdiction in which a
Paying Agent is located, other than those resulting from, or required to be paid
in connection with, the enforcement of the Notes or any other such document or
instrument following the occurrence of any Event of Default with respect to the
Notes.
REDEMPTION FOR TAXATION REASONS
The Notes may be redeemed, at the option of the Company, in whole but not
in part, at any time upon giving not less than 30 nor more than 60 days' notice
to the Holders (which notice shall be irrevocable), at a redemption price equal
to the principal amount thereof, together with accrued and unpaid interest, if
any, to the date fixed by the Company for redemption (a "Tax Redemption Date")
and all Additional Amounts (see "-- Withholding Taxes"), if any, then due and
which will become due on the Tax Redemption Date as a result of the redemption
or otherwise, if the Company determines that, as a result of (i) any change in,
or amendment to, the laws or treaties (or any regulations, protocols or rulings
promulgated thereunder) of the United Kingdom (or any political subdivision or
taxing authority of the United Kingdom) affecting taxation which change or
amendment becomes effective on or after the Issue Date, (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the Issue Date or (iii) the
issuance of Definitive Notes due to (A) DTC (as defined) being at any time
unwilling or unable to continue as or ceasing to be a clearing agency registered
under the Exchange Act, and a successor to DTC registered as a clearing agency
under the Exchange Act is not able to be appointed by the Company within 90 days
or (B) the Book-Entry Depositary being at any time unwilling or unable to
continue as a book-entry depositary and a successor Book-Entry Depositary is not
able to be appointed by the Company within 90 days, the Company is or on the
next interest payment date the Company would be, required to pay Additional
Amounts, and the Company determines that such payment obligation cannot be
avoided by the Company taking reasonable measures. Notwithstanding the
foregoing, 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 make such
payment or withholding if a payment in respect of the Notes was then due. Prior
to the publication or, where relevant, mailing of any notice of redemption of
the Notes pursuant to the foregoing, the Company will deliver to the Trustee an
Opinion of Counsel to the effect that the circumstances referred to above exist.
The Trustee shall accept such
67
<PAGE> 75
opinion as sufficient evidence of the satisfaction of the conditions precedent
described above, in which event it shall be conclusive and binding on the
Holders.
GUARANTEE
Parent has irrevocably and unconditionally guaranteed (the "Note
Guarantee") on a senior unsecured basis the performance and punctual payment
when due, whether at Stated Maturity, by acceleration or otherwise, of all
obligations of the Company under the Indenture and the Notes, whether for
principal or interest on the Notes, expenses, indemnifications or otherwise (all
such obligations guaranteed by Parent pursuant to the Note Guarantee being
herein called the "Guaranteed Obligations"). Parent will agree to pay, on a
senior unsecured basis and in addition to the amount stated above, any and all
expenses (including reasonable counsel fees and expenses) incurred by the
Trustee or the Holders of the Notes in enforcing any rights under the Note
Guarantee with respect to Parent.
The Note Guarantee is a continuing guarantee and shall (i) remain in full
force and effect until payment in full of all the Guaranteed Obligations, (ii)
be binding upon Parent and (iii) enure to the benefit of and be enforceable by
the Trustee, the Holders of the Notes and their successors, transferees and
assigns.
RANKING
The Notes and the Note Guarantee are unsecured senior indebtedness of the
Company and Parent, respectively, will rank pari passu in right of payment with
all existing and future unsecured indebtedness of the Company and Parent,
respectively, other than Subordinated Obligations and will be senior in right of
payment to all existing and future Subordinated Obligations, except that the
lenders under the Credit Facility will have certain payment blockage rights. See
"-- Payment Blockage." The Notes and the Note Guarantee will be effectively
subordinated to any secured indebtedness of the Company and Parent,
respectively, to the extent of the value of the assets securing such
indebtedness and to all liabilities of their direct and indirect subsidiaries
(except, in the case of Parent, the Company). The Company and Parent are holding
companies that conduct all of their business through subsidiaries. Claims of
creditors of such subsidiaries, including trade creditors, secured creditors and
creditors holding indebtedness and guarantees issued by such subsidiaries and
claims of preferred stockholders (if any) of such subsidiaries generally will
have priority with respect to the assets and earnings of such subsidiaries over
the claims of creditors of the Company and Parent, including holders of the
Notes. The Notes and the Note Guarantee, therefore, will be effectively
subordinated to creditors (including trade creditors) and preferred stockholders
(if any) of subsidiaries of the Company and Parent, respectively. As of December
31, 1997, after giving pro forma effect to the Transactions, Parent's
subsidiaries (other than the Company) would have had approximately $390.4
million of liabilities outstanding (including $280.0 million of indebtedness).
Although the Indenture limits the incurrence of Indebtedness and preferred stock
of certain of such subsidiaries, such limitation is subject to a number of
significant qualifications. Moreover, the Indenture does not impose any
limitation on the incurrence by such subsidiaries of liabilities that are not
considered Indebtedness under the Indenture. See "-- Certain
Covenants -- Limitation on Consolidated Indebtedness".
As described below, the Notes and the Note Guarantee are subject to certain
payment blockage provisions for the benefit of "Bank Indebtedness", which
consists of borrowings and other obligations under certain credit facilities of
subsidiaries of the Company. See "Payment Blockage".
PAYMENT BLOCKAGE
During the continuance of any default with respect to the Bank Indebtedness
(which is defined in the Indenture to mean obligations under certain credit
facilities of Subsidiaries of the Company) pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiry of any
applicable
68
<PAGE> 76
grace periods, the Company may not pay the principal of, or premium, if any, or
interest on, the Notes (except for payments made from the trusts described under
"-- Defeasance") or make any deposit with respect to legal defeasance or
covenant defeasance and may not purchase, redeem or (except for Notes previously
acquired by the Company that are credited against the Company's mandatory
redemption requirement as described above under "-- Mandatory Redemption")
otherwise retire the Notes pursuant to a Change of Control, an Asset Sale or
otherwise and Parent may not make any payments under the Note Guarantee
(collectively, "pay the Notes") for a period (a "Payment Blockage Period")
commencing upon the receipt by the Company and the Trustee of written notice (a
"Payment Blockage Notice") of such default from the Representative under the
Credit Agreement specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (unless earlier terminated (i) by written notice to
the Trustee and the Company from the Representative that submitted such Payment
Blockage Notice or (ii) because such default is no longer continuing or (iii)
because the Bank Indebtedness has been paid in full in cash and any outstanding
letters of credit, bonds and guarantees under the Credit Agreement and any
Hedging Obligations Incurred in connection with the Credit Agreement have been
fully cash collateralized). Notwithstanding the provisions described in the
immediately preceding sentence, provided that the Notes have not become
immediately due and payable, the Company may cure any Event of Default in
relation to the Notes and resume payments on the Notes after the end of such
Payment Blockage Period. Not more than one Payment Blockage Notice may be given
in any consecutive 360-day period, irrespective of the number of defaults with
respect to the Bank Indebtedness during such period. No default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
shall be, or be made, the basis for commencement of a second Payment Blockage
Period by the Representative under the Credit Agreement whether or not within a
period of 360 consecutive days, unless such default shall have been cured or
waived for a period of not less than 180 consecutive days (it being acknowledged
that any subsequent action, omission or any breach of any financial covenants
for a period commencing after the date of commencement of such Payment Blockage
Period or other matter or thing that, in any case, would give rise to a default
pursuant to any provisions under which a default previously existed or was
continuing shall constitute a new default for this purpose).
The above described payment blockage provisions shall become permanently
inoperable upon the retirement of all Indebtedness Incurred pursuant to the
Credit Agreement or upon the amendment of the Credit Agreement to eliminate the
provisions relating to payment blockage.
As described below, subject to certain exceptions, the Indenture requires
Parent and the Company to include payment blockage provisions substantially the
same as those set forth above in any Indebtedness that either of them may Incur
in the future for so long as the Company or Parent is subject to the payment
blockage provisions described above.
SAME-DAY PAYMENT
The Indenture will require that payments in respect of Notes (including
principal, premium and interest) be made by wire transfer of immediately
available funds to the accounts specified by those entitled to receive such
funds as described in the last paragraph of "-- Book-Entry Depositary Interest".
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Issuer on May 5, 1998 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to (i) qualified institutional buyers in
reliance on Rule 144A and (ii) qualified buyers outside the United States in
reliance upon Regulation S under the Securities Act. As a condition to the
Purchase
69
<PAGE> 77
Agreement, the Company and Parent have agreed pursuant to an exchange and
registration rights agreement (the "Exchange and Registration Rights Agreement")
with the Initial Purchasers, for the benefit of the holders of the Notes, that
the Company would, at its cost, (i) within 60 days after the date of original
issue of the Old Notes, file a registration statement (the "Exchange Offer
Registration Statement") with the SEC with respect to a registered offer to
exchange the Notes for new notes of the Company (the "Exchange Notes") having
terms substantially identical in all material respects to the Old Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions) and (ii) use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act within
150 days after the date of original issue of the Old Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer the Exchange Notes in exchange for surrender of the Old Notes. The Company
will keep the Registered Exchange Offer open for not less than 20 business days
(or longer if required by applicable law) after the date notice of the
Registered Exchange Offer is mailed to the holders of the Notes. For each Old
Note surrendered to the Company pursuant to the Registered Exchange Offer, the
holder of such Old Note will receive an Exchange Note having a principal amount
equal to that of the surrendered Note. Interest on each Exchange Note will
accrue from the last interest payment date on which interest was paid on the
Note surrendered in exchange thereof or, if no interest has been paid on such
Old Note, from the date of its original issue. Under existing SEC
interpretations, the Exchange Notes would be freely transferable by holders
other than affiliates of the Company after the Registered Exchange Offer without
further registration under the Securities Act if the holder of the Exchange
Notes represents that it is acquiring the Exchange Notes in the ordinary course
of its business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of the Company, as such terms are interpreted by the SEC; provided,
however, that broker-dealers ("Participating Broker-Dealers") receiving Exchange
Notes in the Registered Exchange Offer will have a prospectus delivery
requirement with respect to resales of such Exchange Notes. The SEC has taken
the position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to Exchange Notes (other than a resale of an
unsold allotment from the original sale of the Notes) with the prospectus
contained in the Exchange Offer Registration Statement. Under the Registration
Rights Agreement, the Company is required to allow Participating Broker-Dealers
and other persons, if any, with similar prospectus delivery requirements to use
the prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of such Exchange Notes.
A Holder of Old Notes (other than certain specified holders) who wishes to
exchange such Old Notes for Exchange Notes in the Registered Exchange Offer will
be required to represent that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business and that at the time of the
commencement of the Registered Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 of the Securities Act, or if
it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If (i) the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or SEC policy or
(ii) any holder of Transfer Restricted Securities notifies the Company prior to
the 20th day following consummation of the Exchange Offer that (A) it is
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) that it may not sell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and a prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales or (C) that it is a broker dealer and owns Notes acquired directly
from the Company or an affiliate of the Company, the Company will, at its cost,
(a) as promptly as practicable, file a shelf registration statement (a "Shelf
Registration Statement") covering resales of the Notes or the Exchange Notes, as
the case may be, (b) use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act and (c) keep the
Shelf Registration Statement effective until the time when the Notes covered
70
<PAGE> 78
by the Shelf Registration Statement can be sold pursuant to Rule 144 without any
limitations under clauses (c), (e), (f) and (h) of Rule 144. The Company will,
in the event a Shelf Registration Statement is filed, among other things,
provide to each holder for whom such Shelf Registration Statement was filed
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Notes or the Exchange Notes, as the case may be. A holder selling
such Notes or Exchange Notes pursuant to the Shelf Registration Statement
generally would be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such holder (including certain indemnification
obligations). For purposes of the foregoing, "Transfer Restricted Securities"
means each Old Note until (i) the date on which such Old Note has been exchanged
by a person other than a broker-dealer for an Exchange Note in the Exchange
Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of
an Old Note for an Exchange Note, the date on which such Exchange Note is sold
to a purchaser who receives from such broker-dealer on or prior to the date of
such sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Securities Act.
If (i) by the 60th day after the date of original issuance of the Old
Notes, neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement has been filed with the SEC; (ii) by the 180th day after
the date of original issuance of the Notes, the Registered Exchange Offer is not
consummated; (iii) by the 45th day after the Company is obligated to file the
Shelf Registration Statement such filing has not occurred; (iv) by the 90th day
after the Company becomes obligated to file a Shelf Registration Statement such
Shelf Registration Statement has not been declared effective by the SEC or (v)
after either the Exchange Offer Registration Statement or the Shelf Registration
Statement is declared effective, such Registration Statement thereafter ceases
to be effective or usable (subject to certain exceptions) in connection with
resales of Notes or Exchange Notes in accordance with and during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (i) through (v) a "Registration Default"), additional interest will
accrue on the Transfer Restricted Securities from and including the date on
which any such Registration Default shall occur to but excluding the date on
which all Registration Defaults have been cured, such additional interest to
accrue at a rate of 0.25% per annum and increase by an additional 0.25% per
annum at the end of each 90-day period until all Registration Defaults have been
cured; provided, however, that such additional interest shall not exceed a rate
of 1.00% per annum. Such interest is payable in addition to any other interest
payable from time to time with respect to the Notes and the Exchange Notes.
If the Company effects the Registered Exchange Offer, it will be entitled
to close the Registered Exchange Offer 20 business days after the commencement
thereof provided that it has accepted all Notes theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
The Issuer has submitted an application to list the Old Notes and the
Exchange Notes on the Luxembourg Stock Exchange and will seek clearance of the
Exchange Notes through Cedel Bank and Euroclear (and new codes shall be
obtained). All documentation prepared in connection with such listing of the Old
Notes and the Exchange Notes will be available at the offices of the Luxembourg
Paying Agent, which will provide all services and actions in connection with the
listing of the Old Notes and the Exchange Notes and the Old Note exchange. All
notices to be given in
71
<PAGE> 79
connection with the Old Note Exchange and any increase in the interest rate of
the Old Notes will be made in the manner described under "--Notices."
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Consolidated Indebtedness. (a) Parent shall not, and shall
not permit any Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness; provided, however, that Parent and its Restricted Subsidiaries may
Incur Indebtedness if, on the date of such Incurrence, the Consolidated Debt to
EBITDA Ratio does not exceed the ratio indicated below:
<TABLE>
<CAPTION>
CONSOLIDATED DEBT
DATE OF INCURRENCE TO EBITDA RATIO
------------------ -----------------
<S> <C>
Period ended June 30, 1999.................................. 2.00 to 1.0
Period ended June 30, 2000.................................. 1.75 to 1.0
Period ended June 30, 2001
and thereafter............................................ 1.50 to 1.0
</TABLE>
(b) Notwithstanding the foregoing paragraph (a), Parent and its Restricted
Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Term Loan Facility;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of all Indebtedness Incurred under this clause
(1) and then outstanding does not exceed $280 million less the aggregate
sum of all principal payments actually made from time to time after the
Issue Date with respect to such Indebtedness (other than principal payments
made from any Refinancings thereof);
(2) Indebtedness Incurred pursuant to the Revolving Credit Facility;
provided, however, that the aggregate principal amount outstanding at any
time under this clause (2) does not exceed $20 million;
(3) Indebtedness which is intercompany Indebtedness between or among
Parent and any of its Restricted Subsidiaries; provided, however, that (i)
any subsequent issuance or transfer of Capital Stock that results in any
such Indebtedness being held by a Person other than Parent or a Restricted
Subsidiary thereof or (ii) any sale or other transfer of any such
Indebtedness to a person that is not either Parent or a Restricted
Subsidiary thereof shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness by Parent or such Restricted Subsidiary, as
the case may be, that was not permitted by this clause (3);
(4) the Notes and the Exchange Notes;
(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this covenant);
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (4) or (5) or this clause
(6); provided, however, that Parent and its Restricted Subsidiaries shall
not Incur any Indebtedness pursuant to this paragraph (b)(6) if the
proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to
the Notes to at least the same extent as such Subordinated Obligations;
(7) Hedging Obligations consisting of Interest Rate Agreements and
Currency Agreements directly related to Indebtedness permitted to be
Incurred by Parent or a Restricted Subsidiary pursuant to the Indenture;
(8) Guarantees by Parent and its Restricted Subsidiaries of each
other's Indebtedness; provided that such Indebtedness is permitted to be
incurred under the Indenture; and
72
<PAGE> 80
(9) other Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of Parent and the Restricted
Subsidiaries outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (7) above or paragraph (a))
does not exceed $10 million.
(c) For purposes of determining compliance with the foregoing paragraphs
(a) and (b), (i) in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described above, Parent, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(d) Neither Parent nor the Company shall Incur any Indebtedness (exclusive
of Hedging Obligations) unless such Indebtedness is subject to payment blockage
provisions that are substantially the same as those described above under
"Payment Blockage" for so long as the Notes are subject to such provisions (for
the avoidance of doubt it is understood that this clause shall not apply to the
Incurrence of Indebtedness by Restricted Subsidiaries other than the Company).
Limitation on Restricted Payments. (a) Parent shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time Parent or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) Parent is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Consolidated Indebtedness"; or (3) the aggregate amount of
such Restricted Payment and all other Restricted Payments since the Issue Date
would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
during which the Notes are originally issued to the end of the most recent
fiscal quarter for which financial statements are publicly available on the
date of such Restricted Payment (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit); provided, however, that
the incremental amount added to amounts otherwise available under this
clause (A) shall not exceed (i) $20.0 million for any 12-month period
ending on or before June 30, 2002 and (ii) $15.0 million for any 12-month
period ending after June 30, 2002; provided further, however, that, for
purposes of this clause (A), Consolidated Net Income shall be calculated in
the same manner as for determining whether an Incurrence of Indebtedness
would be permitted pursuant to the covenant described under "-- Limitation
on Consolidated Indebtedness";
(B) the aggregate Net Cash Proceeds received by Parent from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of Parent and other than an issuance or sale to an employee
stock ownership plan or to a trust established by Parent or any of its
Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of Parent is reduced on Parent's
balance sheet upon the conversion or exchange (other than by a Subsidiary
of Parent) subsequent to the Issue Date of any Indebtedness of Parent
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of Parent (less the amount of any cash, or the fair value of any
other property, distributed by Parent upon such conversion or exchange);
and
(D) an amount equal to the sum of (i) the net reduction in Investments
(other than Investments in Restricted Subsidiaries) resulting from
dividends, repayments of loans or advances or other transfers of assets, in
each case to Parent or any Restricted Subsidiary, or sales of assets to
third parties and (ii) the portion (proportionate to Parent's equity
interest in such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however,
73
<PAGE> 81
that the amount in clause (ii) shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and
treated as a Restricted Payment) by Parent or any Restricted Subsidiary in
such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any acquisition of any Capital Stock of Parent or any purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value of Subordinated Obligations made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of Parent
(other than Disqualified Stock and other than Capital Stock issued or sold
to a Subsidiary of Parent or an employee stock ownership plan or to a trust
established by Parent or any of its Subsidiaries for the benefit of their
employees); provided, however, that such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Capital Stock (other than Disqualified Stock) of Parent or Indebtedness
of Parent which is permitted to be Incurred pursuant to the covenant
described under "--Limitation on Consolidated Indebtedness"; provided,
however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of
the amount of Restricted Payments;
(iii) the payment of any dividend or the consummation of any
irrevocable redemption within 60 days after the date of declaration of such
dividend or notice of such redemption if the dividend or payment of the
redemption price, as the case may be, would have been permitted on the date
of declaration or notice; provided, however, that at the time of payment of
such dividend or redemption, no other Default shall have occurred and be
continuing (or result therefrom); provided further, however, that such
dividend or redemption shall be included in the calculation of the amount
of Restricted Payments; or
(iv) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of Parent or any of its Subsidiaries from
employees, former employees, directors or former directors of Parent or any
of its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such individuals
purchase or sell or are granted the option to purchase or sell, shares of
such common stock; provided, however, that the aggregate amount of such
repurchases and other acquisitions shall not exceed $0.5 million in any
calendar year; provided further, however, that such repurchases and other
acquisitions shall be excluded in the calculation of the amount of
Restricted Payments;
(v) repurchases of Capital Stock deemed to occur upon the exercise of
stock options if such Capital Stock represents a portion of the exercise
price thereof; or
(vi) distributions to Great Lakes to fund the Transactions and to make
the Special Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. Parent shall not, and shall not permit any Restricted Subsidiary
to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions on its Capital
Stock to Parent or a Restricted Subsidiary or pay any Indebtedness owed to
Parent, (b) make any loans or advances to Parent or (c) transfer any of its
property or assets to Parent, except:
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date, including the Credit Agreement;
74
<PAGE> 82
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by Parent (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by Parent) and outstanding on such
date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this covenant or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or
(ii) of this covenant or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such refinancing agreement or amendment are no less
favorable to the Noteholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such predecessor
agreements;
(iv) any such encumbrance or restriction consisting of customary non
assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock. (a) Parent shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) Parent or such Restricted Subsidiary
receives consideration at the time of such Asset Disposition at least equal to
the fair market value (including as to the value of all non-cash consideration),
as determined in good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition and at least 85% of the consideration thereof
received by Parent or such Restricted Subsidiary is in the form of cash or cash
equivalents and (ii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by Parent (or such Restricted Subsidiary, as the
case may be) (A) to the extent Parent elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase Indebtedness (other than
Subordinated Obligations) of Parent or the Company or Indebtedness (other than
any Disqualified Stock) of a Restricted Subsidiary (in each case other than
Indebtedness owed to Parent or an Affiliate of Parent) within one year from the
later of the date of such Asset Disposition or the receipt of such Net Available
Cash; (B) to the extent Parent elects, to acquire Additional Assets within one
year from the later of the date of such Asset Disposition or the receipt of such
Net Available Cash; and (C) to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), to cause the
Company to make an offer to the holders of the Notes (and if necessary or
desirable to holders of other Indebtedness designated by Parent) to purchase
Notes (and such other Indebtedness) pursuant to and subject to the conditions
contained in the Indenture (provided that if Parent or the Company would be
prohibited from repurchasing Notes in accordance with this clause (a)(ii)(C) by
the terms of any Indebtedness described in clause (a)(ii)(A) above, Parent shall
be required, at its option, either to repay such Indebtedness or to obtain any
required consents under the instruments governing any such Indebtedness in order
to permit the repurchase of the Notes), in each case within one year from the
later of the receipt of such Net Available Cash and the date the offer described
in clause (b) below is consummated; provided, however, that in connection with
any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or
75
<PAGE> 83
(C) above, Parent or such Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this paragraph,
Parent and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this paragraph except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are not applied
in accordance with this paragraph exceeds $5.0 million. Pending application of
Net Available Cash pursuant to this covenant, such Net Available Cash may be
used for any purpose not prohibited by the Indenture.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the assumption of Indebtedness of Parent or any Restricted
Subsidiary and the release of Parent or such Restricted Subsidiary from all
liability on such Indebtedness in connection with such Asset Disposition and (y)
securities received by Parent or any Restricted Subsidiary from the transferee
that are promptly converted by Parent or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes (and other Indebtedness) pursuant to clause (a)(ii)(C) above, Parent will
be required to cause the Company to purchase Notes tendered pursuant to an offer
by Parent and the Company for the Notes (and other Indebtedness) at a purchase
price of 100% of their principal amount (without premium) plus accrued but
unpaid interest (or, in respect of such other Indebtedness, such greater or
lesser price, if any, as may be provided for by the terms of such Indebtedness)
in accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. Parent shall not be required to
cause the Company to make such an offer to purchase Notes (and other
Indebtedness) pursuant to this covenant if the Net Available Cash available
therefor is less than $7.5 million (which lesser amount shall be carried forward
for purposes of determining whether such an offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition). To the extent
that the aggregate amount of Notes tendered pursuant to clause (a)(ii)(C) above
is less than the Net Available Cash, Parent may use any remaining Net Available
Cash for general corporate purposes. Upon completion of any such offer pursuant
to clause (a)(ii)(C), the Net Available Cash amount shall be reset at zero.
(c) Parent and the Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, Parent and the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached their obligations under this clause by virtue
thereof.
Limitation on Affiliate Transactions. (a) Parent shall not, and shall not
permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of Parent (an "Affiliate Transaction") unless the terms thereof (1)
are no less favorable to Parent or such Restricted Subsidiary than those that
could be obtained at the time of such transaction in arm's-length dealings with
a Person who is not such an Affiliate, (2) if such Affiliate Transaction
involves an amount in excess of $2.0 million, (i) are set forth in writing and
(ii) have been approved by a majority of the members of the Board of Directors
having no personal stake in such Affiliate Transaction or have been determined
by a nationally recognized appraisal or investment banking firm to be fair, from
a financial standpoint, to Parent and its Restricted Subsidiaries and (3) if
such Affiliate Transaction involves an amount in excess of $7.5 million, have
been determined by a nationally recognized appraisal or investment banking firm
to be fair, from a financial standpoint, to Parent and its Restricted
Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "-- Limitation on Restricted Payments", (ii) any issuance of securities,
or other payments, awards or grants in cash,
76
<PAGE> 84
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of Directors,
(iii) the grant of stock options or similar rights to employees and directors of
Parent and its Restricted Subsidiaries pursuant to plans approved by the Board
of Directors, (iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of Parent or its Restricted
Subsidiaries, but in any event not to exceed $0.5 million in the aggregate
outstanding at any one time, (v) reasonable fees and compensation paid to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of Parent or any Restricted Subsidiary as determined in good faith by Parent's
Board of Directors or senior management, (vi) any Affiliate Transaction between
Parent and a Restricted Subsidiary or between Restricted Subsidiaries, (vii) the
issuance or sale of any Capital Stock (other than Disqualified Stock) of Parent
and (viii) transactions and agreements with Great Lakes and its Affiliates as
described herein arising out of the Spinoff and the Reorganization.
Repurchase of Notes upon a Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date) in
accordance with the terms contemplated in paragraph (b) below; provided,
however, that notwithstanding the occurrence of a Change of Control, the Company
shall not be obligated to purchase Notes pursuant to this covenant in the event
that the Company has theretofore exercised its right to redeem all the Notes as
described under "-- Optional Redemption" above.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness or other Indebtedness restrict or prohibit the repurchase of
Notes pursuant to this provision, then prior to the mailing of the notice to
Holders provided for in the next paragraph below but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full all
Bank Indebtedness or such other Indebtedness or to offer to repay in full all
Bank Indebtedness or such other Indebtedness and to repay the Bank Indebtedness
or such other Indebtedness of each lender who has accepted such offer or (ii)
obtain the requisite consent under the agreements governing the Bank
Indebtedness or such other Indebtedness to permit the repurchase of the Notes as
provided for in this covenant.
(b)(i) Subject to paragraph (b)(ii), promptly, and in any event within 30
days following the date upon which the Company becomes aware that a Change of
Control has occurred, Parent and the Company shall, so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, publish notice thereof in a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) and, in
the case of Definitive Notes, shall also mail a notice to each Holder at its
address appearing in the register of Holders, with a copy to the Trustee, which
notice shall govern the terms of the Change of Control Offer (the "Change of
Control Offer"). For so long as any Notes are represented by Global Notes, the
Change of Control Offer shall (in addition to publication as described above)
also be given by delivery of the notice to DTC, Euroclear and/or Cedel Bank (as
the case may be) for communication to the relative Holders of the Book-Entry
Interests. Such notice shall state: (1) that a Change of Control has occurred
and that such Holder has the right to require the Company to purchase such
Holder's Notes at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders on the relevant record date to receive interest
on the relevant interest payment date); (2) the circumstances and relevant facts
regarding such Change of Control (including information with respect to pro
forma historical income, cash flow and capitalization after giving effect to
such Change of Control); (3) the repurchase date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed); and (4) the
instructions determined by the Company, consistent with the covenant described
hereunder, that a Holder must follow in order to have its Notes purchased.
77
<PAGE> 85
(ii) The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
(c) Parent and the Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, Parent and the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under the covenant described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenant described under "-- Certain Covenants -- Limitation on Consolidated
Indebtedness," "-- Limitation on Liens" and "-- Limitation on Sale/Leaseback
Transactions." Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the Notes then outstanding. Except
for the limitations contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford holders of the Notes
protection in the event of a highly leveraged transaction.
The Credit Agreement restricts the Company's ability to purchase Notes
prior to termination of the Credit Agreement in 2001, and also provides that the
occurrence of certain change of control events with respect to the Company would
constitute a default thereunder. In the event a Change of Control occurs at a
time when the Company is prohibited from purchasing Notes, the Company could
seek the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the Indenture
which would, in turn, constitute a default under the Credit Agreement. In such
circumstances, the payment blockage provisions in the Indenture would, in the
event the Bank Indebtedness was due and payable or subject to acceleration,
likely restrict payment to the Holders of Notes for up to 179 days.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require the Company to repurchase
the Notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders of Notes
following the occurrence of a Change of Control may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases.
The provisions under the Indenture relative to the Company's obligation to
make an offer to repurchase the Notes as a result of a Change of Control may be
waived or modified with the written consent of the holders of a majority in
principal amount of the Notes.
78
<PAGE> 86
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. Parent shall not sell or otherwise dispose of any Capital Stock
of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell or otherwise dispose of any of its
Capital Stock except (i) to Parent or a Restricted Subsidiary, (ii) if,
immediately after giving effect to such issuance, sale or other disposition,
neither Parent nor any of its Subsidiaries own any Capital Stock of such
Restricted Subsidiary or (iii) if, immediately after giving effect to such
issuance, sale or other disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such Person remaining
after giving effect thereto would have been permitted to be made under the
covenant described under "-- Limitation on Restricted Payments" if made on the
date of such issuance, sale or other disposition.
Limitation on Liens. Parent shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any
nature whatsoever on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired,
other than Permitted Liens, without effectively providing that the Notes shall
be secured equally and ratably with (or prior to) the obligations so secured for
so long as such obligations are so secured.
Limitation on Sale/Leaseback Transactions. Parent shall not, and shall not
permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction
with respect to any property unless (i) Parent or such Subsidiary would be
entitled to (A) Incur Indebtedness in an amount equal to the Attributable Debt
with respect to such Sale/Leaseback Transaction pursuant to the covenant
described under "-- Limitation on Consolidated Indebtedness" and (B) create a
Lien on such property securing such Attributable Debt without equally and
ratably securing the Notes pursuant to the covenant described under
"-- Limitation on Liens," (ii) the net proceeds received by Parent or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair value (as determined by the Board of Directors) of such
property and (iii) Parent applies the proceeds of such transaction in compliance
with the covenant described under "-- Limitation on Sale of Assets and
Subsidiary Stock."
Limitation on Lines of Business. Neither Parent nor the Company shall and
shall not permit any Restricted Subsidiary to, directly or indirectly, engage in
any business other than a Related Business.
Merger and Consolidation. Neither Parent nor the Company shall consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
a series of transactions, all or substantially all its assets to, any other
Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the laws of
England and Wales or the laws of the United States of America, any State thereof
or the District of Columbia and the Successor Company (if not Parent or the
Company) shall expressly assume, by an indenture supplemental thereto, executed
and delivered to the Trustee, in form reasonably satisfactory to the Trustee,
all the obligations of Parent or the Company under the Note Guarantee or the
Notes and the Indenture, respectively; (ii) immediately after giving effect to
such transaction (and treating any Indebtedness which becomes an obligation of
the Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by such Successor Company or such Subsidiary at the time of
such transaction), no Default shall have occurred and be continuing; (iii)
except in the case of a merger of Parent or the Company with or into a Wholly
Owned Subsidiary of Parent or the Company, respectively, and except in the case
of a merger entered into solely for the purpose of reincorporating Parent or the
Company in another jurisdiction, immediately after giving effect to such
transaction, the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Consolidated Indebtedness;" (iv) immediately after giving
effect to such transaction, the Successor Company shall have Consolidated Net
Worth in an amount that is not less than the Consolidated Net Worth of Parent or
the Company, as the case may be, immediately prior to such transaction; (v)
Parent or the Company, as the case may be, shall have delivered to the Trustee
an Officers'
79
<PAGE> 87
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture; and (vi) Parent or the Company, as the case may be, shall have
delivered to the Trustee Opinions of Counsel to the effect that (A) the Holders
will not recognize income, gain or loss for U.S. Federal income tax purposes as
a result of such transaction; (B) any payment of principal, redemption price or
purchase price of, premium (if any), Additional Amounts (if any) and interest on
the Notes by the Successor Company to a Holder after the consolidation, merger,
conveyance, transfer or lease of assets will be exempt from the Taxes described
and defined under "-- Withholding Taxes" and (C) no other taxes on income
(including taxable capital gains) will be payable under the laws of the United
Kingdom or any other jurisdiction where the Successor Company is or becomes
located by a Holder of the Notes who is not or is not deemed to be a resident of
the United Kingdom or other jurisdiction where the Successor Company is or
becomes located and does not carry on a trade in the United Kingdom through a
branch, agency or permanent establishment to which the Notes of that Holder are
attributable (or, as the case may be, does not carry on any business activities
through a branch, agency or permanent establishment in such other jurisdiction
where the Successor Company is or becomes located) in respect of the
acquisition, ownership or disposition of Notes, including the receipt of
principal, premium (if any), Additional Amounts (if any) or interest paid
pursuant to such Notes.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, Parent or the Company under the Note
Guarantee or the Indenture, as the case may be, but the predecessor company in
the case of a conveyance, transfer or lease of all or substantially all its
assets will not be released from the obligation to pay the principal of and
interest on the Notes.
SEC Reports. Notwithstanding that Parent may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, Parent shall
file with the SEC and provide the Trustee and Noteholders with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and other reports to be so
filed and provided at the times specified for the filing of such information,
documents and reports under such Sections.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest or any Additional Amounts on the Notes when due, continued
for 30 days, (ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by Parent or the Company to comply
with its obligations under "-- Certain Covenants -- Merger and Consolidation"
above, (iv) the failure by the Company to comply for 30 days after written
notice with any of their obligations in the covenants described above under
"-- Certain Covenants" under "-- Limitation on Consolidated Indebtedness,"
"-- Limitation on Restricted Payments," "-- Limitation on Restrictions on
Distributions from Restricted Subsidiaries," "-- Limitation on Sales of Assets
and Subsidiary Stock" (other than a failure to purchase Notes), "-- Limitation
on Affiliate Transactions," "-- Repurchase of Notes upon a Change of Control"
(other than a failure to purchase Notes), "-- Limitation on the Sale or Issuance
of Capital Stock of Restricted Subsidiaries," "-- Limitation on Liens,"
"-- Limitation on Sale/Leaseback Transactions," "-- Limitation on Lines of
Business," or "-- SEC Reports," (v) the failure by Parent or the Company to
comply for 60 days after written notice with their other agreements contained in
the Indenture, (vi) Indebtedness of Parent, the Company or any Significant
Subsidiary is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
principal amount or accreted value of such Indebtedness unpaid or accelerated
exceeds $5.0 million (the "cross acceleration provision"), (vii) certain events
of bankruptcy, insolvency or reorganization of Parent, the Company or a
Significant Subsidiary (the "bankruptcy provisions") or (viii) any judgment or
decree for the
80
<PAGE> 88
payment of money in excess of $5.0 million is entered against Parent, the
Company or a Significant Subsidiary, remains outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed (the "judgment
default provision"). However, a default under clauses (iv) and (v) will not
constitute an Event of Default until the Trustee or the holders of 25% in
principal amount of the outstanding Notes notify the Company of the default and
Parent or the Company does not cure such default within the time specified after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable by notice in writing to the Company (and the Trustee, if applicable)
specifying the Event of Default and that such notice is a "notice of
acceleration" ("Acceleration Notice"), and the same shall become immediately due
and payable; provided, however, that until such time as the Bank Indebtedness is
paid in full, no such Acceleration Notice with respect to an Event of Default
described in clause (i) of the preceding paragraph shall be effective until the
earlier of (a) the fifth Business Day after the giving of the Acceleration
Notice to the Company and the Representative under the Credit Agreement (but
only if such Event of Default is then continuing) and (b) the acceleration of
the Bank Indebtedness, in each case subject to the provisions described under
"--Payment Blockage." Upon such a declaration, such principal and interest shall
be due and payable immediately. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of Parent or the Company
occurs and is continuing, the principal of and interest on all the Notes will
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences. Subject to the provisions of the Indenture relating to the duties
of the Trustee, in case an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders of the
Notes unless such holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no holder
of a Note may pursue any remedy with respect to the Indenture or the Notes
unless (i) such holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) holders of at least 25% in principal amount of the
outstanding Notes have requested the Trustee to pursue the remedy, (iii) such
holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such request
within 60 days after the receipt thereof and the offer of security or indemnity
and (v) the holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the holders of a majority
in principal amount of the outstanding Notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other holder of a Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
81
<PAGE> 89
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Parent or
the Company, as such, shall have any liability for any obligations of Parent or
the Company under the Note Guarantee, the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive liabilities
under federal securities laws and it is the view of the SEC that such a waiver
is against public policy.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a purchase of, or a
tender offer or exchange for, the Notes) and any past default or compliance with
any provisions may also be waived with the consent of the holders of a majority
in principal amount of the Notes then outstanding (including consents obtained
in connection with a purchase of, or tender offer or exchange offer for, Notes).
However, without the consent of each holder of an outstanding Note affected
thereby, no amendment may, among other things, (i) reduce the amount of Notes
whose holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the amount payable upon the
redemption of any Note or change the time at which any Note may be redeemed as
described under "-- Optional Redemption" or "Redemption for Taxation Reasons"
above or shall be redeemed as described under "-- Mandatory Redemption" above,
(v) make any Note payable in money other than that stated in the Note, (vi)
impair the right of any holder of the Notes to receive payment of principal of
and interest on such holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes, (vii) make any change in the amendment provisions which require
each holder's consent or in the waiver provisions, or (viii) make any change in
the provisions of the Indenture described under "-- Withholding Taxes" that
adversely affects the rights of any Noteholder or amend the terms of the Notes
or the Indenture in a way that would result in the loss of an exemption from any
of the Taxes described thereunder.
Without the consent of any holder of the Notes, the Company and Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of the
Company under the Indenture, to provide for uncertificated Notes in addition to
or in place of certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section 163(f)(2)(B)
of the Code), to add guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Company for the benefit of the holders of the
Notes or to surrender any right or power conferred upon the Company, to make any
change that does not adversely affect the rights of any holder of the Notes or
to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the Trust Indenture Act. However no amendment may be made
to the Payment Blockage Provisions of the Indenture that adversely affects the
rights of any holder of Bank Indebtedness then outstanding unless the holders of
such Bank Indebtedness (or their Representative) consent to such change to the
extent such consent is required pursuant to the terms of such Bank Indebtedness.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such
82
<PAGE> 90
notice to all holders of the Notes, or any defect therein, will not impair or
affect the validity of the amendment.
NOTICES
Notices regarding the Notes will be (so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require)
published in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort) and, in the case of Definitive Notes, shall
also be mailed by first class mail to each Holder of Notes at its address
appearing in the register of Holders. For so long as any Notes are represented
by the Global Note, notices to Holders shall (in addition to publication as
described above) also be given by delivery of the relevant notice to DTC,
Euroclear and/or Cedel Bank (as the case may be) for communication to the
relative Holders of the Book-Entry Interests. If and so long as the Notes are
listed on any securities exchange, notices will also be given in accordance with
any applicable requirements of such securities exchange. Notices given by
publication will be deemed given on the first date on which publication is made
and notices given by first-class mail, postage prepaid, will be deemed given
five calendar days after mailing.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of Definitive Notes, to replace mutilated, destroyed, lost
or stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "-- Certain Covenants" (other than the covenant described under
"-- Merger and Consolidation"), the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Significant Subsidiaries
and the judgment default provision described under "-- Defaults" above and the
limitations contained in clauses (iii) and (iv) under "-- Certain
Covenants -- Merger and Consolidation" above ("covenant defeasance"). In the
event that the Company exercises its legal defeasance option (but not its
covenant defeasance option), Parent will be released from all of its obligations
with respect to the Note Guarantee.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "-- Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) under "-- Certain
Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that (i) holders of the Notes will not recognize income, gain or loss for
U.S. Federal income tax purposes as a result of such deposit and defeasance and
will be subject to U.S. Federal income tax and United Kingdom income tax on the
same amounts and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel as to U.S. Federal income tax must be
based on a ruling of the Internal Revenue Service or other change in applicable
U.S. Federal income tax law) and (ii) after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
under any applicable English or U.S. Federal or state law, and that the Trustee
has a perfected security interest in such trust funds for the ratable benefit of
the Holders.
83
<PAGE> 91
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is to be the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes. The Paying Agent shall at all times be a separate legal entity
from the Book-Entry Depositary.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue or resign.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
ENFORCEABILITY OF JUDGMENTS
Since substantially all of the operating assets of the Company and its
Subsidiaries are outside the United States, any judgment obtained in the United
States against the Company or a Subsidiary, including judgments with respect to
the payment of principal, premium, if any, interest, Additional Amounts, if any,
redemption price and any purchase price with respect to the Notes, may not be
collectible within the United States.
CONSENT TO JURISDICTION AND SERVICE
The Indenture will provide that the Company will appoint CT Corporation
System, 1633 Broadway, New York, New York 10019 as its agent for actions brought
under Federal or state securities laws brought in any Federal or state court
located in the Borough of Manhattan in The City of New York and will submit to
such jurisdiction.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"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 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 "con-
84
<PAGE> 92
trolled" have meanings correlative to the foregoing. For purposes of the
provisions described under "-- Certain Covenants -- Limitation on Restricted
Payments," "-- Certain Covenants -- Limitation on Affiliate Transactions" and
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"
only, "Affiliate" shall also mean any beneficial owner of Capital Stock
representing 5% or more of the total voting power of the Voting Stock (on a
fully diluted basis) of Parent or of rights or warrants to purchase such Capital
Stock (whether or not currently exercisable) and any Person who would be an
Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by Parent or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than Parent or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of Parent or any Restricted Subsidiary or (iii) any other
assets of Parent or any Restricted Subsidiary outside of the ordinary course of
business of Parent or such Restricted Subsidiary; provided, however, that Asset
Disposition shall not include (A) a disposition by a Restricted Subsidiary to
Parent or by Parent or a Restricted Subsidiary to a Restricted Subsidiary, (B)
for purposes of the covenant described under "-- Certain Covenants -- Limitation
on Sales of Assets and Subsidiary Stock" only, a disposition that constitutes a
Restricted Payment permitted by the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments", (C) disposition of assets with
a fair market value of less than $250,000, (D) the disposition of all or
substantially all of the assets of Parent or the Company as permitted under the
provisions described above at the caption "-- Certain Covenants -- Merger and
Consolidation", (E) the factoring of accounts receivable arising in the ordinary
course of business pursuant to arrangements customary in the industry, (F) the
licensing of intellectual property and (G) disposals or replacements of
obsolete, uneconomical, negligible, worn out or surplus property in the ordinary
course of business.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/ Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means all Obligations pursuant to the Credit Agreement.
"Banks" has the meaning specified in the Credit Agreement.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board; provided,
however, that "Board of Directors" means the Board of Directors of Parent when
designated as such.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
85
<PAGE> 93
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that for purposes of this
clause (i) such person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 40% of the total voting power of the
Voting Stock of Parent; provided that a Change of Control shall be deemed
not to have occurred where (through a merger, consolidation or other
transaction) Parent becomes a Wholly Owned Subsidiary of a holding company
substantially all of the Voting Stock of which is held by shareholders of
Parent immediately prior to such transaction (a "Parent Reorganization");
(ii) individuals who on the Issue Date constituted the Board of
Directors of the Company or Parent, as the case may be (together with any
new directors whose election by such Board of Directors of the Company or
Parent, as the case may be, or whose nomination for election by the
shareholders of the Company or Parent, as the case may be, was approved by
a vote of 66 2/3% of the directors of the Company or Parent, as the case
may be, then still in office who were either directors on the Issue Date or
whose election or nomination for election was previously so approved),
cease for any reason to constitute a majority of the Board of Directors of
the Company or Parent, as the case may be, then in office;
(iii) the merger or consolidation of Parent with or into another
Person or the merger of another Person with or into Parent, or the sale of
all or substantially all the assets of Parent to another Person, and, in
the case of any such merger or consolidation, the securities of Parent that
are outstanding immediately prior to such transaction and which represent
100% of the aggregate voting power of the Voting Stock of Parent are
changed into or exchanged for cash, securities or property, unless pursuant
to such transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
corporation; provided that a Change of Control shall be deemed not to have
occurred solely as a result of a Parent Reorganization;
(iv) the failure at any time by (A) Parent to beneficially own (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, 100% of the Voting Stock of the Company and, after the
occurrence of the Spinoff, Octel or (B) the Company to beneficially own (as
so defined), directly or indirectly, at least 98.78% of Octel; or
(v) the adoption of a plan relating to the liquidation or dissolution
of Parent or the Company.
For the avoidance of doubt, the occurrence of the Spinoff shall not
constitute a Change of Control.
"Code" means the Internal Revenue Code of 1986, as amended.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Notes.
86
<PAGE> 94
"Comparable Treasury Price" means with respect to any Redemption Date for
the Notes (i) the average of three Reference Treasury Dealer Quotations for such
Redemption Date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (ii) if the Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Consolidated Debt to EBITDA Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of Indebtedness of Parent and its
Restricted Subsidiaries calculated on a consolidated basis as of the end of the
most recent fiscal quarter for which financial statements are publicly available
prior to the date of such determination (such fiscal quarter being herein called
the "most recent fiscal quarter") to (ii) EBITDA for the four consecutive fiscal
quarters ending with the most recent fiscal quarter for which financial
statements are publicly available (the "Reference Period"); provided, however,
that
(1) if Parent or any Restricted Subsidiary has Incurred any
Indebtedness since the end of the Reference Period that remains outstanding
or if the transaction giving rise to the need to calculate the Consolidated
Debt to EBITDA Ratio is an Incurrence of Indebtedness, the amount of such
Indebtedness shall be calculated after giving effect on a pro forma basis
to such Indebtedness as if such Indebtedness had been outstanding as of the
end of the most recent fiscal quarter and to the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such new Indebtedness had been
Incurred and such other Indebtedness had been discharged as of the end of
such fiscal quarter;
(2) if Parent or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness that was outstanding as
of the end of the most recent fiscal quarter or if any Indebtedness that
was outstanding as of the end of the most recent fiscal quarter is to be
repaid, repurchased, defeased or otherwise discharged on the date of the
transaction giving rise to the need to calculate the Consolidated Debt to
EBITDA Ratio (other than, in each case, Indebtedness Incurred under any
revolving credit agreement unless such Indebtedness has been permanently
repaid and has not been replaced), the aggregate amount of Indebtedness
shall be calculated on a pro forma basis as if such discharge has occurred
as of the end of the most recent fiscal quarter and EBITDA shall be
calculated as if Parent or such Restricted Subsidiary had not earned the
interest income, if any, actually earned during the Reference Period in
respect of cash or Temporary Cash Investments used to repay, repurchase,
defease or otherwise discharge such Indebtedness;
(3) if since the beginning of the Reference Period (including on the
date of the transaction giving rise to the need to calculate the
Consolidated Debt to EBITDA Ratio) Parent or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for the Reference Period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition
for the Reference Period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for the Reference Period;
(4) if since the beginning of the Reference Period (including on the
date of the transaction giving rise to the need to calculate the
Consolidated Debt to EBITDA Ratio) Parent or any Restricted Subsidiary (by
merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets which constitutes all or substantially all of an
operating unit of a business, EBITDA for the Reference Period shall be
calculated after giving pro forma effect thereto (including the Incurrence
of any Indebtedness) as if such Investment or acquisition occurred on the
first day of the Reference Period (and irrespective of the method (purchase
or pooling) of accounting for such Investment or acquisition of assets);
and
(5) if since the beginning of the Reference Period (including on the
date of the transaction giving rise to the need to calculate the
Consolidated Debt to EBITDA Ratio) any Person (that
87
<PAGE> 95
subsequently became a Restricted Subsidiary or was merged with or into
Parent or any Restricted Subsidiary since the beginning of such Reference
Period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to
clause (3) or (4) above if made by Parent or a Restricted Subsidiary during
the Reference Period, EBITDA for the Reference Period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of the Reference
Period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of EBITDA relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of Parent. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of Parent and its consolidated Restricted Subsidiaries, plus, to the
extent not included in such total interest expense, and to the extent incurred
by Parent or its Restricted Subsidiaries, without duplication, (i) interest
expense attributable to capital leases and the interest expense attributable to
leases constituting part of a Sale/Leaseback Transaction, (ii) amortization of
debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash
interest expenses, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Hedging Obligations (including amortization of fees),
(vii) Preferred Stock dividends (other than dividends paid in Capital Stock of
Parent (other than Disqualified Stock)) in respect of all Preferred Stock of
Parent or a Restricted Subsidiary held by Persons other than Parent or a Wholly
Owned Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) Parent or any Restricted Subsidiary and (x) the cash contributions to
any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
Person (other than Parent) in connection with Indebtedness Incurred by such plan
or trust.
"Consolidated Net Income" means, for any period, the net income of Parent
and its consolidated Subsidiaries; provided, however, that there shall not be
included in such Consolidated Net Income:
(i) any net income of any Person (other than Parent) if such Person is
not a Restricted Subsidiary, except that (A) subject to the exclusion
contained in clause (iv) below, Parent's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to Parent or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained
in clause (iii) below) and (B) Parent's equity in a net loss of any such
Person for such period shall be included in determining such Consolidated
Net Income;
(ii) any net income (or loss) of any Person acquired by Parent or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to Parent; provided, however, that (A)
subject to the exclusion contained in clause (iv) below, Parent's equity in
the net income of any such
88
<PAGE> 96
Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to Parent or
another Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) Parent's
equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income; provided
further, however, that, for purposes of determining whether an Incurrence
of Indebtedness (1) by Parent will be permitted pursuant to the covenant
described under "-- Limitation on Consolidated Indebtedness", the entire
net income of each Restricted Subsidiary that is subject to restrictions,
directly or indirectly, on the payment of dividends or the making of
distributions to Parent will be included in determining Consolidated Net
Income so long as the agreements or instruments imposing such restrictions
(including with respect to the Indebtedness being Incurred) permit such
Restricted Subsidiary to pay dividends or make distributions sufficient to
pay interest on the Indebtedness being Incurred and any other Indebtedness
of Parent in existence as of the date of determination and (2) by a
Restricted Subsidiary (including the Company) (the "Borrowing Subsidiary")
will be permitted pursuant to the covenant described under "-- Limitation
on Consolidated Indebtedness", the entire net income of the Borrowing
Subsidiary will be included in determining Consolidated Net Income and the
entire net income of each Restricted Subsidiary that is a Subsidiary of the
Borrowing Subsidiary and that is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions to
Parent will be included in determining Consolidated Net Income so long as
the agreements or instruments imposing such restrictions (including with
respect to the Indebtedness being Incurred) permit such Restricted
Subsidiary to pay dividends or make distributions sufficient to pay
interest on the Indebtedness being Incurred and any other Indebtedness of
the Borrowing Subsidiary and Indebtedness of Parent in existence as of the
date of determination;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of Parent, its consolidated Subsidiaries or any
other Person (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person together with any related
tax effects according to GAAP associated with the foregoing;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Parent and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of Parent ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of Parent plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Credit Agreement" means the Facility Agreement dated April 27, 1998, by
and among Octel, certain of its Subsidiaries, the lenders referred to therein,
and Goldman Sachs Credit Partners, L.P. and Barclays Bank PLC, as joint
arrangers and joint syndication agents, together with the related documents
thereto (including the term loans and revolving loans thereunder, any guarantees
and security documents), as amended, extended, renewed, restated, supplemented
or otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time, and any
agreement (and related document) governing Indebtedness incurred to refund or
refinance, in whole or in part, the borrowings and commitments
89
<PAGE> 97
then outstanding or permitted to be outstanding under such Credit Agreement or a
successor Credit Agreement, whether by the same or any other lender or group of
lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable or must be purchased, upon the occurrence of certain events
or otherwise, by such Person at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the Stated Maturity
of the Notes; provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to purchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if (x) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Notes and described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" and
"-- Certain Covenants -- Repurchase of Notes upon a Change of Control" and (y)
any such requirement only becomes operative after compliance with such terms
applicable to the Notes, including the purchase of any Notes tendered pursuant
thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of Parent
and its consolidated Restricted Subsidiaries, (b) depreciation expense of Parent
and its consolidated Restricted Subsidiaries, (c) amortization expense of Parent
and its consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period) and (d) all
other non-cash charges of Parent and its consolidated Restricted Subsidiaries
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash expenditures in any future period), in each case for such
period. EBITDA shall be increased or decreased, as the case may be, to the
extent of non-cash reductions or increases, respectively, in Consolidated Net
Income in such period due solely to fluctuations in currency values and the
related tax effects according to GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this "Description of the Notes" shall be
computed in conformity with
90
<PAGE> 98
GAAP. Any accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP.
"Great Lakes" means Great Lakes Chemical Corporation, a Delaware
corporation.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the several persons who are for the time
being holders of the Notes (being, in the case of Definitive Notes, the several
persons whose names are entered in the register of Holders of the Definitive
Notes as the holders thereof) which expression shall, while any Global Note
remains outstanding, mean in relation to the Notes represented thereby each
person who is for the time being shown in the records of DTC, Euroclear or of
Cedel Bank as the holder of a particular Book-Entry Interest in respect of such
Notes (in which regard any certificate or other document issued by DTC,
Euroclear or Cedel Bank as to the principal amount of Notes represented by a
Global Note standing to the account of any person shall be conclusive and
binding for all purposes) for all purposes other than with respect to the
payment of principal, premium, if any, and interest on such Notes, the right to
which shall be vested, as against the Company, solely in the bearer of such
Global Note (being at the Issue Date the Book-Entry Depositary) in accordance
with and subject to its terms and the terms of the Indentures and the words
"holder" and "holders" and related expressions shall (where appropriate) be
construed accordingly.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
91
<PAGE> 99
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit or
performance bonds securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit or performance
bonds are not drawn upon or, if and to the extent drawn upon, such drawing
is reimbursed no later than the tenth Business Day following payment on the
letter of credit or performance bond);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Trustee after consultation
with the Company.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary", the definition of "Restricted Payment" and the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments", (i) "Investment" shall include the portion (proportionate to Parent's
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of Parent at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, Parent shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount
(if positive) equal to (x) Parent's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to Parent's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
92
<PAGE> 100
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form), in each case net of (i) all legal, accounting and investment
banking fees, and sales commissions and all other legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Restricted Subsidiaries as a result of such Asset Disposition and
(iv) the deduction of appropriate amounts provided by the seller as a reserve,
in accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by Parent or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
and other amounts payable pursuant to the documentation governing such
Indebtedness.
"Octel" means Octel Associates and any successor Person.
"Parent" means Octel Corp., a Delaware corporation, and any successor
Person.
"Permitted Investment" means an Investment by Parent or any Restricted
Subsidiary in (i) Parent, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, Parent or a Restricted Subsidiary; provided,
however, that such Person's primary business is a Related Business; (iii)
Temporary Cash Investments; (iv) receivables owing to Parent or any Restricted
Subsidiary if created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as Parent or
any such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of Parent or such Restricted Subsidiary; (vii) stock, obligations
or securities received in settlement of debts created in the ordinary course of
business and owing to Parent or any Restricted Subsidiary or in satisfaction of
judgments; (viii) any Investment in any Person to the extent such Investment
represents the non-
93
<PAGE> 101
cash portion of the consideration received for an Asset Disposition as permitted
pursuant to the covenant described under "-- Certain Covenants -- Limitation on
Sales of Assets and Subsidiary Stock"; (ix) Investments existing on the date of
the Indenture; (x) Hedging Obligations otherwise in compliance with the
Indenture; and (xi) Investments the total payment for which consists exclusively
of Capital Stock (excluding Disqualified Stock) of Parent.
"Permitted Liens" means, with respect to any Person, (a) liens, pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
and other types of social security laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for the payment
of Indebtedness) or leases to which such Person is a party, or deposits to
secure public or statutory obligations of such Person or deposits of cash or
government bonds to secure surety or appeal bonds to which such Person is a
party, or deposits as security for contested taxes or import duties or for the
payment of rent, in each case Incurred in the ordinary course of business; (b)
statutory liens of landlords and other Liens imposed by law, including
carriers', warehousemen's, supplier's, materialmen's, repairmen's and mechanics'
Liens, in each case for sums not yet due or being contested in good faith or
other Liens arising out of judgments or awards against such Person with respect
to which such Person shall then be proceeding with an appeal or other
proceedings for review; (c) liens for taxes, assessments or governmental charges
not yet subject to penalties for non-payment, or which are being contested in
good faith; (d) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; provided, however, that such letters of credit
do not constitute Indebtedness; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights-of-way,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real property or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (f) Liens securing Indebtedness Incurred to finance the
construction, purchase or lease of, or repairs, improvements or additions to,
property of such Person; provided, however, that the Lien may not extend to any
other property owned by such Person or any of its Subsidiaries at the time the
Lien is Incurred, and the Indebtedness (other than any interest thereon) secured
by the Lien may not be Incurred more than 180 days after the later of the
acquisition, completion of construction, repair, improvement, addition or
commencement of full operation of the property subject to the Lien; (g) Liens to
secure Indebtedness of Restricted Subsidiaries (other than the Company)
permitted under "-- Certain Covenants -- Limitation on Consolidated
Indebtedness"; (h) Liens existing on the Issue Date; (i) Liens on property or
shares of Capital Stock of another Person at the time such other Person becomes
a Subsidiary of such Person; provided, however, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such other
Person becoming such a Subsidiary; provided further, however, that such Lien may
not extend to any other property owned by such Person or any of its
Subsidiaries; (j) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such Person;
provided, however, that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such acquisition; provided further,
however, that the Liens may not extend to any other property owned by such
Person or any of its Subsidiaries; (k) liens securing intercompany indebtedness
of a Restricted Subsidiary of Parent other than the Company on assets of any
Subsidiary of Parent other than the Company; (l) Liens securing Hedging
Obligations so long as such Hedging Obligations relate to Indebtedness that is,
and is permitted to be under the Indenture, secured by a Lien on the same
property securing such Hedging Obligations; (m) Liens to secure any Refinancing
(or successive Refinancings) as a whole, or in part, of any Indebtedness secured
by any Lien referred to in the foregoing clauses (f), (h), (i) and (j);
provided, however, that (x) such new Lien shall be limited to all or part of the
same property that secured the original Lien (plus improvements to or on such
property) and (y) the Indebtedness
94
<PAGE> 102
secured by such Lien at such time is not increased to any amount greater than
the sum of (A) the outstanding principal amount or, if greater, committed amount
of the Indebtedness described under clauses (f), (h), (i) or (j) at the time the
original Lien became a Permitted Lien and (B) an amount necessary to pay any
fees and expenses, including premiums, related to such refinancing, refunding,
extension, renewal or replacement; (n) judgment Liens not giving rise to an
Event of Default; (o) an interest or title of a lessor under any Capitalized
Lease Obligation; (p) Liens on specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment, or storage of such inventory or other goods Incurred in the
ordinary course of business; (q) liens securing reimbursement obligations with
respect to commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds thereof
Incurred in the ordinary course of business; (r) Liens incurred with respect to
obligations that do not in the aggregate exceed $10.0 million at any one time
outstanding; (s) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of Parent and its Restricted
Subsidiaries; and (t) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of custom duties so long as the underlying
obligations are not in default or are being contested in good faith.
Notwithstanding the foregoing, "Permitted Liens" will not include any Lien
described in clauses (f), (i) or (j) above to the extent such Lien applies to
any Additional Assets acquired directly or indirectly from Net Available Cash
pursuant to the covenant described under "-- Certain Covenants -- Limitation on
Sale of Assets and Subsidiary Stock". For purposes of this definition, the term
"Indebtedness" shall be deemed to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Recognized Stock Exchange" means a recognized Stock exchange within the
meaning of Section 841 of the U.K. Income and Corporation Taxes Act 1988.
"Reference Treasury Dealer" means any nationally recognized primary U.S.
Government securities dealer in New York City.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Parent or any Restricted Subsidiary existing on the Issue Date
or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the
95
<PAGE> 103
Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs associated with Refinancing) under the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness shall
not include Indebtedness of a Subsidiary that Refinances Indebtedness of Parent.
"Related Business" means any business related, ancillary or complementary
to the businesses of Parent, the Company and the Restricted Subsidiaries on the
Issue Date.
"Reorganization" means the final reorganization of the corporate and
partnership entities of Parent and its subsidiaries, including Parent, prior to
or concurrently with the Spinoff.
"Representative" means any trustee, agent or representative (if any) for an
issue of Bank Indebtedness.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to Parent or a Restricted Subsidiary,
and other than pro rata dividends or other distributions made by a Subsidiary
that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of Parent held by any Person or of any Capital
Stock of a Restricted Subsidiary held by any Affiliate of Parent (other than a
Restricted Subsidiary), including the exercise of any option to exchange any
Capital Stock (other than into Capital Stock of Parent that is not Disqualified
Stock), (iii) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition) or (iv) the making of any Investment in any Person (other
than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of Parent that is not an
Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility contained
in the Credit Agreement and any other facility or financing arrangement that
Refinances, in whole or in part, any such revolving credit facility.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby Parent or a Restricted Subsidiary transfers
such property to a Person and Parent or a Restricted Subsidiary leases it from
such Person.
"SEC" means the Securities and Exchange Commission.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Parent within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Spinoff" means the distribution of shares of the common stock of Parent to
the holders of common stock of Great Lakes to be effected as described in the
Offering Circular.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the
96
<PAGE> 104
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of Parent or the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Note Guarantee or the Notes, as
applicable, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United Kingdom or the
United States of America or any agency thereof or obligations guaranteed by
the United Kingdom or the United States of America or any agency thereof;
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United Kingdom, the United States of America, any state thereof or
any foreign country recognized by the United States or the United Kingdom,
and which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50 million (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act);
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above;
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of Parent) organized and in existence under the laws of the
United Kingdom, the United States of America or any foreign country
recognized by the United Kingdom or the United States of America with a
rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard & Poor's Ratings Group; and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Moody's Investors Service, Inc. or "A" by Standard & Poor's Ratings
Group.
"Term Loan Facility" means the term loan facility contained in the Credit
Agreement and any other facility or financing arrangement that Refinances in
whole or in part any such term loan facility.
"Treasury Rate" means, with respect to any Redemption Date for the Notes,
(i) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities", for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the maturity date of the Notes, yields for
the two published maturities most closely corresponding to the Comparable
Treasury Issue shall be determined and the Treasury Rate shall be interpolated
or extrapolated from
97
<PAGE> 105
such yields on a straight line basis, rounding to the nearest month) or (ii) if
such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date. The Treasury Rate shall be calculated
on the third Business Day preceding the Redemption Date.
"Unrestricted Subsidiary" means (i) any Subsidiary of Parent other than the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of Parent (other than the Company, but including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, Parent or any other
Subsidiary of Parent that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments." The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation (x) Parent could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "-- Certain
Covenants -- Limitation on Consolidated Indebtedness" and (y) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the resolution of the Board of Directors giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by Parent or
one or more Wholly Owned Subsidiaries.
98
<PAGE> 106
DESCRIPTION OF THE NOTE DEPOSITARY AGREEMENT
GENERAL
The Exchange Notes will be represented initially by the Global Note, which
will be issued in bearer form without coupons and which will represent the
aggregate principal amount of the outstanding Notes. The Global Note will be
deposited with The Industrial Bank of Japan (Luxembourg) S.A., as Book-Entry
Depositary, pursuant to the terms of the Note Depositary Agreement. The
Book-Entry Depositary will issue a certificateless depositary interest
(representing a 100% interest in the underlying Global Note) to DTC or its
nominee. The summary of certain provisions of the Note Depositary Agreement
contained in this section does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Note
Depositary Agreement, a copy of the form of which will be available from Parent
upon request.
Upon confirmation by DTC that the Book-Entry Depositary has custody of the
Global Note and upon acceptance by DTC of the certificateless depositary
interests pursuant to the Letter of Representations to be entered into with DTC,
DTC will record beneficial interests in the Global Notes. Book-Entry Interests
will be recorded in denominations of $1,000 and integral multiples thereof.
Ownership of Book-Entry Interests will be limited to Persons that have accounts
with DTC ("participants") or Persons that hold interests in the Book-Entry
Interests through participants ("indirect participants"), including, as
applicable, the Euroclear Operator, Cedel, banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with DTC,
either directly or indirectly. Indirect participants shall also include Persons
that hold through such indirect participants. The Book-Entry Interests will not
be held in definitive form. Instead, DTC will credit, on its book-entry
registration and transfer system, the participants' accounts with the respective
interests beneficially owned by such participants. Ownership of Book-Entry
Interests will be shown on, and the transfer of these Book-Entry Interests or
the interests therein will be effected only through, records maintained by DTC
or its nominee (with respect to interests of its participants) and on the
records of participants (with respect to interests of indirect participants).
The laws of some states in the United States may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. The foregoing limitations may impair the ability to own, transfer or
pledge Book-Entry Interests.
So long as the Book-Entry Depositary, or its nominee, is the Holder of the
Global Note underlying Book-Entry Interests, the Book-Entry Depositary or such
nominee, as the case may be, will be considered the sole Holder of the Global
Note for all purposes under the Indenture and the Notes. Except as set forth
below under "-- Issuance of Definitive Notes", participants or indirect
participants will not be entitled to have Notes or Book-Entry Interests
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in definitive bearer or registered form and will not be
considered the owners or Holders thereof under the Indenture. Accordingly, each
Person holding a Book-Entry Interest must rely on the procedures of the
Book-Entry Depositary and DTC, the Euroclear Operator and Cedel and indirect
participants must rely on the procedure of the participant or indirect
participants through which such Person owns its interest in the Book-Entry
Interests, including, as applicable, the Euroclear Operator and Cedel, to
exercise any rights and obligations of a Holder under the Indenture. See
"-- Action in Respect of the Global Note and the Book-Entry Interests". If any
Definitive Notes are issued, they will only be issued in registered form.
Unless and until Book-Entry Interests are exchanged for Definitive Notes,
the certificateless depositary interests held by DTC may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor of DTC or a
nominee of such successor.
All interests in the Global Note, including those held through the
Euroclear Operator or Cedel, may be subject to the procedures and requirements
of DTC. Those interests held through the
99
<PAGE> 107
Euroclear Operator or Cedel may also be subject to the procedures and
requirements of such system.
Investors may hold their beneficial interests in the Regulation S Global
Note through the Euroclear Operator or Cedel (in accordance with the provisions
set forth under "-- Transfers and Transfer Restrictions"), if they are account
holders in such systems, or indirectly through organizations which are account
holders in such systems. After the expiration of the Restricted Period (as
defined) but not earlier, investors may also hold such interests through
organizations, other than the Euroclear Operator and Cedel, that are
participants in the DTC system. The Euroclear Operator and Cedel will hold
beneficial interests in the Regulation S Global Note on behalf of their account
holders through securities accounts in the respective account holders' names on
the Euroclear Operator's and Cedel's respective book-entry registration and
transfer systems, which in turn, will hold such interests in the Regulation S
Global Note in accounts in the Euroclear Operator's or Cedel's name on the books
of DTC.
Although DTC, the Euroclear Operator and Cedel have agreed to certain
procedures to facilitate transfers of beneficial interests in the Global Note
among participants of DTC and account holders of the Euroclear Operator and
Cedel, they are under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. None of Parent,
the Trustee or any of their respective agents will have any responsibility for
the performance by DTC, the Euroclear Operator or Cedel or their respective
participants or account holders of their respective obligations under the rules
and procedures governing their operations.
PAYMENTS ON GLOBAL NOTE
Payment of principal of and interest on, and any other amount due in
respect of, the Global Notes will be made through one or more paying agents
appointed under the Indenture to the Book-Entry Depositary and the liability of
the Company with respect to any such payment will be discharged upon the payment
in full of such amount. All such amounts will be payable, by a Paying Agent
located outside of the United Kingdom, in dollars or in such other coin or
currency of the United States of America as at the time of payment is legal
tender for the payment therein of public and private debts. Upon receipt of any
payment of principal of or premium (if any) or interest or any other amount on
the Global Note, the Book-Entry Depositary will distribute all such payments to
Cede & Co., as nominee of DTC. All such payments will be distributed without
deduction or withholding for any taxes, duties, assessments or other
governmental charges of whatever nature except as may be required by law. If any
such deduction or withholding is required to be made, then except as provided in
"Description of the Notes -- Withholding Taxes", such Additional Amounts will be
paid by Parent or the Company, as the case may be, to the Book-Entry Depositary
as may be necessary in order that the net amounts received by the Holder of the
Global Note or owners of Book-Entry Interests after such deduction or
withholding shall be not less than the amounts specified in such Note to which
such Holder or owner is entitled. DTC, upon receipt of any payment made in
respect of the Global Note, will promptly credit participants' accounts with
payments in amounts proportionate to their respective ownership of Book-Entry
Interests, as shown on the records of DTC. Parent expects that payments by
participants to owners of interests in Book-Entry Interests held through such
participants or indirect participants will be governed by standing customer
instructions and customary practices, as is now the case with the securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such participants or indirect
participants. Distribution with respect to ownership of Book-Entry Interests
held through the Euroclear Operator or Cedel will be credited to the cash
accounts of participants in the Euroclear Operator or Cedel in accordance with
the relevant system's rules and procedures, to the extent received by its
depositary. None of Parent, the Trustee, the Book-Entry Depositary or any other
agent of Parent, the Trustee or the Book-Entry Depositary will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of a
100
<PAGE> 108
participant's ownership of Book-Entry Interests or for maintaining, supervising
or reviewing any records relating to a participant's ownership of Book-Entry
Interests.
INFORMATION REGARDING DTC, THE EUROCLEAR OPERATOR AND CEDEL
DTC, the Euroclear Operator and Cedel have advised Parent as follows:
DTC. DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities of its participants and to facilitate the
clearance and settlement of transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies, clearing corporations and
certain other organizations, some of whom (and/or their representatives) own
DTC.
The Euroclear Operator and Cedel. The Euroclear Operator and Cedel each
hold securities for their account holders and facilitate the clearance and
settlement of securities transactions by electronic book-entry transfer between
their respective account holders, thereby eliminating the need for physical
movements of certificates and any risk from lack of simultaneous transfers of
securities.
The Euroclear Operator and Cedel provide various services including
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. The Euroclear Operator and
Cedel also deal with domestic securities lending and borrowing. The Euroclear
Operator and Cedel also deal with domestic securities markets in several
countries through established depository and custodial relationships. The
Euroclear Operator and Cedel have established an electronic bridge between their
two systems across which their respective account holders may settle trades with
each other.
Account holders in the Euroclear Operator and Cedel are worldwide financial
institutions including underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the Euroclear
Operator and Cedel is available to other institutions that clear through or
maintain a custodial relationship with an account holder of either system.
Account holders' overall contractual relations with the Euroclear Operator
and Cedel are governed by the respective rules and operating procedures of the
Euroclear Operator and Cedel and any applicable laws. The Euroclear Operator and
Cedel act under such rules and operating procedures only on behalf of their
respective account holders, and have no record of or relationship with persons
holding through their respective account holders.
Parent understands that under existing industry practices, if either Parent
or Trustee requests any action of owners of Book-Entry Interests or if an owner
of a Book-Entry Interest desires to give or take any action that a Holder is
entitled to give or take under the Indenture, DTC would authorize the
participants owning the relevant Book-Entry Interests to give or take such
action, and such participants would authorize indirect participants to give or
take such action or would otherwise act upon the instructions of such indirect
participants.
REDEMPTION
In the event any Global Note (or a portion thereof) is redeemed, the
Book-Entry Depositary will, through DTC, redeem, from the amount received by it
in respect of the redemption of such Global Note, an equal amount of the
Book-Entry Interests in such Global Note. The redemption price payable in
connection with the redemption of Book-Entry Interests will be equal to the
amount received by the Book-Entry Depositary in connection with the redemption
of the Global Notes (or
101
<PAGE> 109
portion thereof). For any redemptions of a Global Note in part, selection of
Book-Entry Interests to be redeemed will be made by DTC on a pro rata basis (or
on such other basis as DTC deems fair and appropriate) provided that no
Book-Entry Interest of $1,000 principal amount or less shall be redeemed in
part. Once redeemed in part, a new Global Note in the principal amount equal to
the unredeemed portion thereof will be issued and delivered to the Book-Entry
Depositary.
TRANSFERS AND TRANSFER RESTRICTIONS
All transfers of Book-Entry Interests will be recorded in accordance with
the book-entry system maintained by DTC, pursuant to customary procedures
established by DTC and its participants. See "-- General". Pursuant to the Note
Depositary Agreement, the Global Notes may be transferred only to a successor
Book-Entry Depositary.
ISSUANCE OF DEFINITIVE NOTES
Holders of Book-Entry Interests will be entitled to receive Definitive
Notes in registered form in exchange for their holdings of Book-Entry Interest
(i) if DTC is at any time unwilling or unable to continue as, or ceases to be, a
clearing agency registered under the Exchange Act, and a successor to DTC
registered as a clearing agency under the Exchange Act is not able to be
appointed by Parent within 90 days of such notification or (ii) if the
Book-Entry Depositary is at any time unwilling or unable to continue as
Book-Entry Depositary and a successor Book-Entry Depositary is not able to be
appointed by Parent within 90 days. Any Definitive Notes issued in exchange for
Book-Entry Interests will be registered in such name or names as the Book-Entry
Depositary shall instruct the Trustee based on the instructions of DTC. It is
expected that such instructions will be based upon directions received by DTC
from participants with respect to ownership of Book-Entry Interests.
In addition to the foregoing, on or after the occurrence of an Event of
Default, holders of Book-Entry Interests will be entitled to request and receive
Definitive Notes. Such Definitive Notes will be issued to and registered in the
name of, or as directed by, such Person only upon the request in writing by the
Book-Entry Depositary (based upon the instructions of DTC).
To the extent permitted by law, Parent, the Trustee and any Paying Agent
shall be entitled to treat the Person in whose name any Definitive Note is
registered as the absolute owner thereof. The Indenture contains provisions
relating to the maintenance by a registrar of a register reflecting ownership of
Definitive Notes, if any, and any other provisions customary for a registered
debt security. Any payments in respect of a Definitive Note will be made to the
Holder appearing on the register at the close of business on the record date at
his address shown on the Register.
HOLDERS SHOULD BE AWARE THAT, UNDER CURRENT U.K. TAX LAW, UPON THE ISSUANCE
TO A HOLDER OF DEFINITIVE NOTES, SUCH HOLDER WILL BECOME SUBJECT TO U.K. INCOME
TAX (CURRENTLY 20%) TO BE WITHHELD ON ANY PAYMENTS OF INTEREST ON THE DEFINITIVE
NOTES AS SET FORTH UNDER "CERTAIN UNITED KINGDOM TAX CONSEQUENCES".
However, U.S. Holders of Definitive Notes may be entitled to receive a
refund of withheld amounts from the U.K. Inland Revenue in certain
circumstances. See "Certain Income Tax Considerations -- Material U.K. Tax
Consequences". In addition, if a Holder receives Definitive Notes, under certain
circumstances such Holder will be entitled to receive Additional Amounts with
respect to such Notes. See "Description of the Notes -- Withholding Taxes".
TRANSFER AND EXCHANGE OF DEFINITIVE NOTES
In the event that Definitive Notes are in issue, a Holder may transfer or
exchange the Definitive Notes in accordance with the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and Parent may require a Holder to pay any
taxes and fees required by law or permitted by the Indenture. Parent is not
102
<PAGE> 110
required to transfer or exchange any Notes selected for redemption or for a
period of 15 days before a selection of Notes to be redeemed. In addition,
transfers and exchanges of Definitive Notes will be subject to such procedures,
which will be substantially consistent with the procedures described above with
respect to Global Notes (including the certification requirements intended to
ensure that transfers and exchanges comply with applicable securities laws), as
may from time to time be adopted by Parent and the Registrar. If Definitives
Notes are issued, Parent will appoint a Person located in London and reasonably
acceptable to the Trustee, as an additional paying and transfer agent. Upon the
issuance of Definitive Notes, Holders will be able to transfer and exchange
Definitive Notes at the London office of such paying and transfer agent provided
that all transfers and exchanges must be effected in accordance with the terms
of the Indenture and, among other things, be recorded in the register maintained
by the registrar.
ACTION IN RESPECT OF THE GLOBAL NOTE AND THE BOOK-ENTRY INTERESTS
Not later than 10 days after receipt by the Book-Entry Depositary of notice
of any solicitation of consents or requests for a waiver or other action by the
Holder of the Global Note or holders of the Book-Entry Interests, the Book-Entry
Depositary will mail to DTC a notice containing (a) such information as is
contained in such notice, (b) a statement that at the close of business on a
specified record date DTC will be entitled to instruct the Book-Entry Depositary
as to the consent, waiver or other action, if any, pertaining to the Book-Entry
Interests or the Global Note and (c) a statement as to the manner in which such
instructions may be given. Upon the written request of DTC, the Book-Entry
Depositary shall endeavor insofar as practicable to take such action regarding
the requested consent, waiver or other action in respect of the Book-Entry
Interests or the Global Note in accordance with any instructions set forth in
such request. DTC is expected to follow the procedures described under
"-- General" above with respect to soliciting instructions from its
participants. The Book-Entry Depositary will not exercise any discretion in the
granting of consents or waivers or the taking of any other action in respect of
the Book-Entry Interests or the Global Note.
REPORTS
The Book-Entry Depositary will immediately, and in no event later than ten
days from receipt, send to DTC a copy of any notices, reports and other
communications received relating to Parent, the Global Notes or the Book-Entry
Interests. Copies of all such notices, reports and communications will be
available for inspection at the offices of the listing agent for the Notes. All
notices regarding the Notes will be (i) in the case of Global Note, published in
a leading newspaper having a general circulation in New York (which is expected
to be the Wall Street Journal) or (ii) in the case of Definitive Notes, mailed
to Holders by first-class mail at their respective addresses as they appear on
the registration books of the Registrar. If and so long as the Notes are listed
on any other securities exchange, notices will also be given in accordance with
any applicable requirements of such securities exchange.
ACTION BY BOOK-ENTRY DEPOSITARY
Subject to certain limitations, upon the occurrence of a default with
respect to the Notes, or in connection with any other right of the Holder of the
Global Notes under the Indenture or the Note Depositary Agreement, if requested
in writing by DTC, the Book-Entry Depositary will take any such action as shall
be requested in such notice.
CHARGES OF BOOK-ENTRY DEPOSITARY
Parent has agreed to pay all charges of the Book-Entry Depositary under the
Note Depositary Agreement. Parent has also agreed to indemnify the Book-Entry
Depositary against certain liabilities incurred by it under the Note Depositary
Agreement.
103
<PAGE> 111
AMENDMENT AND TERMINATION
The Note Depositary Agreement may be amended by agreement among Parent and
the Book-Entry Depositary. The consent of DTC shall not be required in
connection with any amendment to the Note Depositary Agreement: (i) to cure any
inconsistency, omission, defect or ambiguity in such Agreement; (ii) to add to
the covenants and agreements of the Book-Entry Depositary or Parent; (iii) to
effectuate the assignment of the Book-Entry Depositary's rights and duties to a
qualified successor; (iv) to comply with the Securities Act, the Exchange Act,
the U.S. Investment Company Act of 1940, as amended, or the Trust Indenture Act;
or (v) to modify, alter, amend or supplement the Note Depositary Agreement in
any other manner that is not adverse to DTC or the holders of Book-Entry
Interests. Except as set forth above, no amendment that adversely affects DTC or
the holders of Book-Entry Interests may be made to the Note Depositary Agreement
or the Book-Entry Interests without the consent of DTC.
Upon the exchange of the Global Note in whole for Definitive Notes and the
issuance of Definitive Notes, the Note Depositary Agreement will terminate. The
Note Depositary Agreement may be terminated upon the resignation of the
Book-Entry Depositary if no successor has been appointed within 90 days as set
forth under "-- Resignation or Removal of Book-Entry Depositary" below.
RESIGNATION OR REMOVAL OF BOOK-ENTRY DEPOSITARY
The Book-Entry Depositary may at any time resign as Book-Entry Depositary
upon 60 days' written notice delivered to each of Parent and the Trustee. Parent
may remove the Book-Entry Depositary at any time upon 90 days' written notice.
No resignation or removal of the Book-Entry Depositary and no appointment of a
successor Book-Entry Depositary shall become effective until (i) the acceptance
of appointment by the successor Book-Entry Depositary or (ii) the issuance of
Definitive Notes.
OBLIGATION OF BOOK-ENTRY DEPOSITARY
The Book-Entry Depositary will assume no obligation or liability under the
Note Depositary Agreement other than to use good faith and reasonable care in
the performance of its duties under such Agreement.
104
<PAGE> 112
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
associated with the acquisition, ownership, and disposition of the Notes by
holders who acquire the Notes at original issue for cash. The following summary
does not discuss all of the aspects of federal income taxation that may be
relevant to a prospective holder of the Notes in light of his or her particular
circumstances, or to certain types of holders (including dealers in securities,
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, S corporations, and except as discussed below, foreign
corporations, persons who are not citizens or residents of the United States and
persons who hold the Notes as part of a hedge, straddle, "synthetic security" or
other integrated investment) who are subject to special treatment under the
federal income tax laws. This discussion also does not address the tax
consequences to nonresident aliens or foreign corporations that are subject to
United States federal income tax on a net basis on income with respect to a Note
because such income is effectively connected with the conduct of a U.S. trade or
business. Such holders generally are taxed in a similar manner to U.S. Holders
(as defined below); however, certain special rules apply. In addition, this
discussion is limited to holders who hold the Notes as capital assets within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code"). This summary also does not describe any tax consequences under state,
local, or Non-United States federal income tax laws.
This discussion is based upon the Code, Treasury Regulations, Internal
Revenue Service ("IRS") rulings and pronouncements and judicial decisions all in
effect as of the date hereof, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the Notes. The
Company has not sought and will not seek any rulings or opinions from the IRS or
counsel with respect to the matters discussed below. There can be no assurance
that the IRS will not take positions concerning the tax consequences of the
acquisition, ownership or disposition of the Notes which are different from
those discussed herein.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY APPLY TO THEM, AS
WELL AS THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A U.S. Holder is any holder who or which is (i) a citizen or resident of
the United States; (ii) a corporation, or other entity taxable as a corporation
created or organized in or under the laws of the United States; (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source; (iv) a trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust; (v) a former citizen or resident of the United States
whose income and gain on the Notes will be subject to United States federal
income taxation; or (vi) a person otherwise included within the definition of
United States person under the Code and the regulations thereunder.
Taxation of Stated Interest. In general, a U.S. Holder of the Notes will
be required to include interest received thereon in taxable income as ordinary
income at the time it accrues or is received, in accordance with the holder's
regular method of accounting for federal income tax purposes.
Effect of Optional Redemption and Repurchase. Under certain circumstances
the Company may be entitled to redeem a portion of the Notes. In addition, under
certain circumstances, each holder of Notes will have the right to require the
Company to repurchase all or any part of such holder's Notes. Treasury
Regulations contain special rules for determining the yield to maturity and
maturity on a debt instrument in the event the debt instrument provides for a
contingency that could result in the acceleration or deferral of one or more
payments. The Company does not believe that these rules should apply to either
the Company's right to redeem Notes or to the holders' rights to
105
<PAGE> 113
require the Company to repurchase Notes. Therefore, the Company has no present
intention of treating such redemption and repurchase provisions of the Notes as
affecting the computation of the yield to maturity or maturity date of the
Notes.
Sale or other Taxable Disposition of the Notes. The sale, exchange,
redemption, retirement or other taxable disposition of a Note will result in the
recognition of gain or loss to a U.S. Holder in an amount equal to the
difference between (a) the amount of cash and fair market value of property
received in exchange therefor (except to the extent attributable to the payment
of accrued but unpaid stated interest) and (b) the holder's adjusted tax basis
in such Note.
A holder's tax basis in a Note purchased by such holder will be equal to
the price paid for the Note, less any principal payments received by such
holder.
Any gain or loss on the sale or other taxable disposition of a Note
generally will be capital gain or loss and will be long-term capital gain or
loss if the Note had been held for more than one year as of the date of any such
sale or other taxable disposition and otherwise will be short-term capital gain
or loss. Long-term capital gain realized by an individual U.S. Holder is
generally subject to a maximum tax rate of 28% in respect of property held for
more than one year and to a maximum rate of 20% in respect of property held in
excess of 18 months. Payments on such sale or other taxable disposition for
accrued interest not previously included in income will be treated as ordinary
interest income.
If additional interest is paid, although not free from doubt, such payment
should be taxable to a U.S. Holder as ordinary income at the time it accrues or
is received in accordance with such holder's regular method of accounting. It is
possible, however, that the IRS may take a different position, in which case the
timing and amount of income inclusion may be different.
The exchange of Notes for Exchange Notes pursuant to the exchange offer
will not constitute a taxable event for U.S. Federal income tax purposes. As a
result, (i) a U.S. Holder of Notes will not recognize taxable gain or loss as a
result of the exchange of Notes for Exchange Notes pursuant to the exchange
offer, (ii) the holding period of the Exchange Notes will include the holding
period of the Notes surrendered in exchange therefor and (iii) a U.S. Holder's
adjusted tax basis in the Exchange Notes will be the same as such U.S. Holder's
adjusted tax basis in the Notes surrendered in exchange therefor.
Backup Withholding. The backup withholding rules require a payor of
principal, premium, if any, and interest on a Note to deduct and withhold a tax
if (i) the payee fails to furnish a correct taxpayer identification number
("TIN") in the prescribed manner, (ii) the IRS notifies the payor that the TIN
furnished by the payee is incorrect, (iii) the payee has failed to report
properly the receipt of "reportable payments" and the IRS has notified the payor
that withholding is required, or (iv) the payee fails to certify under penalty
of perjury that such payee is not subject to backup withholding. If any one of
the events discussed above occurs with respect to a holder of Notes, the
Company, its paying agent or other withholding agent will be required to
withhold a tax equal to 31% of any "reportable payment" made in connection with
the Notes of such holder. A "reportable payment" includes, among other things,
payments of principal, premium, if any, and interest on a Note. Any amount
withheld from a payment to a holder under the backup withholding rules will be
allowed as a refund or credit against such holder's federal income tax, provided
that the required information is furnished to the IRS. Certain holders
(including, among others, corporations and certain tax-exempt organizations) are
not subject to backup withholding.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section discusses special rules applicable to a Non-U.S. Holder of
Notes. This summary does not address the tax consequences to stockholders,
partners or beneficiaries in a Non-U.S. Holder. For purposes hereof, a "Non-U.S.
Holder" is any person who is neither (i) a U.S. Holder nor (ii) a person whose
income with respect to a Note is subject to U.S. federal income
106
<PAGE> 114
tax on a net basis because such income is effectively connected with the conduct
of a U.S. trade or business.
Interest. In general, payments of principal, premium (if any) and interest
to a Non-U.S. Holder will not be subject to U.S. Federal income tax or
withholding.
Sale, Exchange or Retirement of Notes. Any gain realized by a Non-U.S.
Holder on the sale, exchange or retirement of the Notes, will generally not be
subject to U.S. Federal income tax or withholding unless (i) the Non-U.S. Holder
is an individual who was present in the U.S. for 183 days or more in the taxable
year of the disposition and meets certain other requirements; or (ii) the Non-
U.S. Holder is subject to tax pursuant to certain provisions of the Code
applicable to certain individuals who renounce their U.S. citizenship or
terminate long-term U.S. residency. If a Non-U.S. Holder falls under (ii) above,
the holder will be taxed on the net gain derived from the sale under the
graduated U.S. Federal income tax rates that are applicable to U.S. citizens and
resident aliens, and may be subject to withholding under certain circumstances.
If a Non-U.S. Holder falls under (i) above, the holder generally will be subject
to U.S. Federal income tax at a rate of 30% on the gain derived from the sale
(or reduced treaty rate) and may be subject to withholding in certain
circumstances. Such gains may also be subject to U.S. Federal income tax if the
Non-U.S. Holder has a present or former status as a personal holding company, a
foreign personal holding company with respect to the United States, a controlled
foreign corporation, a passive foreign investment company, or a foreign private
foundation or foreign tax exempt entity for United States tax purposes, or a
corporation which accumulates earnings to avoid United States federal income
tax.
U.S. Information Reporting and Backup Withholding Tax. Back-up withholding
and information reporting generally will not apply to a Note issued in
registered form that is beneficially owned by a Non-U.S. Holder if such Non-U.S.
Holder furnishes the Company or its paying agent with a properly executed
certification on IRS Form W-8 (or a suitable substitute form) signed under
penalties of perjury stating that the beneficial owner is not a "U.S. person"
for U.S. federal income tax purposes and setting forth such Non-U.S. Holder's
name and address.
If payments of principal and interest are made to the beneficial owner of a
Note by or through the foreign office of a custodian, nominee or other agent of
such beneficial owner, or if the proceeds of the sale of a Note are paid to the
beneficial owner of a Note through a foreign office of a "broker" (as defined in
the pertinent Regulations), the proceeds will not be subject to backup
withholding (absent actual knowledge that the payee is a U.S. person).
Information reporting (but not backup withholding) will apply, however, to a
payment by a foreign office of a custodian, nominee, agent or broker (i) that is
a U.S. person or a controlled foreign corporation for U.S. federal income tax
purposes or (ii) that derives 50% or more of its gross income from the conduct
of a U.S. trade or business for a specified three-year period, unless the broker
has in its records documentary evidence that the holder is a Non-U.S. Holder,
has no actual knowledge to the contrary, and certain other conditions are met,
or unless the holder otherwise establishes an exemption. Payment through the
U.S. office of a custodian, nominee, agent or broker is subject to both backup
withholding at a rate of 31% and information reporting, unless the holder
certifies that it is a Non-U.S. Holder under penalties of perjury or otherwise
establishes an exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's
U.S. federal income tax liability, provided that certain information is provided
by the holder to the IRS.
Recently finalized Treasury regulations (the "Withholding Regulations")
will change the methods for satisfying the certification requirements discussed
above. The Withholding Regulations also will require, in the case of Notes held
by a foreign partnership, that (a) this certification generally be provided by
the partners rather than the foreign partnership and (b) the partnership provide
certain information, including a United States employer identification number. A
look-through rule would apply in the case of tiered partnerships. The
Withholding Regulations are generally effective for payments made after December
31, 1999, subject to certain transition rules.
107
<PAGE> 115
Non-United States Holders should consult their own tax advisors with respect to
the impact, if any, of the new Withholding Regulations.
CERTAIN UNITED KINGDOM TAX CONSEQUENCES
The following summary describes certain U.K. tax matters with respect to
ownership of the Notes. Except where noted below, it relates only to the
position of persons who are the absolute beneficial owners of Notes and may not
apply to certain classes of persons such as dealers in securities. It does not
necessarily apply where the income is deemed to belong to any other person.
PAYMENTS OF INTEREST ON THE NOTES
So long as the Notes are represented by the Global Notes and are and
continue to be listed on a recognized stock exchange within the meaning of
Section 841 of the Income and Corporation Taxes Act 1988 (the Luxembourg Stock
Exchange has been designated a "recognized stock exchange" for this purpose),
payments of interest on the Notes may be made without withholding on account of
U.K. income tax where (i) the payment of interest is made by or through a paying
agent outside the U.K. or (ii) the payment of interest is made by or through a
person who is in the U.K. but either (x) the person who is the beneficial owner
of the Notes and beneficially entitled to the interest is not resident in the
U.K. or (y) the Notes are held in a "recognized clearing system" within the
meaning of Section 841A of the Income and Corporation Taxes Act 1988 (Euroclear,
Cedel Bank and DTC have each been designated as a "recognized clearing system"
for this purpose) and, in each case, a declaration to that effect in the
required form has been given to the person by whom the payment is made or the
Inland Revenue has issued a notice to that person.
In all other cases (and, in particular, where the Notes are represented by
Definitive Notes), interest will be paid after the deduction of U.K. income tax
at the prescribed rate (currently 20%) subject to any direction to the contrary
by the Inland Revenue in respect of such relief as may be available pursuant to
the provisions of any applicable double tax treaty.
So long as the Notes are represented by the Global Notes in bearer form and
are and continue to be listed on a recognized stock exchange, where a collecting
agent in the U.K. either: (i) acts as custodian of the Notes and receives
interest on the Notes or directs that interest on the Notes be paid to another
person or consents to such payment; or (ii) collects or secures payment of, or
receives interest on, the Notes for a holder of Notes or for another person
(except in any case by means only of clearing a check or arranging for the
clearing of a check), the collecting agent will be required to withhold on
account of U.K. income tax at the prescribed rate (currently 20%) unless (x) the
person who is the beneficial owner of the relevant Notes and beneficially
entitled to the interest is not resident in the U.K. and a declaration to that
effect in the required form has been given to the collecting agent or the Inland
Revenue has issued a notice to that person, or (y) the relevant Notes are held
in a "recognized clearing system" and the collecting agent pays or accounts for
the interest directly or indirectly to the clearing system and a declaration in
a form required by law has been given by the clearing system or its depositary,
or (z) one of certain other exceptions to the obligation to withhold is
available.
As the interest paid on the Notes has a U.K. source it may be chargeable to
U.K. income tax by direct assessment. Where interest is paid without deduction
or withholding, the interest will not be assessed to U.K. tax in the hands of
holders of Notes who are not resident for tax purposes in the U.K. unless any
such holders carry on a trade, profession or vocation in the U.K. through a
branch or agency in the U.K. in connection with which the interest is received
or to which the Notes are attributable (subject to certain exemptions for
interest received by certain specified categories of agent (such as some brokers
and investment managers)).
Where interest has been paid under deduction of U.K. income tax, holders of
Notes who are not resident in the U.K. may be able to recover all or part of the
tax deducted if there is an appropriate
108
<PAGE> 116
provision in an applicable double taxation treaty. A U.S. Holder who is entitled
to the benefit of the U.S./U.K. double taxation convention relating to income
and capital gains (the "Treaty") will normally be eligible to recover in full
any U.K. tax withheld from payments of interest to which such holder is
beneficially entitled by making a claim under the Treaty on the appropriate
form. Alternatively, a claim may be made by a holder in advance of a payment of
Interest. If the claim is accepted by the U.K. Inland Revenue, it will authorize
subsequent payments to that U.S. Holder to be made without deduction of U.K.
withholding tax. Claims for repayment must be made within six years of the end
of the U.K. year of assessment (April 5 of each year) to which the interest
relates and must be accompanied by the original statement provided by the Issuer
when the interest payment was made showing the amount of U.K. income tax
deducted.
Holders in other jurisdictions also may be entitled to a refund of all or
part of any tax withheld or to make a claim for interest on the Notes to be paid
without, or subject to a reduced rate of, deduction or withholding under the
provisions of an applicable double taxation treaty.
The provisions relating to Additional Amounts referred to in "Description
of the Notes" above would not apply if the Inland Revenue sought to assess
directly the person entitled to the relevant interest to U.K. tax.
SALE OR DISPOSAL (INCLUDING REDEMPTION)
Individual Holders--Capital Gains. A disposal (which includes redemption)
of a Note by an individual holder of such Note who is resident or ordinarily
resident for tax purposes in the U.K. or carries on a trade, profession or
vocation in the U.K. through a branch or agency to which the Note is
attributable may give rise to a liability to U.K. taxation on capital gains.
Corporate Holders. Holders of Notes which are within the charge to U.K.
corporation tax will be subject to tax as income on all profits and gains
arising from, and from fluctuations in the value of, the Notes, and will
generally be charged in each accounting period by reference to interest and any
profit or loss which, in accordance with such holder's authorized accounting
method, is applicable to that period. Fluctuations in value relating to foreign
exchange gains and losses in respect of the Notes will be brought into account
under the Forex rules as contained in the Finance Act 1993.
Non-U.K. Holders. A disposal (including redemption) of a Note by a holder
who is not resident nor (if an individual) ordinary resident for tax purposes in
the U.K. and does not carry on a trade, profession or vocation in the U.K.
through a branch or agency to which the Note is attributable will generally not
be subject to U.K. tax on capital gains.
UNITED KINGDOM STAMP DUTY AND STAMP DUTY RESERVE TAX
No U.K. stamp duty or stamp duty reserve tax is payable on the issuance of
a Note.
No U.K. stamp duty will be payable in respect of any transfer of a Note. No
stamp duty reserve tax will be payable on an agreement to transfer Certificated
Notes.
Section 105 of the Finance Act 1997 imposes a charge to stamp duty reserve
tax on an agreement to transfer certain bearer securities made in specified
circumstances at the rate of 0.5% of the amount or value of the consideration.
The Company has been advised that Section 105 will not apply to an agreement to
transfer the Notes so long as such Notes are represented by the Global Notes and
such Notes are and continue to be listed on a recognized stock exchange unless
such agreement is entered into in connection with a takeover.
109
<PAGE> 117
PROPOSED EU DIRECTIVE ON THE TAXATION OF SAVINGS INCOME
There is currently a proposed directive before the European Commission
(which might or might not be adopted) to oblige Member States to adopt either a
"withholding tax system" or an "information system" in relation to savings
income (which would include interest on the Notes).
The "withholding tax system" would require a "paying agent" established in
an EU Member State to withhold tax at a minimum rate of 20% from interest paid
to an individual resident in another Member States unless certain exemptions
apply. The "information system" would require an EU Member State to supply other
Member States with details of payments of interest made by "paying agents"
within its jurisdiction to individuals resident in other Member States.
Although the proposed directive is not intended to affect the withholding
tax treatment of payments to U.S. Holders or to other persons resident outside
the Member States, the impact of practical arrangements for implementation of
the proposed directive (if adopted) cannot currently be foreseen.
110
<PAGE> 118
THE EXCHANGE OFFER
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuer will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Issuer will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a different CUSIP
Number from the Old Notes, (ii) the Exchange Notes have been registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof and (iii) the holders of the Exchange Notes will not be entitled to
certain rights under the Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Old Notes in certain
circumstances relating to the timing of the Exchange Offer, all of which rights
will terminate when the Exchange Offer is terminated. The Exchange Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of Old Notes were outstanding. The Issuer has fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, or the Indenture in connection with the
Exchange Offer. The Issuer intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Issuer shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuer has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Issuer.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuer will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Issuer, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
111
<PAGE> 119
In order to extend the Exchange Offer, the Issuer will notify the Exchange
Agent of any extension by oral or written notice and will notify the holders by
issuing a press release regarding such extension, each prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
expiration date.
The Issuer reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on November 1, 1998. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each May 1 and
November 1, commencing on November 1, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
For a holder to tender Old Notes validly pursuant to the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantee, or (in the case of a book-entry
transfer) an Agent's Message in lieu of the letter of Transmittal, and any other
required documents must be received by the Exchange Agent at the address set
forth under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. In addition, prior to 5:00 p.m., New York City time, on the
Expiration Date, either (a) certificates for tendered Old Notes must be received
by the Exchange Agent at such address or (B) such Old Notes must be transferred
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such tender received by the Exchange Agent, including an Agent's
Message if the tendering holder has not delivered a Letter of Transmittal). The
term "Agent's Message" means a message, transmitted by the book-entry transfer
facility, The Depository Trust Issuer (the "Book-Entry Transfer Facility"), to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from the tendering participant that such participant has
received and agrees to be bound by the Letter of Transmittal and that the Issuer
may enforce such Letter of Transmittal against such participant.
By executing the Letter of Transmittal, (or, in the case of a book-entry
transfer, an Agent's Message in lieu thereof) each holder will make to the
Issuer the representations set forth above in the third paragraph under the
heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuer will
constitute agreement between such holder and the Issuer in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL,
INCLUDING DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE
TRANSMITTED THROUGH THE DTC AUTOMATED TENDER OFFER PROGRAM, AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE
HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
112
<PAGE> 120
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUER. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the Issuer
of their authority to so act must be submitted with the Letter of Transmittal.
The Issuer understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the Old
Notes at the Book-Entry Transfer Facility. The Depository Trust Issuer (the
"Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Old Notes by causing such Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's account with respect to the
Old Notes in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. Although delivery of the Old Notes may be effected through book-
entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility, an appropriate Letter of Transmittal properly completed and duly
executed with any required signature guarantee, or (in the case of a book-entry
transfer) an Agent's Message in lieu of the Letter of Transmittal, and all other
required documents must in each case be transmitted to and received or confirmed
by the Exchange Agent at its address set forth below on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures. Delivery
of documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuer in its sole discretion, which determination
will be final and binding. The Issuer reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuer's acceptance
of which would, in the opinion of counsel for the Issuer, be unlawful. The
Issuer also reserves the right in their sole discretion to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Issuer's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuer shall determine.
Although the Issuer intends to notify holders of defects or irregularities
113
<PAGE> 121
with respect to tenders of Old Notes, neither the Issuer, the Exchange Agent nor
any other person shall incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal (or in the case of a book-entry transfer) an Agent's Message in lieu
thereof) or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer (including delivery of an
Agent's Message), prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Issuer or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof) (or,
in the case of a book-entry transfer, an Agent's Message in lieu thereof)
together with the certificate(s) representing the Old Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message in lieu thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register
114
<PAGE> 122
the transfer of such Old Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Issuer, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Old Notes so withdrawn are validly retendered.
Any Old Notes which have been tendered but which are not accepted for exchange
will be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuer shall not
be required to accept for exchange, or Exchange Notes for, any Old Notes, and
may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Issuer, might materially impair the
ability of the Issuer to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Issuer or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Issuer, might materially impair the ability of the Issuer
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuer; or
(c) any governmental approval has not been obtained, which approval
the Issuer shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuer determine in its sole discretion that any of the conditions
are not satisfied, the Issuer may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer
and retain all Old Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Old Notes (see
"--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn.
115
<PAGE> 123
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or Hand:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing Window
Attn: Reorganization Operations Subcellar One, (SC-1)
Department
To Confirm by Telephone or For Information: By Facsimile Transmission:
(212) 858-2103 (212) 858-2611
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuer The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuer and its affiliates.
The Issuer has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuer Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Issuer's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Issuer The expenses of the Exchange Offer will be expensed
over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Issuer (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Issuer), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
116
<PAGE> 124
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Issuer believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Old Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Issuer in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Issuer within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives a New Note for
its own account in exchange for Old Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Issuer has
agreed that for a period of 180 days after the Expiration Date, they will make
this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1998 (90 days after the commencement of the Exchange Offer),
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
117
<PAGE> 125
The Issuer will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuer will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such documents
in the Letter of Transmittal.
LISTING AND GENERAL INFORMATION
1. Application has been made to list the Exchange Notes on the Luxembourg Stock
Exchange. Prior to the listing, a legal notice relating to the issue of the
Exchange Notes and the Memorandum and Article of Association of the Issuers
will be deposited with the Chief Register of the District Court of Luxembourg
(Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg), where
such documents may be examined or copies obtained.
2. So long as the Exchange Notes are listed on the Luxembourg Stock Exchange and
the rules of such Stock Exchange shall so require, copies of the constituent
documents of each Issuer and Guarantor (including the articles of
association), the Indenture (including the terms of the Guarantees and the
forms of Global Note), the Revolving Facility, the Term Facility, and the
Registration Rights Agreement will be available for inspection at the office
of the Luxembourg Listing Agent. So long as the Exchange Notes are listed on
the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so
require, copies of any and all annual and quarterly reports of the Issuer
obtained during normal business hours on any weekday at the office of the
Luxembourg Listing Agent.
3. Octel Developments PLC and Octel Corp. were each incorporated on February 25,
1998 and January 27, 1998, respectively. Octel Developments PLC is recorded
as Company No. 3516662 with the Registrar of Companies for England and Wales.
The purpose of Octel Developments PLC is to carry on business as a general
commercial company as set forth more fully in article 4(a) of the Memorandum
of Association filed with the Company's Registration Statement on Form S-4 as
Exhibit 3.1. The share capital of Octel Developments PLC is L51,000 divided
into L51,000 Ordinary Shares of L1 each. The creation and issuance of the Old
Notes and the Exchange Notes were authorized by resolutions adopted by the
Board of Directors of Issuer on May 6, 1998 and September 29, 1998. The
creation and issuance of the Guarantee was authorized by resolutions adopted
by the Board of Directors of the Guarantor on May 6, 1998.
4. There has been no material adverse change in the consolidated financial
position of the Company, the Issuer or the Guarantor since December 31
Financials Date (1997) as disclosed herein.
118
<PAGE> 126
5. None of the Issuer, the Guarantor or any of their subsidiaries is a party to
any litigation that, in the judgment of the Issuer, is material in context of
the issue of the Exchange Notes, except as disclosed herein.
6. The independent chartered accountants of the Company are Ernst & Young, LLP,
Indianapolis, Indiana.
7. The Old Notes have been accepted for clearance through Euroclear and Cedel
under the following Common Code: [ ]. The ISIN and CUSIP numbers for
the Old Notes sold pursuant to Regulation S under the Securities Act are
USU67502AA94 and U67502AA9, respectively. The CUSIP number for the Old Notes
sold pursuant to Rule 144A under the Securities Act is 675728AA7. Application
has been made to list the Old Notes on the Luxembourg stock Exchange. The
CUSIP number for the Exchange Notes is . Application has been
made to list the Exchange Notes on the Luxembourg Stock Exchange. The
Exchange Notes have been accepted for clearance through Euroclear and Cedel
under the following Common Code: . The ISIN number for the
Exchange Note is .
LEGAL MATTERS
Certain U.S. legal matters in connection with the Exchange Notes offered
hereby will be passed upon for the Company by Kirkland & Ellis, London, England.
Certain U.K. legal matters in connection with the Exchange Notes offered hereby
will be passed upon for the Company by Linklaters & Paines, London, England.
INDEPENDENT AUDITORS
The Company has appointed Ernst & Young LLP as the Company's independent
auditors to audit the Company's financial statements as of and for the year
ending December 31, 1997. Ernst & Young LLP has audited the Company's historical
financial statements as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "forward-looking statements."
Forward-looking statements, which are based upon certain assumptions and
describe future plans, strategies and expectations of the Company are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project" or similar expressions. The ability of the Company to
predict results or the actual effect of future plans or strategies is inherently
uncertain. Important factors which may cause actual results to differ materially
from the forward-looking statements contained herein or in other public
statements by the Company are described in the section entitled "Risk Factors."
119
<PAGE> 127
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Combined Statements of Income for each of the three years in
the period ended December 31, 1997........................ F-3
Combined Balance Sheets as of December 31, 1997 and 1996.... F-4
Combined Statements of Cash Flows for each of the three
years in the period ended December 31, 1997............... F-5
Notes to Combined Financial Statements...................... F-6
Review Report of Independent Accountants.................... F-16
Unaudited Interim Consolidated Statements of Income......... F-17
Unaudited Interim Consolidated Balance Sheets............... F-18
Unaudited Interim Consolidated Statements of Cash Flows..... F-19
Notes to Unaudited Consolidated Financial Statements........ F-20
</TABLE>
F-1
<PAGE> 128
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholder
OCTEL CORP.
We have audited the accompanying combined balance sheets of the businesses
that comprise Octel Corp. as of December 31, 1997 and 1996, and the related
combined statements of income and cash flows for each of the three years in the
period ended December 31, 1997. 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
management, as well as evaluating the overall financial statement presentation.
We believe 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 combined financial position of the businesses that
comprise Octel Corp. at December 31, 1997 and 1996, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Indianapolis, Indiana
April 4, 1998
F-2
<PAGE> 129
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Net sales................................................... $539.1 $597.4 $628.3
Cost of goods sold.......................................... 274.4 298.8 307.0
------ ------ ------
Gross profit.............................................. 264.7 298.6 321.3
Operating expenses:
Selling, general and administrative....................... 38.6 40.2 42.1
Research and development.................................. 3.8 5.6 5.6
------ ------ ------
Total.................................................. 42.4 45.8 47.7
Amortization of intangible assets........................... 27.6 26.7 19.0
Operating income............................................ 194.7 226.1 254.6
Interest expense............................................ 2.2 1.6 10.3
Other expenses.............................................. 5.6 7.5 4.4
Interest income............................................. (3.9) (3.5) (5.1)
Other income................................................ (7.9) (1.2) (4.1)
------ ------ ------
Income before income taxes and minority interest............ 198.7 221.7 249.1
Minority interest........................................... 24.3 29.6 32.3
------ ------ ------
Income before income taxes.................................. 174.4 192.1 216.8
Income taxes................................................ 56.7 63.8 71.7
------ ------ ------
Net income.................................................. $117.7 $128.3 $145.1
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 130
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 29.7 $ 54.9
Accounts receivable....................................... 169.8 196.4
Inventories............................................... 78.8 84.0
Prepaid expenses.......................................... 4.4 4.3
------ ------
Total current assets........................................ 282.7 339.6
Property, plant and equipment............................... 106.0 113.4
Goodwill.................................................... 379.3 319.0
Other assets................................................ 64.9 69.0
------ ------
$832.9 $841.0
====== ======
LIABILITIES AND GREAT LAKES INVESTMENT
Current liabilities
Accounts payable.......................................... $ 40.0 $ 37.6
Accrued expenses.......................................... 9.0 20.5
Accrued income taxes...................................... 53.8 65.4
------ ------
Total current liabilities................................... 102.8 123.5
Other liabilities........................................... 57.2 90.3
Deferred income taxes....................................... 20.1 7.5
Minority interest........................................... -- 35.1
Great Lakes investment...................................... 652.8 584.6
------ ------
$832.9 $841.0
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 131
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 117.7 $ 128.3 $ 145.1
Non-cash items included in net income:
Depreciation............................................. 19.2 16.2 13.7
Amortization............................................. 27.6 26.7 19.0
Deferred income taxes.................................... 13.3 4.0 6.0
Other.................................................... 0.5 1.3 (0.5)
Changes in operating assets and liabilities:
Accounts receivable...................................... 26.6 9.2 (16.9)
Inventories.............................................. 1.6 (12.4) (5.1)
Accounts payable and accrued expenses.................... (2.6) (19.0) 19.3
Income taxes and other current liabilities............... (11.6) (9.8) 3.0
Other non-current liabilities............................ (24.8) (16.7) (7.8)
------- ------- -------
Net cash provided by operating activities.................. 167.5 127.8 175.8
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures....................................... (17.8) (20.6) (31.5)
Business combinations, net of cash acquired................ (130.8) (17.0) (18.8)
Other...................................................... 1.6 (14.9) (31.1)
------- ------- -------
Net cash used in investing activities...................... (147.0) (52.5) (81.4)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash paid to Great Lakes............................... (31.4) (103.0) (104.6)
Minority interest.......................................... 3.3 7.1 4.8
------- ------- -------
Net cash used in financing activities...................... (28.1) (95.9) (99.8)
Effect of exchange rate changes on cash.................... (17.6) 21.1 (6.8)
------- ------- -------
Net change in cash and cash equivalents.................... (25.2) 0.5 (12.2)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............. 54.9 54.4 66.6
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR................... $ 29.7 $ 54.9 $ 54.4
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 132
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BACKGROUND & BASIS OF PRESENTATION
Octel Corp. ("the Company") is a recently-formed Delaware corporation,
which prior to the Distribution was a wholly-owned subsidiary of Great Lakes
Chemical Corporation ("Great Lakes"). In July 1997, the Board of Directors
approved a plan to spin off the Company's petroleum additives business as an
independent, publicly owned company. The transaction will be effected through
the distribution of shares in the Company to the Great Lakes' stockholders and
is expected to be tax free to stockholders. The transaction is subject to the
receipt of a favorable tax ruling from the Internal Revenue Service, which was
received on March 13, 1998, and the final approval by the Great Lakes Board of
Directors of the structure and financing of the Company.
Prior to the Distribution, the Company anticipates that certain of its
subsidiaries will enter into a $300.0 million senior secured credit facility
(the "Credit Facility") and issue $150.0 million of Senior Notes due 2006 (the
"Notes"). The Credit Facility will consist of a $280.0 million senior secured
term loan and a $20.0 million senior secured revolving credit facility. The
Credit Facility will mature on December 31, 2001, with the term loan amortizing
in quarterly installments. The loans under the Credit Facility will bear
interest at LIBOR plus 1.75%, subject to adjustment under certain circumstances.
The Notes will mature in 2006. The Company is required to redeem $37.5 million
principal amount of Notes in each of 2003, 2004 and 2005. Both the Credit
Facility and the Notes will be guaranteed by the Company and will contain
substantial restrictions on the Company's operations. The proceeds of the
borrowings, along with cash available at the Distribution Date, will be used to
repay $116.8 million of intercompany loans and pay a special dividend to Great
Lakes of $350.9 million.
BASIS OF PRESENTATION
The combined financial statements reflect the assets, liabilities, revenues
and expenses of the Petroleum Additives Business Unit ("Petroleum Additives") of
Great Lakes, adjusted only for those parts of Petroleum Additives Business Unit
which are to remain part of Great Lakes after the Distribution. The financial
statements are prepared using the historical cost of Great Lakes.
The Company's combined statements of income include all material costs of
doing business including costs related to Great Lakes services. Charges for such
services are based on a number of factors including time and effort which
Management believes to be reasonable.
The Company has not presented historical earnings per share information
since it was not a separate operating company with a capital structure of its
own during the periods presented.
The financial information included herein may not necessarily be indicative
of the financial position, results of operations or cash flows of the Company in
the future or the financial position, results of operations or cash flows that
would have been achieved if the Company had been a separate, independent company
during the periods presented.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is a major manufacturer and distributor of TEL, Petroleum
Specialties and Performance Chemicals. Its primary manufacturing operation is
located at Ellesmere Port in the United Kingdom. The Company's products are sold
globally, primarily to oil refineries. Principal product lines are lead alkyl
antiknock compounds (TEL), other petroleum additives and performance chemicals.
F-6
<PAGE> 133
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
PRINCIPLES OF COMBINATION
The combined financial statements include all subsidiaries of the Company
after elimination of significant intercompany accounts and transactions.
USE OF ESTIMATES
The preparation of the combined financial statements requires management to
make estimates and assumptions that affect the amount reported in the combined
financial statements and accompanying notes. Actual results could differ from
those estimates.
REVENUE RECOGNITION
Revenue from sales of products is recognized at the time products are
shipped to the customer or, in the case of bulk shipments, at the time of
delivery to the customer.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses various derivative instruments including forward contracts
and options to manage certain foreign currency exposures. These instruments are
entered into under the Company's corporate risk management policy to minimize
exposure and are not for speculative trading purposes. Management periodically
reviews the effectiveness of the use of the derivative instruments.
Derivatives used for hedging purposes must be designed as, and effective
as, a hedge of the identified risk exposure at the inception of the contract.
Accordingly, changes in the market value of the derivative contract must be
highly correlated with changes in the market value of the underlying hedged item
at inception of the hedge and over the life of the hedge contract. Any
derivative instrument designated but no longer effective as a hedge would be
reported at market value and the related gains and losses would be recognized in
earnings.
Derivatives that are designated as, and effective as, a hedge of firm
foreign currency commitments are accounted for using the deferral method. Gains
and losses from instruments that hedge firm commitments are deferred and
recognized as part of the economic basis of the transactions underlying the
commitments when the associated hedged transaction occurs. Gains and losses from
instruments that hedge foreign-currency-denominated receivables, payables and
debt instruments are reported in earnings and offset the effects of foreign
exchange gains and losses from the associated hedged items.
CASH EQUIVALENTS
Investment securities with maturities of three months or less when
purchased are considered to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (FIFO method) or market price.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the assets using the straight-line method.
F-7
<PAGE> 134
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL
Goodwill, the excess of investment over net assets of subsidiaries
acquired, is amortized over periods of up to 40 years. The majority of the
goodwill relates to the TEL business and is being amortized over approximately
10 years, the expected remaining life of the business. The Company regularly
evaluates the realizability of goodwill based on projected undiscounted cash
flows and operating income for each business having material goodwill balances.
Based on its most recent analysis, the Company believes that no impairment of
goodwill exists at December 31, 1997.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental compliance costs include ongoing maintenance, monitoring and
similar costs. Such costs are expensed as incurred. Environmental remediation
costs are accrued when environmental assessments or remedial efforts are
probable and the cost can be reasonably estimated.
MINORITY INTEREST
Minority interest represents income before income taxes as earnings is
predominantly from a partnership; therefore, taxes are paid by each partner
individually.
F-8
<PAGE> 135
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS)
<S> <C> <C>
ACCOUNTS RECEIVABLE
Accounts receivable......................................... $170.7 $197.3
Less allowances............................................. 0.9 0.9
------ ------
$169.8 $196.4
====== ======
INVENTORIES
Finished goods.............................................. $ 35.7 $ 35.8
Work in progress............................................ 10.2 11.3
Raw materials and supplies.................................. 32.9 36.9
------ ------
$ 78.8 $ 84.0
====== ======
PROPERTY, PLANT AND EQUIPMENT
Land........................................................ $ 2.8 $ 3.0
Buildings................................................... 0.6 2.2
Equipment................................................... 101.0 117.1
Construction in progress (estimated additional cost to
complete at
December 31, 1997, $17.6)................................. 18.4 12.8
------ ------
122.8 135.1
Less accumulated depreciation............................... 16.8 21.7
------ ------
$106.0 $113.4
====== ======
The estimated useful lives for purposes of computing
depreciation are:
buildings, 7-25 years; equipment, 3-10 years.
GOODWILL
Goodwill.................................................... $496.9 $411.8
Less accumulated amortization............................... 117.6 92.8
------ ------
$379.3 $319.0
====== ======
OTHER ASSETS
Prepaid pension cost........................................ $ 63.3 $ 67.5
Other....................................................... 1.6 1.5
------ ------
$ 64.9 $ 69.0
====== ======
OTHER LIABILITIES
Provisions for estimated closure costs of TEL manufacturing
facilities................................................ $ 57.2 $ 90.3
====== ======
</TABLE>
The liability for estimated closure costs of Octel's TEL manufacturing
facilities includes costs for personnel reductions, decontamination and
environmental remediation activities when demand for TEL diminishes. Estimated
closing costs are regularly evaluated. Adjustments to the liability are prorated
over the estimated remaining life of the business in proportion to the expected
rate of the TEL market decline. Closure costs as of December 31, 1997 were
estimated to be approximately $124 million.
NOTE 4 -- ACQUISITIONS
The Company's 100% ownership interest in Octel Associates and the
Associated Octel Company Limited ("AOC") was acquired in three transactions. The
Company acquired a 51.15% interest in 1989, a further 36.67% interest in 1992,
with the balance acquired in 1997. The 1989 acquisition agreement provides for
profit participation payments to be made to certain former owners through 2006.
Such profit participation payments are treated as an adjustment to the
F-9
<PAGE> 136
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
purchase price. Profit participation payments for 1997 amounted to $14 million.
In 1997 the Company completed the determination of the profit participation
payments for the years 1989 through 1995 resulting in an addition to purchase
price of approximately $30 million. Total profit participation payments amount
to approximately $230 million since inception. On November 20, 1997, the Company
completed the acquisition of the outstanding minority interest in the Company's
subsidiaries previously owned by Chevron Chemical Company for $116.8 million.
The excess of purchase price over the value of net assets acquired totaled
approximately $81 million and this amount has been added to goodwill and is to
be amortized over a ten year period with effect from January 1, 1998.
On October 31, 1997, the Company acquired certain fractional interests in
the Company's subsidiaries held by the Vendor Partners for a nominal amount.
All acquisitions have been accounted for as purchases and the results of
operations of the acquired businesses are included in the combined financial
statements from the dates of acquisition. The unaudited pro forma net income for
1997 and 1996, as if the Chevron acquisition had occurred at the beginning of
the respective year would have been $123.8 million and $137.9 million
respectively. The pro forma results do not represent the Company's actual
operating results had the acquisition been made at the beginning of the
respective years, or the results which may be expected in future.
NOTE 5 -- INCOME TAXES
The following is a summary of domestic and foreign income before income
taxes, the components of the provisions for income taxes and deferred income
taxes, a reconciliation of the U.S. statutory income tax rate to the effective
income tax rate, and the components of deferred tax assets and liabilities.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES:
Domestic......................................... $ (1.2) $ 1.7 $ (0.6)
Foreign.......................................... 175.6 190.4 217.4
------ ------ ------
$174.4 $192.1 $216.8
====== ====== ======
PROVISIONS FOR INCOME TAXES:
Current:
Federal........................................ $ 0.1 $ 0.1 $ --
Foreign........................................ 43.3 59.6 65.7
------ ------ ------
43.4 59.7 65.7
Deferred:
Domestic....................................... -- 0.4 0.3
Foreign........................................ 13.3 3.7 5.7
------ ------ ------
13.3 4.1 6.0
------ ------ ------
$ 56.7 $ 63.8 $ 71.7
====== ====== ======
PROVISIONS (CREDITS) FOR DEFERRED INCOME TAXES:
Pension costs.................................... $ (3.7) $ 1.5 $ 2.0
Amortization of goodwill......................... 0.9 0.8 1.1
Plant closure costs.............................. 12.1 1.2 3.2
Other............................................ 4.0 0.6 (0.3)
------ ------ ------
$ 13.3 $ 4.1 $ 6.0
====== ====== ======
</TABLE>
F-10
<PAGE> 137
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
EFFECTIVE INCOME TAX RATE RECONCILIATION:
U.S. statutory income tax rate................... 35.0% 35.0% 35.0%
Increase (decrease) resulting from:
Foreign tax rate differential.................. (3.5) (2.9) (1.4)
Amortization of goodwill....................... 2.1 1.3 (0.3)
Other.......................................... (1.1) (0.2) (0.2)
------ ------ ------
Effective income tax rate........................ 32.5% 33.2% 33.1%
====== ====== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS)
<S> <C> <C>
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES:
Deferred tax assets -- closure costs........................ $17.7 $29.8
===== =====
Deferred tax liabilities:
Pension costs............................................. $18.6 $22.3
Amortization of goodwill.................................. 4.1 3.2
Other..................................................... 15.1 11.8
----- -----
Total................................................ $37.8 $37.3
===== =====
</TABLE>
Cash payments for income taxes were $62.0 million, $58.0 million and $69.0
million in 1997, 1996 and 1995, respectively.
NOTE 6 -- GREAT LAKES INVESTMENT
Changes in Great Lakes Investment during each of the years ended December
31 were as follows:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
BALANCE AT DECEMBER 31, 1994................................ $488.4
Net income................................................ 145.1
Net amount paid to GLCC including exchange effect of
$7.9................................................... (96.7)
Net change in cumulative translation...................... (6.0)
------
BALANCE AT DECEMBER 31, 1995................................ 530.8
Net income................................................ 128.3
Net amount paid to GLCC including exchange effect of
$0.7................................................... (102.3)
Net change in cumulative translation...................... 27.8
------
BALANCE AT DECEMBER 31, 1996................................ 584.6
Net income................................................ 117.7
Net amount paid to GLCC including exchange effect of
$0.4................................................... (31.0)
Net change in cumulative translation...................... (18.5)
------
BALANCE AT DECEMBER 31, 1997................................ $652.8
======
</TABLE>
The net amount of $31.0 million paid to Great Lakes in 1997 includes the
receipt of a short term loan from Great Lakes of $116.8 million used to fund the
acquisition of the Chevron interest described in Note 4: Acquisitions.
F-11
<PAGE> 138
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INDUSTRY SEGMENTS AND FOREIGN OPERATIONS
The Company's operations consist of one dominant industry segment:
petroleum additives. Net sales, income before income taxes and minority interest
and identifiable assets by geographic areas are shown below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
NET SALES TO UNAFFILIATED CUSTOMERS (BY ORIGIN):
United States....................................... $ 32.1 $ 36.3 $ 33.9
United Kingdom...................................... 441.1 477.5 484.9
Rest of Europe...................................... 65.9 83.6 109.5
------ ------ ------
Total.......................................... $539.1 $597.4 $628.3
====== ====== ======
INTERCOMPANY SALES BETWEEN GEOGRAPHIC AREAS:
United States....................................... $ 6.9 $ 7.3 $ 7.3
United Kingdom...................................... 71.1 49.8 53.9
Rest of Europe...................................... 37.6 54.9 72.2
------ ------ ------
Total.......................................... $115.6 $112.0 $133.4
====== ====== ======
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY
INTEREST:
United States....................................... $ (1.2) $ 1.7 $ (0.6)
United Kingdom...................................... 198.1 208.3 222.7
Rest of Europe...................................... 1.8 11.7 27.0
------ ------ ------
Total.......................................... $198.7 $221.7 $249.1
====== ====== ======
IDENTIFIABLE ASSETS AT YEAR-END:
United States....................................... $ 30.8 $ 34.8 $ 31.0
United Kingdom...................................... 741.2 717.3 663.0
Rest of Europe...................................... 60.9 88.9 104.4
------ ------ ------
Total.......................................... $832.9 $841.0 $798.4
====== ====== ======
</TABLE>
The majority of the Company's operations are conducted by its U.K.
enterprises. Sales are reported in the geographic area where the transaction
originates, rather than where the final sale to customers is made. Inter-company
sales are priced to recover cost plus an appropriate mark-up for profit and are
eliminated in the combined financial statements.
NOTE 8 -- RETIREMENT PLANS
The Company maintains a contributory defined benefit pension plan (the
"Octel Pension Plan") covering substantially all U.K. employees. Benefits are
based on final salary and years of credited service, reduced by social security
benefits according to a plan formula. Normal retirement age is 65, but
provisions are made for early retirement. The Company's funding policy is to
contribute amounts to the plans to cover service costs to date as recommended by
the Company's actuary. The plan's assets are invested by two investment
management companies in funds holding U.K. and overseas equities, U.K. and
overseas fixed interest securities, index linked securities, property unit
trusts and cash or cash equivalents.
F-12
<PAGE> 139
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the components of net periodic pension cost for the U.K.
pension plan is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Service cost.................................... $ 13.4 $ 12.0 $ 10.9
Interest cost on projected benefit obligation... 39.7 35.2 33.5
Actual return on plan assets.................... (103.4) (60.6) (66.3)
Net amortization and deferral................... 50.8 14.1 23.6
------- ------ ------
Net pension cost................................ $ 0.5 $ 0.7 $ 1.7
======= ====== ======
</TABLE>
The funded status and prepaid pension cost for the U.K. pension plan is as
follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31
---------------------------------
1997 1996 1995
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Actuarial present value of accumulated plan
benefits, all vested........................ $ 455.8 $ 446.1 $ 368.9
Additional amounts related to projected salary
increases................................... 38.8 49.5 38.6
------- ------- -------
Total projected benefit obligation............ 494.6 495.6 407.5
Plan assets at fair value..................... 708.2 644.2 525.5
------- ------- -------
Plan assets in excess of projected benefit
obligation.................................. 213.6 148.6 118.0
Unrecognized net gain......................... (151.3) (83.2) (69.1)
Unrecognized prior service cost............... 8.0 9.6 9.4
------- ------- -------
Prepaid pension cost.......................... 70.3 75.0 58.3
Estimated transfer............................ (7.0) (7.5) (5.8)
------- ------- -------
$ 63.3 $ 67.5 $ 52.5
======= ======= =======
</TABLE>
The estimated transfer represents prepaid pension cost attributable to
employees who participate in the Octel retirement plans that will remain with
Great Lakes. Final determination of the transfer is subject to, among other
things, a final actuarial evaluation and election of the employee.
Assumptions used in determining the actuarial present value of the
projected benefit obligations are set forth below. Assumptions used in 1997 are
consistent with the prior year. The weighted average discount rate, rate of
increase in compensation levels and expected long-term return on assets were
assumed to be 7.75%, 5.5% and 8.5%, respectively.
NOTE 9 -- EMPLOYEE STOCK PLANS
In October 1995, the Financial Accounting Standards Board issued
"Accounting for Stock-Based Compensation" (SFAS 123). The statement is effective
for fiscal years beginning after December 1995. Under SFAS 123, stock-based
compensation expense is measured using either the intrinsic-value method as
prescribed by Accounting Principle Board Opinion No. 25 (APB 25) or the
fair-value method described in SFAS 123. The Company intends to follow APB 25.
Prior to the Distribution, certain employees of the Company participated in
the Great Lakes 1984 Employee Stock Option Plan and the Great Lakes 1993
Employee Stock Compensation Plan which cover officers and key employees of Great
Lakes. The Company intends to grant to its employees who would otherwise have
been eligible to receive grants under such plans, restricted
F-13
<PAGE> 140
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
stock units under the Stock Plan of the Company, which is to be approved by
Great Lakes, as the sole stockholder of the Company, prior to Distribution. It
is anticipated that the Octel Corp. 1998 Stock Compensation Plan, when approved,
will provide for the grant of various types of equity-based compensation to key
employees and non-employee directors of the Company. The total number of shares
of the Company's common stock that may be issued or awarded will not exceed
1,175,000, subject to adjustment. Awards granted under the plan are expected to
be at market value at the date of grant, become exercisable over three years
from date of grant and expire ten years from date of grant.
NOTE 10 -- FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISK
The carrying amounts of cash and cash equivalents reported in the balance
sheet do not materially differ from their fair value at December 31, 1997.
The Company hedges certain portions of its exposure to foreign currency
fluctuations in revenues through the use of forward exchange contracts. The
Company invoices between 50% and 60% of its sales in U.S. dollars; the balance
of the Company's billing is invoiced in pound sterling in an effort to match the
Company's pound sterling costs. Foreign exchange contracts are taken out with
both Great Lakes and, prior to November 20, 1997, Chevron Chemical Company to
hedge the dollar income and thereby hedge the quarterly dollar profit
distributions made to both parties. At December 31, 1997 and 1996, open foreign
exchange contracts totaled $53.4 million and $55.3 million, respectively. If
valued at year-end rates of exchange, the contracts would have been valued at
$53.5 million and $57.3 million respectively. Gains and losses arising from the
use of such instruments are recorded in the income statement concurrently with
gains and losses arising from the underlying hedged transactions.
In October 1997, the Company entered into interest rate swaps to fix a
portion of the interest rate relative to the Notes. The notional amount of the
debt to which the interest rate swaps apply is $125 million. The notional amount
of the agreements are used to measure interest to be paid or received and do not
represent an exposure to the Company. For interest rate instruments that
effectively hedge interest rate exposures the net cash paid or received on the
agreements are accrued and recognized as an adjustment to interest expense over
the term of the loan. If the contracts were closed at December 31, 1997, the
Company would incur a cash cost of about $2.8 million.
The Company sells a range of petroleum additives, including significant
quantities of TEL, to major oil refineries throughout the world. Significant
sales of TEL are also made to Ethyl Corporation on wholesale terms, and in 1997
these accounted for 11.4% of net revenues. At December 31, 1997 amounts owing by
Ethyl Corporation to the Company were less than 5% of accounts receivable.
Credit limits, ongoing credit evaluation and account monitoring procedures are
utilized to minimize the risk of loss. Generally, collateral is not required.
Approximately 60% of the Company's labor force are covered by a collective
bargaining agreement, which expires on January 1, 2000.
NOTE 11 -- RELATED PARTY TRANSACTIONS
The Company sells significant quantities of TEL to refineries wholly or
partially owned by BP, Texaco and Mobil (the Vendor Partners) and Chevron
Chemical Company, who ceased to be related parties on October 31, 1997 and
November 20, 1997, respectively. Such sales are made at arm's length and at
prices which vary according to individual customers and the markets in which
they operate. In the years 1997, 1996 and 1995 such sales amounted to $80.2
million, $94.7 million and $116.2 million respectively. Amounts due in respect
of these sales amounted to $26.3 million and $35.0 million at December 31, 1997
and December 31, 1996, respectively.
F-14
<PAGE> 141
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Sales of product between the Company and Great Lakes are reported in the
financial statements at estimated market value. In the years 1997, 1996 and 1995
the value of sales from the Company to Great Lakes amounted to $7.4 million,
$6.4 million and $5.8 million, respectively, and the value of purchases by the
Company from Great Lakes amounted to $18.5 million, $15.7 million and $12.1
million respectively.
Interest charges from Great Lakes in respect of funding provided for
acquisitions amounted to $2.1 million, $1.5 million and $9.9 million in the
years 1997, 1996 and 1995, respectively. At December 31, 1997, the balance owing
to Great Lakes was $141.2 million.
NOTE 12 -- FUTURE ACCOUNTING CHANGES
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.
The statement must be adopted in the first quarter of 1998. Under provisions of
this statement, the Company will be required to change the financial statement
presentation of comprehensive income and its components to conform to these new
requirements. As a consequence of this change, certain reclassifications will be
necessary for previously reported amounts to achieve the required presentation
of comprehensive income.
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued. Under provisions of this statement, the
Company will be required to provide financial statement disclosures for
operating segments, products and services, and geographic areas beginning in
1998.
In December 1997, SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," was issued and is effective for the Company's
1998 fiscal year. The statement revises current disclosure requirements for
employers' pension and other retiree benefits.
Implementation of these disclosure standards will not affect the Company's
financial position or results of operations.
F-15
<PAGE> 142
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Octel Corp.
We have reviewed the accompanying balance sheet of Octel Corp. and
subsidiaries as of June 30, 1998, and the related consolidated statements of
income for the three-month and six-month periods ended June 30, 1998 and 1997,
and consolidated statements of cash flows for the six-month periods ended June
30, 1998 and 1997. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the combined balance sheet of the businesses that comprise Octel
Corp. as of December 31, 1997, and the related consolidated statements of income
and cash flows for the year then ended and in our report dated April 4, 1998, we
expressed an unqualified opinion on those combined financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 1997, is fairly stated, in all material respects, in
relation to the combined balance sheet from which it has been derived.
Indianapolis, Indiana
October 1, 1998
F-16
<PAGE> 143
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(MILLIONS OF DOLLARS EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C>
Net sales................................. $115.6 $134.6 $238.8 $258.1
Cost of goods sold........................ 59.9 69.0 123.7 133.4
------ ------ ------ ------
Gross profit............................ 55.7 65.6 115.1 124.7
Operating expenses
Selling, general and admin.............. 8.8 9.9 17.8 19.9
Research and development................ 0.8 0.7 1.6 1.7
Amortization of intangible assets....... 10.2 6.7 18.8 13.4
------ ------ ------ ------
19.8 17.3 38.2 35.0
------ ------ ------ ------
Income from operations.................... 35.9 48.3 76.9 89.7
Interest expense.......................... 7.5 0.4 9.6 0.8
Interest income........................... (0.7) (1.1) (1.3) (2.0)
Other expense (income).................... (0.2) (0.1) 1.1 (5.0)
------ ------ ------ ------
Income before income taxes and minority
interest................................ 29.3 49.1 67.5 95.9
Minority interest......................... -- 7.0 -- 13.6
------ ------ ------ ------
Income before income taxes................ 29.3 42.1 67.5 82.3
Income taxes.............................. 12.7 14.4 25.3 28.2
------ ------ ------ ------
Net income................................ $ 16.6 $ 27.7 $ 42.2 $ 54.1
====== ====== ====== ======
Basic and diluted earnings per share...... $ 1.12 $ 1.88 $ 2.86 $ 3.66
Shares used to compute basic earnings per
share (based on the number of shares
issued on May 26, 1998 and still
outstanding)............................ 14,762,417 14,762,417 14,762,417 14,762,417
</TABLE>
The accompanying footnotes are an integral part of these unaudited condensed
financial statements.
F-17
<PAGE> 144
UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 42.0 $ 29.7
Accounts receivable, less allowance of $0.9 (1997 --
$0.9).................................................. 132.0 169.8
Inventories
Finished products...................................... 48.7 35.7
Work in progress....................................... 5.4 10.2
Raw materials and supplies............................. 23.8 32.9
------ ------
Total inventories...................................... 77.9 78.8
Prepaid expenses.......................................... 6.2 4.4
------ ------
Total current assets........................................ 258.1 282.7
------ ------
Property, plant and equipment............................... 125.5 122.8
Less allowance for depreciation........................... 20.1 16.8
------ ------
Net property, plant and equipment......................... 105.4 106.0
Goodwill and other intangible assets........................ 381.4 379.3
Other assets................................................ 61.9 64.9
------ ------
$806.8 $832.9
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 27.7 $ 40.0
Accrued expenses.......................................... 9.3 9.0
Accrued income taxes...................................... 22.7 53.8
------ ------
Total current liabilities................................... 59.7 102.8
Other liabilities (plant closure provision)................. 49.7 57.2
Deferred income taxes....................................... 20.1 20.1
Long-term debt.............................................. 390.0 --
Great Lakes investment...................................... -- 652.8
Stockholder's equity
Common stock, $0.01 par value, authorised 40,000,000
shares, issued 14,762,417 shares as of 6/30/98
(zero shares as of 12/31/97)........................... 0.1 --
Additional paid-in capital................................ 276.1 --
Retained earnings......................................... 9.0 --
Cumulative translation adjustment......................... 2.1 --
------ ------
Total stockholders' equity................................ 287.3 --
------ ------
$806.8 $832.9
====== ======
</TABLE>
The accompanying footnotes are an integral part of these unaudited condensed
financial statements.
F-18
<PAGE> 145
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
------------------------
1998 1997
---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 42.2 $ 54.1
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 29.0 22.7
Changes in deferred and other items....................... (0.1) 0.9
-------- --------
Cash provided by operations excluding changes in working
capital................................................ 71.1 77.7
Changes in working capital other than debt................ 52.1 49.0
Other noncurrent liabilities (plant closure provision).... (8.4) (22.5)
-------- --------
Net cash provided by operating activities................... 114.8 104.2
INVESTING ACTIVITIES
Plant and equipment additions............................... (8.1) (4.8)
Other....................................................... (7.3) 6.8
-------- --------
Net cash used in investing activities....................... (15.4) 2.0
FINANCING ACTIVITIES
Net cash paid to Great Lakes................................ (468.5) (109.1)
Receipt of long-term borrowings............................. 430.0 --
Repayment of long-term borrowings........................... (40.0) --
Fees relating to spin financing............................. (11.0) --
Minority interest........................................... -- (1.3)
-------- --------
Net cash used in financing activities....................... (89.5) (110.4)
Effect of exchange rate changes on cash and cash
equivalents............................................... 2.4 (9.8)
-------- --------
Increase (decrease) in cash and cash equivalents............ 12.3 (14.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 29.7 54.9
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 42.0 $ 40.9
======== ========
</TABLE>
The accompanying footnotes are an integral part of these unaudited condensed
financial statements.
F-19
<PAGE> 146
OCTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BACKGROUND AND BASIS OF PRESENTATION
Octel Corp., a Delaware corporation (the "Company"), is a major
manufacturer and distributor of fuel additives and other specialty performance
chemicals. Its primary manufacturing operation is located at Ellesmere Port,
Cheshire, United Kingdom. The Company's products are sold globally, primarily to
oil refineries. Principal product lines are lead alkyl antiknock compounds
(TEL), other petroleum additives and performance chemicals.
Until May 22, 1998, the Company was a wholly-owned subsidiary of Great
Lakes Chemical Corporation, a Delaware corporation ("Great Lakes"). On May 22,
1998, Great Lakes consummated the spin off of its petroleum additives business
by distributing shares of the Company to the stockholders of Great Lakes in a
ratio of one Company share for every four Great Lakes shares (the "Spin Off").
In connection with the Spin Off, the Company issued 14,762,417 shares of common
stock on May 26, 1998.
On April 27, 1998, the Company entered into a $300 million senior secured
credit facility (the "Credit Facility"). On May 5, 1998, the Company issued $150
million of Senior Notes due 2006 (the "Notes"). The Credit Facility consisted of
a $280 million senior secured term loan and a $20 million senior secured
revolving credit facility. The Credit Facility will mature on December 31, 2001,
with the term loan amortizing in quarterly instalments. The Company made its
first repayment of $40 million on the secured term loan on June 30, 1998. Loans
under the Credit Facility bear interest at LIBOR plus 1.75%. The interest rate
will reduce to LIBOR plus 1.25% when the outstanding balance under the Credit
Facility has reduced to $140 million. The Notes mature in 2006. The Company is
required to redeem $37.5 million principal amount of Notes in each of the years
2003, 2004 and 2005. The Credit Facility and the Notes contain substantial
restrictions on the Company's operations, including the ability to pay
dividends. The proceeds of the borrowings, along with available cash of $52.7
million, were used to repay a $116.8 million inter-company loan used to purchase
a 10.65% interest in subsidiaries of the Company from Chevron Chemical Company
and pay a special dividend to Great Lakes of $350.9 million and other costs of
approximately $16.0 million related to the Spin Off.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position and
results of operations.
It is management's opinion, however, that all material adjustments
(consisting of normal recurring accruals) have been made which are necessary for
a fair financial statement presentation. These financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10/A filed on May 6, 1998, in connection with the
Distribution. The results for the interim period are not necessarily indicative
of the results to be expected for the year due to the levels of borrowings
incurred by the Company on spin off.
F-20
<PAGE> 147
OCTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
The following sets forth the Company's comprehensive income for the six
months to June 30, 1998 together with an analysis of the movement in
stockholders' equity during the same period:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C> <C>
Balance at December 31, 1997................................ $652.8
Comprehensive Income:
Net Income................................................ 42.2
Net change in cumulative translation account.............. 9.5
----
Total comprehensive income.................................. 51.7
Other movement in stockholders' equity
Transfer of income tax liabilities to Great Lakes......... 56.0
Net amount paid to Great Lakes including exchange effect
of $4.7................................................ (473.2)
------
Balance at June 30, 1998.................................... $287.3
======
</TABLE>
NOTE 3 -- INCOME TAXES
A reconciliation of the U.S. statutory income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30
1998 1997
EFFECTIVE INCOME TAX RATE RECONCILIATION: ---- ----
<S> <C> <C>
Statutory US Federal tax rate............................... 35.0% 35.0%
Increase (decrease) resulting from:
Foreign tax rate differential............................. (3.9) (2.9)
Amortization of goodwill.................................. 5.9 2.7
Other..................................................... 0.5 (0.5)
---- ----
37.5% 34.3%
==== ====
</TABLE>
NOTE 4 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting Standard No. 128
"Earnings Per Share" for the first six months of 1998. The Statement establishes
standards for computing and presenting earnings per share ("EPS") by replacing
the presentation of primary EPS with a presentation of basic EPS.
The Company intends to adopt Statement of Financial Accounting Standard No.
131 "Disclosures about Segments of an Enterprise and Related Information"
beginning with the fourth quarter of 1998. The Statement establishes standards
for reporting information about operating segments including related disclosure
about products, geographic areas and major customers.
Statement of Financial Accounting Standard No. 132, "Employers' Disclosures
about Pensions and Other Post-retirement Benefits" was issued in December 1997
and is effective for the Company's 1998 fiscal year. The Statement revises
current disclosure requirements for employers' pension and other retiree
benefits.
Implementation of these standards will not affect the Company's financial
position or results of operations.
F-21
<PAGE> 148
OCTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("FSAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. This Statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company is at
present evaluating the impact of SFAS 133 on its operations.
NOTES 5 -- RELATED PARTY TRANSACTIONS
Prior to the Spin Off on May 22, 1998, sales of product between the Company
and Great Lakes were reported in the financial statements at estimated market
value. In the current half year and in the first half year of 1997, the value of
sales from the Company to Great Lakes amounted to $3.3 million and $3.8 million
respectively and the value of purchases by the Company from Great Lakes amounted
to $7.1 million and $8.3 million respectively.
Prior to the Spin Off, interest charges from Great Lakes, in respect of
funding provided primarily for acquisitions amounted to $3.4 million and $0.7
million in the first half year of 1998 and 1997 respectively.
F-22
<PAGE> 149
- ---------------------------------------------------------
- ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 1
Risk Factors............................. 13
Use of Proceeds.......................... 21
Capitalization........................... 22
Pro Forma Financial Data................. 23
Selected Historical Combined Financial
Data................................... 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations for the Fiscal Years Ended
1995, 1996 and 1997.................... 31
Interim Unaudited Combined Financial
Data................................... 39
Management's Discussion and Analysis of
Financial Condition and Results of
Operations for the Six Months Ended
June 30, 1998....................... 41
Business................................. 44
Management............................... 52
Security Ownership of Certain Beneficial
Owners................................. 59
Beneficial Ownership of Management....... 59
Certain Relationships and Related
Transactions........................... 60
Description of Credit Facility........... 62
Description of the Notes................. 63
The Exchange Offer....................... 69
Description of the Note Depositary
Agreement.............................. 99
Certain U.S. Federal Income Tax
Consequences........................... 105
Certain United Kingdom Tax
Consequences........................... 108
Plan of Distribution..................... 117
Legal Matters............................ 119
Independent Auditors..................... 119
Special Note Regarding Forward-Looking
Statements............................. 119
Index to Combined Financial Statements... F-1
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
$150,000,000
OCTEL DEVELOPMENTS PLC
10% SENIOR NOTES DUE 2006
UNCONDITIONALLY GUARANTEED
AS TO PAYMENT OF PRINCIPAL AND
INTEREST BY
OCTEL CORP.
------------------
[OCTEL LOGO]
------------------
OFFER TO EXCHANGE ITS 10% SENIOR NOTES DUE 2006 FOR ANY AND ALL OF ITS
OUTSTANDING 10% SENIOR NOTES DUE 2006.
PROSPECTUS
---------------------------------------------------------
---------------------------------------------------------
<PAGE> 150
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Issuer (as defined)
The Issuer is a company formed under the laws of England and Wales. Under
the laws of the United Kingdom, members of the board of directors of a company
do not, in principle, incur personal liability for the company's acts. However,
a director owes his company duties to act in the company's best interests, and
also to exercise reasonable care and skill when acting. Should the director be
in breach of these duties, then he is liable to the company for the damage which
the company sustains as a result. Futhermore, in some circumstances, director
may incur liability to a third party. At common law a director is liable to a
third party which was a reasonably foreseeable consequence of a negligent or
fraudulent misstatement made by the director.
A director may be absolved of liability to his company (in the absence of
fraud) by a shareholders' resolution ratifying his act. Also, by section 727 of
the Companies Act 1985 the court may relieve a director of his liability to his
company for negligence, default, breach of duty or breach of trust. It will only
do so if the director has acted honestly and reasonably, and in all the
circumstances it would be fair to grant relief. Neither a shareholders'
resolution, nor the court, can relieve a director of his liability to a third
party.
Article 13 of the Articles of Association of the Issuer provides for the
indemnification of the Directors of the Issuer to the extent allowed by
applicable law.
The Companies Act 1985 allows a company to take out insurance for the
benefit of a director, protecting him against his liability to the company.
Article 13.2 of the Articles of Association of the Issuer grants the Directors
power to purchase insurance for the benefit of present or past Directors.
The Guarantor (as defined).
The Guarantor is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware ("Section
145") provides that a Delaware corporation may indemnify any persons who are, or
are threatened to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
or are threatened to be made, a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reason of the fact that
such person was a director, officer, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorney's fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
II-1
<PAGE> 151
which such officer or director has actually and reasonably incurred.
The certificates of incorporation, as amended, of the Guarantor provide
that no director of the corporation shall be liable to the corporation or its
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the corporation of its stockholders. In addition, the Guarantor's certificate
of incorporation, as amended, provides for the indemnification of directors and
officers of the Guarantor to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
Article V of the by-laws of the Guarantor provides that, to the fullest
extent permitted by the General Corporation Law of the State of Delaware, no
director or the Guarantor shall be liable to the Guarantor or its stockholders
for monetary damages arising from a breach of fiduciary duty owed to the
Guarantor or its stockholders. Article V of the by-laws of the Guarantor further
provides that the Guarantor shall indemnify, to the fullest extent permitted by
the General Corporation Law of the State of Delaware, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director or officer of
such corporation, or is or was serving at the request of such corporation as a
director, officer or member of another corporation, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
and such indemnification shall continue as to an indemnitee who has ceased to a
be a director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators. Article V of the by-laws of
the Guarantor further provides that any person serving as a director, officer,
employee or agent of another corporation, partnership, joint venture or other
enterprise, at least 50% of whose equity interests are owned by the corporation,
shall be conclusively presumed to be serving in such capacity at the request of
the Guarantor and, hence, subject to indemnification by the Guarantor.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
Article V of the by-laws of the Guarantor further provides that the
corporation may purchase and maintain insurance on its own behalf and on behalf
of any person who is or was a director, officer, employee, fiduciary, or agent
of the corporation or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, whether or not the
corporation would have the power to indemnify such person against such liability
under Article V of its by-laws.
All of the directors and officers of the Guarantor are covered by insurance
policies maintained and held in effect by such corporation against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
II-2
<PAGE> 152
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
LOCATION OF DOCUMENT
IN SEQUENTIAL
NUMBERING SYSTEM
--------------------
<C> <S> <C>
3.1 Articles of Association of Octel Developments PLC. .........
3.2 Certificate of Incorporation, Memorandum and Articles of
Association of Octel Developments PLC. .....................
3.3 Amended and Restated Certificate of Incorporation of the
Guarantor*..................................................
3.4 Amended and Restated By-laws of Guarantor*..................
4.1 Indenture dated as of May 1, 1998 among the Issuer, the
Guarantor and the IBJ Schroder Bank and Trust Company, as
trustee.....................................................
4.2 Form of 10% Senior Notes (contained in Exhibit 4.1 as
Exhibit A)..................................................
4.3 Registration Rights Agreement dated as of April 30, 1998
among the Issuer, the Guarantor, and the Initial
Purchasers.*................................................
4.4 Purchase Agreement dated as of April 30, 1998 among the
Initial Purchasers, the Issuer and the Guarantor............
5.1 Opinion and consent of Kirkland & Ellis.....................
5.2 Opinion and consent of Linklaters & Paines..................
10.1 Tax Disaffiliation Agreement between Great Lakes and the
Company.*...................................................
10.2 Corporate Services Transition Agreement between Great Lakes
and the Company.*...........................................
10.3 Supply Agreement between Great Lakes and the Company for the
supply of ethylene dibromide.*..............................
10.4 Supply Agreement between Great Lakes and the Company for the
supply of anhydrous hydrogen bromide.*......................
10.5 Supply Agreement for the supply of 10% sodium hydroxide
solution.*..................................................
10.6 Ethyl Corporation Market and Sales Agreement.****...........
10.7 Octel Corp. Non Employee Directors Stock Option Plan........
10.8 Employment Agreement between Associated Octel Limited and
Steve W. Williams, Geoff J. Hignett, Graham M. Leathes and
Robert A. Lee.*.............................................
10.9 Employment Agreement between Associated Octel Limited and
Dennis J. Kerrison.*........................................
10.10 Agreement between Great Lakes and the Company for the Toll
Manufacture of Stadis Product...............................
10.11 Octel Corp. Time Restricted Share Plan.***..................
10.12 Octel Corp. Performance Related Stock Option Plan.***.......
10.13 Octel Corp. Savings-Related Share Option Plan.***...........
12.1 Statement Regarding Computation of Ratios of Earnings to
Fixed Charges...............................................
21.1 Subsidiaries of the Registrant.***..........................
23.1 Consent of Ernst & Young LLP................................
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).......
23.3 Consent of Linklaters & Paines (included in Exhibit 5.2)....
</TABLE>
II-3
<PAGE> 153
<TABLE>
<CAPTION>
LOCATION OF DOCUMENT
IN SEQUENTIAL
NUMBERING SYSTEM
--------------------
<C> <S> <C>
24.1 Powers of Attorney of Directors and Officers of the Company
and the Guarantor (included in pages II-6 to II-8)..........
25.1 Statement of Eligibility of Trustee on Form T-1.............
27.1 Financial Data Schedule.**..................................
99.1 Form of Letter of Transmittal...............................
99.2 Form of Notice of Guaranteed Delivery.......................
99.3 Form of Tender Instructions.................................
</TABLE>
- ---------------
* Incorporated by reference to the Company's amendment dated April 21, 1998
to a previously filed Form 10-/A.
** Incorporated by reference to the Company's Form 10-/A previously filed on
April 10, 1998
*** Incorporated by reference to the Company's amendment dated May 4, 1998, to
a previously filed Form 10-/A
**** To be filed by Amendment
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange
II-4
<PAGE> 154
Act of 1934) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered, therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a directors, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 155
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Octel Corp.,
has duly caused this Amendment No. 1 to Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of South Wirral, United Kingdom, on October 1, 1998.
OCTEL CORP.
By: /s/ ALAN G. JARVIS
-----------------------------------
Alan G. Jarvis
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dennis J. Kerrison, Alan G. Jarvis, and
each of them severally, his true and lawful attorneys-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and
all capacities, to do any and all things and execute any and all instruments
that such attorney may deem necessary or advisable under the Securities Act of
1933 (the "Securities Act"), and any rules, regulations and requirements of the
U.S. Securities and Exchange Commission in connection with the registration
under the Securities Act of notes of the registrant, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign his name in his respective capacity as a member of the Board of Directors
or officer of the registrant, this Registration Statement and/or such other form
or forms as may be appropriate to be filed with the Commission as any of them
may deem appropriate in respect of the notes of the registrant to any and all
amendments thereto (including post-effective amendments) to this Registration
Statement, to any related Rule 462(b) Registration Statement and to any
documents filed as part of or in connection with this Registration Statement and
any and all amendments thereto, including post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed on October 1, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
Dennis J. Kerrison
* Chief Financial Officer, Octel Corp;
- ----------------------------------------------------- (Principal Financial and Accounting Officer)
Alan G. Jarvis
* Company Secretary and General Counsel
- -----------------------------------------------------
Graham M. Leathes
</TABLE>
II-6
<PAGE> 156
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* Director
- -----------------------------------------------------
Dr. Robert E. Bew
* Director
- -----------------------------------------------------
Martin M. Hale
* Director
- -----------------------------------------------------
Thomas M. Fulton
* Director
- -----------------------------------------------------
James Puckridge
* Director
- -----------------------------------------------------
Dr. Benito Fiore
* Director
- -----------------------------------------------------
Charles M. Hale
/s/ ALAN G. JARVIS
- -----------------------------------------------------
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 157
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Octel
Developments PLC, has duly caused this Amendment No. 1 to Registration Statement
on Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of South Wirral, United Kingdom, on October 1, 1998.
OCTEL DEVELOPMENTS PLC
By: /s/ ALAN G. JARVIS
------------------------------------
Alan G. Jarvis
Finance Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dennis J. Kerrison, Alan G. Jarvis, and
each of them severally, his true and lawful attorneys-in-fact with power of
substitution and resubstitution to sign in his name, place and stead, in any and
all capacities, to do any and all things and execute any and all instruments
that such attorney may deem necessary or advisable under the Securities Act of
1933 (the "Securities Act"), and any rules, regulations and requirements of the
U.S. Securities and Exchange Commission in connection with the registration
under the Securities Act of notes of the registrant, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign his name in his respective capacity as a member of the Board of Directors
or officer of the registrant, this Registration Statement and/or such other form
or forms as may be appropriate to be filed with the Commission as any of them
may deem appropriate in respect of the notes of the registrant to any and all
amendments thereto (including post-effective amendments) to this Registration
Statement, to any related Rule 462(b) Registration Statement and to any
documents filed as part of or in connection with this Registration Statement and
any and all amendments thereto, including post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-4 has been signed on October 1, 1998
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* Managing Director, Director
- ------------------------------------------------ (Principal Executive Officer)
Dennis J. Kerrison
* Finance Director, Director
- ------------------------------------------------ (Principal Financial Officer)
Alan G. Jarvis
/s/ ALAN G. JARVIS
- ------------------------------------------------
Alan G. Jarvis
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 158
HEAD OFFICE OF THE ISSUER AND GUARANTOR
OCTEL DEVELOPMENTS PLC
P.O. Box 17, Oil Sites Road
Ellesmere Port, South Wirral
United Kingdom
LEGAL ADVISERS
<TABLE>
<CAPTION>
To the Issuer To the Issuer
as to English law as to United States law
<S> <C>
KIRKLAND & ELLIS INTERNATIONAL
LINKLATERS & PAINES International Financial Centre; Old Broad
One Silk Street Street
London ECZY 8HQ, United Kingdom London EC2N 1HQ; United Kingdom
</TABLE>
AUDITORS TO THE ISSUER AND GUARANTOR
ERNST & YOUNG LLP
1 Indiana Square
Suite 3400
Indianapolis, Indiana 46204
<TABLE>
<S> <C>
BOOK-ENTRY DEPOSITARY,
TRUSTEE AND EXCHANGE TRANSFER AGENT, LISTING AND
AGENT PAYING AGENT
IBJ SCHRODER BANK AND TRUST COMPANY INDUSTRIAL BANK OF JAPAN (LUXEMBOURG) S.A.
One State Street 8 rue Jean Monnet
New York, NY 10004 L-2180 Luxembourg
</TABLE>
II-9
<PAGE> 1
Exhibit 3.1
THE COMPANIES ACT 1985
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
OCTEL DEVELOPMENT PLC
PRELIMINARY
1 The regulations contained in Table A in The Companies (Tables A to F)
Regulations 1985 (as amended so as to affect companies first registered on
the date of incorporation of the Company) shall, except as hereinafter
provided and so far as not inconsistent with the provisions of these
Articles, apply to the Company to the exclusion of all other regulations
or Articles of Association. References herein to regulations are to
regulations in the said Table A unless otherwise stated.
SHARE CAPITAL
2 The share capital of the Company is pound sterling 50,000 divided into
50,000 Ordinary Shares of pound sterling 1 each.
3
3.1 Subject to Section 80 of the Act, all unissued shares shall be at the
disposal of the Directors and they may allot, grant options over or
otherwise dispose of them to such persons, at such times, and on such
terms as they think proper.
3.2
3.2.1 Pursuant to and in accordance with Section 80 of the Act the
Directors shall be generally and unconditionally authorised to
exercise during the period of five years from the date of
incorporation of the Company all the powers of the Company to allot
relevant securities up to an aggregate nominal amount of pound
sterling 50,000;
3.2.2 by such authority the Directors may make offers or agreements
which would or might require the allotment of relevant securities
after the expiry of such period.
3.3 Any allotment made pursuant to clause 3.2 of these Articles may be made as
if Section 89(1) of the Act did not apply.
3.4 Words and expressions defined in or for the purposes of the said Section
80 or the said Section 89 shall bear the same meanings in this Article.
PROCEEDINGS AT GENERAL MEETINGS
4 In the case of a corporation a resolution in writing may be signed on its
behalf by a Director or the Secretary thereof or by its duly appointed
attorney or duly authorised representative. Regulation 53 shall be
extended accordingly. Regulation 53 (as so extended) shall apply mutatis
mutandis to resolutions in writing of any class of members of the Company.
VOTES OF MEMBERS
5 An instrument appointing a proxy (and, where it is signed on behalf of the
appointor by an attorney, the letter or power of attorney or a duly
certified copy thereof) must either be delivered at such place or one of
such places (if any) as may be specified for that purpose in or by way of
1
<PAGE> 2
note to the notice convening the meeting (or, if no place is so specified,
at the registered office) before the time appointed for holding the
meeting or adjourned meeting or (in the case of a poll taken otherwise
than at or on the same day as the meeting or adjourned meeting) for the
taking of the poll at which it is to be used or be delivered to the
Secretary (or the chairman of the meeting) on the day and at the place of,
but in any event before the time appointed for holding, the meeting or
adjourned meeting or poll. The instrument may be in the form of
a facsimile or other machine made copy and shall, unless the contrary is
stated thereon, be valid as well for any adjournment of the meeting as for
the meeting to which it relates. An instrument of proxy relating to more
than one meeting (including any adjournment thereof) having once been so
delivered for the purposes of any meeting shall not require again to be
delivered for the purposes of any subsequent meeting to which it relates.
Regulation 62 shall not apply.
ALTERNATE DIRECTORS
6
6.1 Any director (other than an alternate director) may by notice in writing
to the Company appoint any other director, or any other person who is
willing to act, to be an alternate director and remove from office an
alternate director so appointed by him. Regulation 65 of Table A shall
not apply.
6.2 An alternate Director shall be entitled to receive notices of meetings of
the Directors and of any committee of the Directors of which his
appointor is a member and shall be entitled to attend and vote as a
Director and be counted in the quorum at any such meeting at which his
appointor is not personally present and generally at such meeting to
perform all functions of his appointor as a Director and for the purposes
of the proceedings at such meeting the provisions of these Articles
shall apply as if he were a Director. If he shall be himself a Director
or shall attend any such meeting as an alternate for more than one
Director, his voting rights shall be cumulative but he shall not be
counted more than once for the purposes of the quorum. If his appointor
is for the time being absent from the United Kingdom or temporarily
unable to act through ill health or disability his signature to any
resolution in writing of the Directors shall be as effective as the
signature of his appointor. An alternate Director shall not (save as
aforesaid) have power to act as a Director, nor shall he be deemed to be
a Director for the purposes of these Articles, nor shall he be deemed to
be the agent of his appointor. Regulations 66 and 69 shall not apply.
6.3 An alternate Director shall be entitled to contract and be interested in
and benefit from contracts or arrangements or transactions and to be
repaid expenses and to be indemnified to the same extent mutatis mutandis
as if he were a Director but he shall not be entitled to receive from
the Company in respect of his appointment as alternate Director any
remuneration except only such part (if any) of the remuneration otherwise
payable to his appointor as such appointor may by notice in writing to
the Company from time to time direct.
DELEGATION OF DIRECTORS' POWERS
7 In addition to the powers to delegate contained in Regulation 72, the
Directors may delegate any of their powers or discretions (including
without prejudice to the generality of the foregoing all powers and
discretions whose exercise involves or may involve the payment of
remuneration to or the conferring of any other benefit on all or any of
the Directors) to committees consisting of one or more Directors and (if
thought fit) one or more other named persons or persons to be co-opted as
hereinafter provided. Insofar as any such power or discretion is
delegated to a committee, any reference in these Articles to the exercise
by the Directors of the power or discretion so delegated shall be read
and construed as if it were a reference to the exercise thereof by such
committee. Any committee so formed shall in the exercise of the powers so
delegated conform to any regulations which may from time to time be
imposed by the Directors.
<PAGE> 3
Any such regulations may provide for or authorise the co-option to the
committee of persons other than Directors and may provide for members who
are not Directors to have voting rights as members of the committee but so
that (a) the number of members who are not Directors shall be less than
one-half of the total number of members of the committee and (b) no
resolution of the committee shall be effective unless passed by a majority
including at least one member of the committee who is a Director.
Regulation 72 shall be modified accordingly.
APPOINTMENT AND RETIREMENT OF DIRECTORS
8 The Directors shall not be subject to retirement by rotation.
Regulations 73 to 75 and the second and third sentences of Regulation 79
shall not apply, and other references in the said Table A to retirement by
rotation shall be disregarded.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
9 The office of a Director shall be vacated in any of the events
specified in Regulation 81 and also if he shall in writing offer to resign
and the Directors shall resolve to accept such offer or if he shall be
removed from office by notice in writing signed by all his co-Directors
(being at least two in number) but so that if he holds an appointment to
an executive office which thereby automatically determines such removal
shall be deemed an act of the Company and shall have effect without
prejudice to any claim for damages for breach of any contract of service
between him and the Company.
10 Any provision of the Act which, subject to the provisions of the
articles, would have the effect of rendering any person ineligible for
appointment or election as a Director or liable to vacate office as a
Director on account of his having reached any specified age or of
requiring special notice or any other special formality in connection with
the appointment or election of any Director over a specified age, shall
not apply to the Company.
REMUNERATION OF DIRECTORS
11 Any Director who serves on any committee, or who otherwise performs
services which in the opinion of the Directors are outside the scope of
the ordinary duties of a Director, may be paid such extra remuneration by
way of salary, commission or otherwise or may receive such other benefits
as the Directors may determine. Regulation 82 shall be extended
accordingly.
PROCEEDINGS OF DIRECTORS
12 On any matter in which a Director is in any way interested he may
nevertheless vote and be taken into account for the purposes of a quorum
and (save as otherwise agreed) may retain for his own absolute use and
benefit all profits and advantages directly or indirectly accruing to him
thereunder or in consequence thereof. Regulations 94 to 98 shall not
apply.
INDEMNITY
13
13.1 Subject to the provisions of and so far as may be consistent with the
Statutes, every Director, Secretary or other officer of the Company shall
be indemnified by the Company out of its own funds against and/or exempted
by the Company for all costs, charges, losses, expenses and liabilities
incurred by him in the actual or purported execution and/or discharge of
his duties and/or the exercise or purported exercise of his powers and/or
otherwise in relation to or in connection with his duties, powers or
office including (without prejudice to the generality of the foregoing)
any liability incurred by him in defending any proceedings, civil or
criminal which
3
<PAGE> 4
relate to anything done or omitted or alleged to have been done or omitted
by him as an officer or employee of the Company and in which judgment is
given in his favour (or the proceedings are otherwise disposed of without
any finding or admission of any material breach of duty on his part) or in
which he is acquitted or in connection with any application under any
statute for relief from liability in respect of any such act or omission
in which relief is granted to him by the Court.
13.2 Without prejudice to paragraph 13.1 of this Article the Directors shall
have power to purchase and maintain insurance for or for the benefit of
any persons who are or were at any time Directors, officers or employees
of any Relevant Company (as defined in paragraph 13.3 of this Article) or
who are or were at any time trustees of any pension fund or employees'
share scheme in which employees of any Relevant Company are interested,
including (without prejudice to the generality of the foregoing) insurance
against any liability incurred by such persons in respect of any act or
omission in the actual or purported execution and/or discharge of their
duties and/or in the exercise or purported exercise of their powers and/or
otherwise in relation to their duties, powers or offices in relation to
any Relevant Company, or any such pension fund or employees' share scheme.
13.3 For the purpose of paragraph 13.2 of this Article "Relevant Company" shall
mean the Company, any holding company of the Company or any other body,
whether or not incorporated, in which the Company or such holding company
or any of the predecessors of the Company or of such holding company has
or had any interest whether direct or indirect or which is in any way
allied to or associated with the Company, or any subsidiary undertaking of
the Company or of such other body.
<PAGE> 5
No. 351662
OCTEL DEVELOPMENT PLC (FORMERLY KNOWN AS
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED) (THE "COMPANY")
Notice is hereby given that an Extraordinary General Meeting of the
Company will be held at One Silk Street, London EC2 on 27 April 1998 at
1.00 p.m. for the purpose of considering and, if thought fit, passing the
following Resolution as Special Resolutions:
RESOLUTION
1 THAT it is in the best interests of, and to the further benefit and
advantage of, the Company to enter into each of the following documents
and the transactions contemplated by them:
(a) a final draft of a US$280,000,000 Term Loan and US$20,000,000
Revolving Credit Facilities Agreement (the "AGREEMENT") between Octel
Corp. (as parent), Octel Associates Partnership and the companies
named in the Agreement (as Borrowers and/or Guarantors), Goldman
Sachs International and Barclays Capital (as Joint Arrangers and
Joint Syndication Agents) the Banks names in the Agreement (as
Original Banks), Barclays Bank PLC (as provider of the Barclays
facilities) and Barclays Bank PLC as Facility Agent and Security
Agent;
(b) a final draft of a Debenture by the Company and Octel International
Limited (formerly known as Hamsard One Thousand and Thirty Four) in
favour of Barclays Bank PLC (as Security Agent) creating fixed
charges over the Company's interests in its subsidiary, Octel Trading
Limited (formerly known as Hamsard One Thousand and Seventy Five) and
a floating charge over substantially all its assets;
(c) a final draft of a Subordination Deed between Octel Corp., Octel
L.L.C., Octel America Inc, Octel Resources (formerly known as Hamsard
One Thousand and Thirty Three) Limited, Octel International Limited,
the Company, Octel Trading Limited, The Associated Octel Company
Limited, Associated Octel Company (Plant) Limited and AKC Trading
Limited and Barclays Bank PLC (as Security Agent);
(each a "FINANCE DOCUMENT" and together the ""FINANCE DOCUMENTS").
2 THAT the Articles of Associations of the Company be amended by inserting
new Clause 14 (Transfer of Shares):
"14. Regulations 24 and 25 shall not apply."
3 THAT the Memorandum of Association of the Company be amended by adding the
words, "with or without consideration", after the words, "the obligations
and contracts of any person or corporation", in Clause 3(h) thereto.
4 THAT the Directors are instructed to take any action in connection with
the negotiation, execution, delivery and performance of the Finance
Documents as they shall deem necessary or appropriate.
BY ORDER OF THE BOARD
GRAHAM M. LEATHES
Secretary
Date: 27 April 1998
3
<PAGE> 6
Registered No: 3516662
Registered Office: 7 Devonshire Square
Cutlers Gardens
London
EC2M 4YH
Note: A member entitled to attend and vote at the above meeting is entitled to
appoint a proxy to attend and, on a poll, to vote in his place. A proxy
need not be a member of the Company.
4
<PAGE> 7
CONSENT TO SHORT NOTICE
OCTEL DEVELOPMENTS PLC (FORMERLY KNOWN AS
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED)
(THE "COMPANY")
We, the undersigned, being a majority in number of the Members of the Company
entitled to attend and vote at the meeting convened by the attached Notice and
together holding all the Shares giving such rights hereby consent to such
Meeting being convened and held on the date specified in such Notice, and to
the proposing and passing thereat of the Resolution set out therein,
notwithstanding that less than the requisite notice of the meeting has been
given in accordance with the Companies Act 1985 (as amended by the Companies
Act 1989) and the Articles of Association of the Company.
Date: 27 April 1998 Signed: GRAHAM M. LEATHES
---------------------- --------------------------
For and on behalf of Octel
International Limited
5
<PAGE> 8
OCTEL DEVELOPMENTS PLC (FORMERLY KNOWN AS
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED)
(THE "COMPANY")
Minutes of an Extraordinary General Meeting of the Company
held at One Silk Street, London EC2 on 27 April 1998 at 1.00 p.m.
Present: (Chairman)
In Attendance:
1 The Chairman produced to the meeting a copy of the Notice convening the
meeting. He declared that a quorum was present and that the requisite
consents to short notice of the meeting had been obtained and that
accordingly the meeting was properly convened and constituted.
2 The Notice convening the meeting was, by general consent, taken as read.
3 The Chairman proposed the Resolution set out in the Notice as a Special
Resolution of the Company. The Resolution was seconded by Mr ,
and the Chairman, having put the Resolution to the meeting, declared it
duly passed on a show of hands as a Special Resolution.
4 The business at the meeting being concluded, the Chairman declared the
meeting closed.
GRAHAM M. LEATHES
Chairman
6
<PAGE> 1
Exhibit 3.2
[GOVERNMENT COAT OF ARMS LOGO]
CERTIFICATE OF INCORPORATION
OF A PRIVATE LIMITED COMPANY
Company No. 3516662
The Registrar of Companies for England and Wales hereby certifies that
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED
is this day incorporated under the Companies Act 1985 as a private
company and that the company is limited.
Given at Companies House, Cardiff, the 25th February 1998
/s/ L. Parry
MRS. L. PARRY
FOR THE REGISTRAR OF COMPANIES
[COMPANIES HOUSE LOGO]
<PAGE> 2
[GOVERNMENT COAT OF ARMS LOGO]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
AND RE-REGISTRATION OF A PRIVATE COMPANY
AS A PUBLIC COMPANY
Company No. 3516662
The Registrar of Companies for England and Wales hereby certifies that
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED
formerly registered as a private company having changed its name and having
this day been re-registered under the Companies Act 1985 as a public limited
company is now incorporated under the name of
OCTEL DEVELOPMENTS PLC
and that the company is limited.
Given at Companies House, London, the 23rd April 1998
/s/ S. Bashar
MISS S. BASHAR
For The Registrar Of Companies
[COMPANIES HOUSE LOGO]
<PAGE> 3
No. 3516662
THE COMPANY ACT 1985
COMPANY LIMITED BY SHARES
Special Resolution
of
Hamsard One Thousand and Seventy Four Limited
At an Extraordinary General Meeting of the Company duly convened and held on
21 April 1998 at Oil Sites Road, Ellesmere Fort, South Wirral, L65 4HF the
following Resolution was duly passed as a Special Resolution:
Special Resolution
That the Company re-registered as a public company under the name of "Octel
Developments PLC" and accordingly that, with effect from the date of
re-registration:
(a) the name of the Company be changed to "Octel Developments PLC":
(b) the following new Clause 2 be inserted into the Company's Memorandum of
Association:
"The Company is to be a public company",
and the remaining clauses be renumbered accordingly; and
(c) the name "Octel Developments PLC" be substituted for the name "Hamsard One
Thousand and Seventy Four Limited" in Clause 1 of the Company's Memorandum
of Association; and
(d) the regulations contained in the printed document produced to the Meeting
and signed by the Chairman for purposes of identification be hereby adopted
as the Articles of Association of the Company in substitution for and to
the exclusion of all existing Articles of the Company.
/s/ Graham M. Leathes
Chairman
1
<PAGE> 4
Hansard One Thousand and Seventy Four Limited
Minutes of an Extraordinary General Meeting of the Company held at Oil Sites
Road, Ellesmere Port, South Wirral, L65 4HF on 21 April 1998 at 4:30 p.m.
Present: G Leathes (as Alternate Director to D Kerrison) (in the Chair)
M Pimbley (as Alternate Director to A Jarvis)
1. The Chairman produced to the meeting a copy of the Notice convening the
meeting. He declared that a quorum was present and that the requisite
consensus to short notice of the meeting had been obtained and that
accordingly the meeting was properly convened and constituted.
2. The Notice convening the meeting was, by general consent, taken as read.
3. The Chairman proposed the Resolution set out in the Notice as a Special
Resolution of the Company. The Resolution was seconded by Mr Pimbley, and
the Chairman, having put the Resolution to the meeting, declared it duly
passed on a show of hands as a Special Resolution.
4. The business of the meeting being concluded, the Chairman declared the
meeting closed.
GRAHAM M. LEATHES
Chairman
1
<PAGE> 5
Consent to Short Notice
Hamsard One Thousand and Seventy Four Limited
We, the undersigned, being a majority in number of the Members of the Company
entitled to attend and vote at the meeting convened by the attached Notice and
together holding not less than 95 per cent in nominal value of the shares giving
such rights hereby consent to such Meeting being convened and held on the date
specified in such Notice, and to the proposing and passing thereat of the
Special Resolution set out therein, notwithstanding that less than the requisite
notice of the Meeting has been given in accordance with the Companies Act 1985
and the Articles of Association of the Company.
Dated: 21 April 1998 Signed: GRAHAM M. LEATHES
for Hamsard One Thousand and Thirty Four Limited
1
<PAGE> 6
Notice to Extraordinary General Meeting
Hamsard One Thousand and Seventy Four Limited
Notice is hereby given than an Extraordinary General Meeting of the Company will
be held at Oil Sites Road, Ellesmere Port, South Wirral, L65 4HF on 21 April
1998 at 4:30 p.m. for the purpose of considering and, if thought fit, passing
the following Resolution which will be proposed as a Special Resolution:
Special Resolution
That the Company be re-registered as a public company under the name of "Octel
Developments PLC" and accordingly that, with effect from the date of
re-registration:
(a) the name of the Company be changed to "Octel Developments PLC";
(b) the following new Clause 2 be inserted into the Company's Memorandum of
Association;
"The Company is to be a public company".
and the remaining clauses be renumbered accordingly;
(c) the name "Octel Developments PLC" be substituted for the name "Hamsard One
Thousand and Seventy Four Limited" in Clause 1 of the Company's Memorandum
of Association; and
(d) the regulations contained in the printed document produced to the Meeting
and signed by the Chairman for purposes of identification be hereby adopted
as the Articles of Association of the Company in substitution for and to
the exclusion of all existing Articles of the Company.
By Order of the Board
GRAHAM M. LEATHES
Secretary
Dated: 21 April 1998
Registered No: 3516562
Registered Office: Unit 2, 4th Floor, Berkeley Square House, London, W1X 6DT
Note: A member entitled to attend and vote at the above meeting is entitled to
appoint a proxy to attend and, on a poll, to vote in his place. A proxy
need not be a member of the Company.
1
<PAGE> 7
- ------------------------------------------------------------------------------
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED
Minutes of a Meeting of the Board of Directors held at Oil Sites Road,
Ellesmere Port, South Wirral, L65 4HF on 21 April 1998 at 4.15 p.m
- ------------------------------------------------------------------------------
Present: G Leatham (as Alternate Director to D Kernson) (Chairman)
M Pimbley (as Alternate Director to A Jarvis)
1. The Chairman proposed that the Company should re-register as a public
company and that the Memorandum of Association should be appropriately
altered. At the same time it was proposed that the name of the Company be
changed. The Chairman explained that re-registration required the passing
of a Special Resolution to make the appropriate changes to the Memorandum
of Association and proposed that the opportunity should be taken to adopt
new Articles of Association suitable for a public company. A print of the
Memorandum of Association containing the proposed amendments, and also a
print of the proposed new Articles of Association, were produced to the
Meeting and after careful consideration it was resolved that the same be
and are hereby approved.
2. The Chairman reported that the auditors were happy to give a written
statement in accordance with 43(3)(b) of the Companies Act 1985 stating
that in their opinion the Company's Balance Sheet as at 21 April 1998
shows that the amount of the Company's net assets (as defined in the
Companies Act 1985) was not less than the aggregate of its called up
capital and undistributable reserves.
3. There was then produced to the Meeting a Notice convening an Extraordinary
General Meeting to be held forthwith, at which would be proposed a Special
Resolution to change the name of the Company, to authorise the Directors
to apply for the re-registration of the Company as a public company under
the name of "Octel Development PLC", to make the appropriate changes to
the Memorandum of Association and to adopt new Articles of Association,
with effect from the date of re-registration. It was resolved that:
(a) the Notice be and is hereby approved;
(b) such Meeting be convened for the place and time specified in the
Notice;
(c) a copy of the Notice be forthwith delivered to all shareholders; and
(d) the consent of all shareholders should be sought to the Meeting being
held on short notice.
4. The Meeting then adjourned to enable the Extraordinary General Meeting to
be held.
5. On resumption of the Meeting, it was reported by the Chairman that the
Special Resolution set out in the Notice of Extraordinary General Meeting
had been duly passed.
6. It was resolved that the Secretary be instructed to file the following at
the Companies Registry with a cheque for the relevant fee payable to the
Registrar of Companies:
(a) a signed print of the Special Resolution;
(b) a print of the Memorandum of Association as altered by the Special
Resolution;
1
<PAGE> 8
(c) the new Articles of Association;
(d) Form 43(3) (Application by a private company for re-registration as a
public company);
(e) the written statement of the auditors, Ernst & Young, in accordance
with Section 43(3)(b) of the Companies Act 1985;
(f) a copy of the Company's balance sheet as at 21 April 1998 and the
auditors' unqualified report; and
(g) a declaration of compliance with statutory requirements in Form
43(3)(c).
7. There being no further business, the Meeting concluded.
Graham M. Leathes
------------------------
Chairman
2
<PAGE> 9
THE COMPANIES ACT 1985
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
OCTEL DEVELOPMENTS PLC*1
1. The Company's name is Octel Developments PLC.
2. The Company is to be a public company.
3. The Company's registered office is to be situated in England.
4. The Company's objects are:-
a) To carry on business as a general commercial company; to carry on
all or any of the businesses of general merchants and traders,
manufacturers, assemblers, distributors, importers, exporters,
merchants, factors, and shippers of, and wholesale and retail
dealers in, goods, wares produce, products, commodities, fancy
goods, handicrafts, and merchandise of every description, to act as
agents for and to enter into agreements and arrangements of all
kinds on behalf of such persons, firms or companies as may be
thought expedient, and to negotiate, assign and mortgage or pledge
for cash or otherwise, any such agreements and the payments due
thereunder and any property the subject thereof, to carry on all or
any of the businesses of mail order specialists, credit and discount
traders, cash and carry traders, manufacturers' agents, commission
and general agents, brokers, factors, warehousemen, and agents in
respect of raw materials and manufactured goods of all kinds, and
general railway, shipping and forwarding agents and transport
contractors; to create, establish, build up, and maintain an
organisation for the marketing, selling, retailing, servicing,
advertisement, distribution or introduction of the products,
merchandise, goods, wares, and commodities dealt in or services
rendered by any person, firm or company, and to participate in,
undertake, perform and carry out all kinds of commercial, trading
and financial operations and all or any of the operations ordinarily
performed by import, export and general merchants, factors,
shippers, agents, traders, distributors, capitalists and financiers,
either on the Company's own account or otherwise; and to open and
establish shops, stalls, stores, markets and depots for the sale,
collection and distribution of the goods dealt in by the Company.
- ----------
1* Pursuant to a special resolution passed on 21 April 1998 the Company became a
public company on April 1998 and the name of the Company was changed from
the previous name of Hamsard One Thousand and Seventy Four Limited
1
<PAGE> 10
b) To carry on any other trade or business whatsoever which can, in the
opinion of the Board of Directors, be advantageously carried on by
the Company in connection with or ancillary to any of the above
businesses or the general business of the company, or further any of
its objects.
c) To purchase, take on lease or in exchange, hire or otherwise acquire
and hold any estate or interest in any lands, buildings, easements,
rights, privileges, concessions, patents, patent rights, licences,
secret processes, machinery, plant, stock-in-trade, and any real or
personal property or any kind for such consideration and on such
terms as may be considered expedient.
d) To erect, construct, lay down, enlarge, alter and maintain any roads,
railways, tramways, sidings, bridges, reservoirs, shops, stores,
factories, buildings, works, plant and machinery necessary or
convenient for the Company's business, and to contribute to or
subsidise the erection, construction and maintenance of any of the
above.
e) To borrow or raise or secure the payment of money for the purpose of
or in connection with the Company's business, and for the purposes of
or in connection with the borrowings or raising of money by the
Company to become a member of any building society.
f) To mortgage and charge the undertaking and all or any of the real
and personal property and assets, present or future, and all or any
of the uncalled capital for the time being of the company, and to
issue at par or at a premium or discount, and for such consideration
and with and subject to such rights, powers, privileges and
conditions as may be thought fit, debentures or debenture stock,
either permanent or redeemable or repayable, and collaterally or
further to secure any securities of the Company by a trust deed or
other assurance.
g) To issue and deposit any securities which the Company has power to
issue by way of mortgage to secure any sum less than the nominal
amount of such securities, and also by way of security for the
performance of any contracts or obligations of the Company or of its
customers or other persons or corporations having dealings with the
Company, or in whose businesses or undertakings the Company is
interested, whether directly or indirectly.
h) To receive money on deposit or loan upon such terms as the Company
may approve, and to guarantee the obligations and contracts of any
person or corporation.
i) To make advances to customers and others with or without the security
and upon such terms as the Company may approve, and generally to act
as bankers for any person or corporation.
j) To grant pensions, allowances, gratuities and bonuses to officers,
ex-officers, employees or ex-employees of the Company or its
predecessors in
2
<PAGE> 11
business or the dependents or relations of such persons, to establish
and maintain or concur in establishing and maintaining trusts, funds
or schemes (whether contributory or non-contributory) with a view to
providing pensions or other benefits for any such persons as
aforesaid, their dependents or relations, and to support or subscribe
to any charitable funds or institutions, the support of which may, in
the opinion of the Directors, be calculated directly or indirectly to
benefit the company or its employees, and to institute and maintain
any club or other establishment or profit sharing scheme calculated
to advance the interests of the Company or its officers or employees.
k) to draw, make, accept, endorse, negotiate, discount and execute
promissory notes, bills of exchange and other negotiable instruments.
l) To invest and deal with the moneys of the Company not immediately
required for the purposes of its business in or upon such investments
or securities and in such manner as may from time to time be
determined.
m) To pay for any property or rights acquired by the Company, either in
cash or fully or partly paid-up shares, with or without preferred or
deferred or special rights or restrictions in respect of dividend,
repayment or capital, voting or otherwise, or by any securities which
the Company has power to issue, or partly in one mode and partly in
another, and generally on such terms as the Company may determine.
n) To accept payment of any property or rights sold or otherwise
disposed of or dealt with by the Company, either in cash, by
instalments or otherwise, or in fully or partly paid-up shares of any
company or corporation, with or without deferred or preferred or
special rights or restrictions in respect of dividend, repayment of
capital, voting or otherwise, or in debentures or mortgage debentures
or debenture stock, mortgages or other securities of any company or
corporation, or partly in one mode and partly in another, and
generally on such terms as the Company may determine, and to hold,
dispose of or otherwise deal with any shares, stock or securities so
acquired.
o) To enter into any partnership or joint-purse arrangement or
arrangement for sharing profits, union of interest or cooperation
with any company, firm or person carrying on or proposing to carry on
any business within the objects of this Company, and to acquire and
hold, sell, deal with or dispose of shares, stock or securities of
any such company, and to guarantee the contracts or liabilities of,
or the payment of the dividends, interest or capital of any shares,
stock or securities of and to subsidise or otherwise assist any such
company.
p) To establish or promote or concur in establishing or promoting any
other company whose objects shall include the acquisition and taking
over of all or any of the assets and liabilities of the Company or
the promotion of which shall be in any manner calculated to advance
directly or indirectly the objects or interests of the Company, and
to acquire and hold or dispose of shares, stock
3
<PAGE> 12
or securities of and guarantee the payment of the dividends, interest
or capital of any shares, stock or securities issued by or any other
obligations of any such company.
q) To purchase or otherwise acquire and undertake all or any part of the
business, property, assets, liabilities and transactions of any
persons, firm or company carrying on any business which the Company
is authorised to carry on.
r) To sell, improve, manage, develop, exchange, let on lease, or
otherwise, mortgage, charge, sell, turn to account, grant licences
options, easements and other rights in or over, and in any other
manner deal with or dispose of the undertaking and all or any of the
property and assets for the time being of the Company for such
consideration as the Company may think fit.
s) To amalgamate with any other company whose objects are to include
objects similar to those of this Company, whether by sale or purchase
(for fully or partly paid-up shares or otherwise) of the undertaking,
subject to liabilities of this or any such other company as
aforesaid, with or without winding up, or by sale or purchase (for
fully of partly paid-up shares or otherwise) of all or a controlling
interest in the shares or stock of this or any such other company as
aforesaid, or in any other manner.
t) To distribute among the members in specie any property of the
Company, or any proceeds of sale or disposal of any property of the
Company, but so that no distribution amounting to a reduction of
capital be made except with the sanction (if any) for the time being
required by law.
u) To do all or any of the above things in any part of the world, and
either as principals, agents, trustees, contractors or otherwise, and
either alone or in conjunction with others, and either by or through
agents, trustees, sub-contractors or otherwise.
v) To do all such other things as are incidental or conducive to the
above objects or any of them.
And it is hereby declared that (a) the objects set forth in each subclause
of this clause shall not be restrictively construed but the widest
interpretation shall be given thereto, and (b) the word "company" in this
clause, except where used in reference to the Company, shall be deemed to
include any partnership or the body of persons, whether corporate or
unincorporate and whether domiciled in the United Kingdom or elsewhere,
and (c) except where the context expressly so requires, none of the
several paragraphs of this clause, or the objects therein specified, or
the powers thereby conferred shall be limited by, or be deemed merely
subsidiary or auxiliary to, any other paragraph of this clause, or the
objects in such other paragraph specified, or the powers thereby
conferred.
5. The liability of the members is limited.
1
<PAGE> 13
6. The Share Capital of the Company is 50,000 pound sterling divided into
50,000 ordinary shares of 1 pound sterling each*.2
NAME AND ADDRESS OF number of Shares taken by each Subscriber
SUBSCRIBERS
Hammond Suddards Directors Limited One Julie Eve for and on behalf of
7 Devonshire Square, Cutlers Gardens Hammond Suddards Directors
London EC2M 4YH Limited
Hammond Suddards Secretaries Limited One Julie Eve for and on behalf of
7 Devonshire Square, Cutlers Gardens Hammond Suddards Secretaries
London EC2M 4YH Limited
Dated this 12 day of February 1998
Witness of the above signatures:- Deborah Ann Kahn
116 Bryon Road, Chadwell Health,
Romford, Essex RM6 5BT
Legal Secretary
____________________
2 By an Ordinary Resolution of the Company passed on 21 April 1998 the
authorized share capital of the Company was increased from 100 pound sterling
divided into 100 shares of 1 pound sterling each of 50,000 pound sterling
divided into 50,000 shares of 1 pound sterling each
<PAGE> 14
THE COMPANIES ACT 1985
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
OCTEL DEVELOPMENT PLC
PRELIMINARY
1 The regulations contained in Table A in The Companies (Tables A to F)
Regulations 1985 (as amended so as to affect companies first registered on
the date of incorporation of the Company) shall, except as hereinafter
provided and so far as not inconsistent with the provisions of these
Articles, apply to the Company to the exclusion of all other regulations
or Articles of Association. References herein to regulations are to
regulations in the said Table A unless otherwise stated.
SHARE CAPITAL
2 The share capital of the Company is pound sterling 50,000 divided into
50,000 Ordinary Shares of pound sterling 1 each.
3
3.1 Subject to Section 80 of the Act, all unissued shares shall be at the
disposal of the Directors and they may allot, grant options over or
otherwise dispose of them to such persons, at such times, and on such
terms as they think proper.
3.2
3.2.1. Pursuant to and in accordance with Section 80 of the Act the
Directors shall be generally and unconditionally authorised to
exercise during the period of five years from the date of
incorporation of the Company all the powers of the Company to allot
relevant securities up to an aggregate nominal amount of pound
sterling 50,000;
3.2.2. by such authority the Directors may make offers or agreements
which would or might require the allotment of relevant securities
after the expiry of such period.
3.3 Any allotment made pursuant to clause 3.2 of these Articles may be made as
if Section 89(1) of the Act did not apply.
3.4 Words and expressions defined in or for the purposes of the said Section
50 or the said Section 89 shall bear the same meanings in this Article.
PROCEEDINGS AT GENERAL MEETINGS
4 In the case of a corporation a resolution in writing may be signed on its
behalf by a Director or the Secretary thereof or by its duly appointed
attorney or duly authorised representative. Regulation 53 shall be
extended accordingly. Regulation 53 (as so extended) shall apply mutatis
mutandis to resolutions in writing of any class of members of the Company.
VOTES OF MEMBERS
5 An instrument appointing a proxy (and, where it is signed on behalf of the
appointor by an attorney, the letter or power of attorney or a duly
certified copy thereof) must either be delivered at such place or one of
such places (if any) as may be specified for that purpose in or by way of
1
<PAGE> 15
note to the notice convening the meeting (or, if no place is so specified,
at the registered office) before the time appointed for holding the
meeting or adjourned meeting or (in the case of a poll taken otherwise
than at or on the same day as the meeting or adjourned meeting) for the
taking of the poll at which it is to be used or be delivered to the
Secretary (or the chairman of the meeting) on the day and at the place of,
but in any event before the time appointed for holding, the meeting or
adjourned meeting or poll. The instrument may be in the form of a
facsimile or other machine made copy and shall, unless the contrary is
stated thereon, be valid as well for any adjournment of the meeting as for
the meeting to which it relates. An instrument of proxy relating to more
than one meeting (including any adjournment thereof) having once been so
delivered for the purposes of any meeting shall not require again to be
delivered for the purposes of any subsequent meeting to which it relates.
Regulation 82 shall not apply.
ALTERNATE DIRECTORS
6
6.1 Any director (other than an alternate director) may by notice in writing
to the company appoint any other director, or any other person who is
willing to act, to be an alternate director and remove from office an
alternate director so appointed by him. Regulation 65 of Table A shall not
apply.
6.2 An Alternate Director shall be entitled to receive notices of meetings of
the Directors and of any committee of the Directors of which his
appointor is a member and shall be entitled to attend and vote as a
Director and be counted in the quorum at any such meeting at which his
appointor is not personally present and generally at such meeting to
perform all functions of his appointor as a Director and for the purposes
of the proceedings at such meeting the provisions of these Articles shall
apply as if he were a Director. If he shall be himself a Director or
shall attend any such meeting as an alternate for more than one Director,
his voting rights shall be cumulative but he shall not be counted more
than once for the purposes of the quorum. If his appointor is for the
time being absent from the United Kingdom or temporarily unable to act
through ill health or disability his signature to any resolution in
writing of the Directors shall be as effective as the signature of his
appointor. An alternate Director shall not (save as aforesaid) have power
to act as a Director, nor shall he be deemed to be a Director for the
purposes of these Articles, nor shall he be deemed to be the agent of his
appointor. Regulations 68 and 69 shall not apply.
6.3 An Alternate Director shall be entitled to contract and be interested in
and benefit from contracts or arrangements or transactions and to be
repaid expenses and to be indemnified to the same extent mutatis mutandis
as if he were a Director but he shall not be entitled to receive from the
Company in respect of his appointment as alternate Director any
remuneration except only such part (if any) of the remuneration otherwise
payable to his appointor as such appointor may by notice in writing to the
Company from time to time direct.
DELEGATION OF DIRECTORS' POWERS
7 In addition to the powers to delegate contained in Regulation 72, the
Directors may delegate any of their powers or discretions (including
without prejudice to the generality of the foregoing all powers and
discretions whose exercise involves or may involve the payment of
remuneration to or the conferring of any other benefit on all or any of
the Directors) to committees consisting of one or more Directors and (if
thought fit) one or more other named persons or persons to be co-opted as
hereinafter provided. Insofar as any such power or discretion is delegated
to a committee, any reference in these Articles to the exercise by the
Directors of the power or discretion so delegated shall be read and
construed as if it were a reference to the exercise thereof by such
committee. Any committee so formed shall in the exercise of the powers so
delegated conform to any regulations which may from time to time be
imposed by the Directors.
2
<PAGE> 16
Any such regulations may provide for or authorise the co-option to the
committee of persons other than Directors and may provide for members who
are not Directors to have voting rights as members of the committee but so
that (a) the number of members who are not Directors shall be less than
one-half of the total number of members of the committee and (b) no
resolution of the committee shall be effective unless passed by a majority
including at least one member of the committee who is a Director,
Regulation 72 shall be modified accordingly.
APPOINTMENT AND RETIREMENT OF DIRECTORS
8 The Directors shall not be subject to retirement by rotation. Regulation
73 to 75 and the second and third sentences of Regulation 79 shall not
apply, and other references in the said Table A to retirement by rotation
shall be disregarded.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
9 The office of a Director shall be vacated in any of the events specified
in Regulation 81 and also if he shall in writing offer to resign and the
Directors shall resolve to accept such offer or if he shall be removed
from office by notice in writing signed by all his co-Directors (being at
least two in number) but so that if he holds an appointment to an
executive office which thereby automatically determines such removal shall
be deemed an act of the Company and shall have affect without prejudice to
any claim for damages for breach of any contract of service between him
and the Company.
10 Any provision of the Act which, subject to the provisions of the
articles,would have the effect of rendering any person ineligible for
appointment or election as a Director or liable to vacate office as a
Director on account of his having reached any specified age or of
requiring special notice or any other special formality in connection with
the appointment or election of any Director over a specified age, shall
not apply to the Company.
REMUNERATION OF DIRECTORS
11 Any Director who serves on any committee, or who otherwise performs
services which in the opinion of the Directors are outside the scope of
the ordinary duties of a Director, may be paid such extra remuneration by
way of salary, commission or otherwise or may receive such other benefits
as the Directors may determine. Regulation 82 shall be extended
accordingly.
PROCEEDINGS OF DIRECTORS
12 On any matter in which a Director is in any way interested he may
nevertheless vote and be taken into account for the purposes of a quorum
and (save as otherwise agreed) may retain for his own absolute use and
benefit all profits and advantages directly or indirectly accruing to him
thereunder or in consequence thereof. Regulation 94 to 95 shall not apply.
INDEMNITY
13
13.1 Subject to the provisions of and so far as may be consistent with the
Statutes, every Director, Secretary or other officer of the Company shall
be indemnified by the Company out of its own funds against and/or exempted
by the Company from all costs, charges, losses, expenses and liabilities
incurred by him in the actual or purported execution and/or discharge of
his duties and/or the exercise or purported exercise of his powers and/or
otherwise in relation to or in connection with his duties, powers or
office including (without prejudice to the generality of the foregoing)
any liability incurred by him in defending any proceedings, civil or
criminal, which
3
<PAGE> 17
relate to anything done or omitted or alleged to have been done or
omitted by him as an officer or employee of the Company and in which
judgment is given in his favour (or the proceedings are otherwise disposed
of without any finding or admission of any material breach of duty on his
part) or in which he is acquitted or in connection with any application
under any statute for relief from liability in respect of any such act or
omission in which relief is granted to him by the Court.
13.2 Without prejudice to paragraph 13.1 of this Article the Directors shall
have power to purchase and maintain insurance for or for the benefit of
any persons who are or were at any time Directors, officers or employees
of any Relevant Company (as defined in paragraph 13.3 of this Article) or
who are or were at any time trustees of any pension fund or employees'
share scheme in which employees of any Relevant Company are interested,
including (without prejudice to the generality of the foregoing)
insurance against any liability incurred by such persons in respect of
any act or omission in the actual or purported execution and/or discharge
of their duties and/or in the exercise or purported exercise of their
powers and/or otherwise in relation to their duties, powers or offices in
relation to any Relevant Company, or any such pension fund or employees'
share scheme.
13.3 For the purpose of paragraph 13.2 of this Article "Relevant Company"
shall mean the Company, any holding company of the Company or any other
body, whether or not incorporated, in which the Company or such holding
company or any of the predecessors of the Company or of such holding
company has or had any interest whether direct or indirect or which is in
any way allied to or associated with the Company, or any subsidiary
undertaking of the Company or of such other body.
4
<PAGE> 18
OCTEL DEVELOPMENTS PLC
(FORMERLY KNOWN AS HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED)
(THE "COMPANY")
Notice is hereby given that an Extraordinary General Meeting of the
Company will be held at One Silk Street, London EC2 on 27 April 1998 at
1.00 p.m. for the purpose of considering and, if thought fit, passing the
following Resolution as Special Resolutions:
Resolution
1 That it is in the best interests of, and to the further benefit and
advantage of, the Company to enter into each of the following documents
and the transactions contemplated by them:
(a) a final draft of a US$280,000,000 Term Loan and US$20,000,000
Revolving Credit Facilities Agreement (the "Agreement") between Octel
Corp. (as parent), Octel Associates Partnership and the companies
named in the Agreement (as Borrowers and/or Guarantors), Goldman
Sachs International and Barclays Capital (as Joint Arrangers and
Joint Syndication Agents) the Banks named in the Agreement (as
Original Banks), Barclays Bank PLC (as provider of the Barclays
facilities) and Barclays Bank PLC as Facility Agent and Security
Agent;
(b) a final draft of a Debenture by the Company and Octel International
Limited (formerly known as Hamsard One Thousand and Thirty Four) in
favour of Barclays Bank PLC (as Security Agent) creating fixed
charges over the Company's interests in its subsidiary Octel Trading
Limited (formerly known as Hamsard One Thousand and Seventy Five) and
a floating charge over substantially all its assets;
(c) a final draft of a Subordination Deed between Octel Corp., Octel
LLC., Octel America Inc. Octel Resources (formerly known as Hamsard
One Thousand and Thirty Three) Limited, Octel International Limited,
the Company, Octel Trading Limited. The Associated Octel Company
Limited, Associated Octel Company (Plant) Limited and AKC Trading
Limited and Barclays Bank PLC (as Security Agent);
(each a "Finance Document" and together the "Finance Documents").
2 That the Articles of Associations of the Company be amended by inserting
new Clause 14 (Transfer of Shares):
"14. Regulations 24 and 25 shall not apply."
3 That the Memorandum of Association of the Company be amended by adding the
words, "with or without consideration", after the words, "the obligations
and contracts of any person or corporation", in Clause 3(n) thereto.
4 That the Directors are instructed to take any action in connection with
the negotiation, execution, delivery and performance of the Finance
Documents as they shall deem necessary or appropriate.
By Order of the Board
GRAHAM M. LEATHES
Secretary
Date: 27 April 1998
3
<PAGE> 19
Registered No: 3516682
Registered Office: 7 Devonshire Square
Cutlers Gardens
London
EC2M 4YH
Note: A member entitled to attend and vote at the above meeting is entitled to
appoint a proxy to attend and, on a poll, to vote in his place. A proxy
need not be a member of the Company.
4
<PAGE> 20
CONSENT TO SHORT NOTICE
OCTEL DEVELOPMENTS PLC (FORMERLY KNOWN AS
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED)
(THE "COMPANY")
We, the undersigned, being a majority in number of the Members of the Company
entitled to attend and vote at the meeting convened by the attached Notice and
together holding all the Shares giving such rights hereby consent to such
Meeting being convened and held on the date specified in such Notice, and to the
proposing and passing the rest of the Resolution set out therein,
notwithstanding that less than the requisite notice of the meeting has been
given in accordance with the Companies Act 1985 (as amended by the Companies Act
1989) and the Articles of Association of the Company.
Date: 27 April 1998 Signed: GRAHAM M. LEATHES
------------------ --------------------------
For and on behalf of Octel
International Limited
5
<PAGE> 21
OCTEL DEVELOPMENTS PLC (FORMERLY KNOWN AS
HAMSARD ONE THOUSAND AND SEVENTY FOUR LIMITED)
(THE "COMPANY")
Minutes of an Extraordinary General Meeting of the Company
held at One Silk Street, London EC2 on 27 April 1998 at 1.00 p.m.
Present: G. M. LEATHES (Chairman)
M. PIMBLEY
In Attendance:
1 The Chairman produced to the meeting a copy of the Notice convening the
meeting. He declared that a quorum was present and that the requisite
consents to short notice of the meeting had been obtained and that
accordingly the meeting was properly convened and constituted.
2 The Notice convening the meeting was, by general consent, taken as read.
3 The Chairman proposed the Resolution set out in the Notice as a Special
Resolution of the Company. The Resolution was seconded by Mr M.V. FINDLEY,
and the Chairman, having put the Resolution to the meeting, declared it
duly passed on a show of hands as a Special Resolution.
4 The business of the meeting being concluded, the Chairman declared the
meeting closed.
(GRAHAM M. LEATHES)
----------------------------
Chairman
6
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
___________________________________________________________
___________________________________________________________
OCTEL DEVELOPMENTS PLC
Issuer
OCTEL CORP.
Guarantor
10% Senior Notes due 2006
____________________
INDENTURE
Dated as of May 1, 1998
_____________________
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
___________________________________________________________
___________________________________________________________
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
<S> <C>
310(a)(1) .................................................................. 7.10
(a)(2) .................................................................. 7.10
(a)(3) .................................................................. N.A.
(a)(4) .................................................................. N.A.
(b) .................................................................. 7.08; 7.10
(c) .................................................................. N.A.
311(a) .................................................................. 7.11
(b) .................................................................. 7.11
(c) .................................................................. N.A.
312(a) .................................................................. 2.05
(b) .................................................................. 13.03
(c) .................................................................. 13.03
313(a) .................................................................. 7.06
(b)(1) .................................................................. N.A.
(b)(2) .................................................................. 7.06
(c) .................................................................. 13.02
(d) .................................................................. 7.06
314(a) .................................................................. 4.02;
4.14; 13.02
(b) .................................................................. N.A.
(c)(1) .................................................................. 13.04
(c)(2) .................................................................. 13.04
(c)(3) .................................................................. N.A.
(d) .................................................................. N.A.
(e) .................................................................. 13.05
(f) .................................................................. 4.14
315(a) .................................................................. 7.01
(b) .................................................................. 7.05; 13.02
(c) .................................................................. 7.01
(d) .................................................................. 7.01
(e) .................................................................. 6.11
316(a)(last sentence) .................................................... 13.06
(a)(1)(A) ............................................................... 6.05
(a)(1)(B) ............................................................... 6.04
(a)(2) ............................................................... N.A.
(b) ............................................................... 6.07
317(a)(1) .................................................................. 6.08
(a)(2) .................................................................. 6.09
(b) .................................................................. 2.04
318(a) .................................................................. 13.01
</TABLE>
N.A. means Not Applicable.
__________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> ARTICLE 1 <C>
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.................................................. 1
SECTION 1.02. Other Definitions............................................ 30
SECTION 1.03. Incorporation by Reference of Trust Indenture Act............ 31
SECTION 1.04. Rules of Construction........................................ 31
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating.............................................. 32
SECTION 2.02. Execution and Authentication................................. 32
SECTION 2.03. Registrar and Paying Agent................................... 33
SECTION 2.04. Paying Agent To Hold Money in Trust.......................... 34
SECTION 2.05. Securityholder Lists......................................... 34
SECTION 2.06. Transfer and Exchange........................................ 34
SECTION 2.07. Replacement Securities....................................... 34
SECTION 2.08. Outstanding Securities....................................... 35
SECTION 2.09. Temporary Securities......................................... 35
SECTION 2.10. Cancellation................................................. 35
SECTION 2.11. Defaulted Interest........................................... 35
SECTION 2.12. CUSIP Numbers and ISIN Numbers............................... 35
SECTION 2.13. Registration, Registration of Transfer and Exchange.......... 37
SECTION 2.14. Payment of Interest; Interest Rights Preserved............... 43
ARTICLE 3
Redemption
SECTION 3.01. Notice to Trustee............................................ 45
SECTION 3.02. Selection of Securities To Be Redeemed....................... 45
SECTION 3.03. Notice of Redemption......................................... 45
SECTION 3.04. Effect of Notice of Notice of Redemption..................... 48
SECTION 3.05. Deposit of Redemption Price.................................. 48
SECTION 3.06. Securities Redeemed in Part.................................. 48
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities........................................ 48
SECTION 4.02. SEC Reports.................................................. 49
SECTION 4.03. Limitation on Consolidated Indebtedness...................... 49
SECTION 4.04. Limitation on Restricted Payments............................ 50
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted
Subsidiaries............................................... 54
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock........... 55
SECTION 4.07. Limitation on Affiliate Transactions......................... 59
SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries.................................... 60
SECTION 4.09. Change of Control............................................ 61
SECTION 4.10. Limitation on Liens.......................................... 63
SECTION 4.11. Limitation on Sale/Leaseback Transactions.................... 63
SECTION 4.12. Limitations on Lines of Business............................. 64
SECTION 4.13. Additional Amounts........................................... 64
SECTION 4.14. Compliance Certificate....................................... 67
SECTION 4.15. Further Instruments and Acts................................. 67
ARTICLE 5
Successor Company
SECTION 5.01. When Parent and Company May Merge or Transfer Assets......... 67
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default............................................ 69
SECTION 6.02. Acceleration................................................. 72
SECTION 6.03. Other Remedies............................................... 73
SECTION 6.04. Waiver of past Defaults...................................... 73
SECTION 6.05. Control by Majority.......................................... 73
SECTION 6.06. Limitation on Suits.......................................... 74
SECTION 6.07. Rights of Holders to Receive Payment......................... 74
SECTION 6.08. Collection Suit by Trustee................................... 74
SECTION 6.09. Trustee May File Proofs of Claim............................. 74
SECTION 6.10. Priorities................................................... 75
SECTION 6.11. Undertaking for Costs........................................ 75
SECTION 6.12. Waiver of Stay or Extension Laws............................. 76
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee ........................................ 76
SECTION 7.02. Rights of Trustee ........................................ 77
SECTION 7.03. Individual Rights of Trustee ............................. 78
SECTION 7.04. Trustee's Disclaimer ..................................... 78
SECTION 7.05. Notice of Defaults ....................................... 79
SECTION 7.06. Reports by Trustee to Holders ............................ 79
SECTION 7.07. Compensation and Indemnity ............................... 79
SECTION 7.08. Replacement of Trustee ................................... 80
SECTION 7.09. Successor Trustee by Merger .............................. 81
SECTION 7.10. Eligibility; Disqualification ............................ 81
SECTION 7.11. Preferential Collection of Claims Against Company......... 82
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance ......... 82
SECTION 8.02. Conditions to Defeasance ................................. 83
SECTION 8.03. Application of Trust Money ............................... 85
SECTION 8.04. Repayment to Company ..................................... 85
SECTION 8.05. Indemnity for Government Obligations ..................... 85
SECTION 8.06. Reinstatement ............................................ 85
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders ............................... 86
SECTION 9.02. With Consent of Holders .................................. 87
SECTION 9.03. Compliance with Trust Indenture Act ...................... 88
SECTION 9.04. Revocation and Effect of Consents and Waivers ............ 88
SECTION 9.05. Notation on or Exchange of Securities .................... 89
SECTION 9.06. Trustee to Sign Amendments ............................... 89
SECTION 9.07. Payment for Consent ...................................... 89
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C>
ARTICLE 10
Payment Blockage
SECTION 10.01. Default on Bank Indebtedness ..................... 90
SECTION 10.02. Acceleration of Payment of Securities ............ 91
SECTION 10.03. Relative Rights .................................. 91
SECTION 10.04. Payment Blockage May Not Be Impaired by Company .. 91
SECTION 10.05. Notice to Representative ......................... 91
SECTION 10.06. Article 10 Not to Prevent Events of Default or
Limit Right to Accelerate ...................... 91
SECTION 10.07. Trust Moneys Not Subject to Payment Blockage ..... 91
ARTICLE 11
Parent Guaranty
SECTION 11.01. Guarantee ........................................ 92
SECTION 11.02. Successors and Assigns ........................... 94
SECTION 11.03. No Waiver ........................................ 94
SECTION 11.04. Modification ..................................... 95
ARTICLE 12
Payment Blockage of Parent Guaranty
SECTION 12.01. Default on Bank Indebtedness ..................... 95
SECTION 12.02. Demand for Payment of Securities ................. 96
SECTION 12.03. Relative Rights .................................. 96
SECTION 12.04. Payment Blockage May Not Be Impaired by Parent ... 96
SECTION 12.05. Notice to Representative ......................... 96
SECTION 12.06. Article 12 Not to Prevent Defaults under Parent
Guaranty or Limit Right to Demand Payment ...... 96
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls ..................... 97
SECTION 13.02. Notices .......................................... 97
SECTION 13.03. Communication by Holders with Other Holders ...... 99
SECTION 13.04. Certificate and Opinion as to
</TABLE>
iv
<PAGE> 7
<TABLE>
<S> <C> <C>
Conditions Precedent....................................... 99
SECTION 13.05. Statements Required in Certificate or Opinion.............. 99
SECTION 13.06. When Securities Disregarded................................ 100
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar............... 100
SECTION 13.08. Legal Holidays............................................. 100
SECTION 13.09. Governing Law.............................................. 100
SECTION 13.10. No Recourse Against Others................................. 100
SECTION 13.11. Successors................................................. 100
SECTION 13.12. Multiple Originals......................................... 101
SECTION 13.13. Table of Contents; Headings................................ 101
ARTICLE 14
Security Forms
SECTION 14.01. Forms Generally............................................ 101
SECTION 14.02. Form of Face of Security................................... 103
SECTION 14.03. Form of Reverse of Security................................ 110
SECTION 14.04. Form of Trustee's Certificate of Authentication............ 116
EXHIBIT A -- Form of Exchange Security or Private Exchange Security
ANNEX A -- Form of Regulation S Certificate
ANNEX B -- Form of Restricted Securities Certificate
ANNEX C -- Form of Unrestricted Securities Certificate
</TABLE>
v
<PAGE> 8
INDENTURE dated as of May 1, 1998, among OCTEL
DEVELOPMENTS PLC, a company organized under the laws of
England and Wales (the "Company"), OCTEL CORP., a Delaware
corporation (the "Guarantor" or "Parent"), and IBJ SCHRODER
BANK & TRUST COMPANY, a New York banking corporation, as
trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's 10% Senior Notes
due 2006 (the "Initial Securities") and, if and when issued pursuant to a
registered exchange for Initial Securities, the Company's 10% Senior Notes due
2006 (the "Exchange Securities") and if and when issued pursuant to a private
exchange for Initial Securities, the Company's 10% Senior Notes due 2006 (the
"Private Exchange Securities", together with the Exchange Securities and the
Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another Restricted Subsidiary; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"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 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. For
purposes of
<PAGE> 9
2
Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any beneficial
owner of Capital Stock representing 5% or more of the total voting power of the
Voting Stock (on a fully diluted basis) of Parent or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Security, Euroclear and Cedel, in each
case to the extent applicable to such transaction and as in effect from time to
time.
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by Parent or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than Parent or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of Parent or any Restricted Subsidiary or (iii) any other
assets of Parent or any Restricted Subsidiary outside of the ordinary course of
business of Parent or such Restricted Subsidiary; provided, however, that Asset
Disposition shall not include (A) a disposition by a Restricted Subsidiary to
Parent or by Parent or a Restricted Subsidiary to a Restricted Subsidiary, (B)
for purposes of Section 4.06 only, a disposition that constitutes a Restricted
Payment permitted by Section 4.04, (C) disposition of assets with a fair market
value of less than $250,000, (D) the disposition of all or substantially all of
the assets of Parent or the Company as permitted under Article V, (E) the
factoring of accounts receivable arising in the ordinary course of business
pursuant to arrangements customary in the industry, (F) the licensing of
intellectual property and (G) disposals or replacements of obsolete,
uneconomical, negligible, worn out or surplus property in the ordinary course of
business.
<PAGE> 10
3
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means all Obligations pursuant to the Credit
Agreement.
"Banks" has the meaning specified in the Credit Agreement.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board; provided,
however, that "Board of Directors" means the Board of Directors of Parent when
designated as such.
"Book-Entry Depositary" means The Industrial Bank of Japan (Luxembourg)
S.A. in its capacity as book-entry depositary pursuant to the terms of the
Deposit Agreement, until a successor Book-Entry Depositary shall have become
such pursuant to the terms of the Deposit Agreement, and thereafter "Book-Entry
Depositary" shall mean such successor Book-Entry Depositary.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last
<PAGE> 11
4
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of
this clause (i) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 40% of the total voting
power of the Voting Stock of Parent; provided that a Change of Control
shall be deemed not to have occurred where (through a merger,
consolidation or other transaction) Parent becomes a Wholly Owned
Subsidiary of a holding company substantially all of the Voting Stock of
which is held by shareholders of Parent immediately prior to such
transaction (a "Parent Reorganization");
(ii) individuals who on the Issue Date constituted the Board of
Directors of the Company or Parent, as the case may be (together with any
new directors whose election by such Board of Directors of the Company or
Parent, as the case may be, or whose nomination for election by the
shareholders of the Company or Parent, as the case may be, was approved
by a vote of 66 2/3% of the directors of the Company or Parent, as the
case may be, then still in office who were either directors on the Issue
Date or whose election or nomination for election was previously so
approved), cease for any reason to constitute a majority of the Board of
Directors of the Company or Parent, as the case may be, then in office;
(iii) the merger or consolidation of Parent with or into another
Person or the merger of another Person
<PAGE> 12
5
with or into Parent, or the sale of all or substantially all the assets
of Parent to another Person, and, in the case of any such merger or
consolidation, the securities of Parent that are outstanding immediately
prior to such transaction and which represent 100% of the aggregate
voting power of the Voting Stock of Parent are changed into or exchanged
for cash, securities or property, unless pursuant to such transaction
such securities are changed into or exchanged for, in addition to any
other consideration, securities of the surviving corporation that
represent immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving corporation;
provided that a Change of Control shall be deemed not to have occurred
solely as a result of a Parent Reorganization;
(iv) the failure at any time by (A) Parent to beneficially own (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, 100% of the Voting Stock of the Company and, after the
occurrence of the Spinoff, Octel or (B) the Company to beneficially own
(as so defined), directly or indirectly, at least 98.78% of Octel; or
(v) the adoption of a plan relating to the liquidation or
dissolution of Parent or the Company.
For the avoidance of doubt, the occurrence of the Spinoff shall not
constitute a Change of Control.
"Code" means the Internal Revenue Code of 1986, as amended.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable
to the remaining term of the Securities to be redeemed that would be utilized,
at the time of selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of the Securities.
"Comparable Treasury Price" means with respect to any Redemption Date for
the Securities (i) the average of three Reference Treasury Dealer Quotations
for such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (ii) if the Trustee
<PAGE> 13
6
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such quotations.
"Consolidated Debt to EBITDA Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of Indebtedness of Parent and its
Restricted Subsidiaries calculated on a consolidated basis as of the end of the
most recent fiscal quarter for which financial statements are publicly
available prior to the date of such determination (such fiscal quarter being
herein called the "most recent fiscal quarter") to (ii) EBITDA for the four
consecutive fiscal quarters ending with the most recent fiscal quarter for
which financial statements are publicly available (the "Reference Period");
provided, however, that
(1) if Parent or any Restricted Subsidiary has Incurred any
Indebtedness since the end of the Reference Period that remains
outstanding or if the transaction giving rise to the need to calculate
the Consolidated Debt to EBITDA Ratio is an Incurrence of Indebtedness,
the amount of such Indebtedness shall be calculated after giving effect
on a pro forma basis to such Indebtedness as if such Indebtedness had
been outstanding as of the end of the most recent fiscal quarter and to
the discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if
such new Indebtedness had been Incurred and such other Indebtedness had
been discharged as of the end of such fiscal quarter;
(2) if Parent or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness that was outstanding as
of the end of the most recent fiscal quarter or if any Indebtedness that
was outstanding as of the end of the most recent fiscal quarter is to be
repaid, repurchased, defeased or otherwise discharged on the date of the
transaction giving rise to the need to calculate the Consolidated Debt to
EBITDA Ratio (other than, in each case, Indebtedness Incurred under any
revolving credit agreement unless such Indebtedness has been permanently
repaid and has not been replaced), the aggregate amount of Indebtedness
shall be calculated on a pro forma basis as if such discharge has
occurred as of the end of the most recent fiscal quarter and EBITDA shall
be calculated as if Parent or such Restricted Subsidiary had not earned
the interest income, if any, actually earned during the Reference Period
in respect of cash
<PAGE> 14
7
or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness;
(3) if since the beginning of the Reference Period (including on
the date of the transaction giving rise to the need to calculate the
Consolidated Debt to EBITDA Ratio) Parent or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for the Reference
Period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for the Reference Period or increased by an amount equal to
the EBITDA (if negative) directly attributable thereto for the Reference
Period;
(4) if since the beginning of the Reference Period (including on
the date of the transaction giving rise to the need to calculate the
Consolidated Debt to EBITDA Ratio) Parent or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets which constitutes all or substantially all of an
operating unit of a business, EBITDA for the Reference Period shall be
calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of the Reference Period (and irrespective of
the method (purchase or pooling) of accounting for such Investment or
acquisition of assets); and
(5) if since the beginning of the Reference Period (including on
the date of the transaction giving rise to the need to calculate the
Consolidated Debt to EBITDA Ratio) any Person (that subsequently became a
Restricted Subsidiary or was merged with or into Parent or any Restricted
Subsidiary since the beginning of such Reference Period) shall have made
any Asset Disposition, any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (3) or (4) above if made
by Parent or a Restricted Subsidiary during the Reference Period, EBITDA
for the Reference Period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of the Reference Period.
<PAGE> 15
8
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of EBITDA relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of Parent. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of Parent and its consolidated Restricted Subsidiaries, plus, to the
extent not included in such total interest expense, and to the extent incurred
by Parent or its Restricted Subsidiaries, without duplication, (i) interest
expense attributable to capital leases and the interest expense attributable to
leases constituting part of a Sale/Leaseback Transaction, (ii) amortization of
debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash
interest expenses, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Hedging Obligations (including amortization of fees),
(vii) Preferred Stock dividends (other than dividends paid in Capital Stock of
Parent (other than Disqualified Stock)) in respect of all Preferred Stock of
Parent or a Restricted Subsidiary held by Persons other than Parent or a Wholly
Owned Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by (or secured by
the assets of) Parent or any Restricted Subsidiary and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than Parent) in connection with Indebtedness Incurred
by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of Parent
and its consolidated Subsidiaries; provided, however, that there shall not be
included in such Consolidated Net Income:
<PAGE> 16
9
(i) any net income of any Person (other than Parent) if such Person
is not a Restricted Subsidiary, except that (A) subject to the exclusion
contained in clause (iv) below, Parent's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to Parent or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or
other distribution paid to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (B) Parent's equity in a net loss of
any such Person for such period shall be included in determining such
Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by Parent or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to Parent; provided, however, that (A)
subject to the exclusion contained in clause (iv) below, Parent's equity
in the net income of any such Restricted Subsidiary for such period shall
be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Restricted Subsidiary during such period
to Parent or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) Parent's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income; provided further, however, that, for purposes of
determining whether an Incurrence of Indebtedness (1) by Parent will be
permitted pursuant to Section 4.03, the entire net income of each
Restricted Subsidiary that is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions to
Parent will be included in determining Consolidated Net Income so long as
the agreements or instruments imposing such restrictions (including with
respect to the Indebtedness being Incurred) permit such Restricted
<PAGE> 17
10
Subsidiary to pay dividends or make distributions sufficient to pay
interest on the Indebtedness being Incurred and any other Indebtedness of
Parent in existence as of the date of determination and (2) by a
Restricted Subsidiary (including the Company) (the "Borrowing Subsidiary")
will be permitted pursuant to Section 4.03, the entire net income of the
Borrowing Subsidiary will be included in determining Consolidated Net
Income and the entire net income of each Restricted Subsidiary that is a
Subsidiary of the Borrowing Subsidiary and that is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of distributions to Parent will be included in determining
Consolidated Net Income so long as the agreements or instruments imposing
such restrictions (including with respect to the Indebtedness being
Incurred) permit such Restricted Subsidiary to pay dividends or make
distributions sufficient to pay interest on the Indebtedness being
Incurred and any other Indebtedness of the Borrowing Subsidiary and
Indebtedness of Parent in existence as of the date of determination;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of Parent, its consolidated Subsidiaries or any
other Person (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person together with any related
tax effects according to GAAP associated with the foregoing;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Parent and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of Parent ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of Parent plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned
<PAGE> 18
11
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Credit Agreement" means the Facility Agreement dated April 27, 1998, by
and among Octel, certain of its Subsidiaries, the lenders referred to therein,
and Goldman Sachs Credit Partners, L.P. and Barclays Bank PLC, as joint
arrangers and joint syndication agents, together with the related documents
thereto (including the term loans and revolving loans thereunder, any guarantees
and security documents), as amended, extended, renewed, restated, supplemented
or otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time, and any
agreement (and related document) governing Indebtedness incurred to refund or
refinance, in whole or in part, the borrowings and commitments then outstanding
or permitted to be outstanding under such Credit Agreement or a successor Credit
Agreement, whether by the same or any other lender or group of lenders.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Deposit Agreement" means the Note Deposit Agreement, dated as of the date
hereof, between the Company, the Guarantor and The Industrial Bank of Japan
(Luxembourg) S.A., as Book-Entry Depositary, with respect to the Global
Securities, as amended from time to time in accordance with the terms thereof.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in the form of one or more Global Securities, The Depository
Trust Company for so long as it shall be a clearing agency registered under the
Exchange Act, or such successor as the Company shall designate from time to time
in an Officers' Certificate delivered to the Trustee.
"Depositary Interest" means a certificateless depositary interest
representing a 100% beneficial interest in a Global Security.
<PAGE> 19
12
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable or must be purchased, upon the occurrence of certain events
or otherwise, by such Person at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the Stated Maturity
of the Securities; provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Securities shall not constitute
Disqualified Stock if (x) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions of Sections 4.06 and 4.09 and (y) any such
requirement only becomes operative after compliance with such terms applicable
to the Securities, including the purchase of any Securities tendered pursuant
thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of Parent
and its consolidated Restricted Subsidiaries, (b) depreciation expense of Parent
and its consolidated Restricted Subsidiaries, (c) amortization expense of Parent
and its consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period) and (d) all
other non-cash charges of Parent and its consolidated Restricted Subsidiaries
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash expenditures in any future period), in each case for such
period. EBITDA shall be increased or decreased, as the case may be, to the
extent of non-cash reductions or increases, respectively, in Consolidated Net
Income in such period due solely to fluctuations in currency values and the
related tax effects according to GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and non-cash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the
<PAGE> 20
13
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP. Any accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP.
"Global Security" means the security or securities issued initially in
bearer form that evidences all or part of the Securities and bears the legend
set forth in Section 14.02.
"Great Lakes" means Great Lakes Chemical Corporation, a Delaware
corporation.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however,
<PAGE> 21
14
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning. The term "Guarantor" shall mean any Person
Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the several persons who are for the
time being holders of the Securities (being, in the case of Definitive
Securities the several persons whose names are entered in the register of
Holders of the Definitive Securities as the holders thereof) which expression
shall, while any Global Security remains outstanding, mean in relation to the
Securities represented thereby each person who is for the time being shown in
the records of DTC, Euroclear or of Cedel Bank as the holder of a particular
Book-Entry Interest in respect of such Securities (in which regard any
certificate or other document issued by DTC, Euroclear or Cedel Bank as to the
principal amount of Securities represented by a Global Security standing to the
account of any person shall be conclusive and binding for all purposes) for all
purposes other than with respect to the payment of principal, premium, if any,
and interest on such Securities, the right to which shall be vested, as against
the Company, solely in the bearer of such Global Security (being at the Issue
Date the Book-Entry Depositary) in accordance with and subject to its terms and
the terms of the Indentures and the words "holder" and "holders" and related
expressions shall (where appropriate) be construed accordingly.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
<PAGE> 22
15
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into
by such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit or
performance bonds securing obligations (other than obligations described
in clauses (i) through (iii) above) entered into in the ordinary course
of business of such Person to the extent such letters of credit or
performance bonds are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day following
payment on the letter of credit or performance bond);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including by means of
any Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by
<PAGE> 23
16
any Lien on any property or asset of such Person (whether or not such obligation
is assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured; and
(viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Trustee after consultation
with the Company.
"Indirect Participant" means a Person who holds an interest through a
Participant in a Depositary Interest issued by the Book-Entry Depositary to the
Depositary.
"Initial Purchasers" means Goldman, Sachs & Co., Lehman Brothers Inc. and
Merrill Lynch, Pierce Fenner & Smith Incorporated.
"Interest Payment Date" means the date an installment of interest on the
Securities is due.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock,
<PAGE> 24
17
Indebtedness or other similar instruments issued by such Person. For purposes
of the definition of "Unrestricted Subsidiary", the definition of "Restricted
Payment" and Section 4.04, (i) "Investment" shall include the portion
(proportionate to Parent's equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of Parent at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, Parent
shall be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) Parent's "Investment"
in such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to Parent's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Securities are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of (i) all legal,
accounting and investment banking fees, and sales commissions and all other
legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local taxes
required to be accrued as a liability under GAAP, as a consequence of such
Asset Disposition, (ii) all payments made on any Indebtedness which is secured
by any assets subject to such Asset Disposition, in accordance with the terms
of any Lien upon
<PAGE> 25
18
or other security agreement of any kind with respect to such assets, or which
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such
Asset Disposition, (iii) all distributions and other payments required to be
made to minority interest holders in Restricted Subsidiaries as a result of
such Asset Disposition and (iv) the deduction of appropriate amounts provided
by the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset Disposition
and retained by Parent or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means with respect to any Indebtedness all obligations for
principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.
"Octel" means Octel Associates and any successor Person.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the President, the Managing Director, the Chief Financial Officer, the Finance
Director, the General Counsel, any Vice President, the Treasurer or the
Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company, Parent or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and,
<PAGE> 26
19
with respect to the Depositary, shall include Euroclear and Cedel).
"Permitted Investment" means an Investment by Parent or any Restricted
Subsidiary in (i) Parent, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, Parent or a Restricted Subsidiary; provided,
however, that such Person's primary business is a Related Business; (iii)
Temporary Cash Investments; (iv) receivables owing to Parent or any Restricted
Subsidiary if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as
Parent or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of Parent or such Restricted Subsidiary; (vii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to Parent or any Restricted Subsidiary or
in satisfaction of judgments; (viii) any Investment in any Person to the extent
such Investment represents the non-cash portion of the consideration received
for an Asset Disposition as permitted pursuant to Section 4.06; (ix)
Investments existing on the date of this Indenture; (x) Hedging Obligations
otherwise in compliance with the Indenture; and (xi) Investments the total
payment for which consists exclusively of Capital Stock (excluding Disqualified
Stock) of Parent.
"Permitted Liens" means, with respect to any Person, (a) liens, pledges or
deposits by such Person under workers' compensation laws, unemployment
insurance and other types of social security laws or similar legislation, or
good faith deposits in connection with bids, tenders, contracts (other than for
the payment of Indebtedness) or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or deposits
of cash or government bonds to secure surety or
<PAGE> 27
20
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business; (b) statutory liens of landlords
and other Liens imposed by law, including carriers', warehousemen's,
supplier's, materialmen's, repairmen's and mechanics' Liens, in each case for
sums not yet due or being contested in good faith or other Liens arising out of
judgments or awards against such Person with respect to which such Person shall
then be proceeding with an appeal or other proceedings for review; (c) liens
for taxes, assessments or governmental charges not yet subject to penalties for
non-payment, or which are being contested in good faith; (d) Liens in favor of
issuers of surety bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
provided, however, that such letters of credit do not constitute Indebtedness;
(e) minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real property or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (f) Liens securing
Indebtedness Incurred to finance the construction, purchase or lease of, or
repairs, improvements or additions to, property of such Person; provided,
however, that the Lien may not extend to any other property owned by such
Person or any of its Subsidiaries at the time the Lien is Incurred, and the
Indebtedness (other than any interest thereon) secured by the Lien may not be
Incurred more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation
of the property subject to the Lien; (g) Liens to secure Indebtedness of
Restricted Subsidiaries (other than the Company) permitted under Section 4.03;
(h) Liens existing on the Issue Date; (i) Liens on property or shares of
Capital Stock of another Person at the time such other Person becomes a
Subsidiary of such Person; provided, however, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such other
Person becoming such a Subsidiary; provided further, however, that such Lien
may not extend to any other property owned by such Person or any of its
Subsidiaries; (j) Liens on property at
<PAGE> 28
21
the time such Person or any of its Subsidiaries acquires the property,
including any acquisition by means of a merger or consolidation with or into
such Person or a Subsidiary of such Person; provided, however, that such Liens
are not created, incurred or assumed in connection with, or in contemplation
of, such acquisition; provided further, however, that the Liens may not extend
to any other property owned by such Person or any of its Subsidiaries; (k)
Liens securing intercompany indebtedness of a Restricted Subsidiary of Parent
other than the Company on assets of any Subsidiary of Parent other than the
Company; (l) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Indebtedness that is, and is permitted to be under the
Indenture, secured by a Lien on the same property securing such Hedging
Obligations; (m) Liens to secure any Refinancing (or successive Refinancings)
as a whole, or in part, of any Indebtedness secured by any Lien referred to in
the foregoing clauses (f), (h), (i) and (j); provided, however, that (x) such
new Lien shall be limited to all or part of the same property that secured the
original Lien (plus improvements to or on such property) and (y) the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under clauses (f), (h), (i) or
(j) at the time the original Lien became a Permitted Lien and (B) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement; (n) judgment Liens
not giving rise to an Event of Default; (o) an interest or title of a lessor
under any Capitalized Lease Obligation; (p) Liens on specific items of
inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment, or storage of such
inventory or other goods Incurred in the ordinary course of business; (q) Liens
securing reimbursement obligations with respect to commercial letters of credit
which encumber documents and other property relating to such letters of credit
and products and proceeds thereof Incurred in the ordinary course of business;
(r) Liens incurred with respect to obligations that do not in the aggregate
exceed $10.0 million at any one time outstanding; (s) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of Parent and its Restricted Subsidiaries; and (t) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
custom duties so long as the underlying obligations are not
<PAGE> 29
22
in default or are being contested in good faith. Notwithstanding the
foregoing, "Permitted Liens" will not include any Lien described in clauses
(f), (i) or (j) above to the extent such Lien applies to any Additional Assets
acquired directly or indirectly from Net Available Cash pursuant to Section
4.06. For purposes of this definition, the term "Indebtedness" shall be deemed
to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Recognized Stock Exchange" means a recognized Stock exchange within the
meaning of Section 841 of the U.K. Income and Corporation Taxes Act 1988.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
<PAGE> 30
23
"Reference Treasury Dealer" means any nationally recognized primary U.S.
Government securities dealer in New York City.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Parent or any Restricted Subsidiary existing on the Issue Date
or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or
if Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs associated with the Refinancing) under the Indebtedness being
Refinanced; provided further, however, that Refinancing Indebtedness shall not
include Indebtedness of a Subsidiary that Refinances Indebtedness of Parent.
"Regular Record Date" for the interest payable on any Interest Payment Date
means April 15 or October 15 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
<PAGE> 31
24
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Certificate" means a certificate substantially in the form
set forth in Annex A.
"Regulation S Global Security" has the meaning specified in Section 14.01.
"Regulation S Legend" means a legend substantially in the form of the
legend required in the form of Security set forth in Section 14.02 to be placed
upon each Regulation S Security.
"Regulation S Securities" means all Securities sold pursuant to Regulation
S, which are required pursuant to Section 2.13(c) to bear a Regulation S Legend.
Such term includes the Regulation S Global Security.
"Related Business" means any business related, ancillary or complementary
to the businesses of Parent, the Company and the Restricted Subsidiaries on the
Issue Date.
"Reorganization" means the final reorganization of the corporate and
partnership entities of Parent and its subsidiaries, including Parent, prior to
or concurrently with the Spinoff.
"Representative" means any trustee, agent or representative (if any) for
an issue of Bank Indebtedness.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect
of its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to Parent or a Restricted Subsidiary,
and other than pro rata dividends or other distributions made by a Subsidiary
that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Subsidiary that is an entity other than a
corporation)), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of Parent held by any Person or of any Capital
Stock of a Restricted Subsidiary held by any
<PAGE> 32
25
Affiliate of Parent (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of Parent that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase, or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Securities" means all Securities required pursuant to Section
2.13(c) to bear any Restricted Securities Legend. Such term includes any
Restricted Global Security.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Annex B.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 14.02 to be placed upon each Restricted Security.
"Restricted Subsidiary" means any Subsidiary of Parent that is not an
Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility contained
in the Credit Agreement and any other facility or financing arrangement that
Refinances, in whole or in part, any such revolving credit facility.
"Restricted Period" means the period of 41 consecutive days beginning on
and including the later of (i) the day on which Securities are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the original issuance date of the Securities.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Securities" means all Securities sold pursuant to Rule 144A,
which are required pursuant to
<PAGE> 33
26
Section 2.13(c) to bear a Restricted Securities Legend. Such term includes the
Restricted Global Security.
"Sale/Leaseback Transaction" means an arrangement
relating to property now owned or hereafter acquired whereby Parent or a
Restricted Subsidiary transfers such property to a Person and Parent or a
Restricted Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.
"Securities Act Legend" means a Restricted Securities Legend or a
Regulation S Legend.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 2.13.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Parent within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Special Interest" has the meaning set forth in the form of Security
contained in Section 14.02. Unless the context otherwise requires, references
herein to "interest" on the Securities shall include Special Interest.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.14.
"Spinoff" means the distribution of shares of the common stock of Parent to
the holders of common stock of Great Lakes.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option
<PAGE> 34
27
of the holder thereof upon the happening of any contingency unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of Parent or the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Parent Guaranty or the
Securities, as applicable, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Successor Security" of any particular Security means every Security issued
after, and evidencing all or a portion of the same debt as that evidenced by,
such particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United Kingdom or the United States of
America or any agency thereof or obligations guaranteed by the United Kingdom or
the United States of America or any agency thereof, (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United Kingdom, the United
States of America, any state thereof or any foreign country recognized by the
United Kingdom or the United States of America, and which bank or trust company
has capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt that is
rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act),
<PAGE> 35
28
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of Parent)
organized and in existence under the laws of the United Kingdom, the United
States of America or any foreign country recognized by the United Kingdom or
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and (v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Term Loan Facility" means the term loan facility contained in the Credit
Agreement and any other facility or financing arrangement that Refinances in
whole or in part any such term loan facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture.
"Treasury Rate" means, with respect to any Redemption Date for the
Securities, (i) the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which
is published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities",
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the maturity date of the Securities,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or
<PAGE> 36
29
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated using
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such Redemption
Date. The Treasury Rate shall be calculated on the third Business Day
preceding the Redemption Date.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
"Unrestricted Securities Certificate" means a certificate substantially in
the form set forth in Annex C.
"Unrestricted Subsidiary" means (i) any Subsidiary of Parent other than
the Company that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below
and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors
may designate any Subsidiary of Parent (other than the Company, but including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, Parent or any
other Subsidiary of Parent that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under Section
4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (x) Parent could Incur $1.00 of additional Indebtedness
under Section 4.03(a) and (y) no Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and
<PAGE> 37
30
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by Parent or
one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" ................ 4.08
"Bankruptcy Law" ....................... 6.01
"Blockage Notice" ...................... 10.01
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 13.08
"Offer" ................................ 4.06(b)
"Offer Amount" ......................... 4.06(c)(2)
"Offer Period" ......................... 4.06(c)(2)
"Parent Blockage Notice" ............... 12.01
"Parent Payment Blockage Period" ....... 12.01
"pay the Securities" ................... 10.01
"Paying Agent" ......................... 2.03
"Payment Blockage Period" .............. 10.01
"Purchase Date" ........................ 4.06(c)(1)
"Registrar"............................. 2.03
"Successor Company" .................... 5.01
</TABLE>
<PAGE> 38
31
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as
unsecured Indebtedness;
(7) the principal amount of any non-interest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a
<PAGE> 39
32
balance sheet of the issuer dated such date prepared in accordance with
GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
(9) all references to the date the Securities were originally issued
shall refer to the date the Initial Securities were originally issued.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. The Initial Securities and the Trustee's
certificate of authentication shall be substantially in the form set forth in
Article 14. The Exchange Securities, the Private Exchange Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit A are part of
the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall sign the
Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
<PAGE> 40
33
The Trustee shall authenticate and deliver Securities for original issue
in an aggregate principal amount of $150,000,000, upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall specify
the amount of the Securities to be authenticated and the date on which the
original issue of Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed that amount except
as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as any Registrar, Paying Agent or agent for service of notices
and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of any such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor pursuant to Section
7.07. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer
agent.
The Company initially appoints the Trustee as Registrar and Paying Agent
in connection with the Securities.
<PAGE> 41
34
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date
of the principal and interest on any Security, the Company shall deposit with
the Paying Agent a sum sufficient to pay such principal and interest when so
becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by the Paying Agent. Upon complying with
this Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing within seven Business Days of such request, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be transferable
in accordance with the provisions of Section 2.13.
SECTION 2.07. Replacement Securities. If any mutilated Security is
surrendered to the Trustee, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
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 written notice to
the Company or the Trustee that such Security has been acquired by a bona fide
<PAGE> 42
35
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, 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 Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any time
are all Securities authenticated by the Trustee except for those canceled by it,
those delivered to it for cancellation and those described in this Section as
not outstanding. A Security does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
each of them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to pay all
principal and interest payable on that date with respect to the Securities
<PAGE> 43
36
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.10. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of
interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP and ISIN Numbers. The Company in issuing the
Securities may use "CUSIP" or "ISIN" numbers (if then generally in use) and, if
so, the Trustee
<PAGE> 44
37
shall use "CUSIP" or "ISIN" numbers in notices of redemption as a convenience
to Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
SECTION 2.13. Registration, Registration of Transfer and Exchange. (a)
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency designated pursuant to Section 2.03 being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Definitive Securities and of transfers of such Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering such
Securities and transfers of such Securities as herein provided. Such Security
Register shall distinguish between Original Securities and Exchange Securities.
Subject to the other provisions of this Indenture regarding restrictions
on transfer, upon surrender for registration of transfer of any Definitive
Security at an office or agency of the Company designated pursuant to Section
2.03 for such purpose in accordance with the terms hereof, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denominations and of a like tenor and aggregate principal amount and
bearing such restrictive legends as may be required by this Indenture.
At the option of the Holder, and subject to the other provisions of this
Section 2.13, Securities may be exchanged for other Securities of any
authorized denominations and of a like tenor and aggregate principal amount,
upon surrender of such Securities to be exchanged at such office or agency.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid
<PAGE> 45
38
obligations of the Company, evidencing the same debt, and (subject to the
provisions in the Initial Securities regarding the payment of Special Interest)
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, 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
Securities, other than exchanges pursuant to Section 2.09, 2.13(d), or 3.06 or
in accordance with any offer to purchase pursuant to Section 4.06 not involving
any transfer.
The Company shall not be required (i) to issue, register the transfer of
or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 3.02 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
(b) Certain Transfers and Exchanges. Notwithstanding any other provision
of this Indenture or the Securities, transfers and exchanges of Securities and
beneficial interests in a Global Security of the kinds specified in this
Section 2.13(b) shall be made only in accordance with this Section 2.13(b).
(i) Restricted Global Security to Regulation S Global Security. If
the owner of a beneficial interest in the Restricted Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the Regulation S
Global Security, such transfer may be effected only in accordance with
the provisions of this Clause (b)(i) and Clause (b)(v) below and subject
to the Applicable Procedures. Upon receipt by the
<PAGE> 46
39
Trustee, as Security Registrar, of (A) an order given by the Depositary or
its authorized representative directing that a beneficial interest in the
Regulation S Global Security in a specified principal amount be credited
to a specified Agent Member's account and that a beneficial interest in
the Restricted Global Security in an equal principal amount be debited
from another specified Agent Member's account and (B) a Regulation S
Certificate, satisfactory to the Trustee and duly executed by the owner of
such beneficial interest in the Restricted Global Security or his attorney
duly authorized in writing, then the Trustee, as Security Registrar but
subject to Clause (b)(v) below, shall reduce or cause to be reduced the
principal amount of the Restricted Global Security and increase the
principal amount of the Regulation S Global Security by such specified
principal amount as provided in Section 2.13(e).
(ii) Regulation S Global Security to Restricted Global Security. If
the owner of a beneficial interest in the Regulation S Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the Restricted
Global Security, such transfer may be effected only in accordance with
this Clause (b)(ii) and subject to the Applicable Procedures. Upon
receipt by the Trustee, as Security Registrar, of (A) an order given by
the Depositary or its authorized representative directing that a
beneficial interest in the Restricted Global Security in a specified
principal amount be credited to a specified Agent Member's account and
that a beneficial interest in the Regulation S Global Security in an equal
principal amount be debited from another specified Agent Member's account
and (B) if such transfer is to occur during the Restricted Period, a
Restricted Securities Certificate, satisfactory to the Trustee and duly
executed by the owner of such beneficial interest in the Regulation S
Global Security or his attorney duly authorized in writing, then the
Trustee, as Security Registrar, shall reduce or cause to be reduced the
principal amount of the Regulation S Global Security and increase the
principal amount of the Restricted Global Security by such specified
principal amount as provided in Section 2.13(e).
(iii) Definitive Security to Definitive Security. A Security that
is a Definitive Security may
<PAGE> 47
40
be transferred, in whole or in part, to a Person who takes delivery in the
form of another Security that is a Definitive Security as provided in
Section 2.13(a), provided that, if the Security to be transferred in whole
or in part is a Restricted Security, or is a Regulation S Security and the
transfer is to occur during the Restricted Period, then the Trustee shall
have received (A) a Restricted Securities Certificate, satisfactory to the
Trustee and duly executed by the transferor Holder or his attorney duly
authorized in writing, in which case the transferee Holder shall take
delivery in the form of a Restricted Security, or (B) a Regulation S
Certificate, satisfactory to the Trustee and duly executed by the
transferor Holder or his attorney duly authorized in writing, in which
case the transferee Holder shall take delivery in the form of a Regulation
S Security (subject in every case to Section 2.13(c)).
(iv) Exchanges between Global Security and Definitive Security. A
beneficial interest in a Global Security may be exchanged for a Security
that is a Definitive Security as provided in Section 2.13(d), provided
that, if such interest is a beneficial interest in the Restricted Global
Security, or if such interest is a beneficial interest in the Regulation S
Global Security and such exchange is to occur during the Restricted
Period, then such interest shall be exchanged for a Restricted Security
(subject in each case to Section 2.13(c)).
(v) Regulation S Global Security to be Held Through Euroclear or
Cedel during Restricted Period. The Company shall use its best efforts to
cause the Depositary to ensure that, until the expiration of the
Restricted Period, beneficial interests in the Regulation S Global
Security may be held only in or through accounts maintained at the
Depositary by Euroclear or Cedel (or by Agent Members acting for the
account thereof), and no person shall be entitled to effect any transfer
or exchange that would result in any such interest being held otherwise
than in or through such an account; provided that this Clause (b)(v) shall
not prohibit any transfer or exchange of such an interest in accordance
with Clause (b)(ii) above.
(c) Securities Act Legends. Rule 144A Securities and their Successor
Securities shall bear a Restricted
<PAGE> 48
41
Securities Legend, and the Regulation S Securities and their Successor
Securities shall bear a Regulation S Legend, subject to the following:
(i) subject to the following Clauses of this Section 2.13(c), a
Security or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Securities Act Legend borne by such Global Security while represented
thereby;
(ii) subject to the following Clauses of this Section 2.13(c), a new
Security which is a Definitive Security and is issued in exchange for a
Global Security or any portion thereof, upon transfer or otherwise, shall
bear the Securities Act Legend borne by such other Security, provided
that, if such new Security is required pursuant to Section 3.05(b)(iii) or
(iv) to be issued in the form of a Restricted Security, it shall bear a
Restricted Securities Legend and, if such new Security is so required to
be issued in the form of a Regulation S Security, it shall bear a
Regulation S Legend;
(iii) Registered Securities shall not bear a Securities Act Legend;
(iv) at any time after the Securities may be freely transferred
without registration under the Securities Act or without being subject to
transfer restrictions pursuant to the Securities Act, a new Security which
does not bear a Securities Act Legend may be issued in exchange for or in
lieu of a Security (other than a Global Security) or any portion thereof
which bears such a legend if the Trustee has received an Unrestricted
Securities Certificate, satisfactory to the Trustee and duly executed by
the Holder of such legended Security or his attorney duly authorized in
writing, and after such date and receipt of such certificate, the Trustee
shall authenticate and deliver such a new Security in exchange for or in
lieu of such other Security as provided in this Article 2;
(v) a new Security which does not bear a Securities Act Legend may be
issued in exchange for or in lieu of a Security (other than a Global
Security) or any portion thereof which bears such a legend if, in the
Company's judgment, placing such a legend upon such new Security is not
necessary to ensure compliance with
<PAGE> 49
42
the registration requirements of the Securities Act, and the Trustee, at
the direction of the Company, shall authenticate and deliver such a new
Security as provided in this Article 2; and
(vi) notwithstanding the foregoing provisions of this Section
2.13(c), a Successor Security of a Security that does not bear a
particular form of Securities Act Legend shall not bear such form of
legend unless the Company has reasonable cause to believe that such
Successor Security is a "restricted security" within the meaning of Rule
144, in which case the Trustee, at the direction of the Company, shall
authenticate and deliver a new Security bearing a Restricted Securities
Legend in exchange for such Successor Security as provided in this
Article 2.
(d) Exchanges of Global Security for Definitive Security. Transfers of
Global Securities shall be by delivery. The Book-Entry Depositary and the
Company have agreed that the Global Securities shall only be delivered in the
circumstances described in the Deposit Agreement. Notwithstanding any other
provision in this Indenture, no Global Security may be exchanged in whole or in
part for Definitive Securities unless (i) the Depositary notifies the Company or
the Book-Entry Depositary in writing that it (or its nominee) is unwilling or
unable to continue to act as depositary or ceases to be a clearing agency
registered under the Exchange Act, and, in either case, a successor depositary
registered as a clearing agency under the Exchange Act is not appointed by the
Company within 90 days, (ii) at any time if the Company determines that the
Global Securities (in whole but not in part) should be exchanged for Definitive
Securities; provided, that (x) such exchange is required by (A) any applicable
law or (B) any event beyond the Company's control or (y) payments of interest on
any Global Security, Depositary Interest or beneficial interest are, or would
become, subject to any deduction or withholding for taxes, (iii) at any time
after the consummation of the Exchange Offer, if the owner of a beneficial
interest requests such exchange in writing delivered to the Depositary and
through the Depositary to the Book-Entry Depositary and the Trustee, or (iv) if
the Book-Entry Depositary is at any time unwilling or unable to continue as
Book-Entry Depositary and a successor Book-Entry Depositary is not appointed by
the Company within 90 days. Upon the occurrence of any of the preceding events,
Definitive Securities shall be issued in such names as the
<PAGE> 50
43
Book-Entry Depositary shall instruct the Trustee based on the instructions of
the Depositary.
(e) If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Book-Entry
Depositary or its nominee to the Trustee, as Security Registrar, for exchange or
cancelation as provided in this Article 2. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, then either (i) such Global Security shall be so surrendered for
exchange or cancelation as provided in this Article 2 or (ii) the principal
amount thereof shall be reduced or increased by an amount equal to the portion
thereof to be so exchanged or canceled, or equal to the principal amount of such
other Security to be so exchanged for a beneficial interest therein, as the case
may be, by means of an appropriate adjustment made by the Book-Entry Depositary
as directed by the Trustee in such Book-Entry Depositary's book-entry system to
the corresponding Depositary Interest, whereupon the Trustee, in accordance with
the Applicable Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Security, the Trustee shall, subject to
Section 2.13(b) and as otherwise provided in this Article 2, authenticate and
deliver any Securities issuable in exchange for such Global Security (or any
portion thereof) to or upon the order of, and registered (if applicable) in such
names as may be directed by, the Book-Entry Depositary or its authorized
representative. Upon the request of the Trustee in connection with the
occurrence of any of the events specified in the preceding paragraph, the
Company shall promptly make available to the Trustee a reasonable supply of
Securities that are not in the form of Global Securities. The Trustee shall be
entitled to rely upon any order, direction or request of the Book-Entry
Depositary or the Depositary or any of their authorized representatives which is
given or made pursuant to this Article 2 if such order, direction or request is
given or made in accordance with the Depositary Agreement with respect to the
Book-Entry Depositary and the Applicable Procedures with respect to the
Depositary.
SECTION 2.14. Payment of Interest; Interest Rights Preserved. Interest
on any Security which is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the bearer thereof on
<PAGE> 51
44
the Interest Payment Date in the case of a Global Security in bearer form and,
in the case of a Definitive Security, to the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest.
Any interest (including Special Interest) on any Security which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall (a) bear interest at the
rate per annum stated in the form of Security included herein (to the extent
that the payment of such interest shall be legally enforceable), and (b)
forthwith cease to be payable to the bearer thereof on such Interest Payment
Date with respect to a Global Security in bearer form and, with respect to a
Definitive Security, to the Holder on the relevant Regular Record Date by virtue
of having been such Holder, and, in each case, such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in Clause (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the bearer of such Security on any Special Payment Date (as defined
below) with respect to any Global Security in bearer form and, with
respect to a Definitive Security, to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security 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
<PAGE> 52
45
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, to each Holder, 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, with respect to any
Definitive Security, to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (b). As used in this Clause (a),
"Special Payment Date" means the date on which Defaulted Interest is paid
to the Holder.
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities in accordance with the terms of the Securities or is required to
redeem Securities in accordance with the terms of the Securities, it shall
notify the Trustee in writing of the redemption date, the principal amount of
Securities to be redeemed and the provision of the Securities pursuant to which
the redemption will occur.
If the Company is required to redeem Securities in accordance with the
terms of the Securities, it may reduce the principal amount of Securities
required to be redeemed
<PAGE> 53
46
to the extent it is permitted a credit by the terms of the Securities and it
notifies the Trustee of the amount of the credit and the basis for it. If the
reduction is based on a credit for redeemed or canceled Securities that the
Company has not previously delivered to the Trustee for cancellation, it shall
deliver such Securities with the notice.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed in compliance with the requirements of the Luxembourg Stock
Exchange (for so long as the Securities are listed thereon) or such other stock
exchange on which the Securities are listed or, if such Securities are not so
listed or such exchange prescribes no method of selection, pro rata or by lot or
by a method that complies with applicable legal requirements and that the
Trustee in its sole discretion shall deem to be fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Company shall, on a reasonably timely basis, give
written notice of any such securities exchange requirements to the Trustee. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more than
60 days before a date for redemption of Securities, the Company shall, so long
as the Securities are listed on the Luxembourg Stock Exchange and the rules of
such stock exchange shall so require, publish in a newspaper having a general
circulation in Luxembourg
<PAGE> 54
47
(which is expected to be the Luxemburger Wort) and, in the case of Definitive
Securities, mail a notice of redemption by first-class mail to each Holder of
Securities to be redeemed at such Holder's registered address. For so long as
any Securities are represented by the Global Securities, notices to Holders
shall (in addition to publication as described above) also be given by delivery
of the relevant notice to DTC, Euroclear and/or Cedel Bank (as the case may be)
for communication to the relative Holders of the Book-Entry Interests.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed, the
identification and principal amounts of the particular Securities to be
redeemed;
(6) that, unless the Company defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
(7) the provision of the Securities pursuant to which the Securities
called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy of
the CUSIP or ISIN number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
<PAGE> 55
48
The Trustee shall not be responsible for the accuracy of any such information.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date). Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. At least one Business Day
prior to the redemption date, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
<PAGE> 56
49
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that Parent may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Parent shall file with the SEC and provide the Trustee and Securityholders
with such annual reports and such information, documents and other reports as
are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such information, documents and
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections. Parent also shall
comply with the other provisions of TIA Section 314(a).
SECTION 4.03. Limitation on Consolidated Indebtedness. (a) Parent
shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; provided, however, that Parent and its Restricted
Subsidiaries may Incur Indebtedness if, on the date of such Incurrence, the
Consolidated Debt to EBITDA Ratio does not exceed the ratio indicated below:
<TABLE>
<CAPTION>
CONSOLIDATED DEBT
DATE OF INCURRENCE TO EBITDA RATIO
------------------ -------------------
<S> <C>
Period ended June 30, 1999 2.00 to 1.0
Period ended June 30, 2000 1.75 to 1.0
Period ended June 30, 2001
and thereafter 1.50 to 1.0
</TABLE>
(b) Notwithstanding the foregoing paragraph (a), Parent and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Term Loan Facility;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of all Indebtedness Incurred under this clause
(1) and then outstanding does not exceed $280 million less the aggregate
sum of all principal payments actually made from time to time after the
Issue Date with respect to such Indebtedness (other than principal
payments made from any Refinancings thereof);
<PAGE> 57
50
(2) Indebtedness Incurred pursuant to the Revolving Credit Facility;
provided, however, that the aggregate principal amount outstanding at any
time under this clause (2) does not exceed $20 million;
(3) Indebtedness which is intercompany Indebtedness between or among
Parent and any of its Restricted Subsidiaries; provided, however, that (i)
any subsequent issuance or transfer of Capital Stock that results in any
such Indebtedness being held by a Person other than Parent or a Restricted
Subsidiary thereof or (ii) any sale or other transfer of any such
Indebtedness to a person that is not either Parent or a Restricted
Subsidiary thereof shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness by Parent or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (3);
(4) the Securities;
(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this Section
4.03(b));
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (4) or (5) or this clause
(6); provided, however, that Parent and its Restricted Subsidiaries shall
not Incur any Indebtedness pursuant to this paragraph (b)(6) if the
proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to
the Notes to at least the same extent as such Subordinated Obligations;
(7) Hedging Obligations consisting of Interest Rate Agreements and
Currency Agreements directly related to Indebtedness permitted to be
Incurred by Parent or a Restricted Subsidiary pursuant to the Indenture;
(8) Guarantees by Parent and its Restricted Subsidiaries of each
other's Indebtedness; provided that such Indebtedness is permitted to be
incurred under the Indenture; and
(9) other Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of
<PAGE> 58
51
Parent and the Restricted Subsidiaries outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (7)
above or Section 4.03(a) does not exceed $10 million.
(c) For purposes of determining compliance with the foregoing
Sections 4.03(a) and (b), (i) in the event that an item of Indebtedness meets
the criteria of more than one of the types of Indebtedness described above,
Parent, in its sole discretion, will classify such item of Indebtedness and only
be required to include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and classified in
more than one of the types of Indebtedness described above.
(d) Neither Parent nor the Company shall Incur any Indebtedness
(exclusive of Hedging Obligations) unless such Indebtedness is subject to
payment blockage provisions that are substantially the same as those described
above under "Payment Blockage" for so long as the Notes are subject to such
provisions (for the avoidance of doubt it is understood that this clause shall
not apply to the Incurrence of Indebtedness by Restricted Subsidiaries other
than the Company).
SECTION 4.04. Limitation on Restricted Payments. (a) Parent shall
not, and shall not permit any Restricted Subsidiary, directly or indirectly, to
make a Restricted Payment if at the time Parent or such Restricted Subsidiary
makes such Restricted Payment: (1) a Default shall have occurred and be
continuing (or would result therefrom); (2) Parent is not able to Incur an
additional $1.00 of Indebtedness pursuant to Section 4.03(a); or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter during which the Notes are originally issued to the end of the
most recent fiscal quarter for which financial statements are publicly
available on the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit);
provided, however, that the incremental amount added to amounts otherwise
available under this clause (A) shall not exceed (i) $20.0 million for any
12-month period ending on or before June 30, 2002 and (ii) $15.0 million
for
<PAGE> 59
52
any 12-month period ending after June 30, 2002; provided further, however,
that, for purposes of this clause (A), Consolidated Net Income shall be
calculated in the same manner as for determining whether an Incurrence of
Indebtedness would be permitted pursuant to Section 4.03(a);
(B) the aggregate Net Cash Proceeds received by Parent from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of Parent and other than an issuance or sale to an employee
stock ownership plan or to a trust established by Parent or any of its
Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of Parent is reduced on
Parent's balance sheet upon the conversion or exchange (other than by a
Subsidiary of Parent) subsequent to the Issue Date of any Indebtedness of
Parent convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of Parent (less the amount of any cash, or the fair
value of any other property, distributed by Parent upon such conversion or
exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments (other than Investments in Restricted Subsidiaries) resulting
from dividends, repayments of loans or advances or other transfers of
assets, in each case to Parent or any Restricted Subsidiary, or sales of
assets to third parties and (ii) the portion (proportionate to Parent's
equity interest in such Subsidiary) of the fair market value of the net
assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, however, that
the amount in clause (ii) shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and
treated as a Restricted Payment) by Parent or any Restricted Subsidiary in
such Unrestricted Subsidiary.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any acquisition of any Capital Stock of Parent or any purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value
<PAGE> 60
53
of Subordinated Obligations made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Capital Stock of Parent (other
than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of Parent or an employee stock ownership plan or to a trust
established by Parent or any of its Subsidiaries for the benefit of their
employees); provided, however, that such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Capital Stock (other than Disqualified Stock) of Parent or
Indebtedness of Parent which is permitted to be Incurred pursuant to
Section 4.03(a); provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value shall
be excluded in the calculation of the amount of Restricted Payments;
(iii) the payment of any dividend or the consummation of any
irrevocable redemption within 60 days after the date of declaration of
such dividend or notice of such redemption if the dividend or payment of
the redemption price, as the case may be, would have been permitted on the
date of declaration or notice; provided, however, that at the time of
payment of such dividend or redemption, no other Default shall have
occurred and be continuing (or result therefrom); provided further,
however, that such dividend or redemption shall be included in the
calculation of the amount of Restricted Payments; or
(iv) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of Parent or any of its Subsidiaries from
employees, former employees, directors or former directors of Parent or
any of its Subsidiaries (or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the terms of
the agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such individuals
purchase or sell or are granted the option to purchase or sell, shares of
such common stock; provided, however, that the aggregate amount of such
repurchases and other
<PAGE> 61
54
acquisitions shall not exceed $0.5 million in any calendar year; provided
further, however, that such repurchases and other acquisitions shall be
excluded in the calculation of the amount of Restricted Payments;
(v) repurchases of Capital Stock deemed to occur upon the exercise
of stock options if such Capital Stock represents a portion of the
exercise price thereof; or
(vi) distributions to Great Lakes to fund the Transactions and to
make the Special Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. Parent shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions on its Capital
Stock to Parent or a Restricted Subsidiary or pay any Indebtedness owed to
Parent, (b) make any loans or advances to Parent or (c) transfer any of its
property or assets to Parent, except:
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date, including the Credit Agreement;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by Parent(other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by Parent) and outstanding
on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause
(iii) or contained in any amendment to an agreement referred to in clause
(i) or (ii) of this Section 4.05 or this clause (iii); provided, however,
that the encumbrances and restrictions with respect to
<PAGE> 62
55
such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable to the Securityholders than encumbrances
and restrictions with respect to such Restricted Subsidiary contained in
such predecessor agreements;
(iv) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) Parent shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless (i) Parent or
such Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the value
of all non-cash consideration), as determined in good faith by the Board of
Directors, of the shares and assets subject to such Asset Disposition and at
least 85% of the consideration thereof received by Parent or such Restricted
Subsidiary is in the form of cash or cash equivalents and (ii) an amount equal
to 100% of the Net Available Cash from such Asset Disposition is applied by
Parent (or such Restricted Subsidiary, as the case may be) (A) to the extent
Parent elects (or is required by the terms of any Indebtedness), to prepay,
repay, redeem or purchase Indebtedness (other than Subordinated Obligations) of
Parent or the Company or Indebtedness (other than any Disqualified Stock) of a
Restricted Subsidiary (in each case other than Indebtedness owed to Parent or an
Affiliate of Parent) within one year from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (B) to the extent Parent
elects, to acquire Additional Assets within one year from the later of the date
<PAGE> 63
56
of such Asset Disposition or the receipt of such Net Available Cash; and (C) to
the extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to cause the Company to make an offer to
the holders of the Securities (and if necessary or desirable to holders of other
Indebtedness designated by Parent) to purchase Securities (and such other
Indebtedness) pursuant to and subject to the conditions contained in the
Indenture (provided that if Parent or the Company would be prohibited from
repurchasing Securities in accordance with this clause (a)(ii)(C) by the terms
of any Indebtedness described in clause (a)(ii)(A) above, Parent shall be
required, at its option, either to repay such Indebtedness or to obtain any
required consents under the instruments governing any such Indebtedness in order
to permit the repurchase of the Securities), in each case within one year from
the later of the receipt of such Net Available Cash and the date the offer
described in Section 4.06(b) is consummated; provided, however, that in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A) or (C) above, Parent or such Restricted Subsidiary shall
permanently retire such Indebtedness and shall cause the related loan commitment
(if any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this
Section 4.06(a), Parent and the Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this Section 4.06(a) except to
the extent that the aggregate Net Available Cash from all Asset Dispositions
which are not applied in accordance with this Section 4.06(a) exceeds $5.0
million. Pending application of Net Available Cash pursuant to this covenant,
such Net Available Cash may be used for any purpose not prohibited by this
Indenture.
For the purposes of this Section 4.06, the following are deemed to be
cash or cash equivalents: (x) the assumption of Indebtedness of Parent or any
Restricted Subsidiary and the release of Parent or such Restricted Subsidiary
from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by Parent or any Restricted Subsidiary
from the transferee that are promptly converted by Parent or such Restricted
Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Securities (and other Indebtedness) pursuant to clause (a)(ii)(C) above,
Parent will be required to cause the Company to purchase Securities tendered
<PAGE> 64
57
pursuant to an offer by Parent and the Company for Securities (and other
Indebtedness) at a purchase price of 100% of their principal amount (without
premium) plus accrued but unpaid interest (or, in respect of such other
Indebtedness, such greater or lesser price, if any, as may be provided for by
the terms of such Indebtedness) in accordance with the procedures (including
prorating in the event of oversubscription) set forth Section 4.06(c). Parent
shall not be required to cause the Company to make such an offer to purchase
Securities (and other Indebtedness) pursuant to this Section 4.06 if the Net
Available Cash available therefor is less than $7.5 million (which lesser amount
shall be carried forward for purposes of determining whether such an offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition). To the extent that the aggregate amount of Securities tendered
pursuant to clause (a)(ii)(C) above is less than the Net Available Cash, Parent
may use any remaining Net Available Cash for general corporate purposes. Upon
completion of any such offer pursuant to clause (a)(ii)(C), the Net Available
Cash amount shall be reset at zero.
(c) (1) Promptly, and in any event within 10 days after Parent
becomes obligated to require the Company to make an Offer, Parent shall be
obligated to deliver to the Trustee and send, by first-class mail to each
Holder, a written notice stating that the Holder may elect to have his
Securities purchased by the Company either in whole or in part (subject to
prorating as hereinafter described in the event the Offer is oversubscribed) in
integral multiples of $1,000 of principal amount, at the applicable purchase
price. The notice shall specify a purchase date not less than 30 days nor more
than 60 days after the date of such notice (the "Purchase Date") and shall
contain such information concerning the business of Parent which Parent in good
faith believes will enable such Holders to make an informed decision (which at a
minimum will include (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of Parent, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form
8-K of Parent filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Dispositions otherwise described in the offering
materials (or corresponding successor reports), (ii) a description of material
developments in Parent's business subsequent to the date of the latest of such
Reports, and (iii) if material, appropriate pro forma financial information) and
all instructions and materials
<PAGE> 65
58
necessary to tender Securities pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, Parent shall deliver to the Trustee
an Officers' Certificate as to (i) the amount of the Offer (the "Offer Amount"),
(ii) the allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and (iii) the compliance of such
allocation with the provisions of Section 4.06(a). On such date, the Company
shall also irrevocably 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) in
Temporary Cash Investments, maturing on the last day prior to the Purchase Date
or on the Purchase Date if funds are immediately available by open of business,
an amount equal to the Offer Amount to be held for payment in accordance with
the provisions of this Section. Upon the expiration of the period for which the
Offer remains open (the "Offer Period"), but in no event later than one Business
Day prior to the Purchase Date, the Company shall deliver to the Trustee for
cancellation the Securities or portions thereof which have been properly
tendered to and are to be accepted by the Company. Subject to the prior receipt
by the Trustee of the Offer Amount in immediately available funds, (i) the
Trustee shall, on the Purchase Date, mail or deliver payment to each tendering
Holder in the amount of the purchase price and (ii) in the event that the
aggregate purchase price of the Securities delivered by the Company to the
Trustee is less than the Offer Amount applicable to the Securities, the Trustee
shall deliver the excess to the Company immediately after the expiration of the
Offer Period for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the Purchase Date, a telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased. The Company shall
promptly deliver a copy of any such notice received by it to the Trustee. If at
the expiration of the Offer Period the
<PAGE> 66
59
aggregate principal amount of Securities (and any other Indebtedness included
in the Offer) surrendered by holders thereof exceeds the Offer Amount, the
Company shall select the Securities and the other Indebtedness to be purchased
on a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Securities and the other Indebtedness in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Securities are purchased only in part shall be issued new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which are
to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
(d) Parent and the Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, Parent and the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section by virtue
thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) Parent shall
not, and shall not permit any Restricted Subsidiary to, enter into or permit to
exist any transaction (including the purchase, sale, lease or exchange of any
property, employee compensation arrangements or the rendering of any service)
with any Affiliate of Parent (an "Affiliate Transaction") unless the terms
thereof (i) are no less favorable to Parent or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate, (ii) if such Affiliate
Transaction involves an amount in excess of $2.0 million, (1) are set forth in
writing and (2) have been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction or have been
determined by a nationally recognized appraisal or investment banking
<PAGE> 67
60
firm to be fair, from a financial standpoint, to Parent and its Restricted
Subsidiaries and (iii) if such Affiliate Transaction involves an amount in
excess of $7.5 million, have been determined by a nationally recognized
appraisal or investment banking firm to be fair, from a financial standpoint,
to Parent and its Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii) the
grant of stock options or similar rights to employees and directors of Parent
and its Restricted Subsidiaries pursuant to plans approved by the Board of
Directors, (iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of Parent or its Restricted
Subsidiaries, but in any event not to exceed $.05 million in the aggregate
outstanding at any one time, (v) reasonable fees and compensation paid to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of Parent or any Restricted Subsidiary as determined in good faith by Parent's
Board of Directors or senior management, (vi) any Affiliate Transaction between
Parent and a Restricted Subsidiary or between Restricted Subsidiaries, (vii)
the issuance or sale of any Capital Stock (other than Disqualified Stock) of
Parent and (viii) transactions and agreements with Great Lakes and its
Affiliates as described herein arising out of the Spinoff and the
Reorganization.
SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. Parent shall not sell or otherwise dispose of any
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to Parent or a Restricted Subsidiary, (ii) if,
immediately after giving effect to such issuance, sale or other disposition,
neither Parent nor any of its Subsidiaries own any Capital Stock of such
Restricted Subsidiary or (iii) if, immediately after giving effect to such
issuance, sale or other disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such Person remaining
after giving effect thereto would have been permitted to be made under the
covenant described
<PAGE> 68
61
in Section 4.04 if made on the date of such issuance, sale or other
disposition.
SECTION 4.09. Change of Control. (a) Upon the occurrence of a Change of
Control, each Holder shall have the right to require that the Company repurchase
such Holder's Securities at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest on the relevant interest payment date), in accordance
with the terms contemplated in Section 4.09(b); provided, however, that
notwithstanding the occurrence of a Change of Control, the Company shall not be
obligated to purchase Securities pursuant to this Section 4.09 in the event the
Company has theretofore exercised its right to redeem all the Securities as
described in paragraph 5 of the Securities. In the event that at the time of
such Change of Control the terms of the Bank Indebtedness or other Indebtedness
restrict or prohibit the repurchase of Securities pursuant to this Section, then
prior to the mailing of the notice to Holders provided for in Section 4.09(b)
below but in any event within 30 days following any Change of Control, the
Company shall (i) repay in full all such Bank Indebtedness or other Indebtedness
or offer to repay in full all such Bank Indebtedness or other Indebtedness and
repay such Bank Indebtedness or other Indebtedness of each lender who has
accepted such offer or (ii) obtain the requisite consent under the agreements
governing such Bank Indebtedness or other Indebtedness to permit the repurchase
of the Securities as provided for in Section 4.09(b).
<PAGE> 69
62
(b) Within 30 days following any Change of Control, (1) Parent and the
Company shall, so long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, publish notice
thereof in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort) and, in the case of Definitive Notes,
shall also mail a notice to each Holder at its address appearing in the
register of Holders, with a copy to the Trustee, which notice shall govern the
terms of the Change of Control Offer (the "Change of Control Offer") and (2),
for so long as any Notes are represented by Global Notes, the Change of Control
Offer shall (in addition to publication as described above) also be given by
delivery of the notice to DTC, Euroclear and/or Cedel Bank (as the case may be)
for communication to the relative Holders of the Book-Entry Interests. Such
notice shall state:
(A) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at
a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders on the relevant record date to receive
interest on the relevant interest payment date);
(B) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);
(C) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(D) the instructions determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Company
at the address specified in the notice at least three Business Days prior to
the purchase date. Holders will be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter setting
<PAGE> 70
63
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased. The Company shall
promptly deliver a copy of any such notice received by it to the Trustee.
(d) On the purchase date, all Securities purchased by the Company under
this Section shall be delivered to the Trustee for cancellation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section, the Company
will not be required to make a Change of Control Offer upon a Change of Control
if a third party makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in this Section
applicable to a Change of Control Offer made by the Company and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.
(f) Parent and the Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, Parent and the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section by virtue
thereof.
SECTION 4.10. Limitation on Liens. Parent shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist
any Lien of any nature whatsoever on any of its properties (including Capital
Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter
acquired, other than Permitted Liens, without effectively providing that the
Securities shall be secured equally and ratably with (or prior to) the
obligations so secured for so long as such obligations are so secured.
SECTION 4.11. Limitation on Sale/Leaseback Transactions. Parent shall
not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) Parent
<PAGE> 71
64
or such Subsidiary would be entitled to (A) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 4.03 and (B) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Securities pursuant
to Section 4.10, (ii) the net proceeds received by Parent or any Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at least
equal to the fair value (as determined by the Board of Directors) of such
property and (iii) Parent applies the proceeds of such transaction in
compliance with Section 4.06.
SECTION 4.12. Limitations on Lines of Business. Neither Parent nor the
Company shall, and neither shall permit any Restricted Subsidiary to, directly
or indirectly, engage in any business other than a Related Business.
SECTION 4.13. Additional Amounts. (a) All payments made by or on behalf
of the Company on or with respect to the Securities (whether or not in the form
of Definitive Notes (as defined)), and all payments made by or on behalf of
Parent under or with respect to the Parent Guaranty will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of the United Kingdom (or the
jurisdiction of incorporation of any Successor Company of either) or any
political subdivision thereof or any authority having power to tax therein (each
a "Tax Authority"), unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on account of, any
Taxes of any Tax Authority shall at any time be required on any payments made by
the Company (or Successor Company) on or with respect to the Securities or by
Parent (or Successor Company) under or with respect to the Parent Guaranty,
including payments of principal, redemption price, interest, additional interest
or premium, the Company or Parent, as the case may be, will pay such additional
amounts (the "Additional Amounts") as may be necessary in order that the net
amounts received in respect of such payments by the Holders of the Securities
(including Additional Amounts) or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; except that no such Additional Amounts will be payable with respect
to:
<PAGE> 72
65
(i) in the case of Securities listed on a Recognized Stock Exchange
at the time such Additional Amounts would be payable, any payments on a
Security held by or on behalf of a Holder or a beneficial owner who is
liable for such Taxes in respect of such Security by reason of the Holder
or beneficial owner having some connection with the United Kingdom or the
jurisdiction of incorporation of any Successor Company (including being a
citizen or resident or national of, or carrying on a business or
maintaining a permanent establishment in, or being physically present in,
the United Kingdom or the jurisdiction of incorporation of any Successor
Company) other than by the mere holding of such Security or enforcement
of rights thereunder or the receipt of payments in respect thereof;
(ii) in the case of Securities listed on a Recognized Stock
Exchange at the time such Additional Amounts would be payable, any Taxes
that are imposed or withheld as a result of a change in law after the
Issue Date where such withholding or imposition is by reason of the
failure of the Holder or beneficial owner of the Security to comply with
any reasonable request by the Company to provide information concerning
the nationality, residence or identity of such Holder or beneficial owner
or to make any declaration or similar claim or satisfy any information or
reporting requirement, (A) if such compliance is required or imposed by a
statute, treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such
Taxes, (B) such Holder may legally comply with such requirements and (C)
at least 30 days prior to the date on which the Company shall apply this
clause (ii), the Company shall have notified such Holders of such
requirements;
(iii) except in the case of the winding up of the Company, any
Security presented for payment (where presentation is required) in the
United Kingdom or the jurisdiction of incorporation of any Successor
Company (unless presentment could not have been made elsewhere); or
(iv) any Security presented for payment (where Securities are in the
form of Definitive Notes and presentation is required) more than 30 days
after the relevant payment is first made available for payment to the
Holder (except to the extent that the Holder would
<PAGE> 73
66
have been entitled to Additional Amounts had the Security been presented
on any day (including the last day) within such 30 day period).
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Security been the Holder of the Security, it would not have been
entitled to payment of Additional Amounts by reason of any of clauses (i) to
(iv) inclusive above.
(b) Where required by applicable law, the Company, Parent or any Paying
Agent, as the case may be, will also (i) make any required withholding or
deduction in respect of any Taxes and (ii) remit the full amount deducted or
withheld to the relevant Tax Authority in accordance with applicable law (in the
case of a Paying Agent that is not the Company or an affiliate thereof, on the
basis of an Officer's Certificate instructing the Paying Agent to do so and
stating the amount of such withholding). The Company or Parent, as the case may
be, will furnish or cause to be furnished to the Trustee, within 30 days after
the date of the payment of any Taxes due pursuant to applicable law, certified
copies of tax receipts satisfactory to the Trustee evidencing such payment by
the Company or Parent, as the case may be. Copies of such receipts will be made
available to Holders of Notes that are outstanding on the date of such
withholding or deduction for or on account of Taxes upon request. Further, the
Company or Parent, as the case may be, will indemnify and hold harmless each
Holder of Notes (other than a Holder described in clauses (i)-(iv) of paragraph
(a) above) and upon written request will promptly reimburse each such Holder for
the amount of (1) any Taxes levied or imposed and paid by such Holder as a
result of payments made on or with respect to the Notes or under or with respect
to the Parent Guarantee, (2) any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto and (3) any Taxes imposed
with respect to any reimbursement under (1) or (2), but excluding any Taxes
based on a Holder's net income.
(c) Whenever in this Indenture there is mentioned, in any context, (i) the
payment of principal, (ii) purchase prices in connection with a purchase of
Securities, (iii) interest or (iv) any other amount payable on or with respect
to any of the Securities or under or with respect to the Parent Guaranty, such
mention shall be deemed to include mention of the payment of Additional Amounts
provided for in this Section to the extent that, in such
<PAGE> 74
67
context, Additional Amounts are, were or would be payable in respect thereof.
(d) The Company or Parent, as the case may be, will pay any present or
future stamp, court or documentary taxes, or any other excise or property
taxes, charges or similar levies which arise in any jurisdiction from the
execution, delivery or registration of the Securities, the Parent Guaranty or
any other document or instrument referred to therein, or the receipt of any
payments on or with respect to the Securities or under or with respect to the
Parent Guaranty, excluding any such taxes, charges or similar levies imposed by
any jurisdiction outside of the United Kingdom, the United States of America or
any jurisdiction in which a Paying Agent is located, other than those resulting
from, or required to be paid in connection with, the enforcement of the
Securities or any other such document or instrument following the occurrence of
any Event of Default with respect to the Securities.
SECTION 4.14. Compliance Certificate. Parent and the Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of Parent and the Company,
respectively, they would normally have knowledge of any Default and whether or
not the signers know of any Default that occurred during such period. If they
do, the certificate shall describe the Default, its status and what action
Parent or the Company is taking or proposes to take with respect thereto.
Parent and the Company also shall comply with TIA " 314(a)(4).
SECTION 4.15. Further Instruments and Acts. Upon request of the Trustee,
Parent and the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE 5
Successor Company
SECTION 5.01. When Parent and Company May Merge or Transfer Assets.
(a) Neither Parent nor the Company shall consolidate with or merge with or into,
or convey,
<PAGE> 75
68
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to, any other Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of
England and Wales or the laws of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if not
Parent or the Company) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Trustee, all the obligations of Parent or
the Company under the Parent Guaranty or the Securities and this
Indenture, respectively;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) except in the case of a merger of Parent or the Company with
or into a Wholly Owned Subsidiary of Parent or the Company, respectively,
and except in the case of a merger entered into solely for the purpose of
reincorporating Parent or the Company in another jurisdiction,
immediately after giving effect to such transaction, the Successor
Company would be able to Incur an additional $1.00 of Indebtedness
pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is
not less than the Consolidated Net Worth of Parent or the Company, as the
case may be, immediately prior to such transaction;
(v) Parent or the Company, as the case may be, shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with this Indenture; and
<PAGE> 76
69
(vi) Parent or the Company, as the case may be, shall have delivered
to the Trustee Opinions of Counsel to the effect that (A) the Holders will
not recognize income, gain or loss for U.S. Federal income tax purposes as
a result of such transaction; (B) any payment of principal, redemption
price or purchase price of, premium (if any), Additional Amounts (if any)
and interest on the Securities by the Successor Company to a Holder after
the consolidation, merger, conveyance, transfer or lease of assets will be
exempt from the Taxes described and defined in Section 4.13 and (C) no
other taxes on income (including taxable capital gains) will be payable
under the laws of the United Kingdom or any other jurisdiction where the
Successor Company is or becomes located by a Holder of the Securities who
is not or is not deemed to be a resident of the United Kingdom or other
jurisdiction where the Successor Company is or becomes located and does
not carry on a trade in the United Kingdom through a branch, agency or
permanent establishment to which the Securities of that Holder are
attributable (or, as the case may be, does not carry on any business
activities through a branch, agency or permanent establishment in such
other jurisdiction where the Successor Company is or becomes located) in
respect of the acquisition, ownership or disposition of Securities,
including the receipt of principal, premium (if any), Additional Amounts
(if any) or interest paid pursuant to such Securities.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, Parent or the Company under this
Indenture, as the case may be, but the predecessor company in the case of a
conveyance, transfer or lease of all or substantially all its assets shall not
be released from the obligation to pay the principal of and interest on the
Securities.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and
<PAGE> 77
70
payable, whether or not such payment shall be prohibited by Article 10,
and such default continues for a period of 30 days;
(2) the Company (i) defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity,
upon redemption, upon declaration or otherwise, whether or not such
payment shall be prohibited by Article 10 or (ii) fails to redeem or
purchase Securities when required pursuant to this Indenture or the
Securities, whether or not such redemption or purchase shall be prohibited
by Article 10;
(3) Parent or the Company fails to comply with Section 5.01;
(4) Parent or the Company fails to comply with Section 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 or 4.12 (other than a
failure to purchase Securities when required under Section 4.06 or 4.09)
and such failure continues for 30 days after the notice specified below;
(5) Parent or the Company fails to comply with any of its agreements
in the Securities or this Indenture (other than those referred to in
clause (1), (2), (3) or (4) above) and such failure continues for 60 days
after the notice specified below;
(6) Indebtedness of Parent, the Company or any Significant Subsidiary
is not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
principal amount or accreted value of such Indebtedness unpaid or
accelerated exceeds $5.0 million, or its foreign currency equivalent at
the time;
(7) Parent, the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
<PAGE> 78
71
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against Parent, the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of Parent, the Company or any
Significant Subsidiary or for any substantial part of its property;
or
(C) orders the winding up or liquidation of Parent, the Company
or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of $5.0
million or its foreign currency equivalent at the time is entered against
Parent, the Company or any Significant Subsidiary, remains outstanding for
a period of 60 days following the entry of such judgment or decree and is
not discharged, waived or the execution thereof stayed.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
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.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
<PAGE> 79
72
A Default under clauses (4) or (5) is not an Event of Default until the
Trustee or the holders of at least 25% in principal amount of the outstanding
Securities notify the Company of the Default and Parent or the Company does not
cure such Default within the time specified after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (4) or
(5), its status and what action Parent and the Company are taking or propose to
take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event
of Default specified in Section 6.01(7) or (8) with respect to the Company)
occurs and is continuing, the Trustee by notice in writing to the Company, or
the Holders of at least 25% in principal amount of the Securities by notice in
writing to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable with such notice
to specify the Event of Default and that such notice is a "notice of
acceleration" ("Acceleration Notice"); provided, however, that until such time
as the Bank Indebtedness is paid in full, no such Acceleration Notice with
respect to an Event of Default described in Section 6.01(1) shall be effective
until the earlier of (a) the fifth Business Day after the giving of the
Acceleration Notice to the Company and the Representative under the Credit
Agreement (but only if such Event of Default is then continuing) and (b) the
acceleration of the Bank Indebtedness, in each case subject to Article 10. Upon
such a declaration, such principal and interest shall be due and payable
immediately. If an Event of Default specified in Section 6.01(7) or (8) with
respect to Parent or the Company occurs and is continuing, the principal of and
interest on all the Securities shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Securityholders. The Holders of a majority in principal amount of the
Securities by notice to the Trustee may rescind an 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 nonpay-
<PAGE> 80
73
ment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to this Indenture or
(iii) a Default in respect of a provision that under Section 9.02 cannot be
amended without the consent of each Securityholder affected. When a Default is
waived, it is deemed cured, but no such waiver shall extend to any subsequent or
other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in principal
amount of the Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.01,
that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
<PAGE> 81
74
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may
file such proofs of claim and other papers
<PAGE> 82
75
or documents as may be necessary or advisable in order to have the claims of the
Trustee and the Securityholders allowed in any judicial proceedings relative to
Parent, the Company, their respective creditors or their respective property
and, unless prohibited by law or applicable regulations, may vote on behalf of
the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article 6, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the Securities
for principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section
<PAGE> 83
76
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 or a suit by Holders of more than 10% in principal amount of the
Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. Parent and the
Company (to the extent they may lawfully do so) shall not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and Parent and the Company (to the extent that they may lawfully do
so) hereby expressly waive all benefit or advantage of any such law, and shall
not hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise 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 Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) 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; and
(2) 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 the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
<PAGE> 84
77
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
<PAGE> 85
78
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(g) The Trustee shall not be required to give nay bond or surety in
respect of the performance of its powers and duties hereunder.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Inden-
<PAGE> 86
79
ture or in any document issued in connection with the sale of the Securities or
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Trust Officer of the Trustee, the Trustee shall mail to
each Securityholder notice of the Default within 90 days after it occurs.
Except in the case of a Default in payment of principal of or interest on any
Security (including payments pursuant to the mandatory redemption provisions of
such Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable
after each May 15 beginning with the May 15 following the date of this
Indenture, and in any event prior to July 15 in each year, the Trustee shall
mail to each Securityholder a brief report dated as of such May 15 that complies
with TIA paragraph 313(a). The Trustee also shall comply with TIA paragraph
313(b).
A copy of each report at the time of its mailing to Securityholders shall
be filed with the SEC and each stock exchange (if any) on which the Securities
are listed. The Company agrees to notify promptly the Trustee whenever the
Securities become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall
not relieve the Company of its
<PAGE> 87
80
obligations hereunder. The Company shall defend the claim and the Trustee may
have separate counsel and the Company shall pay the fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(7) or (8) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the
<PAGE> 88
81
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA
<PAGE> 89
82
Section 310(a). The Trustee shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA Section 310(b); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of interest
or participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When
(i) the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.07), and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Sections
8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12 and the operation of
Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the
limitations contained in Sections 5.01(a)(iii) and (iv)
<PAGE> 90
83
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default with respect
thereto. If the Company exercises its covenant defeasance option, payment of
the Securities may not be accelerated because of an Event of Default specified
in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or
because of the failure of the Company to comply with Section 5.01(a)(iii) or
(iv). In the event that the Company exercises its legal defeasance option (but
not its covenant defeasance option), Parent will be released from all of its
obligations under the Parent Guaranty.
Upon satisfaction of the conditions set forth herein and upon
specific request of the Company, the Trustee shall acknowledge in writing the
discharge of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise
its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal of and
interest on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
<PAGE> 91
84
(3) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Sections 6.01(7) or (8) with respect to
Parent or the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable U.S. Federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Securityholders will not recognize income, gain
or loss for U.S. Federal income tax purposes as a result of such deposit
and defeasance and will be subject to U.S. Federal income tax and United
Kingdom income tax on the same amounts, in the same manner and at the
same times as would have been the case if such deposit and defeasance had
not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that
the Securityholders will not recognize income, gain or loss for U.S.
Federal income tax purposes as a result of such deposit and covenant
defeasance and will be subject to U.S. Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such deposit and covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.
<PAGE> 92
85
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to this Article
8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities. Money and
securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall
promptly turn over to the Company upon request money or securities held by them
at any time that, in the written opinion addressed to the Trustee of a
nationally recognized firm of independent public accountants (which may be the
opinion delivered under Section 8.02(2)), are in excess of the amount that would
then be required to be deposited pursuant to this Article 8.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors and all liability of the Trustee and such Paying
Agent (if not the Company or any of its affiliates) with respect to the payment
of such money shall thereupon cease.
SECTION 8.05. Indemnity for Government Obligations. The Company shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article 8
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's and Parent's obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had
occurred pursuant to this Article 8 until such time as the Trustee or Paying
Agent is permitted to apply all such
<PAGE> 93
86
money or U.S. Government Obligations in accordance with this Article 8;
provided, however, that, if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 or Article 12 that would limit
or terminate the benefits available to any holder of Bank Indebtedness
(or Representatives therefor) under Article 10 or Article 12;
(5) to add guarantees with respect to the Securities or to secure
the Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA; or
(8) to make any change that does not adversely affect the rights of
any Securityholder.
<PAGE> 94
87
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 or Article 12 of any holder of Bank
Indebtedness then outstanding unless the holders of such Bank Indebtedness (or
their representative) consent to such change to the extent such consent is
required pursuant to the terms of such Bank Indebtedness.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company and the Trustee may
amend this Indenture or the Securities without notice to any Securityholder but
with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a purchase of, or a tender offer or exchange for, the
Securities). However, without the consent of each Securityholder affected
thereby, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security
or change the time at which any Security may or shall be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article 10 or Article 12 that adversely
affects the rights of any Securityholder under Article 10 or Article 12;
(7) make any change in Section 6.04 or 6.07 or the second sentence
of this Section;
<PAGE> 95
88
(8) make any change in the Parent Guaranty that would adversely
affect the Securityholders; or
(9) make any change in Section 4.13 that would adversely affect the
Securityholders or amend the terms of the Securities or this Indenture in
a way that would result in the loss of an exemption from any of the Taxes
described in Section 4.13.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 or Article 12 of any holder of Bank
Indebtedness then outstanding unless the holders of such Bank Indebtedness (or
their representative) consent to such change to the extent such consent is
required pursuant to the terms of the Bank Indebtedness.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to
an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an amendment
or waiver becomes effective, it shall bind every Securityholder. An amendment
or waiver becomes effective upon the execution of such amendment or waiver by
the Trustee.
<PAGE> 96
89
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding
the immediately preceding paragraph, those Persons who were Securityholders at
such record date (or their duly designated proxies), and only those Persons,
shall be entitled to give such consent or to revoke any consent previously
given or to take any such action, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective
for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and will be valid and
binding upon the Company in accordance with its terms.
SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate
of the Company shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
<PAGE> 97
90
ARTICLE 10
Payment Blockage
SECTION 10.01. Default on Bank Indebtedness. During the continuance of
any default with respect to any Bank Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the principal of or interest
on the Securities (except for payments made from the trusts described in Article
8) or make any deposit pursuant to Section 8.01 and may not repurchase, redeem
or (except for Securities delivered to the Trustee pursuant to the second
sentence of paragraph 6 of the Securities) otherwise retire any Securities
(collectively, "pay the Securities") for a period (a "Payment Blockage Period")
commencing upon the receipt by the Company and the Trustee of written notice (a
"Blockage Notice") of such default from the Representative under the Credit
Agreement specifying an election to effect a Payment Blockage Period and ending
179 days thereafter (or earlier if such Payment Blockage Period is terminated
(i) by written notice to the Trustee and the Company from the Person or Persons
who gave such Blockage Notice, (ii) because the default giving rise to such
Blockage Notice is no longer continuing or (iii) because such Bank Indebtedness
has been repaid in full in cash and any outstanding letters of credit, bonds and
guarantees under the Credit Agreement and any Hedging Obligations Incurred in
connection with the Credit Agreement have been fully cash collateralized).
Notwithstanding the provisions described in the immediately preceding sentence,
the Company may resume payments on the Securities after termination of such
Payment Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Bank Indebtedness during such period. For purposes of this Section, no
default or event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Bank
Indebtedness initiating such Payment Blockage Period shall be, or be made, the
basis of the commencement of a subsequent Payment Blockage Period by the
Representative under the Credit Agreement whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 180 consecutive days (it being
acknowledged that any subsequent action, omission or any
<PAGE> 98
91
breach of any financial covenants for a period commencing after the date of
commencement of such Payment Blockage Period or other matter or thing that, in
any case, would give rise to a default pursuant to any provisions under which a
default previously existed or was continuing shall constitute a new default for
this purpose).
SECTION 10.02. Acceleration of Payment of Securities. If payment of the
Securities is accelerated because of an Event of Default, the Company shall
promptly notify the holders of the Bank Indebtedness (or their Representative)
of the acceleration.
SECTION 10.03. Relative Rights. This Article 10 defines the relative
rights of Securityholders and holders of Bank Indebtedness. Nothing in this
Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default.
SECTION 10.04. Payment Blockage May Not Be Impaired by Company. No right
of any holder of Bank Indebtedness to enforce the payment blockage of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.05. Notice to Representative. Whenever a notice is to be given
to holders of Bank Indebtedness, the notice may be given to their Representative
(if any).
SECTION 10.06. Article 10 Not to Prevent Events of Default or Limit Right
to Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect
on the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.07. Trust Moneys Not Subject to Payment Blockage.
Notwithstanding anything contained herein
<PAGE> 99
92
to the contrary, payments from money or the proceeds of U.S. Government
Obligations held in trust under Article 8 by the Trustee for the payment of
principal of and interest on the Securities shall not be subject to the
restrictions set forth in this Article 10.
ARTICLE 11
Parent Guaranty
SECTION 11.01. Guarantee. Parent, as primary obligor and not merely as
surety, hereby irrevocably, fully and unconditionally Guarantees on a senior
basis to each Holder and to the Trustee and its successors and assigns (a) the
full and punctual payment of principal of and interest on the Securities when
due, whether at Stated Maturity, by acceleration, by redemption or otherwise,
and all other monetary obligations of the Company under this Indenture and the
Securities and (b) the full and punctual performance within applicable grace
periods of all other obligations of the Company under this Indenture and the
Securities (the foregoing obligations Guaranteed by Parent hereinafter
collectively called the "Guaranteed Obligations" or the "Parent Guaranty").
Parent further agrees that the Guaranteed Obligations may be extended or
renewed, in whole or in part, without notice or further assent from Parent, and
that Parent shall remain bound under this Article 11 notwithstanding any
extension or renewal of any such Guaranteed Obligation.
Parent waives presentation to, demand of, payment from and protest to the
Company of any of the Guaranteed Obligations and also waives notice of protest
for nonpayment. Parent waives notice of any default under the Securities or
the Guaranteed Obligations. The obligations of Parent hereunder shall not be
affected by (a) the failure of any Holder or the Trustee to assert any claim or
demand or to enforce any right or remedy against the Company or any other
Person under this Indenture, the Securities or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Securities or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Guaranteed Obligations or
any of them; (e) the failure of any Holder or Trustee to exercise any right or
remedy against any other Guarantor of the Guaranteed
<PAGE> 100
93
Obligations; or (f) any change in the ownership of such Guarantor.
Parent further agrees that the Parent Guaranty herein constitutes a
Guarantee of payment, performance and compliance when due (and not a Guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Guaranteed
Obligations.
The Parent Guaranty, as it relates to the principal of and interest on the
Securities shall be, to the extent and manner set forth in Article 12, subject
to certain payment blockage provisions with respect to the Bank Indebtedness
and the Parent Guaranty is hereby made subject to such provisions of this
Indenture.
The obligations of Parent hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing,
the obligations of Parent herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Securities
or any other agreement, by any waiver or modification of any thereof, by any
default, failure or delay, wilful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
Parent or would otherwise operate as a discharge of Parent as a matter of law
or equity.
In furtherance of the foregoing and not in limitation of any other right
which any Holder or the Trustee has at law or in equity against Parent by
virtue hereof, upon the failure of the Company to pay the principal of or
interest on any Guaranteed Obligation when and as the same shall become due,
whether at maturity, by acceleration, by redemption or otherwise, or to perform
or comply with any other Guaranteed Obligation, Parent shall, upon receipt of
written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to
the Holders or the Trustee an amount equal to the sum of (i) the unpaid
principal amount of such
<PAGE> 101
94
Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary Guaranteed Obligations of the Company to the Holders and the Trustee.
Parent agrees that it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any Guaranteed Obligations guaranteed
hereby until payment in full of all Guaranteed Obligations. Parent further
agrees that, as between it, on the one hand, and the Holders and the Trustee,
on the other hand, (x) the maturity of the Guaranteed Obligations Guaranteed
hereby may be accelerated as provided in Article 6 for the purposes of the
Parent Guaranty, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Guaranteed Obligations
Guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Guaranteed Obligations as provided in Article 6, such obligations (whether
or not due and payable) shall forthwith become due and payable by Parent for
the purposes of this Section.
Parent also agrees to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Section.
SECTION 11.02. Successors and Assigns. This Article 11 shall be binding
upon Parent and its respective successors and assigns and shall enure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.03. No Waiver. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 11 at law,
in equity, by statute or otherwise.
<PAGE> 102
95
SECTION 11.04. Modification. No modification, amendment or waiver of any
provision of this Article 11, nor the consent to any departure by Parent
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on Parent in any case shall entitle Parent to any other or further
notice or demand in the same, similar or other circumstances.
ARTICLE 12
Payment Blockage of Parent Guaranty
SECTION 12.01. Default on Bank Indebtedness. During the continuance of
any default with respect to any Bank Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, Parent may not pay its Guaranty for a period (a
"Parent Payment Blockage Period") commencing upon the receipt by the Trustee
(with a copy to Parent) of written notice (a "Parent Blockage Notice") of such
default from the Representative under the Credit Agreement specifying an
election to effect a Parent Payment Blockage Period and ending 179 days
thereafter (or earlier if such Parent Payment Blockage Period is terminated (i)
by written notice to the Trustee and Parent from the Person or Persons who gave
such Parent Blockage Notice, (ii) because the default giving rise to such Parent
Blockage Notice is no longer continuing or (iii) because such Bank Indebtedness
has been repaid in full in cash and any outstanding letters of credit, bonds and
guarantees under the Credit Agreement and any Hedging Obligations Incurred in
connection with the Credit Agreement have been fully cash collateralized).
Notwithstanding the provisions described in the immediately preceding sentence,
Parent shall resume payments pursuant to its Obligations after termination of
such Parent Payment Blockage Period. The Parent Guaranty shall not be subject
to more than one Parent Payment Blockage Period in any consecutive 360-day
period, irrespective of the number of defaults with respect to Bank Indebtedness
during such period. For purposes of this Section, no default or event of default
which existed or was continuing on the date of the commencement of any Parent
Payment Blockage Period with respect to the Bank Indebtedness initiating such
Parent Payment Blockage Period
<PAGE> 103
96
shall be, or be made, the basis of the commencement of a subsequent Parent
Payment Blockage Period by the Representative under the Credit Agreement whether
or not within a period of 360 consecutive days, unless such default or event of
default shall have been cured or waived for a period of not less than 180
consecutive days (it being acknowledged that any subsequent action, omission or
any breach of any financial covenants for a period commencing after the date of
commencement of such Parent Payment Blockage Period or other matter or thing
that, in any case, would give rise to a default pursuant to any provisions under
which a default previously existed or was continuing shall constitute a new
default for this purpose).
SECTION 12.02. Demand for Payment of Securities. If a demand for payment
(upon receipt of the requisite information from Parent) is made on Parent
pursuant to Article 11, Parent shall promptly notify the holders of the Bank
Indebtedness (or their Representative) of such demand.
SECTION 12.03. Relative Rights. This Article 12 defines the relative rights
of Securityholders and holders of Bank Indebtedness. Nothing in this Indenture
shall:
(1) impair, as between Parent and Securityholders, the obligations of
Parent, which is absolute and unconditional, to pay its Obligations to the
extent set forth in Article 11; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by Parent under its Obligations.
SECTION 12.04. Payment Blockage May Not Be Impaired by Parent. No right of
any holder of Bank Indebtedness to enforce the payment blockage of the
Obligations of Parent shall be impaired by any act or failure to act by Parent
or by its failure to comply with this Indenture.
SECTION 12.05. Notice to Representative. Whenever a notice is to be given
to holders of Bank Indebtedness, the notice may be given to their Representative
(if any).
SECTION 12.06. Article 12 Not to Prevent Defaults under Parent Guaranty or
Limit Right to Demand Payment. The failure to make a payment pursuant to the
Parent Guaranty by reason of any provision in this Article 12 shall not be
<PAGE> 104
97
construed as preventing the occurrence of a default under the Parent Guaranty.
Nothing in this Article 12 shall have any effect on the right of the
Securityholders or the Trustee to made a demand for payment on Parent pursuant
to Article 11.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail addressed as follows:
if to the Company:
Octel Developments PLC
P.O. Box 17
Oil Sites Road
Ellesmere Port, South Wirral
L65 4AF
ENGLAND
Attention of Company Secretary
if to Parent:
Octel Corp.
P.O. Box 17
Oil Sites Road
Ellesmere Port, South Wirral
L65 4AF
ENGLAND
Attention of Company Secretary
<PAGE> 105
98
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Finance Trust Services
Facsimile No. (212) 858-2952
The Company, Parent or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication regarding the Securities will be (so long as
the Securities are listed on the Luxembourg Stock Exchange and the rules of such
stock exchange shall so require) published in a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) and, in
the case of Definitive Securities, shall also be mailed by first class mail to
each Holder of Securities at its address appearing in the register of Holders.
For so long as any Securities are represented by the Global Securities, notices
to Holders shall (in addition to publication as described above) also be given
by delivery of the relevant notice to DTC, Euroclear and/or Cedel Bank (as the
case may be) for communication to the relative Holders of the Book-Entry
Interests. Such notice shall be sufficiently given if so published or mailed, as
the case may be, within the time prescribed.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered, five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next Business Day delivery.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
<PAGE> 106
99
SECTION 13.03. Communication by Holders with Other Holders. Securityholders
may communicate pursuant to TIA Section 312(b) with other Securityholders with
respect to their rights under this Indenture or the Securities. The Company,
Parent, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
<PAGE> 107
100
SECTION 13.06. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Trust Officer knows are so owned shall be so disregarded.
Also, subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or
a day on which banking institutions are not required to be open in the State of
New York. If a payment date is a Legal Holiday, payment shall be made on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
record date shall not be affected.
SECTION 13.09. Governing Law. This Indenture and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to the applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 13.10. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder, as such, of Parent or the Company shall have any
liability for any obligations of Parent or the Company under the Parent
Guaranty, the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 13.11. Successors. All agreements of the Company in this Indenture
and the Securities shall bind its
<PAGE> 108
101
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 13.12 Multiple Originals. The parties may sign any number of copies
of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 13.13 Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
ARTICLE 14
Security Forms
SECTION 14.01. Forms Generally. The Securities and the Trustee's
certificates of authentication thereof shall be in substantially the forms set
forth in this Article, with such appropriate legends, 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 or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities.
Upon their original issuance, Rule 144A Securities shall be issued in the
form of a Global Security in bearer form without interest coupons, which shall
be deposited on behalf of the Initial Purchasers with the Book-Entry Depositary
at its Luxembourg corporate trust office, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. Such Global Security,
together with its Successor Securities which are Global Securities other than
the Regulation S Global Security, are collectively herein called the "Restricted
Global Security". Upon their original issuance, Regulation S Securities shall be
issued in the form of a Global Security in bearer form without interest coupons,
which shall be deposited on behalf of the Initial Purchasers with the Book-Entry
Depositary at its New York corporate trust office, duly executed by the Company
<PAGE> 109
102
and authenticated by the Trustee as hereinafter provided. Such Global Security,
together with its Successor Securities which are Global Securities other than
the Restricted Global Security, are collectively herein called the "Regulation S
Global Security".
Upon receipt of the Restricted Global Security and the Regulation S Global
Security authenticated and delivered by the Trustee, the Book-Entry Depositary
shall issue to the Depositary a Depositary Interest in each such Global Security
by recording the Depositary Interest in the register of the Book-Entry
Depositary in the name of Cede & Co., as nominee of the Depositary. Ownership of
beneficial interests shall be limited to Participants, including Euroclear and
Cedel, and Indirect Participants. Upon the issuance of the Depositary Interest
in such Global Security to the Depositary, the Depositary shall credit, on its
internal book-entry registration and transfer system, its Participant's
accounts with respective interests owned by such Participants.
Neither the Depositary nor its Participants shall have any rights either
under this Indenture or under any Global Security with respect to such Global
Security held on their behalf by the Book-Entry Depositary, and the Book-Entry
Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Security for the
purpose of receiving payment of or on account of the principal of (premium, if
any) and, subject to the provisions of this Indenture, interest on the Global
Security and for all other purposes. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Book-Entry Depositary or impair, as between the
Book-Entry Depositary and the Depositary and its Participants, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Security.
The definitive Securities 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 all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
<PAGE> 110
103
SECTION 14.02. Form of Face of Security. [If a Global Security issued in
bearer form, then insert -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE BOOK-ENTRY
DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS SECURITY) IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. THIS SECURITY IS NOT EXCHANGEABLE
IN WHOLE OR IN PART OR TRANSFERABLE IN WHOLE OR IN PART EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.)
[If Restricted Securities, then insert -- THE SECURITIES EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)
(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.]
[If a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY
NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS SECURITY IS REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS
AVAILABLE.]
10% SENIOR NOTES DUE 2006
[IF RESTRICTED GLOBAL SECURITY - CUSIP NO. 675728AA7]
[IF REGULATION S SECURITY - CUSIP NO. U67502AA9]
[IF REGULATION S GLOBAL SECURITY - ISIN NO. - USU67502AA94]
No. ______________________ $ __________________
<PAGE> 111
Octel Developments PLC, a company organized under the laws of England and
Wales (herein called the "Issuer", which term includes any successor Person
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to [if this Security is a Global Security issued in bearer form,
then insert: the bearer hereof]. [If this Security is not a Global Security
issued in bearer form, then insert: __________, or registered assigns], the
principal sum of __________ Dollars [if this Security is a Global Security, then
insert: (which principal amount may from time to time be increased or decreased
to such other principal amounts by adjustments made on the records of the
trustee hereinafter referred to in accordance with the Indenture)] on May 1,
2006, and to pay interest thereon from May 5, 1998 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on May 1 and November 1 in each year, commencing November 1, 1998
at the rate of 10% per annum, until the principal hereof is paid or made
available for payment [If Initial Securities, then insert: provided, however,
that in the event that (i) by the 60th day after the Issue Date, neither the
Exchange Offer Registration Statement nor the Shelf Registration Statement has
been filed with the Commission; (ii) by the 180th day after the date of the
Issue Date, the Registered Exchange Offer is not consummated; (iii) by the 45th
day after the Issuer is obligated to file the Shelf Registration Statement such
filing has not occurred; (iv) by the 90th day after the Issuer becomes obligated
to file a Shelf Registration Statement such Shelf Registration Statement has not
been declared effective by the Commission or (v) after either the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared
effective, such Registration Statement thereafter ceases to be effective or
useable for its intended purposes without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (each such event referred to
in clauses (i) through (v), a "Registration Default" and each period during
which a Registration Default has occurred and is continuing, a "Registration
Default Period"), then, as liquidated damages for such Registration Default,
special interest ("Special Interest"), in addition to the rate of interest per
annum shown above, shall accrue at a per annum rate of 0.25% for the first 90
days of the Registration Default Period, at a per annum rate of 0.50% for the
second 90 days of the Registration Default Period, at a per annum rate of 0.75%
for the third 90 days of the Registration Default Period and at a per annum rate
of 1.0%
<PAGE> 112
105
thereafter for the remaining portion of the Registration Default Period;
provided that the Issuer shall in no event be required to pay Special Interest
for more than one Registration Default at any given time. The Special Interest
shall be payable in cash on the regular interest dates with respect to the
Securities. Any accrued and unpaid interest (including Special Interest) on this
Security upon the issuance of an Exchange Security (as defined in the Indenture)
in exchange for this Security shall cease to be payable to the Holder hereof but
such accrued and unpaid interest (including Special Interest) shall be payable
on the next Interest Payment Date for such Exchange Security to the Holder
thereof [if not a Global Security in bearer form, insert: on the related Regular
Record Date].] The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to [If this Security is a Global Security issued in bearer form, then insert:
the bearer hereof on the Interest Payment Date] [If this Security is not a
Global Security issued in bearer form, then insert: the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be
February 15 or August 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date]. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Interest Payment Date and may either be paid to [If this Security is a
Global Security issued in bearer form, then insert: the bearer hereof on the
Special Payment Date] [If this Security is not a Global Security issued in
bearer form, then insert: the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date,] or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture.
All payments made by or on behalf of the Issuer on or with respect to the
Securities (whether or not in the form of Definitive Notes), and all payments
made by or on behalf of Parent under or with respect to the Parent Guaranty will
be made without withholding or deduction for, or on account of, any present or
future taxes, duties,
<PAGE> 113
106
assessments or governmental charges of whatever nature (collectively, "Taxes")
imposed or levied by or on behalf of the United Kingdom (or the jurisdiction of
incorporation of any Successor Company of either) or any political subdivision
thereof or any authority having power to tax therein (each a "Tax Authority"),
unless the withholding or deduction of such Taxes is then required by law. If
any deduction or withholding for, or on account of, any Taxes of any Tax
Authority shall at any time be required on any payments made by the Issuer (or
Successor Company) on or with respect to the Securities or by Parent (or
Successor Company) under or with respect to the Parent Guaranty, including
payments of principal, redemption price, interest, additional interest or
premium, the Issuer or Parent, as the case may be, will pay such additional
amounts (the "Additional Amounts") as may be necessary in order that the net
amounts received in respect of such payments by the Holders of the Securities
(including Additional Amounts) or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; except that no such Additional Amounts will be payable with respect
to:
(i) in the case of Securities listed on a Recognized Stock Exchange
at the time such Additional Amounts would be payable, any payments on a
Security held by or on behalf of a Holder or a beneficial owner who is
liable for such Taxes in respect of such Security by reason of the Holder
or beneficial owner having some connection with the United Kingdom or the
jurisdiction of incorporation of any Successor Company (including being a
citizen or resident or national of, or carrying on a business or
maintaining a permanent establishment in, or being physically present in,
the United Kingdom or the jurisdiction of incorporation of any Successor
Company) other than by the mere holding of such Security or enforcement of
rights thereunder or the receipt of payments in respect thereof;
(ii) in the case of Securities listed on a Recognized Stock Exchange
at the time such Additional Amounts would be payable, any Taxes that are
imposed or withheld as a result of a change in law after the Issue Date
where such withholding or imposition is by reason of the failure of the
Holder or beneficial owner of the Security to comply with any reasonable
request by the Issuer to provide information concerning the nationality,
residence or identity of such Holder or
<PAGE> 114
107
beneficial owner or to make any declaration or similar claim or satisfy any
information or reporting requirement, (A) if such compliance is required or
imposed by a statute, treaty, regulation or administrative practice of the
taxing jurisdiction as a precondition to exemption from all or part of such
Taxes, (B) such Holder may legally comply with such requirements and (C) at
least 30 days prior to the date on which the Issuer shall apply this clause
(ii), the Issuer shall have notified such Holders of such requirements;
(iii) except in the case of the winding up of the Issuer, any Security
presented for payment (where presentation is required) in the United
Kingdom or the jurisdiction of incorporation of any Successor Company
(unless presentment could not have been made elsewhere); or
(iv) any Security presented for payment (where Securities are in the
form of Definitive Notes and presentation is required) more than 30 days
after the relevant payment is first made available for payment to the
Holder (except to the extent that the Holder would have been entitled to
Additional Amounts had the Security been presented on any day (including
the last day) within such 30 day period).
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Security been the Holder of the Security, it would not have been
entitled to payment of Additional Amounts by reason of any of clauses (i) to
(iv) inclusive above.
Where required by applicable law, the Issuer, Parent or any Paying Agent,
as the case may be, will also (i) make any required withholding or deduction in
respect of any Taxes and (ii) remit the full amount deducted or withheld to the
relevant Tax Authority in accordance with applicable law. The Issuer or Parent,
as the case may be, will furnish or cause to be furnished to the Trustee, within
30 days after the date of the payment of any Taxes due pursuant to applicable
law, certified copies of tax receipts satisfactory to the Trustee evidencing
such payment by the Issuer or Parent, as the case may be. Copies of such
receipts will be made available to Holders of Notes that are outstanding on the
date of such withholding or deduction for or on account of Taxes upon request.
Further, the Issuer or Parent, as the case may be, will indemnify and hold
harmless
<PAGE> 115
108
each Holder of Notes (other than a Holder described in clauses (i)-(iv) of
paragraph (a) above) and upon written request will promptly reimburse each such
Holder for the amount of (1) any Taxes levied or imposed and paid by such Holder
as a result of payments made on or with respect to the Notes or under or with
respect to the Parent Guarantee, (2) any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto and (3) any
Taxes imposed with respect to any reimbursement under (1) or (2), but excluding
any Taxes based on a Holder's net income.
Whenever in the Indenture or under the Securities there is mentioned, in
any context, (i) the payment of principal, (ii) purchase prices in connection
with a purchase of Securities, (iii) interest or (iv) any other amount payable
on or with respect to any of the Securities, such mention shall be deemed to
include mention of the payment of Additional Amounts provided for this Section
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
The Issuer or Parent, as the case may be, will pay any present or future
stamp, court or documentary taxes, or any other excise or property taxes,
charges or similar levies which arise in any jurisdiction from the execution,
delivery or registration of the Securities, the Parent Guaranty or any other
document or instrument referred to therein, or the receipt of any payments on or
with respect to the Securities or under or with respect to the Parent Guaranty,
excluding any such taxes, charges or similar levies imposed by any jurisdiction
outside of the United Kingdom, the United States of America or any jurisdiction
in which a Paying Agent is located, other than those resulting from, or required
to be paid in connection with, the enforcement of the Securities or any other
such document or instrument following the occurrence of any Event of Default
with respect to the Securities.
The Issuer shall promptly pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities and in the
Indenture. Principal and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with the Indenture
money sufficient to pay all principal and interest then due and the Trustee or
the Paying Agent, as the case may be, is not prohibited from paying such money
to the Securityholders on that date pursuant to the terms of the Indenture.
<PAGE> 116
109
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
Dated:
OCTEL DEVELOPMENTS PLC,
by
----------------------
Name:
Title:
by
----------------------
Name:
Title:
<PAGE> 117
110
SECTION 14.03. Form of Reverse of Security. This Security is one of a
duly authorized issue of Securities of the Issuer designated as its 10% Senior
Notes due 2006 (the "Securities") issued under an Indenture, dated as of May 5,
1998 (herein called the "Indenture"), between the Issuer, Octel Corp., as the
guarantor (the "Guarantor") and IBJ Schroder Bank & Trust Company, as trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture). Reference is hereby made to the Indenture and all indentures
supplemental thereto for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Issuer, the Guarantor, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor more than 60
days' notice by mail to each Holder of Securities to be redeemed at such
Holder's registered address, in amounts of $1,000 or an integral multiple of
$1,000, at any time on or after May 1, 2002 and prior to maturity, as a whole or
in part, at the election of the Issuer, at the following Redemption Prices
(expressed as percentages of the principal amount) plus accrued interest to the
Redemption Date (subject to the right of Holders [If this Security is not a
Global Security issued in bearer form, insert: on the relevant Regular Record
Date] on the relevant record date to receive interest due on the relevant
Interest Payment Date), if redeemed during the 12-month period commencing May 1,
of each of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 105.000%
2003 103.333%
2004 101.667%
2005 and
thereafter 100.000%
</TABLE>
In addition, at any time prior to May 1, 2002, the Securities will be
redeemable, in whole or from time to time in part, at the option of the Issuer
on any date, upon not less than 30 nor more than 60 days' prior notice, at a
redemption price equal to the greater of (i) 100% of the principal amount of the
Securities to be redeemed and
<PAGE> 118
111
(ii) the sum of the present values of (A) the redemption price of such Security
at May 1, 2002 (as set forth in the table above), and (B) the remaining
scheduled payments of interest thereon to May 1, 2002 (exclusive of interest
accrued to such redemption date) discounted to such redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 50 basis points, plus, in either case, accrued and unpaid
interest on the principal amount being redeemed to such redemption date;
provided that installments of interest on Securities which are due and payable
on an interest payment date falling on or prior to the relevant redemption date
shall be payable to the Holders of such Securities at the close of business on
the relevant regular record date according to their terms and the provisions of
the Indenture.
The Indenture requires the Issuer to provide for the retirement, by
redemption, of $37.5 million principal amount of the Securities on each of May
1, 2003, May 1, 2004 and May 1, 2005, in each case at a redemption price equal
to 100% of the principal amount thereof, plus accrued interest to the redemption
date. The Issuer may, at its option, receive credits against such mandatory
redemptions for the principal amount of Securities acquired or redeemed (other
than through this mandatory redemption provision) by the Issuer and surrendered
to the Trustee for cancelation.
The Securities may be redeemed, at the option of the Issuer, in whole but
not in part, at any time upon giving not less than 30 or nor more than 60 days'
notice to the Holders (which notice shall be irrevocable), at a redemption price
equal to the principal amount thereof, together with accrued and unpaid
interest, if any, to the date fixed by the Issuer for redemption (a "Tax
Redemption Date") and all Additional Amounts, if any, then due and which will
become due on the tax Redemption Date as a result of the redemption or
otherwise, if the Issuer determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations, protocols or rulings
promulgated thereunder) of the United Kingdom (or any political subdivision or
taxing authority of the United Kingdom) affecting taxation which change or
amendment becomes effective on or after the Issue Date, (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after
<PAGE> 119
112
the Issue Date or (iii) the issuance of Definitive Securities due to (A) DTC
being at any time unwilling or unable to continue as or ceasing to be a clearing
agency registered under the Exchange Act, and a successor to DTC registered as a
clearing agency under the Exchange Act is not able to be appointed by the Issuer
within 90 days or (B) the Book-Entry Depositary being at any time unwilling or
unable to continue as a book-entry depositary and a successor Book-Entry
Depositary is not able to be appointed by the Issuer within 90 days, the Issuer
is or on the next interest payment date the Issuer would be, required to pay
Additional Amounts, and the Issuer determines that such payment obligation
cannot be avoided by the Issuer taking reasonable measures. Notwithstanding the
foregoing, no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Issuer would be obligated to make such
payment or withholding if a payment in respect of the Securities was then due.
Prior to the publication or, where relevant, mailing of any notice of redemption
of the Securities pursuant to the foregoing, the Issuer will deliver to the
Trustee an Opinion of Counsel to the effect that the circumstances referred to
above exist. The trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
The Indenture provides that, subject to certain conditions, upon the
occurrence of a Change of Control, each Holder shall have the right to require
that the Issuer repurchase such Holder's Securities at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date).
[If not a Global Security: In the event of redemption or purchase pursuant
to an Offer to Purchase of this Security in part only, a new Security or
Securities of like tenor for the unredeemed or unpurchased portion hereof will
be issued in the name of the Holder hereof upon the cancelation hereof.]
In the event of a deposit or withdrawal of a beneficial interest in this
Security (including upon an exchange, transfer, redemption or repurchase of this
Security in part only) effected in accordance with the Applicable Procedures,
the Security Registrar, upon receipt
<PAGE> 120
113
of notice of such event from the Depositary's custodian for this Security,
shall make an adjustment on its records to reflect an increase or decrease of
the outstanding principal amount of this Security resulting from such deposit
or withdrawal, as the case may be, and shall instruct the Book-Entry Depositary
to make a similar notation in its book-entry system to the corresponding
Depositary Interest.
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof with the consent of the holders of a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a purchase of, or a tender offer or exchange for, the
Securities). In addition, any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
Securities).
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Security, or (ii) certain restrictive covenants
with respect to this Security, in each case upon compliance with certain
conditions set forth therein.
Unless the context otherwise requires, the Initial Securities, the
Exchange Securities and the Private Exchange Securities shall constitute one
series for all purposes under the Indenture, including without limitation,
amendments, waivers, and redemptions.
[If this Security is not a Global Security issued in bearer form, then
insert: As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Issuer in the Borough of Manhattan, the City of New
York, New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the issuer and the Security Registrar duly
executed by the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and like tenor
and
<PAGE> 121
114
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.]
The Global Securities are issuable only in bearer form without coupons in
denominations of $1,000 and any integral multiple thereof. Definitive Securities
shall be integral multiple thereof. Definitive Securities shall be issuable in
registered form without interest coupons in denominations of $1,000 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities are exchangeable for a like tenor and
aggregate principal amount of Securities of a different authorized denomination,
as requested by the Holder surrendering the same.
The bearer of this Security shall be treated as the owner of this Security
for all purposes.
No service charge shall be made for any such registration of transfer or
exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
[If this Security is not a global Security issued in bearer form, insert:
Prior to due presentment of this Security for registration of transfer, the
Issuer, the Guarantor, the Trustee and any agent of the Issuer, the Guarantor,
or the Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security be overdue, and
neither the Issuer, the Guarantor, the Trustee nor any such agent shall be
affected by notice to the contrary.]
Interest on this Security shall be computed on the basis of a 360-day year
of twelve 30-day months; Special Interest shall be computed on the basis of a
360-day year and the number of days actually elapsed.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
<PAGE> 122
115
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase Custodian
- -------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 123
116
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuer
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
[ ]
If you want to elect to have only a part of this Security purchased by
the Issuer pursuant to Section _____________ of the Indenture, state the
amount $_____________
Dated: Your Signature:
-------------- ---------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
----------------------------------------------
Notice: Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Security Registrar which
requirements will include membership or
participation in STAMP or such other "signature
guarantee program" as may be determined by the
Trustee in addition to, or in substitution for
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
SECTION 14.04. Form of Trustee's Certificate of Authentication. This
is one of the Securities referred to in the within-mentioned Indenture.
Dated: IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
by
----------------------------
Authorized Signatory
<PAGE> 124
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
OCTEL DEVELOPMENTS PLC.
by /s/ GRAHAM M. LEATHES
------------------------
Name: Graham M. Leathes
Title: Company Secretary
OCTEL CORP.
by /s/ GRAHAM M. LEATHES
------------------------
Name: Graham M. Leathes
Title: Secretary
IBJ SCHRODER BANK & TRUST
by
-----------------------
Name:
Title:
<PAGE> 125
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
OCTEL DEVELOPMENTS PLC,
by
-------------------------------
Name:
Title:
OCTEL CORP.,
by
-------------------------------
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee,
by
/s/ STEPHEN J. GIURLANDO
-------------------------------
Name: STEPHEN J. GIURLANDO
Title: ASSISTANT VICE PRESIDENT
<PAGE> 126
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to section 2.13(b)(i) and (iii)
of the Indenture)
IBJ Schroder Bank & Trust Company,
as Trustee
One State Street
New York, NY 10004
Re: 10% Senior Notes due 2006 of
Octel Developments PLC (the "Securities")
Reference is made to the Indenture, dated as of May 5, 1998 (the
"Indenture"), among Octel Developments PLC (the "Issuer"), Octel Corp. (the
"Guarantor") and IBJ Schroder Bank & Trust company, as Trustee. Terms used
herein and defined in the Indenture or in Regulation S or Rule 144 under the
U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to U.S. $_________________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). _______________________________________
CERTIFICATE No(s). _________________________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest in the name of the
Undersigned. If the Specified Securities are not represented by a Global
Security, they are registered in the name of the Undersigned, as or on behalf of
the Owner.
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take
<PAGE> 127
delivery in the form of a Regulation S Security. In connection with such
transfer, the Owner hereby certifies that, unless such transfer is being
effected pursuant to an effective registration statement under the Securities
Act, it is being effected in accordance with Rule 904 or Rule 144 under the
Securities Act and with all applicable securities laws of the states of the
United States and other jurisdictions. Accordingly, the Owner hereby further
certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Issuer or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or through
the facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another designated
offshore securities market and neither the Owner nor any person
acting on its behalf knows that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
A-2
<PAGE> 128
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Securities were last acquired from the
Issuer or from an affiliate of the Issuer, whichever is later, and is
being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at least
two years (computed in accordance with paragraph (d) of Rule 144) has
elapsed since the Specified Securities were last acquired from the
Issuer or from an affiliate of the Issuer, whichever is later, and the
Owner is not, and during the preceding three months has not been, an
affiliate of the Issuer.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the Purchasers.
Dated: ___________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
by:________________________________
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
A-3
<PAGE> 129
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 2.13(b) (ii) and (iii) of the Indenture)
IBJ Schroder Bank & Trust Company,
as Trustee
One State Street
New York, NY 10004
Re: 10% Senior Notes due 2006 of
Octel Developments PLC (the "Securities")
Reference is made to the Indenture, dates as of May 5, 1998 (the
"Indenture"), among Octel Developments PLC (the "Issuer"), Octel Corp. (the
"Guarantor") and IBJ Schroder Bank & Trust Company, as Trustee. Terms used
herein and defined in the indenture or in Regulation S or Rule 144 under the
U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein
as so defined.
This certificate relates to U.S. $____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________________
CERTIFICATE No(s). _____________________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest in the name of the
Undersigned. If the Specified Securities are not represented by a Global
Security, they are registered in the name of the Undersigned, as or on behalf of
the Owner.
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of a Restricted
Security. In connection with such transfer, the Owner hereby certifies that,
unless such transfer is being effected pursuant to an effective registration
statement under the Securities Act, it is being effected in
B-1
<PAGE> 130
accordance with Rule 144A or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 144A Transfer. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe
is a "qualified institutional buyer" within the meaning of Rule 144A,
acquiring for its own account or for the account of a qualified
institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(2) Rule 144 Transfers. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the Specified Securities were last acquired from the
Issuer or from an affiliate of the Issuer, whichever is later, and is
being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at
least two years (computed in accordance with paragraph (d) of Rule
144) has elapsed since the Specified Securities were last acquired
from the Issuer or from an affiliate of the Issuer, whichever is
later, and the Owner is not, and during the preceding three months has
not been, an affiliate of the Issuer.
B-2
<PAGE> 131
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer and the Purchasers.
Dated: ______________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
by: ________________________
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
B-3
<PAGE> 132
ANNEX C-- Form of Unrestricted
Securities Certificates
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 2.13(c))
IBJ Schroder Bank & Trust Company,
as Trustee
One State Street
New York, NY 10004
Re: 10% Senior Notes due 2006 of
Octel Development PLC (the "Securities")
Reference is made to the Indenture, dated as of May 5, 1998 (the
"Indenture"), among Octel Developments PLC (the "Issuer"), Octel Corp. (the
"Guarantor") and IBJ Schroder Bank & Trust Company, as Trustee. Terms used
herein and defined in the Indenture or in Regulation S or Rule 144 under the
U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein
as so defined.
This certificate related to U.S. $__________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). _______________
CERTIFICATE No(s). _______________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Book-Entry Depositary who issued a Depositary Interest to the
Depositary (or its nominee) who holds such interest in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
<PAGE> 133
EXHIBIT A
[FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
*
**
OCTEL DEVELOPMENTS PLC
10% SENIOR NOTES DUE 2006
CUSIP NO.__________
ISIN NO.___________
No.______ $_______________
Octel Developments PLC, a company organized under the laws of England and Wales
(herein called the "Issuer", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to the bearer hereof, the principal sum of __________________________ (which
principal amount may from time to time be increased or decreased to such other
principal amounts by adjustments made on the records of the Trustee hereinafter
referred to in accordance with the Indenture) on May 1, 2006, and to pay
interest thereon from May 5, 1998 or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, semi-annually on May 1 and
November 1 in each year, commencing November 1, 1998 at the rate of 10% per
annum, until the principal hereof is paid or made available for payment;
provided, however, that in the event that (i) by the 60th day after the Issue
Date, neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement has been filed with the Commission; (ii) by the 180th day
after the date of the Issue Date, the Registered Exchange Offer is not
consummated; (iii) by the 45th day after the Issuer is obligated to file the
Shelf Registration Statement such filing has not occurred; (iv) by the 90th day
after the Issuer becomes obligated to file a Shelf Registration Statement such
Shelf Registration Statement has not been declared effective by the Commission
or (v) after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective or useable for its intended purposes without
being succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared effective
immediately (each such event referred to in
________________
*. If the Security is to be issued in global form add the Global
Securities legend from Section 14.02 of the Indenture.
**. If the Security is a Private Exchange Security issued in a Private
Exchange to an Initial Purchaser holding an unsold portion of its initial
allotment, add the Restricted Securities legend from Section 14.02 of the
Indenture.
E-1
<PAGE> 134
clauses (i) through (v), a "Registration Defaults" and each period during which
a Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration default, special
interest ("Special Interest"), in addition to the rate of interest per annum
shown above, shall accrue at a per annum rate of 0.25% for the first 90 days of
the Registration Default Period, at a per annum rate of 0.50% for the second 90
days of the Registration Default Period, at a per annum rate of 0.75% for the
third 90 days of the Registration Default Period and at a per annum rate of 1.0%
thereafter for the remaining portion of the Registration Default Period;
provided that the Issuer shall in no event be required to pay Special Interest
for more than one Registration Default at any given time. The Special Interest
shall be payable in cash on the regular interest dates with respect to the
Securities. Any accrued and unpaid interest (including Special Interest) on this
Security upon the issuance of an Exchange Security in exchange for this Security
shall cease to be payable to the Holder hereof but such accrued and unpaid
interest (including Special Interest) shall be payable on the next Interest
Payment Date for such Exchange Security to the Holder thereof. 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 bearer hereof on the Interest
Payment Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Interest Payment Date and
may either be paid to the bearer hereof on the Special Payment Date or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.
All payments made by or on behalf of the Issuer on or with respect to the
Securities (whether or not in the form of Definitive Notes), and all payments
made by or on behalf of Parent under or with respect to the Parent Guaranty will
be made without withholding or deduction for, or on account of, any present or
future taxes, duties, assessments or governmental charges of whatever nature
(collectively, "Taxes") imposed or levied by or on behalf of the United Kingdom
(or the jurisdiction of incorporation of any Successor Company of either) or any
political subdivision thereof or any authority having power to tax therein (each
a "Tax Authority"), unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on account of, any
Taxes of any Tax Authority shall at any time be required on any payments made by
the Issuer (or Successor Company) on or with respect to the Securities or by
Parent (or Successor Company) under or with respect to the Parent Guaranty,
including payments of principal, redemption price, interest, additional interest
or premium, the
<PAGE> 135
Issuer or Parent, as the case may be, will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Securities (including
Additional Amounts) or the Trustee, as the case may be, after such withholding
or deduction, equal the respective amounts which would have been received in
respect of such payments in the absence of such withholding or deduction; except
that no such Additional Amounts will be payable with respect to:
(i) in the case of Securities listed on a Recognized Stock Exchange
at the time such Additional Amounts would be payable, any payments on a
Security held by or on behalf of a Holder or a beneficial owner who is
liable for such Taxes in respect of such Security by reason of the Holder
or beneficial owner having some connection with the United Kingdom or the
jurisdiction of incorporation of any Successor Company (including being a
citizen or resident or national of, or carrying on a business or
maintaining a permanent establishment in, or being physically present in,
the United Kingdom or the jurisdiction of incorporation of any Successor
Company) other than by the mere holding of such Security or enforcement of
rights thereunder or the receipt of payments in respect thereof;
(ii) in the case of Securities listed on a Recognized Stock Exchange
at the time such Additional Amounts would be payable, any Taxes that are
imposed or withheld as a result of a change in law after the Issue Date
where such withholding or imposition is by reason of the failure of the
Holder or beneficial owner of the Security to comply with any reasonable
request by the Issuer to provide information concerning the nationality,
residence or identity of such Holder or beneficial owner or to make any
declaration or similar claim or satisfy any information or reporting
requirement, (A) if such compliance is required or imposed by a statute,
treaty, regulation or administrative practice of the taxing jurisdiction as
a precondition to exemption from all or part of such Taxes, (B) such Holder
may legally comply with such requirements and (C) at least 30 days prior to
the date on which the Issuer shall apply this clause (ii), the Issuer shall
have notified such Holders of such requirements;
(iii) except in the case of the winding up of the Issuer, any Security
presented for payment (where presentation is required) in the United
Kingdom or the jurisdiction of incorporation of any Successor Company
(unless presentment could not have been made elsewhere); or
E-3
<PAGE> 136
(iv) any Security presented for payment (where Securities are in the
form of Definitive Notes and presentation is required) more than 30 days
after the relevant payment is first made available for payment to the
Holder (except to the extent that the Holder would have been entitled to
Additional Amounts had the Security been presented on any day (including
the last day) within such 30 day period).
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Security been the Holder of the Security, it would not have been
entitled to payment of Additional Amounts by reason of any of clauses (i) to
(iv) inclusive above.
Where required by applicable law, the Issuer, Parent or any Paying Agent,
as the case may be, will also (i) make any required withholding or deduction in
respect of any Taxes and (ii) remit the full amount deducted or withheld to the
relevant Tax Authority in accordance with applicable law. The Issuer or Parent,
as the case may be, will furnish or cause to be furnished to the Trustee,
within 30 days after the date of the payment of any Taxes due pursuant to
applicable law, certified copies of tax receipts satisfactory to the Trustee
evidencing such payment by the Issuer or Parent, as the case may be. Copies of
such receipts will be made available to Holders of Notes that are outstanding
on the date of such withholding or deduction for or on account of Taxes upon
request. Further, the Issuer or Parent, as the case may be, will indemnify and
hold harmless each Holder of Notes (other than a Holder described in clauses
(i) - (iv) of paragraph (a) above) and upon written request will promptly
reimburse each such Holder for the amount of (1) any Taxes levied or imposed
and paid by such Holder as a result of payments made on or with respect to the
Notes or under or with respect to the Parent Guarantee, (2) any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto and (3) any Taxes imposed with respect to any reimbursement under (1)
or (2), but excluding any Taxes based on a Holder's net income.
Whenever in the Indenture or under the Securities there is mentioned, in
any context, (i) the payment of principal, (ii) purchase prices in connection
with a purchase of Securities, (iii) interest or (iv) any other amount payable
on or with respect to any of the Securities, such mention shall be deemed to
include mention of the payment of Additional Amounts provided for in this
Section to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof.
The Issuer or Parent, as the case may be, will pay any present or future
stamp, court or documentary taxes, or any other
E-4
<PAGE> 137
excise or property taxes, charges or similar levies which arise in any
jurisdiction from the execution, delivery or registration of the Securities,
the Parent Guaranty or any other document or instrument referred to therein, or
the receipt of any payments on or with respect to the Securities or under or
with respect to the Parent Guaranty, excluding any such taxes, charges or
similar levies imposed by any jurisdiciton outside of the United Kingdom, the
United States of America or any jurisdiction in which a Paying Agent is
located, other than those resulting from, or required to be paid in connection
with, the enforcement of the Securities or any other such document or
instrument following the occurrence of any Event of Default with respect to the
Securities.
The Issuer shall promptly pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities and in the
Indenture. Principal and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with the Indenture
money sufficient to pay all principal and interest then due and the Trustee or
the Paying Agent, as the case may be, is not prohibited from paying such money
to the Securityholders on that date pursuant to the terms of the Indenture.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE> 138
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed.
Dated:
OCTEL DEVELOPMENTS PLC
by
-----------------------------
Name:
Title:
by
-----------------------------
Name:
Title:
E-6
<PAGE> 139
[REVERSE SIDE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
OCTEL DEVELOPMENTS PLC
10% Senior Notes due 2006
This Security is one of a duly authorized issue of Securities of the Issuer
designated as its 10% Senior Notes due 2006 (the "Securities") issued under an
Indenture, dated as of May 5, 1998 (herein called the "Indenture"), among the
Issuer, Octel Corp., as a guarantor (the "Guarantor") and IBJ Schroder Bank &
Trust Company, as trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture). Reference is hereby made to the
Indenture and all indentures supplemental thereto for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Issuer, the Guarantor, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail to each Holder of Securities to be redeemed at such
Holder's registered address, in amounts of $1,000 or an integral multiple of
$1,000, at any time on or after May 1, 2002 and prior to maturity, as a whole or
in part, at the election of the Issuer, at the following Redemption Prices
(expressed as percentages of the principal amount) plus accrued interest to the
Redemption Date (subject to the right of Holders on the relevant record date to
receive interest due on the relevant Interest Payment Date, if redeemed during
the 12-month period commencing May 1, of each of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002 105.000%
2003 103.333%
2004 101.667%
2005 and
thereafter 100.000%
</TABLE>
In addition, at any time prior to May 1, 2002, the Securities will be
redeemable, in whole or from time to time in part, at the option of the Issuer
on any date, upon not less than 30 nor more than 60 days' prior notice, at a
redemption price equal to the greater if (i) 100% of the principal amount of the
Securities to be redeemed and (ii) the sum of the present values of (A) the
redemption price of such Security at May 1, 2002 (as set forth in the table
above), and (B) the remaining scheduled
E-7
<PAGE> 140
payments of interest thereon to May 1, 2002 (exclusive of interest accrued to
such redemption date) discounted to such redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 50 basis points, plus, in either case, accrued and unpaid interest on
the principal amount being redeemed to such redemption date; provided that
installments of interest on Securities which are due and payable on an interest
payment date falling on or prior to the relevant redemption date shall be
payable to the Holders of such Securities at the close of business on the
relevant regular record date according to their terms and the provisions of the
Indenture.
The Indenture requires the Issuer to provide for the retirement, by
redemption, of $37.5 million principal amount of the Securities on each of
May 1, 2003, May 1, 2004 and May 1, 2005, in each case at a redemption price
equal to 100% of the principal amount thereof, plus accrued interest to the
redemption date. The Issuer may, at its option, receive credits against such
mandatory redemptions for the principal amount of Securities acquired or
redeemed (other than through this mandatory redemption provision) by the Issuer
and surrendered to the Trustee for cancelation.
The Securities may be redeemed, at the option of the Issuer, in whole but
not in part, at any time upon giving not less then 30 nor more than 60 days'
notice to the Holders (which notice shall be irrevocable), at a redemption price
equal to the principal amount thereof, together with accrued and unpaid
interest, if any, to the date fixed by the Issuer for redemption (a "Tax
Redemption Date") and all Additional Amounts, if any, then due and which will
become due on the Tax Redemption Date as a result of the redemption or
otherwise, if the Issuer determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations, protocols or rulings
promulgated thereunder) of the United Kingdom (or any political subdivision or
taxing authority of the United Kingdom) affecting taxation which change or
amendment becomes effective on or after the Issue Date, (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the Issue Date or (iii) the
issuance of Definitive Securities due to (A) DTC being at any time unwilling or
unable to continue as or ceasing to be a clearing agency registered under the
Exchange Act, and a successor to DTC registered as a clearing agency under the
Exchange Act is not able to be appointed by the Issuer within 90 days or (B) the
Book-Entry Depositary being at any time unwilling or unable to continue as a
book-entry depositary and a successor Book-Entry Depositary is not able to be
appointed by
E-8
<PAGE> 141
the Issuer within 90 days, the Issuer is or on the next interest payment date
the Issuer would be, required to pay Additional Amounts, and the Issuer
determines that such payment obligation cannot be avoided by the Issuer taking
reasonable measures. Notwithstanding the foregoing, no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Issuer would be obligated to make such payment or withholding if a payment in
respect of the Securities was then due. Prior to the publication or, where
relevant, mailing of any notice of redemption of the Securities pursuant to the
foregoing, the Issuer will deliver to the Trustee an Opinion of Counsel to the
effect that the circumstances referred to above exist. The Trustee shall accept
such opinion as sufficient evidence of the satisfaction of the conditions
precedent described above, in which event it shall be conclusive and binding on
the Holders.
The Indenture provides that, subject to certain conditions, upon the
occurrence of a Change of Control, each Holder shall have the right to require
that the Issuer repurchase such Holder's Securities at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date).
In the event of a deposit or withdrawal of a beneficial interest in; this
Security (including upon an exchange, transfer, redemption or repurchase of this
Security in part only) effected in accordance with the Applicable Procedures,
the Security Registrar, upon receipt of notice of such event from the
Depositary's custodian for this Security, shall make an adjustment on its
records to reflect an increase or decrease of the outstanding principal amount
of this Security resulting from such deposit or withdrawal, as the case may be,
and shall instruct the Book-Entry Depositary to make a similar notation in its
book-entry system to the corresponding Depositary Interest.
If an Event of Default shall occur and be continuing the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof with the consent of the holders of a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a purchase of, or a tender offer or exchange for, the
Securities). In addition, any past default or compliance with any provisions may
also be waived with the consent of the holders of a majority in principal amount
of the Securities then outstanding (including
E-9
<PAGE> 142
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Securities).
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Security, or (ii) certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth therein.
Unless the context otherwise requires, the Initial Securities, the Exchange
Securities and the Private Exchange Securities shall constitute one series for
all purposes under the Indenture, including without limitation, amendments,
waivers and redemptions.
The Global Securities are issuable only in bearer form without coupons in
denominations of $1,000 and any integral multiple thereof. Definitive Securities
shall be issuable in registered form without interest coupons in denominations
of $1,000 and any integral multiple thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities are exchangeable
for a like tenor and aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
The bearer of this Security shall be treated as the owner of this Security
for all purposes.
No service charge shall be made for any such registration of transfer or
exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Interest on this Security shall be computed on the basis of a 360-day year
of twelve 30-day months; Special Interest shall be computed on the basis of a
360-day year, as the case may be, and the number of days actually elapsed.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
<PAGE> 143
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Principal amount Signature of
Amount of decrease Amount of increase of this Global authorized officer
in Principal in Principal Security following of Trustee or
Date of Amount of this Amount of this such decrease or Securities
Exchange Global Security Global Security increase Custodian
- -------- ------------------ ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
</TABLE>
E-11
<PAGE> 144
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuer
pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
[ ]
If you want to elect to have only a part of this Security purchased by the
Issuer pursuant to Section ____________ of the Indenture, state the amount:
$___________
Dated:______________________ Your Signature:___________________________________
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:____________________________________________________________
Notice: Signature(s) must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the
Security Registrar which requirements will include
membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the
Trustee in addition to, or in substitution for STAMP, all
in accordance with the Securities Exchange Act of 1934, as
amended.
<PAGE> 145
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
IBJ SCHRODER BANK & TRUST COMPANY,
As Trustee
by ______________________________
Authorized Signatory
E-13
<PAGE> 1
Exhibit 4.3
EXECUTION COPY
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of April 30, 1998,
among Octel Developments PLC, a company organized under the laws of England and
Wales. (the "Company"), Octel Corp., a Delaware corporation and the parent
corporation of the Company (the "Guarantor") and Goldman, Sachs & Co., Lehman
Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
purchasers (collectively, the "Purchasers") of the 10% Senior Notes due 2006,
of the Company, which are unconditionally guaranteed by the Guarantor.
The Company proposes to issue and sell to the Purchasers upon the terms
set forth in the Purchase Agreement (as defined herein) the Securities (as
defined herein). As an inducement to the Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the
Purchasers thereunder, the Company agrees with the Purchasers for the benefit
of holders (as defined herein) from time to time of the Registrable Securities
(as defined herein) as follows:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue on
the Securities under the terms thereof and the Indenture, without giving
effect to the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.
"Effective Time" in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Exchange Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
-1-
<PAGE> 2
"Great Lakes" shall mean Great Lakes Chemical Corporation, a Delaware
corporation.
"Guarantor" shall mean Octel Corp., a Delaware corporation.
The term "holder" shall mean each of the Purchasers and other persons
who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
"Indenture" shall mean the Indenture, dated as of May 1, 1998, among
the Company, the Guarantor and IBJ Schroder Bank & Trust Company, as
Trustee, as the same shall be amended from time to time.
"Issue Date" shall mean May 5, 1998.
"Notes" shall mean the 10% Senior Notes due 2006 of the Company.
The term "person" shall mean a corporation, association, partnership,
organization, business, limited liability company, individual, government
or political subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
April 30, 1998, among the Purchasers, the Company and the Guarantor
relating to the Securities.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) (provided that any Exchange Security received by a
broker-dealer in an Exchange Offer in exchange for a Registrable Security
that was not acquired by the broker-dealer directly from the Company will
also be a Registrable Security through and including the earlier of the
90th day after the Exchange Offer is completed or such time as such
broker-dealer no longer owns such Security); (ii) in the circumstances
contemplated by Section 2(b) hereof, a Shelf Registration Statement
registering such Security under the Securities Act has been declared or
becomes effective and such Security has been sold or otherwise transferred
by the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Security is sold
pursuant to Rule 144 under circumstances in which any legend borne by such
Security relating to restrictions on transferability thereof, under the
Securities Act or otherwise, is removed by the Company or pursuant to the
Indenture; (iv) such Security is eligible to be sold pursuant to paragraph
(k) of Rule 144; or (v) such Security shall cease to be outstanding.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Securities outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of a distribution (within
the meaning of the Securities Act) of Exchange Securities and (iv) a holder
that is a broker-dealer, but only with respect to Exchange Securities
received by such broker-dealer pursuant to an Exchange Offer in exchange
for Registrable Securities acquired by the broker-dealer directly from the
Company.
-2-
<PAGE> 3
"Rule 144", "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities" shall mean, collectively, the 10% Senior Notes due 2006
of the Company to be issued and sold to the Purchasers, and securities
issued in exchange therefor or in lieu thereof pursuant to the Indenture.
Each Security is entitled to the benefit of the guarantee provided for in
the Indenture (the "Guarantee") and, unless the context otherwise requires,
any reference herein to a "Security," an "Exchange Security," a "Transfer
Restricted Security" or a "Registrable Security" shall include a reference
to the Guarantee.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to file
under the Securities Act, as soon as practicable, but no later than 60 days
after the Issue Date, a registration statement relating to an offer to
exchange (such registration statement, the "Exchange Registration Statement",
and such offer, the "Exchange Offer") any and all of the Securities for a like
aggregate principal amount of debt securities issued by the Company and
guaranteed by the Guarantor, which debt securities and guarantee are
substantially identical to the Securities and the Guarantee, respectively (and
are entitled to the benefits of a trust indenture which is substantially
identical to the Indenture or is the Indenture and which has been qualified
under the Trust Indenture Act), except that they have been registered pursuant
to an effective registration statement under the Securities Act and do not
contain transfer restrictions and provisions for the additional interest
contemplated in Section 2(c) below (such new debt securities hereinafter called
"Exchange Securities"). The Company agrees to use its best efforts to cause
the Exchange Registration Statement to become effective under the Securities
Act as soon as practicable, but no later than 150 days after the Issue Date.
The Exchange Offer will be registered under the Securities Act on the
appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company further agrees to use its best
efforts to hold the Exchange Offer open for at least 20 business days and issue
Exchange Securities for all Registrable Securities that have been properly
tendered and not withdrawn on or prior to the expiration of the Exchange Offer.
The Exchange Offer will be deemed to have been "completed" only if the debt
securities and the guarantee received by holders other than Restricted Holders
in the Exchange Offer for Registrable Securities are, upon receipt,
transferable by each such holder without need for further compliance with
Section 5 of the Securities Act and the
-3-
<PAGE> 4
Exchange Act (except for the requirement to deliver a prospectus included in the
Exchange Registration Statement applicable to resales by broker-dealers of
Exchange Securities received by such broker-dealer pursuant to an Exchange Offer
in exchange for Registrable Securities other than those acquired by the
broker-dealer directly from the Company), and without material restrictions
under the blue sky or securities laws of a substantial majority of the States of
the United States of America. The Exchange Offer shall be deemed to have been
completed upon the earlier to occur of (i) the Company having exchanged the
Exchange Securities for all outstanding Registrable Securities pursuant to the
Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange
Offer, Exchange Securities for all Registrable Securities that have been
properly tendered and not withdrawn before the expiration of the Exchange Offer,
which shall be on a date that is at least 20 business days following the
commencement of the Exchange Offer. The Company agrees (x) to include in the
Exchange Registration Statement a prospectus for use in connection with any
resales of Exchange Securities by a broker-dealer, other than resales of
Exchange Securities received by a broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities acquired by the broker-dealer directly from
the Company, and (y) to keep such Exchange Registration Statement effective for
a period (the "Resale Period") beginning when Exchange Securities are first
issued in the Exchange Offer and ending upon the earlier of (1) the expiration
of the 90th day after the Exchange Offer has been completed and (2) such time as
such broker-dealers no longer own any Registrable Securities. With respect to
such Exchange Registration Statement, each broker-dealer that holds Exchange
Securities received in an Exchange Offer in exchange for Registerable Securities
not acquired by it directly from the Company shall have the benefit of the
rights of indemnification and contribution set forth in Sections 6(a), (c), (d)
and (e) hereof.
(b) If (i) the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Registrable Securities notifies the Company prior
to the twentieth day following consummation of the Exchange Offer that (A) it is
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) that it may not sell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and a prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales or (C) that it is a broker-dealer and owns Notes acquired directly
from the Company or an affiliate of the Company, in lieu of conducting the
Exchange Offer contemplated by Section 2(a) the Company shall file under the
Securities Act as soon as practicable, but no later than 45 days after the time
such obligation to file arises, a "shelf" registration statement providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (such filing, the "Shelf
Registration" and such registration statement, the "Shelf Registration
Statement"). In addition, in the event that the Purchasers shall not have resold
all of the Securities initially purchased by them from the Company pursuant to
the Purchase Agreement prior to the consummation of the Exchange Offer, the
Company shall file under the Securities Act as soon as practicable a Shelf
Registration Statement. The Company agrees to use its best efforts to cause the
Shelf Registration Statement to become or be declared effective no later than 90
days after the Company becomes obligated to file a Shelf Registration Statement
(such 90th day the "Effectiveness Deadline") and to keep such Shelf Registration
Statement continuously effective for a period ending on the earlier of (x) the
second anniversary of the Effective Time and (y) such time as there are no
longer any Registrable Securities outstanding. The Company further agrees to
supplement or make amendments to the Shelf Registration Statement, as and when
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to the holders of the
Registrable Securities copies of any such supplement or amendment prior to its
being used or promptly following its filing with the Commission.
-4-
<PAGE> 5
(c) In the event that (i) by the 60th day after the date of original
issuance of the Notes, neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement has been filed with the Commission; (ii) by the
180th day after the date of the original issuance of the Notes, the Registered
Exchange Offer is not consummated; (iii) by the 45th day after the Company is
obligated to file the Shelf Registration Statement such filing has not occurred;
(iv) by the 90th day after the Company becomes obligated to file a Shelf
Registration Statement such Shelf Registration Statement has not been declared
effective by the Commission or (v) after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective, such
Registration Statement thereafter ceases to be effective or useable for its
intended purposes without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective immediately (each such event referred to in clauses
(i) through (v), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, subject to
the provisions of Section 9(b), special interest ("Special Interest"), in
addition to the Base Interest, shall accrue at a per annum rate of 0.25% for the
first 90 days of the Registration Default Period, at a per annum rate of 0.50%
for the second 90 days of the Registration Default Period, at a per annum rate
of 0.75% for the third 90 days of the Registration Default Period and at a per
annum rate of 1.0% thereafter for the remaining portion of the Registration
Default Period; provided that the Company shall in no event be required to pay
Special Interest for more than one Registration Default at any given time. The
Special Interest shall be payable in cash on the regular interest dates with
respect to the Notes. Special Interest, if any, shall be computed on the basis
of a 360 day year of twelve 30-day months and the number of days actually
elapsed. Notwithstanding anything to the contrary set forth herein (1) upon
filing of the Exchange Offer Registration Statement (and/or if applicable, the
Shelf Registration Statement), in the case of (i) above, (2) upon Consummation
of the Exchange Offer, in the case of (ii) above, (3) upon the filing of the
Shelf Registration Statement, in the case of (iii) above, (4) upon the
effectiveness of the Shelf Registration Statement, in the case of (iv) above or
(5) upon the filing of a post-effective amendment to the Registration Statement
or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made useable in the case of (v) above, the
liquidated damages payable with respect to the Securities as a result of such
clause (i), (ii), (iii), (iv) or (v) as applicable, shall cease.
(d) The Company shall take, and shall cause the Guarantor to take, all
action necessary or advisable to be taken by it to ensure that the transactions
contemplated herein are effected as so contemplated, including all action
necessary or desirable to register the Guarantee under the registration
statement contemplated in Section 2(a) or 2(b) hereof, as applicable.
(e) Any reference herein to a registration statement as of any time shall
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time and any reference herein to any
post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act of 1939.
-5-
<PAGE> 6
(b) In the event that such qualification would require the appointment of
a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
reasonably possible (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
no later the date specified in Section 2(a), an Exchange Registration
Statement on any form which may be utilized by the Company and which shall
permit the Exchange Offer and resales of Exchange Securities by
broker-dealers during the Resale Period to be effected as contemplated by
Section 2(a), and use its best efforts to cause such Exchange Registration
Statement to become effective as soon as practicable thereafter, but no
later than the date specified in Section 2(a);
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange Registration Statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such Exchange Registration Statement for the periods and
purposes contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the instructions
applicable to the form of such Exchange Registration Statement, and
promptly provide each broker-dealer holding Exchange Securities with such
number of copies of the prospectus included therein (as then amended or
supplemented), in conformity in all material respects with the requirements
of the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder, as such broker-dealer reasonably
may request prior to the expiration of the Resale Period, for use in
connection with resales of Exchange Securities;
(iii) promptly notify Goldman, Sachs & Co., counsel for the Purchasers
and, as applicable, each broker-dealer that has requested or received
copies of the prospectus included in such registration statement, and
confirm such advice in writing, (A) when such Exchange Registration
Statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with respect to
such Exchange Registration Statement or any post-effective amendment, when
the same has become effective, (B) of any comments by the Commission and by
the Blue Sky or securities commissioner or regulator of any state with
respect thereto or any request by the Commission for amendments or
supplements to such Exchange Registration Statement or prospectus or for
additional information, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of such Exchange Registration Statement
or the initiation or threatening of any proceedings for that purpose, (D)
if at any time the representations and warranties of the Company
contemplated by Section 5 cease to be true and correct in all material
respects, (E) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Exchange Securities
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (F) at any time during the Resale Period
when a prospectus is required to be delivered under the Securities Act,
that such Exchange Registration Statement, prospectus, prospectus amendment
or supplement or post-effective amendment does not conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder or
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(iv) in the event that the Company would be required, pursuant to
Section 3(c)(iii)(F) above, to notify any broker-dealers holding Exchange
Securities, without delay prepare and furnish to each such holder a
reasonable number of copies of a prospectus
-6-
<PAGE> 7
supplemented or amended so that, as thereafter delivered to purchasers of
such Exchange Securities during the Resale Period, such prospectus shall
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder and shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such Exchange Registration Statement or any
post-effective amendment thereto at the earliest practicable date;
(vi) use its best efforts to (A) register or qualify the Exchange
Securities under the securities laws or blue sky laws of such jurisdictions
as are contemplated by Section 2(a) no later than the commencement of the
Exchange Offer, (B) keep such registrations or qualifications in effect and
comply with such laws so as to permit the continuance of offers, sales and
dealings therein in such jurisdictions until the expiration of the Resale
Period and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each broker-dealer holding Exchange
Securities to consummate the disposition thereof in such jurisdictions;
provided, however, that neither the Company nor the Guarantor shall be
required for any such purpose to (1) qualify as a foreign corporation in
any jurisdiction wherein it would not otherwise be required to qualify but
for the requirements of this Section 3(c)(vi), (2) consent to general
service of process in any such jurisdiction or (3) make any changes to its
certificate of incorporation or by-laws or any agreement between it and its
stockholders;
(vii) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Exchange Registration, the Exchange Offer and
the offering and sale of Exchange Securities by broker-dealers during the
Resale Period;
(viii) provide a CUSIP number for all Exchange Securities, not later
than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Registration Statement, an earning statement of the Company
and its subsidiaries complying with Section 11(a) of the Securities Act
(including, at the option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall use its best efforts to cause the
Shelf Registration to permit the disposition of the Registrable Securities by
the holders thereof in accordance with the intended method or methods of
disposition thereof provided for in the Shelf Registration Statement. In
connection therewith, the Company shall, as soon as reasonably possible (or as
otherwise specified):
(i) prepare and file with the Commission, as soon as practicable, but
no later than the date specified in Section 2(b), a Shelf Registration
Statement on any form which may be utilized by the Company and which shall
permit the disposition of the Registrable Securities in accordance with the
intended method or methods thereof, as specified in writing by the holders
of the Registrable Securities, and use its best efforts to cause such Shelf
Registration Statement to become effective as soon as practicable
thereafter, but no later than the date specified in Section 2(b);
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Shelf Registration Statement and the
prospectus included
-7-
<PAGE> 8
therein as may be necessary to effect and maintain the effectiveness of
such Shelf Registration Statement for the period specified in Section 2(b)
hereof and as may be required by the applicable rules and regulations of
the Commission and the instructions applicable to the form of such Shelf
Registration Statement, and furnish to the holders of the Registrable
Securities copies of any such supplement or amendment simultaneously with
or prior to its being used or filed with the Commission;
(iii) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Securities covered by such Shelf
Registration Statement in accordance with the intended methods of
disposition by the holders thereof provided for in such Shelf Registration
Statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such Shelf Registration Statement, (B) the underwriters (which
term, for purposes of this Exchange and Registration Rights Agreement,
shall include a person deemed to be an underwriter within the meaning of
Section 2(11) of the Securities Act), if any, thereof, (C) any sales or
placement agent therefor, (D) counsel for any such underwriter or agent and
(E) not more than one counsel for all the holders of such Registrable
Securities the opportunity to participate in the preparation of such Shelf
Registration Statement, each prospectus included therein or filed with the
Commission and each amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(iv) who shall certify to the Company that they
have a current intention to sell the Registrable Securities pursuant to the
Shelf Registration such financial and other information and books and
records of the Company, and cause the officers, employees, counsel and
independent certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the
respective counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company as being confidential, until
such time as (A) such information becomes a matter of public record
(whether by virtue of its inclusion in such registration statement or
otherwise), or (B) such person shall be required so to disclose such
information pursuant to a subpoena or order of any court or other
governmental agency or body having jurisdiction over the matter (subject to
the requirements of such order, and only after such person shall have given
the Company prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such Shelf Registration
Statement or the prospectus included therein or in an amendment to such
Shelf Registration Statement or an amendment or supplement to such
prospectus in order that such Shelf Registration Statement, prospectus,
amendment or supplement, as the case may be, complies with applicable
requirements of the federal securities laws and the rules and regulations
of the Commission and does not contain an untrue statement of a material
fact or omit to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(vi) promptly notify the selling holders of Registrable Securities,
any sales or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm such
advice in writing, (A) when such Shelf Registration Statement or the
prospectus included therein or any prospectus amendment or supplement or
post-effective amendment has been filed, and, with respect to such Shelf
Registration Statement or any post-effective amendment, when the same has
become effective, (B) of any comments by the Commission and by the Blue Sky
or securities commissioner or
-8-
<PAGE> 9
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of such
Shelf Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) if at any time the representations and
warranties of the Company and the Guarantor contemplated by Section
3(d)(xv) or Section 5 cease to be true and correct in all material
respects, (E) of the receipt by the Company and the Guarantor of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) if at any time when
a prospectus is required to be delivered under the Securities Act, such
Shelf Registration Statement, prospectus, prospectus amendment or
supplement or post-effective amendment does not conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder or
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(vii) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriter or underwriters, such agent or
such holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including information with respect
to the principal amount of Registrable Securities being sold by such holder
or agent or to any underwriters, the name and description of such holder,
agent or underwriter, the offering price of such Registrable Securities and
any discount, commission or other compensation payable in respect thereof,
the purchase price being paid therefor by such underwriters and with
respect to any other terms of the offering of the Registrable Securities to
be sold by such holder or agent or to such underwriters; and make all
required filings of such prospectus supplement or post-effective amendment
promptly after notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(ix) furnish to each holder of Registrable Securities, each placement
or sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(d)(iv) an executed copy (or, in
the case of a holder of Registrable Securities, a conformed copy) of such
Shelf Registration Statement, each such amendment and supplement thereto
(in each case including all exhibits thereto (in the case of a holder of
Registrable Securities, upon request) and documents incorporated by
reference therein) and such number of copies of such Shelf Registration
Statement (excluding exhibits thereto and documents incorporated by
reference therein unless specifically so requested by such holder, agent or
underwriter, as the case may be) and of the prospectus included in such
Shelf Registration Statement (including each preliminary prospectus and any
summary prospectus), in conformity in all material respects with the
applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder, and such other
documents, as such holder, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and disposition of
the Registrable Securities owned by such holder, offered or sold by such
agent or underwritten by such underwriter and to permit such holder, agent
and underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Company hereby consents to the use of such
prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by
-9-
<PAGE> 10
each such holder and by any such agent and underwriter, in each case in the
form most recently provided to such person by the Company, in connection
with the offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or any
supplement or amendment thereto;
(x) use its best efforts to (A) register or qualify the Registrable
Securities to be included in such Shelf Registration Statement under such
securities laws or blue sky laws of such jurisdictions as any holder of
such Registrable Securities and each placement or sales agent, if any,
therefor and underwriter, if any, thereof shall reasonably request, (B)
keep such registrations or qualifications in effect and comply with such
laws so as to permit the continuance of offers, sales and dealings therein
in such jurisdictions during the period the Shelf Registration is required
to remain effective under Section 2(b) above and for so long as may be
necessary to enable any such holder, agent or underwriter to complete its
distribution of Securities pursuant to such Shelf Registration Statement
and (C) take any and all other actions as may be reasonably necessary or
advisable to enable each such holder, agent, if any, and underwriter, if
any, to consummate the disposition in such jurisdictions of such
Registrable Securities; provided, however, that neither the Company nor the
Guarantor shall be required for any such purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for the requirements of this Section 3(d)(x), (2)
consent to general service of process in any such jurisdiction or (3) make
any changes to its certificate of incorporation or by-laws or any agreement
between it and its stockholders;
(xi) use its best efforts to obtain the consent or approval of each
governmental agency or authority, whether federal, state or local, which
may be required to effect the Shelf Registration or the offering or sale in
connection therewith or to enable the selling holder or holders to offer,
or to consummate the disposition of, their Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, and which shall not bear any
restrictive legends; and, in the case of an underwritten offering, enable
such Registrable Securities to be in such denominations and registered in
such names as the managing underwriters may request at least two business
days prior to any sale of the Registrable Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not
later than the applicable Effective Time;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions relating
to indemnification and contribution, and take such other actions in
connection therewith as any holders of Registrable Securities aggregating
at least 20% in aggregate principal amount of the Registrable Securities at
the time outstanding shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xv) whether or not an agreement of the type referred to in Section
3(d)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten offering
or is made through a placement or sales agent or any other entity, (A) make
such representations and warranties to the holders of the Registrable
Securities covered by such Shelf Registration and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof in form,
substance and scope as are customarily made in connection with an offering
of debt securities pursuant to any
-10-
<PAGE> 11
appropriate agreement or to a registration statement filed on the form
applicable to the Shelf Registration; (B) obtain an opinion of counsel to
the Company and the Guarantor in customary form and covering such matters,
of the type customarily covered by such an opinion, as the managing
underwriters, if any, or as any holders of at least 20% in aggregate
principal amount of the Registrable Securities at the time outstanding may
reasonably request, addressed to such holder or holders and the placement
or sales agent, if any, therefor and the underwriters, if any, thereof and
dated the effective date of such Shelf Registration Statement (and if such
Shelf Registration Statement contemplates an underwritten offering of a
part or all of the Registrable Securities, dated the date of the closing
under the underwriting agreement relating thereto) (it being agreed that
the matters to be covered by such opinion shall include the due
incorporation and good standing of the Company, the Guarantor and their
respective subsidiaries; the qualification of the Company, the Guarantor
and their respective subsidiaries to transact business as foreign
corporations; the due authorization, execution and delivery of the relevant
agreement of the type referred to in Section 3(d)(xiv) hereof; the due
authorization, execution, authentication and issuance, and the validity and
enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Company; the absence of a breach by
the Company or any of its subsidiaries of, or a default under, material
agreements binding upon the Company or any subsidiary of the Company; the
absence of governmental approvals required to be obtained in connection
with the Shelf Registration, the offering and sale of the Registrable
Securities, this Exchange and Registration Rights Agreement or any
agreement of the type referred to in Section 3(d)(xiv) hereof, except such
approvals as may be required under state securities or blue sky laws; the
material compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, respectively; and,
subject to reasonable and customary limitations and exceptions; and, such
counsel shall also state in such opinion that, as of the date of the
opinion and of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
Shelf Registration Statement and the prospectus included therein, as then
amended or supplemented, and from the documents incorporated by reference
therein (in each case other than the financial statements and other
financial information contained therein) of an untrue statement of a
material fact or the omission to state therein a material fact necessary to
make the statements therein not misleading (in the case of such documents,
in the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act)); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Company addressed to the selling holders of Registrable
Securities, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such Shelf
Registration Statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such Shelf Registration Statement
or post-effective amendment to such Shelf Registration Statement which
includes unaudited or audited financial statements as of a date or for a
period subsequent to that of the latest such statements included in such
prospectus (and, if such Shelf Registration Statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such Shelf Registration Statement or post-effective
amendment to such Shelf Registration Statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus, dated the
date of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may be
reasonably requested by any holders of at least 20% in aggregate principal
amount of the Registrable Securities at the time outstanding or the
placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above or those contained in Section
5(a) hereof
-11-
<PAGE> 12
and the compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered into by
the Company or the Guarantor; and (E) undertake such obligations relating
to expense reimbursement, indemnification and contribution as are provided
in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this Exchange
and Registration Rights Agreement pursuant to Section 9(h) hereof and of
any amendment or waiver effected pursuant thereto, each of which notices
shall contain the text of the amendment or waiver proposed or effected, as
the case may be;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD") or
any successor thereto, as amended from time to time) thereof, whether as a
holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules and
By-Laws, including by (A) if such Rules or By-Laws shall so require,
engaging a "qualified independent underwriter" (as defined therein) to
participate in the preparation of the Shelf Registration Statement relating
to such Registrable Securities, to exercise usual standards of due
diligence in respect thereto and, if any portion of the offering
contemplated by such Shelf Registration Statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof (or to such other customary
extent as may be requested by such underwriter), and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice
of the NASD; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Shelf Registration Statement, an earning statement
of the Company, the Guarantor and their respective subsidiaries complying
with Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(e) In the event that the Company would be required, pursuant to Section
3(d)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Company shall without delay prepare and furnish to each such
holder, to each placement or sales agent, if any, and to each such underwriter,
if any, a reasonable number of copies of a prospectus supplemented or amended
so that, as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder and shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each holder of Registrable Securities
agrees that upon receipt of any notice from the Company pursuant to Section
3(d)(vi)(F) hereof, such holder shall forthwith discontinue the disposition of
Registrable Securities pursuant to the Shelf Registration Statement applicable
to such Registrable Securities until such holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Company,
such holder shall deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus covering such Registrable Securities at the time of receipt of such
notice.
-12-
<PAGE> 13
(f) The Company may require each holder of Registrable Securities as to
which any Shelf Registration pursuant to Section 2(b) is being effected to
furnish to the Company such information regarding such holder and such holder's
intended method of distribution of such Registrable Securities as the Company
may from time to time reasonably request in writing, but only to the extent that
such information is required in order to comply with the Securities Act. Each
such holder agrees to notify the Company as promptly as practicable of any
inaccuracy or change in information previously furnished by such holder to the
Company or of the occurrence of any event in either case as a result of which
any prospectus relating to such Shelf Registration contains or would contain an
untrue statement of a material fact regarding such holder or such holder's
intended method of disposition of such Registrable Securities or omits to state
any material fact regarding such holder or such holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such holder or the disposition of such Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(g) Until the expiration of two years after the Issue Date, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144)
to, resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.
4. Registration Expenses.
The Company and the Guarantor, jointly and severally agrees to bear and to
pay or cause to be paid promptly all expenses incident to the Company's and the
Guarantor's performance of or compliance with this Exchange and Registration
Rights Agreement, including (a) all Commission and any NASD registration, filing
and review fees and expenses, including fees and disbursements of counsel for
the placement or sales agent or underwriters in connection with such
registration, filing and review, (b) all fees and expenses in connection with
the qualification of the Securities for offering and sale under the State
securities and blue sky laws referred to in Section 3(d)(x) hereof and
determination of their eligibility for investment under the laws of such
jurisdictions as any managing underwriters or the holders of such Registrable
Securities may designate, including any fees and disbursements of counsel for
the selling holders or underwriters in connection with such qualification and
determination, (c) all expenses relating to the preparation, printing,
production, distribution and reproduction of each registration statement
required to be filed hereunder, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
expenses of preparing the Securities for delivery and the expenses of printing
or producing any underwriting agreements, agreements among underwriters, selling
agreements and "Blue Sky" or legal investment memoranda and all other documents
in connection with the offering, sale or delivery of Securities to be disposed
of (including certificates representing the Securities), (d) messenger,
telephone and delivery expenses relating to the offering, sale or delivery of
Securities and the preparation of documents referred in clause (c) above, (e)
fees and expenses of the Trustee under the Indenture, any agent of the Trustee
and any counsel for the Trustee and of any collateral agent or custodian, (f)
internal expenses (including all salaries and expenses of the Company's and the
Guarantor's officers and employees performing legal or accounting duties), (g)
fees, disbursements and expenses of counsel and independent certified public
accountants of the Company and the Guarantor (including the expenses of any
opinions or "cold comfort" letters required by or incident to such performance
and compliance), (h) any fees charged by securities rating services for rating
the Securities, and (i) fees, expenses and disbursements of any other persons,
including special experts, retained by the Company
-13-
<PAGE> 14
or the Guarantor in connection with such registration (collectively, the
"Registration Expenses"). In connection with any Registration Statement
required by this Agreement (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement) the Company will
reimburse the Purchasers and the Holders of Registrable Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel (not to exceed
$25,000), who shall be Cravath, Swaine & Moore unless another firm shall be
chosen by the Holders of a majority in principal amount of the Registrable
Securities for which benefit such Registration Statement is being prepared. To
the extent that any Registration Expenses are incurred, assumed or paid by any
holder of Registrable Securities or any placement or sales agent therefor or
underwriter thereof, the Company shall reimburse such person for the full amount
of the Registration Expenses so incurred, assumed or paid promptly after receipt
of a request therefor. Notwithstanding the foregoing, the holders of the
Registrable Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Registrable Securities and the fees and disbursements of any counsel or
other advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company and the Guarantor, jointly and severally, represents and
warrants to, and agrees with, each Purchaser and each of the holders from time
to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and
any further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as
the case may be, and, in the case of an underwritten offering of
Registrable Securities, at the time of the closing under the underwriting
agreement relating thereto, will conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and at all times subsequent to the Effective Time
when a prospectus would be required to be delivered under the Securities
Act, other than from (i) such time as a notice has been given to holders of
Registrable Securities pursuant to Section 3(d)(vi)(F) or Section
3(d)(iii)(F) hereof until (ii) such time as the Company furnishes an
amended or supplemented prospectus pursuant to Section 3(e) or Section
3(c)(iv) hereof, each such registration statement, and each prospectus
(including any summary prospectus) contained therein or furnished pursuant
to Section 3(d) or Section 3(c) hereof, as then amended or supplemented,
will conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of
-14-
<PAGE> 15
such documents will contain or contained an untrue statement of a material
fact or will omit or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.
(c) The compliance by the Company and the Guarantor with all of the
provisions of this Exchange and Registration Rights Agreement and the
consummation of the transactions herein contemplated will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or the Guarantor or any
of their subsidiaries is a party or by which the Company or the Guarantor
or any of their subsidiaries is bound or to which any of the property or
assets of the Company or the Guarantor or any of their subsidiaries is
subject, nor will such action result in any violation of the provisions of
the constitutional documents of the Company or the Guarantor or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any subsidiary of the Company
or any of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation by the Company and the
Guarantor of the transactions contemplated by this Exchange and
Registration Rights Agreement, except the registration under the Securities
Act of the Securities, qualification of the Indenture under the Trust
Indenture Act and such consents, approvals, authorizations, registrations
or qualifications as may be required under State securities or blue sky
laws in connection with the offering and distribution of the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the Guarantor.
6. Indemnification.
(a) Indemnification by the Company and the Guarantor. The Company and the
Guarantor, jointly and severally shall indemnify and hold harmless each of the
holders of Registrable Securities included in a registration statement filed
pursuant to Section 2(a) or 2(b) hereof, and each person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder, agent or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Company or the Guarantor to any such
holder, agent or underwriter, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company shall, and it hereby agrees to,
reimburse such holder, such agent and such underwriter for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company or the Guarantor, as the case may be, shall not be
liable to any such person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, or preliminary, final or summary prospectus, or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company or the Guarantor, as the case may be, by
holders of Registrable Securities expressly for use therein;
-15-
<PAGE> 16
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from the holder of
such Registrable Securities and from each underwriter named in any such
underwriting agreement, severally and not jointly, to (i) indemnify and hold
harmless the Company and the Guarantor and all other holders of Registrable
Securities, against any losses, claims, damages or liabilities to which the
Company and the Guarantor or such other holders of Registrable Securities may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in such registration statement, or any preliminary, final or
summary prospectus contained therein or furnished by the Company or the
Guarantor, as the case may be, to any such holder, agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company or the
Guarantor, as the case may be, by such holder or underwriter expressly for use
therein, and (ii) reimburse the Company and the Guarantor for any legal or other
expenses reasonably incurred by the Company and the Guarantor in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such holder shall be required to undertake
liability to any person under this Section 6(b) for any amounts in excess of the
dollar amount of the proceeds to be received by such holder from the sale of
such holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by
-16-
<PAGE> 17
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and the indemnified
party in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or by such indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages which such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Company and the Guarantor under this Section 6
shall be in addition to any liability which the Company or the Guarantor may
otherwise have and shall extend, upon the same terms and conditions, to each
officer, director and partner of each holder, agent and underwriter and each
person, if any, who controls any holder, agent or underwriter within the meaning
of the Securities Act; and the obligations of the holders and any agents or
underwriters contemplated by this Section 6 shall be in addition to any
liability which the respective holder, agent or underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company and the Guarantor (including any person who, with his
consent, is named in any registration statement as about to become a director of
the Company and the Guarantor) and to each person, if any, who controls the
Company or the Guarantor within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered
by the Shelf Registration are to be sold pursuant to an underwritten offering,
the managing underwriter or underwriters thereof shall be designated by the
holders of at least a majority in aggregate principal amount of the Registrable
Securities to be included in such offering, provided that such designated
managing underwriter or underwriters is or are reasonably acceptable to the
Company.
-17-
<PAGE> 18
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Section 13 and 15(d) of the Exchange
Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission
under the Securities Act) and the rules and regulations adopted by the
Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company or the
Guarantor, as applicable, shall deliver to such holder a written statement as to
whether it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities or any other securities which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if the Company or the Guarantor fails to perform
any of their respective obligations hereunder and that the Purchasers and the
holders from time to time of the Registrable Securities may be irreparably
harmed by any such failure, and accordingly agree that the Purchasers and such
holders, in addition to any other remedy to which they may be entitled at law or
in equity, shall be entitled to compel specific performance of the respective
obligations of the Company and the Guarantor under this Exchange and
Registration Rights Agreement in accordance with the terms and conditions of
this Exchange and Registration Rights Agreement, in any court of the United
States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company or the
Guarantor, to them at, P.O. Box 17, Oil Sites Road, Ellesemere Port, South
Wirral, United Kingdom, Attention: Company Secretary, with a copy to Kirkland &
Ellis, International Financial Center, Old Broad Street, London, U.K.,
Attention: Samuel A. Haubold and if to a holder, to the address of such holder
set forth in the security register or other records of the Company, or to such
other address as the Company or any such holder may have furnished to the other
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable
-18-
<PAGE> 19
by the parties hereto and the holders from time to time of the Registrable
Securities and the respective successors and assigns of the parties hereto and
such holders. In the event that any transferee of any holder of Registrable
Securities shall acquire Registrable Securities, in any manner, whether by gift,
bequest, purchase, operation of law or otherwise, such transferee shall, without
any further writing or action of any kind, be deemed a beneficiary hereof for
all purposes and such Registrable Securities shall be held subject to all of the
terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Registrable Securities such transferee shall be entitled to receive
the benefits of, and be conclusively deemed to have agreed to be bound by all of
the applicable terms and provisions of this Exchange and Registration Rights
Agreement. If the Company shall so request, any such successor, assign or
transferee shall agree in writing to acquire and hold the Registrable Securities
subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of a majority in aggregate principal amount of the Registrable
Securities at the time outstanding. Each holder of any Registrable Securities at
the time or thereafter outstanding shall be bound by any amendment or waiver
effected pursuant to this Section 9(h), whether or not any notice, writing or
marking indicating such amendment or waiver appears on such Registrable
Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities for proper purposes only (which
shall include any purpose related to the rights of the holders of Registrable
Securities under the Securities, the Indenture and this Agreement) at the
offices of the Company at the address thereof set forth in Section 9(c) above
and at the office of the Trustee under the Indenture.
-19-
<PAGE> 20
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
-20-
<PAGE> 21
Agreed to and accepted as of the date referred to above.
OCTEL CORP.
By: /s/ Graham M. Leathes
-------------------------------
Name: Graham M. Leathes
Title: Secretary
OCTEL DEVELOPMENTS PLC
By: /s/ Graham M. Leathes
--------------------------------
Name: Graham M. Leathes
Title: Company Secretary
GOLDMAN, SACHS & CO.
By: -------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
21
<PAGE> 22
Agreed to and accepted as of the date referred to above.
OCTEL CORP.
By:
-----------------------------
Name:
Title:
OCTEL DEVELOPMENTS PLC
By: /s/ Goldman Sachs & Co.
----------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
By: /s/ Goldman Sachs & Co.
----------------------------
(Goldman Sachs & Co.)
On behalf of each of the Purchasers
-22-
<PAGE> 1
Exhibit 4.4
EXECUTION COPY
OCTEL DEVELOPMENTS PLC
10% SENIOR NOTES DUE 2006
PURCHASE AGREEMENT
April 30, 1998
Goldman, Sachs & Co.,
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
As representatives of the several Purchasers
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Octel Developments PLC, a company organized under the laws of England and
Wales (the "Company"), proposes, subject to the terms and conditions stated
herein, to issue and sell to the Purchasers named in Schedule I hereto (the
"Purchasers") an aggregate of $150,000,000 principal amount of the 10% Senior
Notes due 2006 specified above (the "Notes"). The Notes will be
unconditionally guaranteed as to payment of principal, interest and any other
amounts due thereon (the "Guarantee") by Octel Corp, a Delaware corporation,
(the "Guarantor"). The Notes and the Guarantee are hereinafter collectively
called the "Securities".
In connection with the offering of the Securities and prior to the
execution of the Related Agreements (as defined below), Great Lakes Chemical
Corporation, a Delaware corporation ("Great Lakes"), which is currently the
parent corporation of the Guarantor, intends to distribute to the holders of
record of its common stock, par value $1.00 per share (the "Great Lakes Common
Stock"), one share of the common stock of the Guarantor, par value $0.01 per
share (the "Octel Common Stock"), for every four shares of Great Lakes Common
Stock owned by such holder at the close of business on May 18, 1998, (the
"Distribution"). Thereafter, the Guarantor will be an independent publicly
traded company. Accordingly, the Guarantor has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form 10
registering the Octel Common Stock under the Securities Exchange Act of 1934,
as amended (the "Distribution Registration Statement").
In connection with the offering of the Securities and the filing of the
Distribution Registration Statement, the Guarantor and Great Lakes or their
respective subsidiaries shall enter into the Related Agreements (as defined
below), pursuant to which (i) Great Lakes intends to distribute to its
stockholders all of the outstanding shares of Octel Common Stock and transfer
certain of its businesses and assets to the Guarantor or its subsidiaries, (ii)
the Guarantor or its subsidiaries will transfer certain business and assets to
Great Lakes or its subsidiaries and (iii) the Company and Great Lakes, or their
respective subsidiaries, shall set forth certain of their respective
obligations regarding various tax liabilities, commercial arrangements and
service agreements. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Offering Circular (as
defined below).
1. Each of the Company and the Guarantor, jointly and severally,
represents and warrants to, and agrees with, each of the Purchasers that:
(a) A preliminary offering circular, dated April 17, 1998 (the
"Preliminary Offering Circular") and an offering circular, dated April 30,
1998 (the "Offering Circular"), in each case including the international
supplement thereto, have been prepared in connection with the offering of
the Securities. Any reference to the Preliminary Offering Circular or the
Offering Circular shall be deemed to refer to and include any Additional
Issuer Information (as defined in Section 5(f))
<PAGE> 2
furnished by the Company prior to the completion of the distribution of
the Securities. The Preliminary Offering Circular or the Offering
Circular and any amendments or supplements thereto did not and will not,
as of their respective dates, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Company or the Guarantor by a Purchaser through Goldman, Sachs & Co.
expressly for use therein;
(b) Neither the Company, the Guarantor or any subsidiary of the
Guarantor that is a "significant subsidiary" as defined in Reg.
210.I-02(w) under Regulation S-X of the Commission (collectively, the
"Subsidiaries") has sustained since the date of the latest audited
financial statements included in the Offering Circular any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Offering Circular; and, since the respective
dates as of which information is given in the Offering Circular, there has
not been any change in the capital stock or long-term debt of the Company,
the Guarantor or the Subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company, the
Guarantor and the Subsidiaries taken as a whole (a "Material Adverse
Effect"), otherwise than as set forth or contemplated in the Offering
Circular;
(c) The Company, the Guarantor and the Subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case free
and clear of all liens, encumbrances and defects except such as are
described in the Offering Circular or such as do not materially affect the
value of such property and do not interfere with the use made and proposed
to be made of such property by the Company, the Guarantor and the
Subsidiaries and any real property and buildings held under lease by the
Company, the Guarantor and the Subsidiaries are held by it under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such
property and buildings by them;
(d) The Company has been duly incorporated and is validly existing as
a company under the laws of England and Wales and the Guarantor has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of Delaware, each has corporate power and
authority to own its properties and conduct its business as described in
the Offering Circular, and each has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the failure to
be so qualified in any such jurisdiction; and each Subsidiary has been
duly incorporated and is, where applicable, validly existing as a company
under the laws of its jurisdiction of incorporation;
(e) The Guarantor has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock of
the Guarantor have been duly and validly authorized and issued and are
fully paid and nonassessable; and all of the issued shares of capital
stock of each Subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares and except as otherwise set forth in the Offering Circular) are
owned directly or indirectly by the Guarantor, free and clear of all
liens, encumbrances, equities or claims;
(f) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by
2
<PAGE> 3
the indenture to be dated as of May 1, 1998 (the "Indenture") between the
Company, the Guarantor and IBJ Schroder Bank & Trust Company, as Trustee
(the "Trustee"), under which they are to be issued, which will be
substantially in the form previously delivered to you; the Guarantee has
been duly authorized and, upon the execution and delivery of the Indenture
by the Company, the Guarantor and the Trustee and the due authorization,
issuance and delivery of the related Notes, will constitute valid and
legally binding obligations of the Guarantor entitled to the benefits
provided by the Indenture; the Indenture has been duly authorized and,
when executed and delivered by the Company, the Guarantor and the Trustee,
the Indenture will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement in
the case of the Securities and the Indenture, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Securities and the Indenture will conform to the descriptions thereof
under the heading "Description of the Notes" in the Offering Circular and
will be in substantially the form previously delivered to you;
(g) This Agreement and the Exchange and Registration Rights Agreement
have been duly authorized, executed and delivered by the Company and the
Guarantor;
(h) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations G, T, U, and X of the Board of Governors of the
Federal Reserve System;
(i) Prior to the date hereof, none of the Company, the Guarantor or
the Subsidiaries or any of their affiliates has taken any action which is
designed to or which has constituted or which might have been expected to
cause or result in stabilization or manipulation of the price of any
security of the Company in connection with the offering of the Securities
or facilitate the sale or resale of the Securities;
(j) There is no "substantial U.S. market interest in the debt
securities of the Company or the Guarantor" within the meaning of Rule
903(c)(1) under the Act;
(k) The issue and sale of the Securities and the compliance by the
Company and the Guarantor, as the case may be, with all of the provisions
of the Securities, the Indenture and this Agreement and the consummation
of the transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument material to the Company,
the Guarantor and the Subsidiaries taken as a whole, to which the Company
or the Guarantor or any of the Subsidiaries is a party or by which the
Company or the Guarantor or any of the Subsidiaries is bound or to which
any of the property or assets of the Company, the Guarantor or the
Subsidiaries is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or By-laws of the
Company or the Guarantor or any statute or any order, rule or regulation
of any court, central bank, stock exchange or governmental agency or body
("Governmental Agency") having jurisdiction over the Company, the
Guarantor or any of the Subsidiaries or any of their respective
properties; and such Governmental Authorizations ("Governmental
Authorizations") of or with any such Governmental Agency is required for
the issue and sale of the Securities or the consummation by the Company or
the Guarantor of the transactions contemplated by this Agreement or, the
Indenture, except for the filing of a registration statement by the
Company with the Commission pursuant to the Act pursuant to Section 5(k)
hereof and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Securities by the
Purchasers;
(l) The execution, delivery and performance by the Company, the
Guarantor or the Subsidiaries, as the case may be, of the Transfer and
Distribution Agreement, the Tax Disaffiliation Agreement, the Corporate
Services Transition Agreement and the Supply and Toll Manufacturing
3
<PAGE> 4
Agreements (each as defined in the Offering Circular, and collectively,
the "Related Agreements") and this Agreement and the Exchange and
Registration Rights Agreement of even date hereof between the Company and
the Purchasers (the "Exchange and Registration Rights Agreement") will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over any of the Guarantor or the Subsidiaries or any of their
respective properties, or any agreement or instrument material to the
Guarantor and the Subsidiaries taken as a whole, to which any of the
Guarantor or the Subsidiaries is a party or by which any of the Guarantor
or the Subsidiaries is bound or to which any of the properties of the
Guarantor or the Subsidiaries is subject, or the charter or by-laws of the
Guarantor or the Subsidiaries;
(m) The Related Agreements have been duly authorized, executed and
delivered by the Guarantor or the Subsidiaries, as the case may be, and
conform in all material respects to the descriptions thereof in the
Offering Circular;
(n) The Related Agreements, this Agreement and the Exchange and
Registration Rights Agreement, assuming due execution and delivery by the
other parties thereto, constitute valid and legally binding obligations of
the Guarantor and the Company, as applicable, and are enforceable against
the Guarantor and the Company, as applicable, in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(o) The Guarantor has delivered to Goldman, Sachs & Co. true and
correct copies of the Related Agreements, in each case, in the form as
originally executed, and there have been no amendments or waivers thereto
or in the exhibits or schedules thereto other than those as to which
Goldman, Sachs & Co. shall have been advised;
(p) None of the Company, the Guarantor, or any of the Subsidiaries is
in violation of its respective certificates of incorporation or by-laws or
in default in the performance or observance of any material obligation,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(q) The statements set forth in the Offering Circular under the
caption "Description of the Notes", insofar as they purport to constitute
a summary of the terms of the Securities, under the caption "Certain
Federal Income Tax Consequences" and under the caption "Plan of
Distribution", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate, complete and fair;
(r) Each of the Company, the Guarantor and the Subsidiaries own or
possess or has the right to use trademarks, trade names and other rights
to inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "intellectual property rights")
necessary to conduct the business now operated by them, and presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company, the
Guarantor or the Subsidiaries, would individually or in the aggregate have
a material adverse effect on the Company, the Guarantor and the
Subsidiaries;
(s) Except as disclosed in the Offering Circular, none of the
Company, the Guarantor or the Subsidiaries is in violation of any statute,
any rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any
environmental laws, is liable for any off-site disposal or contamination
pursuant to any environmental laws, or is
4
<PAGE> 5
subject to any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the aggregate
have a material adverse effect on the Company, the Guarantor and the
Subsidiaries taken as a whole; and neither the Company nor the Guarantor
is aware of any pending investigation which might lead to such a claim;
(t) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company, the
Guarantor or the Subsidiaries is a party or of which any property of the
Company, the Guarantor or the Subsidiaries is the subject which, if
determined adversely to the Company, the Guarantor or the Subsidiaries,
would individually or in the aggregate have a Material Adverse Effect on
the current or future financial position, stockholders' equity or results
of operations of the Company, the Guarantor or the Subsidiaries or would
materially and adversely affect the ability of the Company or the
Guarantor to perform their obligations under the Indenture, the Related
Agreements, the Exchange and Registration Rights Agreement or this
Agreement; and, to the best of the Company's and the Guarantor's
knowledge, no such proceedings are threatened or contemplated by
Governmental Authorities or threatened by others;
(u) No Governmental Authorization is required to effect payments of
principal, premium, if any, and interest on the Securities or for the
Trustee to convert such payments into U.S. dollars for distribution to
Securityholders;
(v) All interest on the Securities may under the current laws and
regulations of England and Wales be paid in the currency of such
jurisdictions that may be converted into foreign currency that may be
freely transferred out of England and Wales, and all such interest and
other distributions on the Securities will not be subject to withholding
or other taxes under the laws and regulations of England and Wales and are
otherwise free and clear of any other tax, withholding or deduction in
England and Wales and without the necessity of obtaining any Governmental
Authorization in England and Wales;
(w) No stamp or other issuance or transfer taxes or duties and no
capital gains, income, withholding or other taxes are payable by or on
behalf of the Purchasers to England and Wales or any political subdivision
or taxing authority thereof or therein in connection with (A) the
issuance, sale and delivery by the Company to or for the respective
accounts of the Purchasers of the Securities or (B) the sale and delivery
outside the United Kingdom by the Purchasers of the Securities to the
initial purchasers thereof;
(x) The Company, the Guarantor and the Subsidiaries have all
licenses, franchises, permits, authorizations, approvals and orders and
other concessions of and from all Governmental Agencies that are necessary
to own or lease their other properties and conduct their businesses as
described in the Offering Circular;
(y) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the
meaning of Rule 144A under the Act) as securities which are listed on a
national securities exchange registered under Section 6 of the United
States Exchange Act of 1934, as amended (the "Exchange Act") or quoted in
a U.S. automated inter-dealer quotation system;
(aa) The Guarantor will be subject to Section 13 or 15(d) of the
Exchange Act;
(bb) Neither the Company nor the Guarantor is, and after giving
effect to the offering and sale of the Securities, will not be an
"investment company", or an entity "controlled" by an "investment
company", as such terms are defined in the United States Investment
Company Act of 1940, as amended (the "Investment Company Act");
(cc) Neither the Company, the Guarantor nor any person acting on its
or their behalf has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c)
under the Act or, with respect to Securities sold outside the United
States
5
<PAGE> 6
to non-U.S. persons (as defined in Rule 902 under the Act), by means of
any directed selling efforts within the meaning of Rule 902 under the Act
and the Company, the Guarantor, any affiliate of the Company or the
Guarantor and any person acting on its or their behalf has complied with
and will implement the "offering restriction" within the meaning of such
Rule 902;
(dd) Within the preceding six months, neither the Company, the
Guarantor nor any other person acting on behalf of the Company or the
Guarantor has offered or sold to any person any Securities, or any
securities of the same or a similar class as the Securities, other than
Securities offered or sold to the Purchasers hereunder. The Company and
the Guarantor will take reasonable precautions designed to insure that any
offer or sale, direct or indirect, in the United States or to any U.S.
person (as defined in Rule 902 under the Act) of any Securities or any
substantially similar security issued by the Company, within six months
subsequent to the date on which the distribution of the Securities has
been completed (as notified to the Company by Goldman, Sachs & Co.), is
made under restrictions and other circumstances reasonably designed not to
affect the status of the offer and sale of the Securities in the United
States and to U.S. persons contemplated by this Agreement as transactions
exempt from the registration provisions of the Act;
(ee) The Company, the Guarantor and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which they are engaged and neither the Company, the Guarantor nor any
such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not result in a Material
Adverse Effect, except as described in or contemplated by the Offering
Circular; and
(ff) Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 97% of the principal amount thereof, plus accrued interest, if any,
from May 5, 1998 to the Time of Delivery hereunder, the principal amount of
Securities set forth opposite the name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities, the
several Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company and
the Guarantor that:
(a) It will offer and sell the Securities only to persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A under the Act in transactions meeting the requirements of
Rule 144A;
(b) It is an "accredited investor" within the meaning of Rule 501 under
the Act; and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Act.
4.(a) The Securities to be purchased by each Purchaser hereunder will be
represented by one or more global Securities in bearer form without coupons
which will be deposited by or on behalf of the Company with The Industrial Bank
of Japan (Luxembourg) S.A., as book-entry depositary (the "Book-Entry
Depositary"). The Book-Entry Depositary will issue a certificate less interest
in each global security representing a 100% interest in such underlying
Security to The Depository Trust Company ("DTC") or its designated custodian.
The Company will deliver the Securities to Goldman, Sachs & Co., for the
account of each Purchaser, against payment by or on behalf of such Purchaser of
the purchase price therefor by
6
<PAGE> 7
certified or official bank check or checks, payable to the order of the Company
in Federal (same day) funds, by causing the Book-Entry Depositary to instruct
DTC to credit the Securities to the account of Goldman, Sachs & Co. at DTC.
The Company will cause the certificates representing the Securities to be made
available to Goldman, Sachs & Co. for checking at least twenty-four hours prior
to the Time of Delivery (as defined below) at the office of the Book-Entry
Depositary (the "Designated Office"). The time and date of such delivery and
payment shall be 9:30 a.m., New York City time, on May 5, 1998 or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date are herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Securities and any additional documents requested by the Purchasers
pursuant to Section 7(i) hereof, will be delivered at such time and date at the
offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, NY 10019-7475
(the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 8:30 a.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. Each of the Company and the Guarantor, jointly and severally, agrees
with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to make no
amendment or any supplement to the Offering Circular which shall be disapproved
by you promptly after reasonable notice thereof; and to furnish you with copies
thereof;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so
as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Purchasers with 5 copies of the Offering Circular and
each amendment or supplement thereto signed by an authorized officer of the
Company with the independent accountants' report(s) in the Offering Circular,
and any amendment or supplement containing amendments to the financial
statements covered by such report(s), signed by the accountants, and additional
copies thereof in such quantities as you may from time to time reasonably
request, and if, at any time prior to the expiration of nine months after the
date of the Offering Circular, any event shall have occurred as a result of
which the Offering Circular as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Offering Circular is
delivered, not misleading, or, if for any other reason it shall be necessary or
desirable during such same period to amend or supplement the Offering Circular,
to notify you and upon your request to prepare and furnish without charge to
each Purchaser and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Offering Circular or a supplement
to the Offering Circular which will correct such statement or omission or
effect such compliance;
(d) During the period beginning from the date hereof and continuing until
the date six months after the Time of Delivery, not to offer, sell contract to
sell or otherwise dispose of, except as provided hereunder any securities of
the Company that are substantially similar to the Securities;
(e) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-
7
<PAGE> 8
amount certificate company that is or is required to be registered under
Section 8 of the Investment Company Act;
(f) At any time when the Company or the Guarantor is not exempt from
registration under Section 12(b) of the Exchange Act nor subject to Section 13
or 15(d) of the Exchange Act, for the benefit of holders from time to time of
Securities, to furnish at its expense, upon request, to holders of Securities
and prospective purchasers of securities information (the "Additional Issuer
Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the Act;
(g) If requested by you, to use its best efforts to cause the Securities
to be eligible for the PORTAL trading system of the National Association of
Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year the Guarantor's annual report (including a
balance sheet and statements of income, stockholders' equity and cash flows of
the Guarantor and its consolidated subsidiaries certified by independent public
accountants) and prepared in conformity with generally accepted accounting
principles in the U.S. ("U.S. GAAP") and, as soon as practicable after the end
of each of the first three quarters of each fiscal year prepared in accordance
with U.S. GAAP (beginning with the fiscal quarter ending after the date of the
Offering Circular), consolidated summary financial information of the Company,
the Guarantor and the Subsidiaries for such quarter in reasonable detail;
(i) During a period of five years from the date of the Offering Circular,
to furnish to you copies of all reports or other communications (financial or
other) furnished to stockholders of the Guarantor, and to deliver to you (i) as
soon as they are available, copies of any reports and financial statements
furnished to or filed with the Commission or any securities exchange on which
the Securities, or any class of securities of the Guarantor is listed; and (ii)
such additional information concerning the business and financial condition of
the Guarantor as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Guarantor and the Subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(j) During the period of three years after the Time of Delivery, the
Company and the Guarantor will not, and will not permit any of its respective
"affiliates" (as defined in Rule 144 under the Securities Act) to, resell any
of the Securities which constitute "restricted securities" under Rule 144 that
have been reacquired by any of them;
(k) The Company shall file and use its best efforts to cause to be
declared or become effective under the Securities Act, on or prior to 150 days
after the Time of Delivery, a registration statement on Form S-4 providing for
the registration of (i) another series of debt securities of the Company, with
terms identical to the Securities (the "Exchange Securities"), and the exchange
of the Securities for the Exchange Securities, all in a manner which will
permit persons who acquire the Exchange Securities to resell the Exchange
Securities pursuant to Section 4(1) of the Securities Act;
(l) Not to (and to cause the Subsidiaries not to) take, directly or
indirectly, any action which is designed to or which constitutes or which might
reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of
the Securities; and
(m) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Offering Circular
under the caption "Use of Proceeds".
6. (a) Each of the Company and the Guarantor, jointly and severally
covenants and agrees with the several Purchasers that the Company will pay or
cause to be paid the following: (i) the fees, disbursements and expenses of the
Company's and the Guarantor's counsel and accountants in connection with the
issue of the Securities and all other expenses in connection with the
preparation, printing and filing of the Preliminary Offering Circular and the
Offering Circular and any amendments and supplements thereto and the mailing
and delivering of copies thereof to the Purchasers and dealers; (ii) the cost
of printing or
8
<PAGE> 9
producing any Agreement among Purchasers, this Agreement, the Indenture, the
Blue Sky and Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; (iii) all expenses in connection
with the qualification of the Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the cost of preparing the Securities; (vi) the fees and expenses of the
Trustee and any agent of the Trustee and the fees and disbursements of counsel
for the Trustee in connection with the Indenture and the Securities; (vii) any
cost incurred in connection with the designation of the Securities for trading
in PORTAL (viii) all expenses and taxes arising as a result of the issuance,
sale and delivery of the Securities, of the sale and delivery outside of
England and Wales of the Securities by the Purchasers to the initial purchasers
thereof in the manner contemplated under the Purchase Agreement, including, in
any such case, any English or Welsh income, capital gains, withholding,
transfer or other tax asserted against a Purchaser by reason of the purchase
and sale of the Securities pursuant to the Purchase Agreement; and (ix) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section.
It is understood, however, that, except as provided in this Section, and
Sections 8 and 11 hereof, the Purchasers will pay all of their own costs and
expenses, including the fees of their counsel, transfer taxes on resale of any
of the Securities by them, and any advertising expenses connected with any
offers they may make.
(b) The Company covenants and agrees with the several Purchasers that it
will register the Securities on the Luxembourg Stock Exchange ("LSE"), as soon
as practicable, but in no event later than 30 days prior to the first interest
payment date on the Notes.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and the Guarantor herein are, at and as of the Time
of Delivery, true and correct, the condition that the Company and the Guarantor
shall have performed all of its respective obligations hereunder theretofore to
be performed, and the following additional conditions:
(a) Cravath, Swaine & Moore, counsel for the Purchasers, shall have
furnished to you such opinion or opinions, dated the Time of Delivery, with
respect to the matters covered in paragraphs (i) through (ix) below as well as
such other related matters as you may reasonably request, and such counsel
shall have received such papers and information as they may reasonably request
to enable them to pass upon such matters;
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Offering Circular;
(ii) The Company has an authorized capitalization as set forth in the
Offering Circular, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and nonassessable;
(iii) This Agreement has been duly authorized, executed and delivered by
the Company;
(iv) The Securities have been duly authorized, executed, authenticated,
issued and delivered and constitute valid and legally binding obligations of
the Company entitled to the benefits provided by the Indenture; and the
Securities and the Indenture conform to the descriptions thereof in the
Offering Circular; The Securities have been duly authorized by the Company;
the temporary global Security has been duly executed, authenticated, issued
and delivered and constitutes a valid and legally binding obligation of the
Company;
(v) The Indenture has been duly authorized, executed and delivered by
the parties thereto and constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as
9
<PAGE> 10
to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
(vi) The statements set forth in the Offering Circular under the caption
"Description of the Notes", insofar as they purport to constitute a summary
of the terms of the Securities, under the caption "Certain Federal Income Tax
Consequences" and under the caption "Underwriting", insofar as they purport
to describe the provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(vii) No registration of the Securities under the Act, and no
qualification of an indenture under the United States Trust Indenture Act of
1939 with respect thereto, is required for the offer, sale and initial resale
of the Securities by the Purchasers in the manner contemplated by this
Agreement;
(viii) Such counsel has no reason to believe that the Offering Circular
and any further amendments or supplements thereto made by the Company prior
to the Time of Delivery (other than the financial statements therein, as to
which such counsel need express no opinion) contained as of its date or
contains as of the Time of Delivery an untrue statement of a material fact or
omitted or omits, as the case may be, to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and
(ix) Neither the Company nor the Guarantor is an "investment company" or
an entity "controlled" by an "investment company", as such terms are defined
in the Investment Company Act.
(b) Kirkland & Ellis, counsel for the Company, shall have furnished to you
their written opinion, dated the Time of Delivery, in form and substance
satisfactory to you, to the effect set forth in Annex III hereto;
(c) Skadden, Arps, Slate, Meagher & Flom, special counsel for Great
Lakes, shall have furnished to you their written opinion, dated the Time of
Delivery, in form and substance satisfactory to you, to the effect set forth in
Annex IV hereto;
(d) Linklaters & Paines, English law counsel for the Company, shall have
furnished to you their written opinion dated the Time of Delivery, in form and
substance satisfactory to you, to the effect set forth in Annex V hereto;
(e) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Ernst & Young LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex II hereto;
(f) (i) Neither the Company, the Guarantor nor the Subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Offering Circular, and (ii)
since the respective dates as of which information is given in the Offering
Circular there shall not have been any change in the capital stock, short-term
debt or long-term debt of the Company, the Guarantor or the Subsidiaries or any
change, or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company, the Guarantor and the Subsidiaries,
otherwise than as set forth or contemplated in the Offering Circular, the
effect of which, in any such case described in Clause (i) or (ii), is in the
judgment of the Purchasers so material and adverse as to make it impracticable
or inadvisable to proceed with the offering or the delivery of the Securities
on the terms and in the manner contemplated in this Agreement and in the
Offering Circular;
(g) Concurrently with or prior to the issuance and sale of the Securities
by the Company and the Guarantor, the Related Agreements shall have been
executed on terms that conform in all material respects to the description
thereof in the Offering Circular, and Goldman, Sachs & Co. shall have received
10
<PAGE> 11
true and correct copies of all documents pertaining thereto and evidence
reasonably satisfactory to Goldman, Sachs & Co. of such execution;
(h) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's or the Guarantor's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's or the Guarantor's debt securities;
(i) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange (the "NYSE") or LSE; (ii) a suspension
or material limitation in trading in the Company's securities on the NYSE or
LSE, if any such Securities are listed thereon; (iii) a general moratorium on
commercial banking activities declared by either Federal or New York State
authorities; (iv) a change or development involving a prospective change in
taxation in England or Wales affecting the Company, the Securities or the
transfer thereof or the imposition of exchange controls by the United States or
England and Wales; (v) the outbreak or escalation of hostilities involving the
United States or England and Wales or the declaration by the United States or
England and Wales of a national emergency or war, if the effect of any such
event specified in this Clause (vi) in the judgment of the Purchasers makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated in the
Offering Circular; or (vii) the occurrence of any material adverse change in
the existing, financial, political or economic conditions in the United States
or England and Wales or elsewhere which, in the judgment of the Purchasers,
would materially and adversely affect the financial markets or the markets for
the Securities and other debt securities;
(j) The Securities have been designated for trading on PORTAL; and
(k) Each of the Company and the Guarantor shall have furnished or caused
to be furnished to you at the Time of Delivery certificates of officers of the
Company and the Guarantor satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Guarantor herein at and
as of such Time of Delivery, as to the performance by each of the Company and
the Guarantor of all of its obligations hereunder to be performed at or prior
to such Time of Delivery, as to the matters set forth in subsections (a) and
(e) of this Section and as to such other matters as you may reasonably request.
8.(a) The Company and the Guarantor will jointly and severally indemnify
and hold harmless each Purchaser against any losses, claims, damages or
liabilities, joint or several, to which such Purchaser may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse each Purchaser for any legal or
other expenses reasonably incurred by such Purchaser in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and the Guarantor, as the case
may be, shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in any
Preliminary Offering Circular or the Offering Circular or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company or the Guarantor, as the case may be, by any Purchaser
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company and the
Guarantor against any losses, claims, damages or liabilities to which the
Company or the Guarantor may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Circular or
the Offering Circular, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact or
11
<PAGE> 12
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company or the Guarantor, as the case may be, by such Purchaser through
Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company
or the Guarantor, as the case may be, for any legal or other expenses
reasonably incurred by the Company, or the Guarantor, as the case may be, in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission to so notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party otherwise than under such subsection. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a)
or (b) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Guarantor on the one hand and the Purchasers on
the other from the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Guarantor on the one hand and the Purchasers on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Guarantor on the one hand and the Purchasers on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Purchasers, in
each case as set forth in the Offering Circular. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Guarantor on the one hand or the Purchasers on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Guarantor and the
Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an
12
<PAGE> 13
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which
such Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company and the Guarantor under this Section 8
shall be in addition to any liability which the Company and the Guarantor may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Purchaser within the meaning of the Act; and
the obligations of the Purchasers under this Section 8 shall be in addition to
any liability which the respective Purchasers may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company and the Guarantor and to each person, if any, who controls the Company
and the Guarantor within the meaning of the Act.
(f) Notwithstanding any contrary provision of this Section 8, the Company
and the Guarantor shall not indemnify and hold harmless any of the Purchasers
for any losses, claims, damages or liabilities to the extent that such losses,
claims, damages or liabilities arise from, or are connected to, any action for
punitive or exemplary damages or any other monetary damages not measured by
actual damages.
9.(a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein. If within thirty-six hours after
such default by any Purchaser you do not arrange for the purchase of such
Securities, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Securities, or the Company notifies
you that it has so arranged for the purchase of such Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Offering Circular, or in any other documents or
arrangements, and the Company agrees to prepare promptly any amendments to the
Offering Circular which in your opinion may thereby be made necessary. The
term "Purchaser" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal
amount of all the Securities, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting Purchasers to
purchase Securities of a defaulting Purchaser or Purchasers, then this
Agreement shall thereupon terminate, without liability on the part of any
non-defaulting Purchaser or the Company, except for the expenses to be borne by
the Company and the
13
<PAGE> 14
Purchasers as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Guarantor and the several Purchasers,
as applicable, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Purchaser or any controlling person of any
Purchaser, or the Company, the Guarantor or any officer or director or
controlling person of the Company or the Guarantor, as applicable, and shall
survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Guarantor shall then be under any liability to any
Purchaser except as provided in Sections 6 and 8 hereof; but, if for any other
reason, the Securities are not delivered by or on behalf of the Company as
provided herein, the Company and the Guarantor will reimburse the Purchasers
through you for all out-of-pocket expenses approved in writing by you,
including fees and disbursements of counsel, reasonably incurred by the
Purchasers in making preparations for the purchase, sale and delivery of the
Securities, but neither the Company nor the Guarantor shall then be under any
further liability to any Purchaser except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs
& Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company or the Guarantor set forth
in the Offering Circular, Attention: Secretary; provided, however, that any
notice to a Purchaser pursuant to Section 8(c) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Purchaser at its address
set forth in its Purchasers' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take
effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchasers, the Company and the Guarantor and, to the extent provided
in Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company, the Guarantor or any Purchaser, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Purchaser shall be
deemed a successor or assign by reason merely of such purchase.
14. Each of the parties hereto irrevocably (i) agrees that any legal suit,
action or proceeding arising out of or based upon this Agreement may be
instituted in any New York Court, (ii) waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such proceeding and (iii) submits to the exclusive
jurisdiction of such courts in any such suit, action or proceeding. The
Company and the Guarantor have appointed CT Corporation System, with offices on
the date hereof at 1633 Broadway, New York, New York, as its authorized agent
(the "Authorized Agent") upon whom process may be served in any such action
arising out of or based on this Agreement or the transactions contemplated
hereby which may be instituted in any New York Court by any Purchaser or by any
person who controls any Purchaser, expressly consents to the jurisdiction of
any such court in respect of any such action, and waives any other requirements
of or objections to personal jurisdiction with respect thereto. Such
appointment shall be irrevocable. Each of the Company and the Guarantor
represents and warrants that the Authorized Agent has agreed to act as such
agent for service of process and agrees to take any and all action, including
the filing of any and all documents and instruments, that may be necessary to
continue such appointment in full force and effect as aforesaid. Service of
process upon the
14
<PAGE> 15
Authorized Agent and written notice of such service to the Company or the
Guarantor shall be deemed, in every respect, effective service of process upon
the Company or the Guarantor, as the case may be.
15. In respect of any judgment or order given or made for any amount due
hereunder that is expressed and paid in a currency (the "judgment currency")
other than United States dollars, the Company and the Guarantor will indemnify
each Purchaser against any loss incurred by such Purchaser as a result of any
variation as between (i) the rate of exchange at which the United States dollar
amount is converted into the judgment currency for the purpose of such judgment
or order and (ii) the rate of exchange at which an Purchaser is able to
purchase United States dollars with the amount of judgment currency actually
received by such Purchaser. The foregoing indemnity shall constitute a
separate and independent obligation of each of the Company and the Guarantor
and shall continue in full force and effect notwithstanding any such judgment
or order as aforesaid. The term "rate of exchange" shall include any premiums
and costs of exchange payable in connection with the purchase of or conversion
into United States dollars.
16. Time shall be of the essence of this Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one
and the same instrument.
15
<PAGE> 16
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and the Guarantor and each of the Purchasers
plus one for each counsel counterparts hereof, and upon the acceptance hereof
by you, on behalf of each of the Purchasers, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Purchasers and
the Company and the Guarantor. It is understood that your acceptance of this
letter on behalf of each of the Purchasers is pursuant to the authority set
forth in a form of Agreement among Purchasers, the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
Octel Developments PLC
By:
-----------------------------------
Name:
Title:
Octel Corp.
By:
-----------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:
-----------------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
16
<PAGE> 17
SCHEDULE I
<TABLE>
<CAPTION>
Principal
Amount of
Securities
to be
Purchaser Purchased
- ----------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co.................................. $ 97,500,000
Lehman Brothers Inc.................................. 26,250,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated... 26,250,000
Total........................................... $150,000,000
</TABLE>
17
<PAGE> 18
ANNEX I
(1) The Securities have not been and will not be registered under the Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S
under the Act or pursuant to an exemption from the registration requirements of
the Act. Each Purchaser represents that it has offered and sold the
Securities, and will offer and sell the Securities (i) as part of their
distribution at any time and (ii) otherwise until 40 days after the later of
the commencement of the offering and the Time of Delivery, only in accordance
with Rule 903 of Regulation S, Rule 144A under the Act or pursuant to paragraph
2 of this Annex I under the Act. Accordingly, each Purchaser agrees that
neither it, its affiliates nor any persons acting on its or their behalf has
engaged or will engage in any directed selling efforts with respect to the
Securities, and it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser agrees that, at or
prior to confirmation of sale of Securities (other than a sale pursuant to Rule
144A), it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act. Terms
used above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery
of the Securities, except with its affiliates or with the prior written consent
of the Company.
In addition,
(A) except to the extent permitted under U.S. Treas. Reg. Section
1.163-5(c)(2)(i)(D) (the "D Rules"), (i) each Purchaser agrees that it has
not offered or sold, and during the restricted period will not offer or
sell, Securities in bearer form to a person who is within the United
States or its possessions or to a U.S. person, and (ii) it has not
delivered and will not deliver within the United States or its possessions
definitive Securities in bearer form that are sold during the restricted
period;
(B) each Purchaser represents and agrees that it has, and throughout
the restricted period will have, in effect procedures reasonably designed
to ensure that its employees or agents who are directly engaged in selling
Securities in bearer form are aware that such Securities may not be
offered or sold during the restricted period to a person who is within the
United States or its possessions or to a United States person, except as
permitted by the D Rules;
(C) if it is a United States person, each such Purchaser represents
that it is acquiring the Securities in bearer form for purposes of resale
in connection with their original issuance and if it retains Securities in
bearer form for its own account, it will only do so in accordance with the
requirements of U.S. Treas. Reg. Section 1.163-5(c)(2)(i)(D)(6); and
(D) with respect to each affiliate that acquires from it Securities
in bearer form for the purpose of offering or selling such Securities
during the restricted period, such Purchaser either (i) repeats and
confirms the representations and agreements contained in clauses (A), (B)
and (C) on its behalf or (ii) agrees that it will obtain from such
affiliate for the Company's benefit the representations and agreements
contained in clauses (A), (B) and (C).
Terms used in this paragraph have the meanings given to them by the United
States Internal Revenue Code and regulations thereunder, including the D Rules.
A-1
<PAGE> 19
(2) Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver any of
the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each
Purchaser understands that no action has been taken to permit a public offering
in any jurisdiction outside the United States where action would be required
for such purpose. Each Purchaser agrees not to cause any advertisement of the
Securities to be published in any newspaper or periodical or posted in any
public place and not to issue any circular relating to the Securities, except
in any such case with Goldman, Sachs & Co.'s express written consent and then
only at its own risk and expense.
A-2
<PAGE> 20
ANNEX II
Pursuant to Section 7(d) of the Purchase Agreement, the accountants shall
furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries under rule 101 of the American Institute
of Certified Public Accountants' Code of Professional Conduct, and its
interpretations and rulings;
(ii) In our opinion, the combined financial statements and financial
statement schedules audited by us and included in the Offering Circular
comply as to form in all material respects with the applicable
requirements of the Exchange Act and the related published rules and
regulations;
(iii) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Guarantor for the four most recent fiscal years included in the Offering
Circular agrees with the corresponding amounts (after restatements where
applicable) in the audited consolidated financial statements for such four
fiscal years;
(iv) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the latest available interim financial statements of the
Guarantor and the Subsidiaries, inspection of the minute books of the
Guarantor and the Subsidiaries since the date of the latest audited
financial statements included in the Offering Circular, inquiries of
officials of the Guarantor and the Subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) at March 31, 1998, there was any decrease in combined Great
Lakes investment or net current assets of the Company as compared
with the amounts shown in the December 31, 1997 audited combined
balance sheet included in the Offering Circular; or
(B) for the period from January 1, 1998 to March 31, 1998,
there were any decreases, as compared with the corresponding period
in the preceding year, in combined net sales or combined operating
income, except in all instances for any decreases that the Offering
Circular discloses have occurred or may occur.
(v) In addition to the examination referred to in their report(s)
included in the Offering Circular and the limited procedures, inspection
of minute books, inquiries and other procedures referred to in paragraphs
(iii) and (iv) above, they have carried out certain specified procedures,
not constituting an audit in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Purchasers, which are derived from the
general accounting records of the Guarantor and the Subsidiaries, which
appear in the Offering Circular, and have compared certain of such
amounts, percentages and financial information with the accounting records
of the Guarantor and the Subsidiaries and have found them to be in
agreement.
A-3
<PAGE> 21
April 30, 1998
Dear Ernst & Young
Goldman, Sachs & Co., as representatives of the Purchasers of Senior Notes
due 2006 to be issued by Octel Developments PLC (the "Company"), will be
reviewing certain information relating to the Company that will be included
(incorporated by reference) in the Offering Circular. This review process,
applied to the information relation to the issue, is (will be) substantially
consistent with the due diligence review process that we would perform if this
placement of securities were being registered pursuant to the Securities Act of
1933 (the Act). It is recognized however that what is "substantially
consistent" may vary from situation to situation and may not be the same as
that done in a registered offering of the same securities for the same issuer
and whether the procedures being, or to be, followed will be "substantially
consistent" will be determined by us on a case-by-case basis. We are
knowledgeable with respect to the due diligence review process that would be
performed if this placement of securities were being registered pursuant to the
Act. We hereby request that you deliver to us a "comfort" letter concerning
the financial statements of the issuer and certain statistical and other data
included in the offering document. We will contact you to identify the
procedures we wish you to follow and the form we wish the comfort letter to
take.
Very truly yours,
_____________________________________
(Goldman, Sachs & Co.)
A-4
<PAGE> 22
ANNEX III
Pursuant to Section 7(b) of the Purchase Agreement, Kirkland & Ellis shall
furnish their written opinion to the Purchasers to the effect that:
(i) After giving effect to the Distribution in the manner
contemplated by the Related Agreements, (i) the Guarantor's
authorized capital stock will be as set forth under the heading
"Security Ownership of Certain Beneficial Owners" in the
Offering Circular and (ii) all of the issued and outstanding
shares of capital stock of the Guarantor will be validly issued,
fully paid and non-assessable;
(ii) Each of the Subsidiaries incorporated in the U.S.
(each, a ("U.S. Subsidiary") is a corporation validly existing
and in good standing under the laws of its jurisdiction of
incorporation; and all of the issued shares of capital stock of
each such U.S. Subsidiary have been duly and validly authorized
and issued, are fully paid and nonassessable, and (except for
directors' qualifying shares) are owned directly or indirectly
by the Company or the Guarantor, free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon
certificates of officers of the Company or the Guarantor or the
U.S. Subsidiaries, provided that such counsel shall state that
they believe that both you and they are justified in relying
upon such opinions and certificates);
(iii) To the best of such counsel's knowledge and other
than as set forth in the Offering Circular, there are no legal
or governmental proceedings pending to which the Company, the
Guarantor or the Subsidiaries is a party or of which any
property of the Company, the Guarantor or the Subsidiaries is
the subject which, if determined adversely to the Company, the
Guarantor or the Subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or
future consolidated financial position, stockholders' equity or
results of operations of the Company, the Guarantor or the
Subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(iv) Each of the Purchase Agreement and the Exchange and
Registration Rights Agreement has been duly executed and
delivered by the Guarantor. Assuming due authorization,
execution and delivery by the Company and the Purchasers, and
the due authorization by the Guarantor, the Purchase Agreement
and the Exchange and Registration Rights Agreement constitute
valid and legally binding obligations of the Company and the
Guarantor, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity);
(v) The Notes, the Related Agreements and the Indenture
have been duly executed, authenticated, issued and delivered by
the Company assuming due authorization, execution and delivery,
to the extent applicable, by the Trustee and the Company, as the
case may be, and the due authorization by the Guarantor, the
Indenture constitutes and the Notes and the Guarantee, when
authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Purchasers in accordance with
the terms of the Purchase Agreement, will constitute valid and
legally binding obligations of the Company and the Guarantor, as
the case may be, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity);
A-5
<PAGE> 23
(vi) The execution and delivery by the Company and the Guarantor,
as the case may be, of the Purchase Agreement, the Exchange and
Registration Rights Agreement, the Related Agreements, the
Guarantee and the Indenture and the performance of its agreements
therein and the consummation of the sale of the Notes to you in
accordance with the Purchase Agreement do not (i) based on our
review of the Guarantor's Articles of Incorporation and Bylaws,
violate such Articles of Incorporation or Bylaws or (ii)
constitute a violation by the Company or the Guarantor, as the
case may be, of any applicable provision of any law, statute or
regulation (except that we express no opinion in this paragraph
as to compliance with any disclosure requirement or any
prohibition against fraud or misrepresentation or as to whether
performance of the indemnification or contribution provisions in
the Purchase Agreement would be permitted) or (iii) breach, or
result in a default under, any existing obligation of the Company
or the Guarantor, as the case may be, under any of the agreements
listed on Schedule A hereto (provided that we express no opinion
as to compliance with any financial test or cross default
provision in any such agreement);
(vii) To our knowledge, no consent, approval, authorization or order of
any governmental agency under U.S. Federal law is required for
the consummation of the Related Agreements, provided that this
paragraph does not cover or address any law or legal issue
identified on Schedule B hereto;
(viii) To our knowledge, neither the Company nor the Guarantor was
required to obtain any consent, approval, authorization or order
of governmental agency for the issuance, delivery and sale of
the Notes being issued and sold by it under the Purchase
Agreement and the Indenture except for any such consent,
approval, authorization or order which may be required under the
so-called "Blue Sky" or securities laws of any states (as to
which we express no opinion or advice);
(ix) To our knowledge, there is no action, suit,
proceeding or investigation before or by any court or
governmental agency or body, domestic or foreign, pending or
threatened against, the Guarantor, the Company or the
Subsidiaries that (i) has caused such counsel to conclude that
such action, suit, proceeding or investigation is required to be
described in the Offering Circular but is not so described or
(ii) would be reasonably likely to adversely affect the
consummation of any of the transactions contemplated by the
Purchase Agreement or the Indenture, including without
limitation the issuance and sale of the Notes and the Guarantee;
(x) It is not necessary in connection with (i) the offer,
sale and delivery of the Notes to the several Purchasers
pursuant to the Purchase Agreement or (ii) the resales of the
Notes by the several Purchasers in the manner contemplated in
the Offering Circular to register the Notes under the Securities
Act or to qualify an indenture in respect thereof under the
United States Trust Indenture Act of 1939;
(xi) Neither the Guarantor or the Company is an
"investment company" as defined in the Investment Company Act of
1940;
(xii) The statements set forth in the Offering Circular under the
caption "Description of the Notes", insofar as they purport to
constitute a summary of the terms of the Securities and under the
caption "Plan of Distribution", insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(xiii) The Notes, the Guarantee and the Indenture conform in all
material respects to the descriptions thereof contained in the
Offering Circular, and the description in the Offering Circular
of United States federal income tax matters under the heading
"Certain Federal Income Tax Consequences" is accurate in all
material respects and fairly presents the information required to
be shown.
A-6
<PAGE> 24
(xiv) Such counsel has no reason to believe that the Offering Circular
and any further amendments or supplements thereto made by the
Company or the Guarantor prior to the Time of Delivery (other
than the financial statements therein, as to which such counsel
need express no opinion) contained as of its date or contains as
of the Time of Delivery an untrue statement of a material fact or
omitted or omits, as the case may be, to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
A-7
<PAGE> 25
ANNEX IV
Pursuant to Section 7(c) of the Purchase Agreement, Skadden, Arps, Slate,
Meagher & Flom shall furnish their written opinion to the Purchasers to the
effect that:
(i) The Guarantor is a corporation validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(ii) The Guarantor has the corporate power to own and lease its
properties and to conduct its business as described in the
Offering Circular;
(iii) Each of the Purchase Agreement and the Exchange and
Registration Rights Agreement has been duly authorized by the
Guarantor.
(iv) The Notes, the Guarantee, the Related Agreements and the
Indenture have been duly authorized by the Guarantor.
(v) The execution and delivery by the Guarantor of the
Purchase Agreement, the Exchange and Registration Rights
Agreement, the Related Agreements, the Guarantee and the
Indenture and the performance of its agreements therein and the
consummation of the sale of the Notes to you in accordance with
the Purchase Agreement will not conflict with the Certificate of
Incorporation or Bylaws of the Guarantor.
A-8
<PAGE> 26
ANNEX V
Pursuant to Section 7(d) of the Purchase Agreement, Linklaters & Paines
shall furnish their written opinion to the Purchasers to the effect that:
(i) The Company is a corporation validly existing under
the laws of its jurisdiction of incorporation;
(ii) The Company's subsidiaries in the United Kingdom are
corporations validly existing under the laws of their
jurisdictions of incorporation;
(iii) The Company has the corporate power to own and lease
its properties and to conduct its business as described in the
Offering Circular;
(iv) The Company is qualified to do business and is in
good standing in each jurisdiction listed opposite its name on
Schedule A hereto;
(v) Each of the Purchase Agreement and the Exchange and
Registration Rights Agreement has been duly authorized, executed
and delivered by the Company.
(vi) No Governmental Authorization of or with any
Governmental Agency in England and Wales is required for the
issue and sale of the Securities or the consummation by the
Company or the Guarantor of the transactions contemplated by
this Agreement or the Indenture;
(vii) The Indenture has been duly authorized, executed,
authenticated, issued and delivered by the Company;
(viii) The execution and delivery by the Company of the Purchase
Agreement, the Exchange and Registration Rights Agreement, and
the Indenture and the performance of its agreements therein and
the consummation of the sale of the Notes to you in accordance
with the Purchase Agreement do not (i) based on our review of
the Company's Memorandum and Articles of Association, violate
such or (ii) constitute a violation by the Company of any
applicable provision of any law, statute or regulation (except
that we express no opinion in this paragraph as to compliance
with any disclosure requirement or any prohibition against fraud
or misrepresentation or as to whether performance of the
indemnification or contribution provisions in the Purchase
Agreement would be permitted) or (iii) breach, or result in a
default under, any existing obligation of the Company under any
of the agreements listed on Schedule B hereto (provided that we
express no opinion as to compliance with any financial test or
cross default provision in any such agreement);
(ix) No Governmental Authorization of or with any
Governmental Agency in England and Wales is required for the
issue and sale of the Securities or the consummation by the
Company or the Guarantor of the transactions contemplated by
this Agreement or the Indenture;
(x) No stamp or other issuance or transfer taxes or
duties and no capital gains, income, withholding or other taxes
are payable by or on behalf of the Purchasers to England and
Wales or to any political subdivision or taxing authority
thereof or therein in connection with (A) issuance, sale and
delivery by the Company of the Securities to or for the
respective accounts of the Purchasers or (B) the sale and
delivery outside England and Wales by the Purchasers of the
Securities to the initial purchasers thereof in the manner
contemplated herein;
(xi) Each of the Company's and the Guarantor's agreement
to the choice of law provisions set forth in Section 14 hereof
will be recognized by the courts of England
A-9
<PAGE> 27
and Wales; each of the Company and the Guarantor can sue and be
sued in its own name under the laws of England and Wales; the
irrevocable submission of the Company and the Guarantor to the
exclusive jurisdiction of a New York Court, the waiver by the
Company and the Guarantor of any objection to the venue of a
proceeding of a New York Court and the agreement of each of the
Company and the Guarantor that this Agreement shall be governed
by and construed in accordance with the laws of the State of New
York are legal, valid and binding; service of process effected in
the manner set forth in Section 14 hereof will be effective,
insofar as the law of England and Wales is concerned, to confer
valid personal jurisdiction over the Company or the Guarantor;
and judgment obtained in a New York Court arising out of or in
relation to the obligations of each of the Company and the
Guarantor under this Agreement would be enforceable against each
of the Company and the Guarantor in the courts of England and
Wales.
(xii) Neither the Company nor the Guarantor is entitled to
any immunity on the basis of sovereignty or otherwise in respect
of its obligations under this Agreement and could successfully
interpose any such immunity as a defense to any suit or action
brought or maintained in respect of its obligations under this
Agreement; and the waiver by the Company and the Guarantor of
immunity to jurisdiction (including the waiver of sovereign
immunity to which the Company or the Guarantor may become
entitled subsequent to the date of this Agreement) and immunity
to pre-judgment attachment, post-judgment attachment and
execution in any suit, action or proceeding against it arising
out of or based on this Agreement is a valid and binding
obligation of the Company and the Guarantor under the laws of
England and Wales;
(xiii) The indemnification and contribution provisions set forth in
Section 8 hereof do not contravene the laws of England and
Wales;
(xiv) All interest on the Securities may under the current
laws and regulations of England and Wales to be paid in the
currency of such jurisdictions may be converted into foreign
currency that may be freely transferred out of England and Wales
and all interest and other distributions on the Securities will
not be subject to withholding or other taxes under the laws and
regulations of England and Wales and are otherwise free and
clear of any other tax, withholding or deduction in England and
Wales and without the necessity of obtaining any Governmental
Authorization in England and Wales; and
(xv) No Governmental Authorization or with any Governmental Agency is
required to effect payments of principal, premium, if any, and
interest on the Securities.
A-10
<PAGE> 1
Exhibit 5.1
October 1, 1998
Octel Developments plc
Octel Corp.
P.O. Box 17 Oil Sites Road
Ellesmere Port
South Wirral L65 4HF
OR
Suite 2, 4th Floor
Berkeley Square House
London W1X 6DT
Re: Registration Statement on Form S-4
Octel Developments plc
Octel Corp.
File No. 333-58919
Gentlemen:
We have acted as special counsel to Octel Developments plc, a company
organized under the laws of England and Wales (the "Issuer") and Octel Corp., a
Delaware Corporation (the "Guarantor")(the Issuer and the Guarantor are
collectively referred to herein as the "Company"), in connection with the
proposed registration under the Securities Act of 1933, as amended (the
"Securities Act"), of $150,000,000 principal amount of 10% Senior Notes due
2006 (the "New Notes") for the purpose of effecting an exchange offer (the
"Exchange Offer") for the Issuer's 10% Senior Notes due 2006 which have not
been registered under the Securities Act (the "Old Notes"). The New Notes will
be issued pursuant to an Indenture, dated as of May 1, 1998, by and among the
Issuer, the Guarantor and IBJ Schroder Bank & Trust Company, as Trustee (the
"Indenture"). Capitalized terms used herein but not defined herein have the
meaning set forth in the Preliminary Prospectus of the Issuer dated as of
October 1, 1998.
In connection therewith, we have examined and relied upon the assumptions
set forth in Schedule A to this letter and upon the original, or copies
certified or otherwise identified to our satisfaction, of (i) corporate
organizational documents of the Company; (ii) minutes and records of the
corporate proceedings of the Company with respect to the issuance and sale of
the New Notes and the Guarantee; (iii) the Registration Statement and exhibits
thereto; (iv) the Indenture; and (v) such other documents, corporate records
and other instruments as we have deemed necessary for the expression of the
opinions contained herein. We have assumed without investigation that there
has
<PAGE> 2
Octel
October 1, 1998
Page 2
been no relevant change or development between the dates as of which the
information cited in the preceding sentence was given and the date of this
letter and that the information upon which we have relied is accurate and does
not omit disclosures necessary to prevent such information from being
misleading.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of
all documents submitted to us as copies, and the authenticity of the
originals of all documents submitted to us as copies. We have also assumed
the genuineness of the signatures of persons signing all documents in
connection with which this opinion is rendered, the authority of such persons
signing on behalf of the parties thereto, and the due authorization, execution
and delivery of all documents by the parties thereto.
All of the opinions contained in this letter with respect to the Company
are subject to the assumption that, under the laws of its jurisdiction of
incorporation, the Company: (i) is duly organized, validly existing and in good
standing, (ii) has full corporate or organizational power and authority to
execute, deliver and perform its obligations under the Indenture and the Notes,
(iii) has duly authorized by all necessary corporate action the execution,
delivery and performance of the Indenture and the Notes, (iv) has duly executed
and delivered the Indenture and the Notes and (v) is not subject to any law or
regulation limiting the enforceability of the Indenture or the Notes against
it.
Subject to the further assumptions, qualifications, exclusions and other
limitations which are identified in this letter and in the schedules attached
to this letter, we advise you that when, as and if (i) the Registration
Statement shall have become effective pursuant to the provisions of the
Securities Act, (ii) the Indenture shall have been qualified pursuant to the
provisions of the Trust Indenture Act of 1939, as amended, (iii) the Old Notes
shall have been validly tendered to the Issuers and (iv) the New Notes shall
have been issued in the form and containing the terms described in the
Registration Statement, the Indenture, the resolutions of the Issuer's and the
Guarantor's Board of Directors authorizing the foregoing and any legally
required consents, approvals, authorizations and other order of the Commission
and any other regulatory authorities to be obtained, the New Notes when issued
pursuant to the Exchange Offer will be legally issued, fully paid and
nonassessable and will constitute valid and binding obligations of the Issuer
and the Guarantee will constitute the valid and binding obligations of the
Guarantor.
<PAGE> 3
Octel
Oct. 1, 1998
Page 3
Our advice on every legal issue addressed in this letter is subject to the
General Qualifications that are recited in Schedule B to this letter.
We express no opinion as to, or the effect or applicability of, any laws
other than the laws of the State of New York. Our advice on every legal issue
addressed in this letter is based exclusively on such laws. We express no
opinion with respect to the applicability thereto, or the effect thereon, of
the laws of any other jurisdiction or as to any matters of municipal law or the
laws of any other local agencies within the state. We advise you that issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. Our opinions do not cover or otherwise address any provision in the
Indenture, the Notes or the Guarantee of a kind identified in Schedule C.
Provisions in the Indenture which are not excluded by Schedule C or any other
part of this letter or its attachments are called the "Relevant Agreement
Terms."
Our advice on each legal issue addressed in this letter represents our
opinion as to how that issue would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the
case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future. It is possible that some Relevant
Agreement Terms may not prove enforceable for reasons other than those cited in
this letter should an actual enforcement action be brought, but (subject to all
the exceptions, qualifications, exclusions and other limitations contained in
this letter) such unenforceability would not in our opinion prevent you from
realizing the principal benefits purported to be provided by the Relevant
Agreement Terms.
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact of which the lawyers in our firm who have had
significant involvement with the negotiation and preparation of the Indenture
(namely, Stuart L. Mills and Mark S. Silver, herein called the "Designated
Transaction Lawyers") did not have actual knowledge at that time, by reason of
any change subsequent to that time in any law covered by any of our opinions,
or for any other reason. The attached schedules are an integral part of this
letter, references herein or therein to this letter include such schedules, and
any term defined in this letter or any schedule has that defined meaning
wherever it is used in this letter or in any schedule to this letter.
<PAGE> 4
Octel
October 1, 1998
Page 4
While we have not conducted any independent investigation to determine
facts upon which our opinions are based or to obtain information about which
this letter advises you, we confirm that we do not have any actual knowledge
which has caused us to conclude that our reliance and assumptions cited in the
preceding paragraph are unwarranted. The term "actual knowledge" whenever it is
used in this letter with respect to our firm means conscious awareness at the
time this letter is delivered on the date it bears by the Designated Transaction
Lawyers.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
titled "Legal Matters" in the Prospectus which is part of the Registration
Statement.
We do not find it necessary for purposes of this opinion, and accordingly
do not purport to cover herein, the application of the securities or "Blue Sky"
laws of the various states to issuance of the New Notes.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE> 5
SCHEDULE A
ASSUMPTIONS
For purposes of the letter to which this Schedule is attached ("our
letter"), we have relied, without investigation, upon each of the following
assumptions:
(a) Each document submitted to us for review is accurate and complete, each
such document that is an original is authentic, each such document that is
a copy conforms to an authentic original, and all signatures on each such
document are genuine.
(b) There has not been any mutual mistake of fact or misunderstanding, fraud,
duress or undue influence.
(c) The constitutionality or validity of a relevant statute, rule, regulation
or agency action is not in issue.
(d) The Company is not subject to any law or regulation,
other than laws of the State of New York limiting the enforceability of
the Indenture, the Notes or the Guarantee against the Company.
<PAGE> 6
SCHEDULE B
GENERAL QUALIFICATIONS
The term "General Qualifications" as used in the letter to which this
Schedule is attached ("our letter") means the Bankruptcy and Insolvency
Exception, the Equitable Principles Limitation, the Common Qualifications and
the Other Qualifications set forth in this Schedule.
Bankruptcy and Insolvency Exception. Each of the opinions ("our
opinions") in our letter is subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws of
general applicability relating to or affecting the enforcement of
creditors' rights from time to time in effect and to general principles
of equity (regardless of whether enforcement is considered in proceedings
at law or in equity). This exception includes:
(a) the Federal Bankruptcy Code and thus comprehends, among
others, matters of turn-over, automatic stay, avoiding powers,
fraudulent transfer, preference, discharge, conversion of a
non-recourse obligation into a recourse claim, limitations on ipso
facto and anti-assignment clauses and the coverage of pre-petition
security agreements applicable to property acquired after a petition
is filed;
(b) all other Federal and state bankruptcy, insolvency,
reorganization, receivership, moratorium, arrangement and assignment
for the benefit of creditors laws that affect the rights of
creditors generally or that have reference to or affect only
creditors of specific types of debtors;
(c) state fraudulent transfer and conveyance laws; and
(d) judicially developed doctrines relevant to any of the
foregoing laws, such as substantive consolidation of entities.
Equitable Principles Limitation. Each of our opinions is subject to the
effect of general principles of equity, whether applied by a court of law
or equity. This limitation includes principles:
(a) governing the availability of specific performance,
injunctive relief or other equitable remedies, which generally place
the award of such remedies, subject to certain guidelines, in the
discretion of the court to which application for such relief is
made;
(b) imposing duties and standard of conduct upon creditors;
(c) affording equitable defenses (e.g., waiver, laches and
estoppel) against a party seeking enforcement;
<PAGE> 7
(d) requiring good faith and fair dealing in the performance and
enforcement of a contract by the party seeking its enforcement;
(e) requiring reasonableness in the performance and enforcement
of an agreement by the party seeking enforcement of the contract;
(f) requiring consideration of the materiality of (i) a breach
and (ii) the consequences of the breach to the party seeking
enforcement;
(g) requiring consideration of the impracticability or
impossibility of performance at the time of attempted enforcement;
and
(h) affording defenses based upon the unconscionability of the
enforcing party's conduct after the parties have entered into the
contract.
Common Qualifications. Each of our opinions is subject to the effect of
rules of law that:
(a) limit or affect the enforcement of provisions of a contract
that purport to waive, or to require waiver of, the obligations of
good faith, fair dealing, diligence and reasonableness;
(b) provide that forum selection clauses in contracts are not
necessarily binding on the court(s) in the forum selected;
(c) limit the availability of a remedy under certain
circumstances where another remedy has been elected;
(d) provide a time limitation after which a remedy may not be
enforced;
(e) limit the right of a creditor to use force or cause a breach
of the peace in enforcing rights;
(f) limit or affect the enforceability of provisions releasing,
exculpating or exempting a party from, or requiring indemnification
of a party for, liability for its own action or inaction, to the
extent the action or inaction involves gross negligence,
recklessness, willful misconduct, unlawful conduct, violation of
public policy or litigation against another party determined
adversely to such party;
(g) may, where less than all of a contract may be unenforceable,
limit the enforceability of the balance of the contract to
circumstances in which the unenforceable portion is not an essential
part of the agreed exchange;
<PAGE> 8
(h) govern and afford judicial discretion regarding the
determination of damages and entitlement to attorneys' fees and
other costs;
(i) may permit a party that has materially failed to render or
offer performance required by the contract to cure that failure
unless (i) permitting a cure would unreasonably hinder the aggrieved
party from making substitute arrangements for performance, or (ii)
it was important in the circumstances to the aggrieved party that
performance occur by the date stated in the contract.
(j) limit or affect the enforceability of provisions in the
Indenture and the New Notes deemed to impose the payment of
interest;
(k) limit or affect the enforceability of requirements in the
Indenture and the New Notes specifying that the provisions thereof
may only be waived in writing to the extent that an oral or implied
agreement by trade practice or course of conduct has been created
modifying any provision of such documents;
(l) limit or affect the enforceability of indemnification or
contribution obligations which contravene public policy, including,
without limitation, indemnification or contribution obligations
which arise out of failure to comply with applicable state or
federal securities law;
(m) limit or affect the enforceability of cumulative remedies to
the extent such cumulative remedies purport to or would have the
effect of compensating the party entitled to the benefits thereof in
excess of the actual loss suffered by such party;
(n) limit the recovery of legal fees and legal expenses by an
indemnified person to reasonable attorneys' fees and legal expenses;
Other Qualifications. Each of our opinions is subject to the following
other qualifications:
(a) our opinion as to the binding effect of the Indenture and the
Guarantees with respect to the Guarantors is subject to the effect
of laws and judicial decisions which have imposed duties and
standards of conduct upon creditors;
(b) provisions of any document or agreement which permit a party
to take any action, to make any determination, or to benefit from
indemnities and similar undertakings may be subject to a requirement
that such action be taken or such determination be made or that any
action or inaction by any party that may give rise to a request for
payment under an such undertaking be taken or not taken, as the case
may be, on a reasonable basis and in good faith;
<PAGE> 9
(c) a substantial body of case law treats guarantors as "debtors"
under the Uniform Commercial Code (as enacted in the State of New
York) (the "Code") thereby according guarantor the rights and
remedies of debtors established by the Code;
(d) we express no opinion as to the binding effect of the
indemnification or contribution provisions of any document or
agreement, insofar as said provisions might require indemnification
or contribution with respect to any litigation by any indemnified
person under an agreement against the Issuers or the Guarantor
determined adversely to such indemnified person under such agreement
or with respect to any loss, cost or expense arising out of an
indemnified person's negligence or willful misconduct or an
violation by such indemnified person of any statutory duties,
general principles of equity or public policy;
(e) waivers of equitable rights and defenses may not be valid,
binding and enforceable under New York law;
(f) we express no opinion with respect to the waivers set forth
in any document or agreement insofar as they might not be broad
enough to cover all situations which might arise for which a waiver
could be found desirable; and
(g) certain rights, remedies and waivers contained in the
Indenture may be rendered ineffective, or limited by, applicable
laws or judicial decisions (other than those reflected in the
foregoing qualifications and assumptions) governing such provisions,
but such laws and judicial decisions do not, in our opinion, make
the Indenture inadequate for the practical realization of the
security provided by the Guarantee;
<PAGE> 10
SCHEDULE C
EXCLUDED PROVISIONS
None of the opinions in the letter to which this Schedule is attached
covers or otherwise addresses any of the following kinds of provisions which
may be contained in the Indenture, the Notes or the Guarantee:
1. Provisions constituting penalties, or for liquidated damages,
acceleration of future amounts due (other than principal) without
appropriate discount to present value, late charges, prepayment charges or
increased interest rates upon default.
2. Provisions that contain a waiver of (i) broadly or vaguely stated rights,
(ii) the benefits of statutory, regulatory, or constitutional rights,
unless and to the extent the statute, regulation, or constitution
explicitly allows waiver, (iii) unknown future defenses, (iv) rights to
damages, (v) statutes of limitations, and (vi) other benefits to the
extent they cannot be waived under applicable law.
3. Provisions which purport to award attorneys' fees solely to one party.
4. Indemnification provisions of the Indenture insofar as said provisions
contravene public policy or might require indemnification of, or payments
to, any party with respect to any litigation by such party against the
Company determined adversely to such party, of any loss, cost
or expense arising of any violation by such party of statutory duties,
general principles of equity or public policy.
5. Provisions purporting to limit rights of third parties who have not
consented thereto or purporting to grant rights to third parties.
6. Provisions providing for forfeitures or the recovery of amounts deemed to
constitute penalties.
7. Provisions, if any, which are contrary to the public policy of any
jurisdiction to any extent that they are also contrary to the public
policy of the State of New York.
8. Waivers of the right to trial by jury, agreements to submit to the
jurisdiction of any particular court or other governmental authority,
waivers of the right to assert forum nonconveniens, and other such
waivers.
<PAGE> 11
9. Provisions in the Indenture providing that any or all of the obligations
thereunder are valid notwithstanding the invalidity of any other
provisions in that agreement or in any other Transaction Agreement.
10. Provisions that provide for the appointment of a receiver, provisions
appointing one party as an attorney-in-fact for an adverse party,
provisions which provide a time limitation after which a remedy may not be
enforced, and forum selection clauses and consent to jurisdiction clauses
(both as to personal jurisdiction and subject matter jurisdiction).
11. Choice-of-law provisions, except to the extent a party brings an action
to enforce the Indenture, the Guarantee or the Notes in a New York state
court.
<PAGE> 1
Exhibit 5.2
LINKLATERS & PAINES
One Silk Street
London EC2Y 8HQ
Telephone: (+44) 171 456 2000
Facsimile: (+44) 171 456 2222
Group 4 FAX: (-44) 171 374 9318
DX Box Number 10
LINKLATERS
Direct line 0171 456 4428
Direct facsimile 0171 456 2271
1 October 1998
Our ref THWW
Your ref
Octel Developments PLC (the "ISSUER")
P.O. Box 17
Oil Sites Road
Ellesmere Port
South Wirral L65 4HF
Dear Sirs
REGISTRATION STATEMENT ON FORM S-4
OCTEL DEVELOPMENTS PLC
OCTEL CORP.
FILE NO. 333-58919
1 This opinion is given in connection with the Registration
Statement on Form S-4 (File No. 333-58919) (the "REGISTRATION STATEMENT")
to be filed with the US Securities and Exchange Commission under the US
Securities Act of 1933, relating to the registration of $150,000,000
principal amount of 10% Senior Notes due 2006 (the "EXCHANGE NOTES") of
the Issuer guaranteed by Octel Corp. (the "GUARANTOR") for the purpose of
effecting an exchange offer (the "EXCHANGE OFFER") for the Issuer's
$150,000,000 10% Senior Notes due 2006 which have not been registered
under the Securities Act (the "ORIGINAL NOTES"). The Original Notes were,
and the Exchange Notes will be, issued pursuant to the Indenture dated as
of 1 May 1998 (the "Indenture") between the Issuer, the Guarantor and IBJ
Schroder Bank & Trust Company as trustee. We have acted as English legal
advisers to the Issuer in connection with the above matter and have taken
instructions solely from the Issuer.
2 This opinion is limited to English law as applied by the
English courts and is given on the basis that it will be governed by and
construed in accordance with English law. We express no opinion on matters
of United States federal or state law or the laws of any other
jurisdiction.
3 For the purpose of this opinion we have examined the documents
listed and, where appropriate, defined in the Schedule to this letter. We
have assumed
3.1 (except in the case of the Issuer) that all relevant documents
are within the capacity and powers of, and have been validly authorised
by, each party and (in the case of each party) that those
<PAGE> 2
LINKLATERS
documents have been or (in the case of the Exchange Notes) will be validly
executed and delivered by the relevant party
3.2 that each of the documents which are the subject of this
opinion is valid and binding on each party under the law to which it is
expressed to be subject where that is not English law
3.3 that words and phrases used in those documents have the same
meaning and effect as they would if those documents were governed by
English law and there is no provision of any law (other than English law)
which would affect anything in this opinion
3.4 all copy documents examined by us for the purpose of this
opinion conform to the originals
3.5 no Finance Agreement nor any Note has been amended,
supplemented or terminated
3.6 the copies of the Memorandum and Articles of Association
examined by us for the purpose of this opinion are complete and up-to-date
3.7 the Minutes of which copies have been examined by us for the
purpose of this opinion are a true record of the proceedings described
therein of duly convened, constituted and quorate meetings of the Board of
Directors of the Issuer (or, as applicable, the Pricing Committee thereof)
and that the resolutions set out in those Minutes were duly passed and
remain in full force and effect without modification and
3.8 the genuineness of all signatures.
The Exchange and Registration Rights Agreement, the Note Depository
Agreement and the Indenture are together referred to in this opinion as
the "FINANCE AGREEMENTS".
The term "NON-ASSESSABLE" in relation to the Exchange Notes means that
under English law holders of Exchange Notes are under no personal
liability to contribute to the assets or liabilities of the Issuer in
their capacities purely as holders of the Exchange Notes.
4 In our opinion:
4.1 The Issuer is a company incorporated in England under the
Companies Act 1985.
4.2 The Issuer has corporate power to enter into and to perform its
obligations under the Finance Agreements and the Exchange Notes and has
taken all necessary corporate action to authorise its execution, delivery
and performance of the Finance Agreements and the Notes. When the
Exchange Notes substantially in the form contained in the Indenture have
been duly created, issued and delivered the Exchange Notes will be legally
issued, non-assessable and will (to the extent applicable under English
law) constitute valid and binding obligations of the Company.
4.3 The English courts will recognise and give effect to the choice
of the laws of the State of New York as the governing law of the Finance
Agreements and the Exchange Notes.
4.4 A judgment of a recognised court sitting in the State of New
York having jurisdiction to give that judgment, finally and conclusively
establishing a debt, will be recognised by the English courts as creating
a debt enforceable against the Issuer by a creditor upon which judgment
may be given in fresh proceedings to recover the debt without a retrial or
re-examination of the matters thereby adjudicated, provided that the
defendant may have defences open to it and/or enforcement may not be
permitted if, inter alia, the judgment:
4.4.1 was obtained by fraud;
2
<PAGE> 3
LINKLATERS
4.4.2 was contrary to public policy of English law or was in respect of a
cause of action which for reasons of public policy or for some other
reason could not have been entertained by the English courts;
4.4.3 relates to foreign penal or revenue laws;
4.4.4 was obtained in proceedings contrary to natural justice;
4.4.5 amounts to judgment on a matter previously determined by an English
court;
4.4.6 is given in proceedings brought in breach of an agreement for the
settlement of disputes;
4.4.7 if enforcement of the judgment is restricted by the provisions of
the Protection of Trading Interests Act, 1980;
4.4.8 is the subject of a pending appeal or the judgment debtor is
entitled to and intends to appeal against the judgment.
5 The term "ENFORCEABLE" as used above means that the obligations
assumed by the relevant party under the relevant document are of a type
which the English courts enforce. It does not mean that those obligations
will necessarily be enforced in all circumstances in accordance with their
terms. In particular:
5.1 Enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganisation and other laws of general application relating
to or affecting the rights of creditors.
5.2 Enforcement may be limited by general principles of equity -
for example, equitable remedies may not be available where damages are
considered to be an adequate remedy.
5.3 Claims may become barred under the Limitation Act 1980 or may
be or become subject to set-off or counterclaim.
5.4 Where obligations are to be performed in a jurisdiction outside
England, they may not be enforceable in England to the extent that
performance would be illegal under the laws of that jurisdiction.
5.5 Enforcement may be refused if a foreign judgement is
incompatible with an English judgement between the same parties relating
to the same issues or, in some circumstances, with an earlier foreign
judgement which satisfied the same criteria and is enforceable in England.
6 This opinion is subject to the following:
6.1 It should be understood that we have not been responsible for
investigating or verifying the accuracy of the facts, including statements
of foreign law, or the reasonableness of any statements of opinion,
contained in the Registration Statement or any other document, or that no
material facts have been omitted from it.
6.2 To the extent it relates to United Kingdom stamp duties any
undertaking or indemnity given by the Issuer may be void under Section 117
of the Stamp Act 1891.
6.3 An English court may refuse to give effect to any provision of
an agreement which amounts to an indemnity in respect of the costs of
unsuccessful litigation brought before an English court or where the court
has itself made an order for costs.
3
<PAGE> 4
LINKLATERS
7 This opinion is addressed to you solely for use in connection
with the filing of the Registration Statement. It is not to be transmitted
to anyone else nor is it to be relied upon by anyone else or for any other
purpose or quoted or (subject as mentioned below) referred to in any
public document or filed with anyone without our express consent.
8 We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
caption entitled "Legal Matters" in the Registration Statement. In giving
this consent, we do not admit that we are within the category of persons
whose consent is required within Section 7 of the US Securities Act of
1933 or the rules and regulations of the US Securities and Exchange
Commission thereunder.
Yours faithfully
/s/ Linklaters & Paines
Linklaters & Paines
4
<PAGE> 5
LINKLATERS
SCHEDULE
1 A search copy of the Certificate of Incorporation and the Memorandum and
Articles of Association of the Issuer.
2 A photocopy of the Minutes of a Meeting of the Board of Directors of the
Issuer and the Guarantor held on 30 April 1998, a fax copy of the Minutes
of a Resolution of the Pricing Committee of the Issuer made on 30 April
1998 and a photocopy of the Minutes of a Meeting of the Board of Directors
of the Issuer held on 29 September 1998.
3 Notes Indenture dated as of 1 May 1998 (the "INDENTURE") between the Issuer
and IBJ Schroder Bank & Trust Company as trustee constituting the Exchange
Notes.
4 Exchange and Registration Rights Agreement dated 30 April 1998 (the
"EXCHANGE AND REGISTRATION RIGHTS AGREEMENT") between the Issuer, Goldman,
Sachs & Co, Lehman Brothers Inc.and Merrill Lynch, Pierce Fenner & Smith
Incorporated.
5 Registration Statement on Form S-4 (File No. 333-58919) and Amendment No. 1
thereto.
6 Notes Depositary Agreement dated 5 May 1998 (the "NOTES DEPOSITORY
AGREEMENT") between the Issuer, the Guarantor and The Industrial Bank of
Japan (Luxembourg) S.A..
5
<PAGE> 1
Exhibit 10.7
OCTEL CORP.
RULES
OF THE
OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Approved by the Compensation Committee on 10 May 1998
PRICEWATERHOUSECOOPERS
9 Bond Court
Leeds
LS1 2SN
<PAGE> 2
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
CONTENTS
1. DEFINITIONS 1
2. GRANT OF OPTIONS 3
<TABLE>
<S> <C>
2.1 Procedure for Grant of Options 3
2.2 Requirement to Issue Option Certificate 3
2.3 Right to Disclaim Option 3
2.4 Options may not be transferred 4
2.5 Modified Terms and Conditions 4
2.6 Additional Requirements 4
</TABLE>
3. RIGHTS OF EXERCISE 4
<TABLE>
<S> <C>
3.1 Earliest Date of Exercise 4
3.2 Requirement to remain in Office 5
3.3 Death of Option Holder 5
3.4 Right to Exercise Prematurely 5
3.5 Lapse of Options 5
</TABLE>
4. TAKE-OVER, RECONSTRUCTION AND AMALGAMATION AND LIQUIDATION 6
<TABLE>
<S> <C>
4.1 Take-over pursuant to Tender 6
4.2 Voluntary Winding Up of the Company 6
4.3 Rollover of Options 6
4.4 Meaning of "appropriate period" 6
</TABLE>
5. MANNER OF EXERCISE 7
<TABLE>
<S> <C>
5.1 Actions Required of the Option Holder 7
5.2 Actions Required of the Company 7
5.3 Partial Exercise 7
</TABLE>
6. ISSUE OF SHARES 7
<TABLE>
<S> <C>
6.1 Ranking of Shares 7
6.2 Admission to the New York Stock Exchange 8
</TABLE>
7. ADJUSTMENTS 8
<TABLE>
<S> <C>
7.1 General Power of Adjustment 8
7.2 Requirement to Capitalise Reserves 8
7.3 Notification of Option Holders 8
</TABLE>
8. ADMINISTRATION 9
<TABLE>
<S> <C>
8.1 Delivery of Notices or Documents 9
8.2 Copies of Shareholder Communications 9
8.3 Maintenance of Unissued Share Capital 9
8.4 Committee's Power to Administer Plan 9
8.5 Committee's Decisions are Final and Conclusive 9
8.6 Costs of Administering Plan 9
</TABLE>
9. ALTERATIONS 10
<TABLE>
<S> <C>
9.1 Power to alter Rules 10
9.2 Alteration which affects subsisting rights of Option Holders 10
9.3 Notification to Option Holders 10
</TABLE>
10.GENERAL 10
<PAGE> 3
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
<TABLE>
<S> <C>
10.1 Termination of the Plan 10
10.2 No Compensation for loss of Option Rights 10
10.3 Governing Law 10
11. DISCRETION TO PAY CASH ON EXERCISE OF AN OPTION 11
12. EMPLOYMENT AND SOCIAL TAXES 11
</TABLE>
<PAGE> 4
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. DEFINITIONS
In this Plan, the following words and expressions shall, where the context so
permits, have the meanings set forth below:
"ACQUIRING COMPANY" the person mentioned in Rule 4.1, being a company within
the meaning of Section 832 of the Act;
"ACQUISITION PRICE" in relation to an Option, the total amount payable on any
exercise being an amount equal to the relevant Share Price
multiplied by the number of Shares in respect of which the
Option is exercised;
"THE CODE" the United States Internal Revenue Code of 1986 (as
amended);
"THE COMPANY" save as provided in Rule 4.3, Octel Corp. a Delaware
corporation;
"DATE OF GRANT" the date on which the Committee resolves to grant an
Option under the Plan pursuant to Rule 2;
"DEALING DAY" a day on which the New York Stock Exchange is open for
business;
"THE COMMITTEE" the Octel Corp. Compensation Committee;
"PARTICIPANT" any person who is a non employee director at the Date of
Grant;
"GRANT PERIOD" a period of 20 days beginning on the
Dealing Day following any of:
(1) a day on which the Company makes an announcement of its
results for any year, quarter year or other period or
issues any prospectus, listing particulars or other
document containing equivalent information relating to
Shares; or
4
<PAGE> 5
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
(2) a day on which the Committee resolves to grant an
Option under the Plan pursuant to Rule 2;
"OFFICE" office of appointment as non employee director of the
Company;
"OPTION" a right to acquire Shares pursuant to the Plan;
"OPTION CERTIFICATE" a certificate issued under Rule 2.2;
"OPTION HOLDER" a person to whom an Option has been granted (or, as the
context requires, his personal representatives);
"PARENT" any company which is a parent corporation of the Company
within the meaning of Section 424(e) of the Code;
"THE PLAN" the Octel Corp. Non Employee Directors' Stock Option
Plan in its present form, or as from time to time altered
in accordance with the Rules;
"RULES" the Rules of the Plan and "RULE" shall be construed
accordingly;
"SECURITIES ACT" the United States Securities Act of 1933 as amended
"SHARE" save as provided in Rule 4.3, a share in the Company;
"SHARE PRICE" the price per Share, as determined by the Committee, at
which a Participant may acquire Shares in respect of
which an Option has been granted to him, being not less
than:
(1) $19.60 per share; or
(2) if greater and Shares are to be subscribed, the
nominal value of a Share, subject to any adjustment
pursuant to Rule 7.1;
"SUBSIDIARY" any company which is a subsidiary corporation within the
meaning of Section 424(f) of the Code;
5
<PAGE> 6
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
"U.S. PERSON" has the meaning attributed by Rule 902(0) promulgated under the
Securities Act;
6
<PAGE> 7
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
References to any statutory provision are to that provision as amended or
re-enacted from time to time, and, unless the context otherwise requires, words
in the singular shall include the plural (and vice versa) and words importing
the masculine the feminine (and vice versa).
2. GRANT OF OPTIONS
3.1 PROCEDURE FOR GRANT OF OPTIONS
a Within a Grant Period, the Committee may, at its absolute
discretion, grant Options under the Plan to Participants.
b The Committee may adopt such procedure as it thinks fit for
granting Options, whether by invitation to Participants to apply for
Options or by granting Options without issuing invitations.
3.2 REQUIREMENT TO ISSUE OPTION CERTIFICATE
The Company shall issue to each Option Holder an Option Certificate which
shall be in such form as the Committee shall from time to time determine.
The Option Certificate shall include details of:
a the Date of Grant of the Option;
b the Share Price; and
c the number of Shares subject to the Option; and
d any date or dates determined by the Committee, upon which the Option
is first exercisable in whole and/or part and, where on any date only
part is first exercisable, the number of Shares over which such
partial exercise may be made.
3.3 RIGHT TO DISCLAIM OPTION
Each Participant to whom an Option is granted may by notice in writing
within 30 days of the Date of Grant disclaim in whole or in part his
rights under the Option in which case the Option shall for all purposes be
deemed never to have been granted.
3.4 OPTIONS MAY NOT BE TRANSFERRED
7
<PAGE> 8
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Subject to the rights of an Option Holder's personal representatives to
exercise an Option as provided in Rule 3.3, every Option shall be personal
to the Participant to whom it is granted and shall not be capable of being
transferred, assigned or charged. Each Option Certificate shall carry a
statement to this effect.
3.5 MODIFIED TERMS AND CONDITIONS
The Committee may determine that any Option granted under the Rules shall
be subject to additional and/or modified terms and conditions relating to
the grant and terms of exercise as may be necessary to comply with or take
account of any securities, exchange control or taxation laws, regulations
or practice of any territory which may have application to the relevant
Participant, or Option Holder.
3.6 ADDITIONAL REQUIREMENTS
In exercising its discretion under Rule 2.5, the Committee may:
a require an Option Holder to make such declarations or take such
other action (if any) as may be required for the purpose of any
securities, taxes or other laws of any territory which may be
applicable to him at the Date of Grant or on exercise; and
b adopt any supplemental rules or procedures governing the grant
or exercise of Options as may be required for the purpose of any
securities, tax or other laws of any territory which may be
applicable to an Participant or Option Holder.
3. RIGHTS OF EXERCISE
4.1 EARLIEST DATE OF EXERCISE
Save as provided in Rules 3.3, 3.4 and 4, an Option may not be exercised
before whichever is the later of:
a 1.1.2001; and
b any date or dates which may have been specified in accordance
with Rule 2.2 in the relevant Option Certificate;
but in any event may not be exercised later than 31.12.2007.
8
<PAGE> 9
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
4.2 REQUIREMENT TO REMAIN IN OFFICE
Save as provided in Rules 3.3, 3.4 and 4, an Option may only be exercised
by an Option Holder while he is a non employee director of the Company.
4.3 DEATH OF OPTION HOLDER
An Option may be exercised by the personal representatives of a deceased
Option Holder during the period of one year following the date of death.
4.4 RIGHT TO EXERCISE PREMATURELY
Where an Option Holder ceases to hold Office with the Company on
account of injury, ill health or disability Options will lapse and will
only be exercisable at the absolute discretion of the Committee in which
circumstances Options will be exercisable by the Option Holder within a
period of one year following the date of termination of Office with the
Company.
4.5 LAPSE OF OPTIONS
An Option shall lapse on the occurrence of the earliest of the following:
a the tenth anniversary of the Date of Grant; or
b subject to Rule 4.3, the expiry of any of the applicable periods
specified in Rules 3.3, 3.4, 4.1, and 4.2, but where an Option Holder
dies while time is running under Rule 3.4, the Option shall not lapse
until the expiry of the period in Rule 3.3; or
c the date on which an Option Holder ceases to be a non employee
director of the Company for any reason other than his death or those
specified in Rule 3.4; or
d the date on which a resolution is passed, or an order is made
by the Court, for the compulsory winding-up of the Company; or
e the date on which the Option Holder becomes bankrupt or does or
attempts or omits to do anything as a result of which he is deprived
of the legal or beneficial ownership of the Option.
9
<PAGE> 10
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
4. TAKE-OVER, RECONSTRUCTION AND AMALGAMATION AND LIQUIDATION
5.1 TAKE-OVER PURSUANT TO TENDER
If any company ("THE ACQUIRING COMPANY") becomes a Parent of the Company
as a result of making either a tender offer to acquire the whole of the
Company's issued share capital (other than any shares already owned by the
Acquiring Company or any Subsidiary of the Acquiring Company) and which is
made on a condition that if it is satisfied the Acquiring Company will
become the Parent, or a tender offer to acquire all the Shares in the
Company which are of the same class as the Shares then an Option may be
exercised within the period of six months of the date on which and any
condition subject to which the offer is made is satisfied.
5.2 VOLUNTARY WINDING UP OF THE COMPANY
If a resolution is passed for the voluntary winding-up of the Company, an
Option may be exercised during the period of six months starting on the
commencement of such winding-up provided that any issue of shares pursuant
to such exercise is authorised by the liquidator or the Court (if
appropriate) upon the application of and at the sole cost and expense of
the Option Holder.
5.3 ROLLOVER OF OPTIONS
Notwithstanding anything to the contrary in these Rules, where Rule 4.1,
applies an Option Holder may, by agreement with the Acquiring Company and
within the appropriate period release his Option under the Plan ("THE OLD
OPTION") in consideration of the grant to him of a new Option ("THE NEW
OPTION") which, is equivalent to the Old Option but relates to shares in a
different company (whether the Acquiring Company or some other company).
With effect from the date of release references in Rules 3, 4, 5, 6, 7, 8,
9, and 10, (and, in relation to expressions used in those Rules, in Rule )
to "THE COMPANY" and "SHARES" shall, in relation to the New Option, be
construed as references to the Acquiring Company and Shares in the
Acquiring Company or that other company as the case may be.
5.4 MEANING OF "APPROPRIATE PERIOD"
For the purpose of Rule 4.3, the "APPROPRIATE PERIOD" is the period
mentioned in Rule 4.1.
10
<PAGE> 11
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
5. MANNER OF EXERCISE
6.1 ACTIONS REQUIRED OF THE OPTION HOLDER
An Option may be exercised, in whole or in part, by the delivery to the
secretary of the Company, or his duly appointed agent, of an Option
Certificate covering not less than all the Shares over which the Option is
then to be exercised, with the notice of exercise in the prescribed form
duly completed and signed by the Option Holder together with a remittance
for the Acquisition Price payable in respect of the Shares over which the
Option is to be exercised.
6.2 ACTIONS REQUIRED OF THE COMPANY
The relevant Shares shall be allotted or transferred (as the case may be)
within 28 days following such delivery and, accordingly in cases where
Shares are to be transferred, the Company shall use its best endeavours to
ensure due transfer thereof. At the request of the Option Holder, the
Shares may be allotted or transferred (as the case may be) to a nominee
provided the Option Holder has beneficial ownership of the Shares at the
time of such allotment or transfer.
6.3 PARTIAL EXERCISE
Where an Option is exercised in part the minimum number of shares which
may be exercised is 100 Shares and the Company shall issue a balancing
Option Certificate to the Option Holder.
6. ISSUE OF SHARES
7.1 RANKING OF SHARES
All Shares issued pursuant to the exercise of Options under the Plan shall
as to voting, dividend, transfer and other rights (including those arising
on a liquidation) rank pari passu in all respects with the Shares then in
issue, except that they shall not rank for any dividend or other rights
declared by reference to a record date preceding the date of such
exercise.
11
<PAGE> 12
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
7.2 ADMISSION TO THE NEW YORK STOCK EXCHANGE
If and so long as the Shares are listed on the New York Stock Exchange the
Company shall use its best endeavours to procure that as soon as
practicable after the allotment of any Shares pursuant to the Plan
application shall be made to the New York Stock Exchange for permission to
deal in those Shares unless such application has already been made.
7. ADJUSTMENTS
8.1 GENERAL POWER OF ADJUSTMENT
The number of Shares over which an Option is granted and the Share Price
thereof may be adjusted in such manner as the Committee shall determine
following any capitalisation issue, subdivision, consolidation or reduction
of share capital and in respect of any discount element in any rights issue
or other variation of share capital to the intent that (as nearly as may be
possible without involving fractions of a Share or a Share Price calculated
to more than two places of decimals) the Acquisition Price payable in
respect of an Option shall remain unchanged PROVIDED that, save as provided
in Rule 7.2, no adjustment made pursuant to this Rule 7.1 shall have the
effect of reducing the Share Price below the par value of a Share.
8.2 REQUIREMENT TO CAPITALISE RESERVES
Any adjustment made to the Share Price of unissued Shares which would have
the effect of reducing the Share Price to less than the par value of the
Share shall only be made if and to the extent that the Committee is
authorised to capitalise from the reserves of the Company a sum equal to
the amount by which the par value of the Shares in respect of which the
Option is exercisable exceeds the adjusted Share Price. The Committee may
apply such sum in paying up such amount on such Shares so that on the
exercise of any Option in respect of which such a reduction shall have
been made, the Committee shall capitalise such sum (if any) and apply the
same in paying up such amount as aforesaid.
8.3 NOTIFICATION OF OPTION HOLDERS
The Committee may take such steps as it may consider necessary to notify
Option Holders of any adjustments made under Rule 7.1 and to call in,
cancel, endorse,
12
<PAGE> 13
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
issue or re-issue any Option Certificate consequent upon such adjustment.
8. ADMINISTRATION
9.1 DELIVERY OF NOTICES OR DOCUMENTS
Notices or documents required to be given to an Participant or to an
Option Holder shall either be delivered to him by hand or sent to him by
post at his last known home or business address according to the
information provided by him. Notices sent by post shall be deemed to have
been given on the day following the date of posting.
9.2 COPIES OF SHAREHOLDER COMMUNICATIONS
The Company may distribute to Option Holders copies of any notice or
document sent by the Company to its shareholders generally.
9.3 MAINTENANCE OF UNISSUED SHARE CAPITAL
The Company shall at all times either keep available sufficient unissued
Shares to satisfy the exercise of all Options which have neither lapsed
nor been exercised (taking account of any other obligations of the Company
to allot unissued Shares) or shall ensure that sufficient issued Shares
will be available to satisfy the exercise of such Options.
9.4 COMMITTEE'S POWER TO ADMINISTER PLAN
The Committee may make such regulations for the administration of the Plan
as it deems fit, provided that no regulation shall be valid to the extent
it is inconsistent with the Rules.
9.5 COMMITTEE'S DECISIONS ARE FINAL AND CONCLUSIVE
The decision of the Committee in any dispute relating to an Option, or the
due exercise thereof, or any other matter in respect of the Plan, shall be
final and conclusive.
9.6 COSTS OF ADMINISTERING PLAN
13
<PAGE> 14
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The costs of introducing and administering the Plan shall be borne by the
Company.
9. ALTERATIONS
10.1 POWER TO ALTER RULES
Subject to Rule 9.2, the Committee may in its discretion alter the Rules.
10.2 ALTERATION WHICH AFFECTS SUBSISTING RIGHTS OF OPTION HOLDERS
No alteration may be made which would abrogate or adversely affect the
subsisting rights of Option Holders.
10.3 NOTIFICATION TO OPTION HOLDERS
Written notice of any amendment made in accordance with this Rule 9 shall
be given to all Option Holders.
10. GENERAL
11.1 TERMINATION OF THE PLAN
The Plan shall terminate on the tenth anniversary of the date on which it
is approved by the Company in general meeting or at any earlier time by
the passing of a resolution by the Committee. Termination of the Plan
shall be without prejudice to the subsisting rights of Option Holders.
11.2 NO COMPENSATION FOR LOSS OF OPTION RIGHTS
If an Option Holder shall cease for any reason to be in the employment of
a Member of the Group, he shall not be entitled, by way of compensation
for loss of office or otherwise howsoever, to any sum or any benefit to
compensate him for the loss of any right or benefit accrued or in prospect
under the Plan.
11.3 GOVERNING LAW
14
<PAGE> 15
THE OCTEL CORP. NON EMPLOYEE DIRECTORS' STOCK OPTION PLAN
This Plan and all Options shall be governed by and construed in accordance
with English law.
11. DISCRETION TO PAY CASH ON EXERCISE OF AN OPTION
If an Option Holder exercises an Option the Committee may in lieu of allotting
or procuring the transfer of Shares in accordance with Rule 5.2 pay to such
Option Holder a cash sum equal to the amount by which the value of the Shares in
respect of which the notice of exercise was given (calculated as the average of
the middle market quotations on the New York Stock Exchange for the three
Dealing Days prior to the date of exercise) exceeds the Acquisition Price of
those Shares.
If payment is made pursuant to this Rule to an Option Holder, he shall have no
further rights in respect of the Shares for which the notice of exercise was
given. The Company may make any deductions in respect of such payment which it
is required to make under the laws of any territory which laws are applicable to
the Option Holder and the Company.
12. EMPLOYMENT AND SOCIAL TAXES
The Option Holder shall indemnify the Company against any tax arising in respect
of the exercise of the Option which is a liability of the Option Holder but for
which the Company is required to account under the laws of any relevant
territory. The Company may recover the tax from the Option Holder in such manner
as the Committee thinks fit including (but without prejudice to the generality
of the foregoing):-
a withholding shares when the Option is exercised and selling the same;
b deducting the necessary amount from the Option Holder's fees; or
c requiring the Option Holder to account directly to such company for such
tax.
15
<PAGE> 1
Exhibit 10.10
THIS AGREEMENT is made between:
1) The Associated Octel Company Limited having its registered office at
Suite 2, 4th Floor, Berkeley Square House, Berkeley Square, London, England
W1X 6DT (the "Owner") and
2) Great Lake Chemical Corporation, having its principal place of business at
One Great Lakes Boulevard, West Lafayette, Indiana 47906 USA (the
"Contractor").
WHEREAS
1) Owner desires that Contractor undertake the conversion of Feedstock (as
defined herein) to be supplied by Owner into Product (as defined herein)
using a Conversion Process (as defined herein) provided by the Owner; and
2) Contractor is willing to undertake the conversion of Feedstock supplied by
Owner into Product by use of the Conversion Process under the terms and
conditions set forth in this Agreement.
IT IS AGREED AS FOLLOWS:
ARTICLE 1 -- DEFINITIONS
The following terms shall have the following meanings:
a) "Feedstock" means the substances listed in Part 1 of Appendix A, and any
changes thereto mutually agreed in writing by the parties;
b) "Product" means Stadis registered trademark425 and Stadis registered
trademark450 (Enhanced);
c) "Compensation" means the sum set forth in Appendix D representing
undepreciated capital expended by Contractor in connection with this
Agreement which shall be payable by Owner to Contractor upon termination
of this Agreement pursuant to the provisions of Section 2.6;
d) "Contractors Plant" means Contractor's manufacturing site at Newport,
Tennessee, USA;
e) "Conversion Process" means the process of Owner set out in Appendix C, and
any changes thereto mutually agreed in writing by the parties;
f) "Specification" means (a) with respect to Product, the properties and
respective tolerances in Appendix B and which are verified by use of the
analytical methods set forth in Appendix B and (b) with respect to
Feedstock, the properties and respective tolerances set forth in Part 2 of
Appendix A, and any changes to (a) or (b) that are mutually agreed in
writing by the parties;
g) "Closure Fee" means the sums set forth in Appendix F.
<PAGE> 2
h) "Contract Year" means the twelve (12) month period commencing on the
Distribution Date, and each successive 12 month period commencing on the
anniversary of the Distribution Date.
i) "Quarter" means the three month period commencing every January 1,
April 1, July 1 and October 1.
j) "Distribution Date" means the date on which Contractor distributes as a
dividend to the holders of its common stock the common stock of Octel Corp.
pursuant to the terms and conditions of the Transfer and Distribution
Agreement dated June 24, 1998 between Contractor and Octel Corp.
ARTICLE 2 -- DURATION; TERMINATION
2.1 This Agreement shall be deemed to have commenced on the Distribution Date
and shall continue in force until terminated by either party as provided in
Section 2.2, 2.5, 9.4 or 9.8.
2.2 Either party may terminate this Agreement without cause on at least twelve
months' written notice to the other party; provided, however, no such
termination of this Agreement shall be effective until the expiration of
three (3) Contract Years.
2.3 Owner shall be in default if any one or more of the following events shall
happen:
(a) Owner shall fail to pay any amount due hereunder and such failure is
not cured within thirty (30) days after receipt of Contractor's
written notice to Owner; or
(b) Owner shall fail to perform or comply with any of the other material
terms or conditions of this Agreement for reasons other than an event
of Force Majeure (as defined herein) and such failure, if curable,
shall continue without cure for a period of sixty (60) days after
written notice thereof from Contractor to Owner; or
(c) filing by Owner of a voluntary petition of bankruptcy or a voluntary
petition or answer seeking reorganization, rearrangement or
readjustment of its debts, or any relief under any bankruptcy or
insolvency act or law, now or hereafter existing, or any agreement by
Owner indicating consent to, approval of, or acquiescence in, any such
petition or proceeding; or
(d) the application by Owner or the consent or acquiescence of Owner in
the appointment of a receiver or trustee for all or a substantial part
of any of its properties or assets; or
(e) the making by Owner of a general assignment for the benefit of
creditors; or
(f) the admission of Owner in writing of its inability generally to pay
its debts as they mature; or
(g) the filing of an involuntary petition against Owner seeking
reorganization, rearrangement, or readjustment of its debts or for any
other relief under any bankruptcy or insolvency act or law, now or
hereafter existing, or the involuntary appointment of a receiver or
trustee for Owner for all or a substantial part of its property or
assets, or the issuance of a warrant of attachment, or execution of
similar process against a substantial part of the property of Owner
and the continuance of such for ninety (90) days undismissed or
undischarged.
2
<PAGE> 3
2.4 Contractor shall be in default if any of one or more of the following
events happen:
(a) Contractor shall fall to perform or comply with any of the material
terms or conditions of this Agreement, for reasons other than an event
of Force Majeure, and such failure, if curable, shall continue without
cure for a period of sixty (60) days after written notice thereof from
Owner to Contractor; provided, however, that Owner's sole remedy for
Product claims shall be as provided in Article 12 and Contractor shall
not be deemed to be in breach of this Agreement for purposes of this
Section 2.4 so long as Contractor satisfies or is disputing in good
faith any claim of Owner under Article 12; or
(b) the filing by Contractor of a voluntary petition of bankruptcy or a
voluntary petition or answer seeking reorganization, rearrangement, or
readjustment of its debts, or any relief under any bankruptcy or
insolvency act or law, now or hereafter existing, or any agreement by
Contractor indicating consent to, approval of, or acquiescence in, any
such petition or proceeding; or
(c) the application by Contractor or the consent or acquiescence of
Contractor in the appointment of a receiver or trustee for all or a
substantial part of any of its properties or assets; or
(d) the making by Contractor of a general assignment for the benefit of
creditors; or
(e) the admission of Contractor in writing of its inability generally to
pay its debts as they mature; or
(f) the filing of an involuntary petition against Contractor seeking
reorganization, rearrangement or readjustment of its debts or for any
other relief under any bankruptcy or insolvency act or law, now or
hereafter existing, or the involuntary appointment of a receiver or
trustee for Contractor for all or a substantial part of its property
or assets, or the issuance of a warrant of attachment, or execution of
similar process against a substantial part of the property of
Contractor and the continuance of such for ninety (90) days
undismissed or undischarged.
2.5 (a) Contractor may terminate this Agreement in the event of a Regulatory
Change (as defined herein) as provided in Section 9.4.
(b) Contractor may terminate this Agreement in the event Contractor
chooses not to meet a lower price offer made to and accepted by Owner
as provided in Section 9.9.
(c) Owner may terminate the Agreement, effective on notice from Owner to
Contractor, within sixty (60) days after consummation of a transaction
wherein a majority of the issued and outstanding common stock of
Contractor, or substantially all of the assets utilized by Contractor
in connection with this Agreement, including without limitation,
Contractor's Plant, are acquired, legally or beneficially, by a
corporation or other entity that competes in the fuel additives
business with Owner.
(d) Contractor may terminate this Agreement if it is prevented from
increasing the Conversion Charge as provided in Section 9.8.
3
<PAGE> 4
(e) This Agreement may be terminated by either party due to a Force Majeure
as provided in Article 8.
(f) Upon the occurrence of any event of default (as defined in Sections 2.3
and 2.4), and during the continuance thereof, the non-defaulting party,
at its option, and without prejudice to other lawful remedies which may
be available, may elect to terminate this Agreement upon thirty (30)
days' prior written notice, provided, however, that in the event of the
appointment of a receiver or trustee, the Agreement may not be
terminated if the receiver or trustee agrees to assume the defaulting
party's liabilities and obligations under this Agreement.
2.6 (a) Upon termination of this Agreement in the event of the default of
Owner (as provided in Sections 2.3 and 2.5), in the event of a change
in control of Contractor (as provided in Section 2.5(c)) or by Owner
on 12 months notice (as provided in Section 2.2), (i) Contractor shall
cease to convert any further Feedstock as soon as it is able to do so
safely, although the conversion of any Feedstock already commenced
shall be completed and Owner shall pay the Conversion Charge for
resulting Product and any other Conversion Charge due and owing and
all taxes and duties applicable thereto, (ii) Owner shall pay
Compensation in the amount provided in Appendix D, (iii) Owner shall
pay any sums due and owing as provided in Section 6.5, (iv) Owner
shall reimburse Contractor the full amount of any sums not recouped by
Contractor for a capital investment made in connection with a
Regulatory Change as described in Section 9.4, (v) Owner shall
reimburse Contractor the full amount of any sums not recouped by
Contractor for a capital investment made to implement a change in the
Conversion Process as described in Section 9.6(a)(ii), (vi) Owner
shall reimburse Contractor any sums advanced by Contractor on behalf,
and for the account, of Owner in connection with Owner's obligation to
purchase and supply Feedstock, and (vii) Owner shall pay the
Termination Fee set forth in Appendix F.
(b) Upon termination of this Agreement in the event of the default by
Contractor (as provided in Sections 2.4 and 2.5) or due to an event of
Force Majeure (as provided in Article 8),(i) Contractor shall cease to
convert any further Feedstock as soon as it is able to do so safely,
although the conversion of any Feedstock already commenced shall be
completed and Owner shall pay the Conversion Charge for resulting
Product and any other Conversion Charge due and owing and all taxes
and duties applicable thereto and (ii) Owner shall reimburse
Contractor any sums advanced by Contractor on behalf, and for the
account of Owner in connection with Owner's obligation to purchase and
supply Feedstock.
(c) Upon termination of this Agreement in the event of a Regulatory Change
(as provided in Section 9.4),(i) Contractor shall cease to convert any
further Feedstock as soon as it is able to do so safely, although the
conversion of any Feedstock already commenced shall be completed and
Owner shall pay the Conversion Charge for resulting Product and any
other Conversion Charge due and owing and all taxes and duties
applicable thereto, (ii) Owner shall pay Compensation in the amount
provided in Appendix D, (iii) Owner shall pay any sums due and owing
as provided in Section 6.5, (iv) Owner shall reimburse Contractor the
full amount of any sums not recouped by Contractor for a capital
investment made in connection with a Regulatory Change (such
regulatory change being earlier in time and not the Regulatory Change
that is the cause of the termination of the Agreement) as described in
Section 9.4, (v) Owner shall reimburse Contractor the full amount of
any sums not recouped by Contractor for a capital investment made to
implement a change in the Conversion.
4
<PAGE> 5
Process as provided in Section 9.6(a)(ii), (vi) Owner shall reimburse
Contractor any sums advanced by Contractor or behalf, and for the
account, of Owner in connection with Owner's obligation to purchase and
supply Feedstock, and (vii) Owner shall pay the Termination Fee set
forth in Appendix F.
(d) Upon termination of this Agreement in the event Contractor is prevented
from increasing the Conversion Charge (as provided in Section 9.8),
or by Contractor on 12 months notice (as provided in Section 2.2),
(i) Contractor shall cease to convert any further Feedstock as soon
as it is able to do so safely, although the conversion of any Feedstock
already commenced shall be completed and Owner shall pay the Conversion
Charge for resulting Product and any other Conversion Charge due and
owing and all taxes and duties applicable thereto, (ii) Owner shall
reimburse Contractor any sums advanced by Contractor on behalf, and for
the account of Owner in connection with Owner's obligation to purchase
and supply Feedstock, and (iii) Owner shall pay the Termination Fee set
forth in Appendix F.
(e) Upon termination of this Agreement in the event Contractor chooses not
to meet a lower price offer (as provided in Sections 2.5 and 9.9),
(i) Contractor shall cease to convert any further Feedstock as soon as
it is able to do so safely, although the conversion of any Feedstock
already commenced shall be completed and Owner shall pay the Conversion
Charge for resulting Product and any other Conversion Charge due and
owing and all taxes and duties applicable thereto, (ii) Owner shall pay
Compensation in the amount provided in Appendix D, (iii) Owner shall
reimburse Contractor the full amount of any sums not recouped by
Contractor for a capital investment made in connection with a
Regulatory Change as described in Section 9.4(a), (iv) Owner shall
reimburse Contractor the full amount of any sums not recouped by
Contractor for a capital investment made to implement a change in the
Conversion Process as described in Section 9.6(a)(i), (v) Owner shall
reimburse Contractor any sums advanced by Contractor on behalf, and for
the account, of Owner in connection with Owner's obligation to purchase
and supply Feedstock, and (vi) Owner shall pay the Termination Fee set
forth in Appendix F.
(f) The provisions of Section 2.6 shall not be deemed to limit in any way
the rights or remedies of either party in the event of any default
under or breach of this Agreement by the other party.
(g) Upon termination of the Agreement, Contractor shall, at Owner's
expense and at Owner's direction, dispose of all Feedstock. Upon
termination of the Agreement, Contractor shall not utilize the
Conversion Process without the written consent of Owner.
ARTICLE 3 -- SUPPLY OF FEEDSTOCK
3.1 Owner shall deliver Feedstock or cause Feedstock to be delivered to
Contractor at the Contractor's Plant at no cost to Contractor and when
requested by Contractor, in quantities required by Contractor to produce
Product as contemplated herein. If Contractor discovers any failure of
Feedstock to meet the Specification, it will promptly notify Owner, who
shall be responsible for providing replacement Feedstock and reimbursing
Contractor for any costs or expenses incurred by Contractor as a result of
the non-conforming Feedstock (including, but not limited to, process
downtime costs). Each delivery of Feedstock shall be accompanied by a
certificate of analysis confirming that the Feedstock meets its
Specification. Contractor shall
5
<PAGE> 6
reasonably assist Owner or Owner's nominee in the purchase of Feedstock at the
most favorable prices available.
ARTICLE 4 -- CONVERSION
4.1 Contractor shall convert Feedstock delivered by or on behalf of Owner into
Product. Owner shall order and purchase one hundred percent (100%) of its
worldwide requirements of Product from Contractor. Contractor shall supply
to Owner 100% of the Product it converts by use of the Conversion Process.
Contractor's Plan shall be certified to ISO 9002 at all times during the
term of this Agreement.
4.2 Contractor shall carry out the conversion by means of the Conversion
Process. In the event of any accidental loss of Feedstock (other than the
failure to utilize Feedstock at the rate set forth in Appendix H), Product
or any intermediate in the Conversion Process, Contractor shall be liable
to (a) reimburse Owner for the value of the demonstrated actual Feedstock
content of the loss or (b) replace the demonstrated actual Feedstock
content of the loss. For purposes of a reimbursement under (a) above,
Feedstock shall be valued as set forth on Exhibit E. Contractor shall also
utilize Feedstock at the rate, and under the terms and conditions, set
forth in Appendix H.
4.3 Contractor shall permit Owner's employees, on at least 24 hours' notice to
Contractor, access during regular business hours to all production units
and data associated with the Conversion Process or with the analysis of
Product.
4.4 Contractor shall, at Contractor's expense, arrange for the lawful disposal
of any waste arising from the Conversion Process. Contractor shall notify
Owner in writing of the arrangements for disposal existing on the
Distribution Date and shall notify Owner of any subsequent change in waste
disposal arrangements.
ARTICLE 5 -- CONFIDENTIALITY
5.1 Neither party shall disclose any information concerning the Conversion
Process, Conversion Charge, Compensation or any other term or condition of
this Agreement, or any of the other party's technical, financial,
marketing, manufacturing or other similar information, to any third party
without first obtaining the written consent of the other party, except as
required by applicable law, a stock exchange on which either party's (or
any such party's parent company, if applicable) stock is traded, or as
ordered by a court of competent jurisdiction. The foregoing restrictions
shall not apply to any information which the disclosing party can show:
(a) has been lawfully received by the disclosing party from a third-party
who has not breached a contractual, legal or fiduciary duty of
non-disclosure to the non-disclosing party or to another party; or
(b) is or becomes publicly known other than by disclosure by the
disclosing party.
In the event disclosure is required by applicable law, a stock exchange on
which either party's (or any such party's parent company, if applicable)
stock is traded, or by a court of competent jurisdiction, the disclosing
party shall provide the non-disclosing party with sufficient notice to
6
<PAGE> 7
afford the non-disclosing party an opportunity to obtain a protective order
or other relief preventing disclosure. The disclosing party shall use
reasonable efforts to assist the non-disclosing party in its efforts to
obtain a protective order or other relief preventing disclosure. The
non-disclosure requirements in this Article 5 shall not be deemed to (a)
prohibit Owner from disclosing the Conversion Process to third parties, or
prohibit Contractor from disclosing its manufacturing know-how and
technology to third parties, or prohibit this Agreement from being included
as an exhibit to any Registration Statement filed by Owner's parent
company, Octel Corp., in connection with the distribution of the common
stock of Octel Corp. as a dividend to the holders of Contractor's common
stock pursuant to the Transfer and Distribution Agreement, dated________,
1998, between Contractor and Octel Corp., or (b)(i) prohibit Owner from
disclosing to third parties any Manufacturing Improvement that has been
licensed to it pursuant to Section 9.6(b) or (ii) prohibit Contractor from
disclosing to any third parties any Invention that has been licensed to it
pursuant to Section 9.6(b), provided, however, that in the case of (i) and
(ii) the third party agrees in writing to be bound to the non-disclosure
covenants set forth in this Section 5.1.
ARTICLE 6 -- ORDERS
6.1 Owner shall provide to Contractor during the month of November each year a
forecast prepared in good faith of monthly quantities of Product likely to
be required by Owner during the following Contract Year. No Quarter in the
forecast will show quantities in excess of 720,000 pounds, and no month
within such Quarter shall show quantities in excess of 300,000 pounds,
without the written content of Contractor. The forecast shall be
non-binding and is intended by the parties to facilitate their planning.
6.2 Contractor shall run two campaigns per Contract Year to manufacture
Product, with the scheduling of the manufacturing campaigns to be
determined by Contractor in its sole discretion, provided, however,
Contractor shall use reasonable efforts to cooperate with Owner in good
faith to schedule its manufacturing campaigns so as to minimize the
quantity of Product held by Contractor in Inventory at Contractor's Plant.
6.3 Owner shall place firm orders for Product at least six months in advance of
requested delivery. Firm orders for Product will not exceed 720,000 pounds
in any Quarter, and will not exceed 300,000 pounds in any month within
such Quarter without the written consent of Contractor.
6.4 Contractor shall manufacture Product ordered by Owner pursuant to Section
6.3 but such obligation shall be expressly conditioned upon delivery of
Feedstock meeting its Specification to Contractor in such quantities, and
on or before the delivery date reasonably requested by Contractor for such
Feedstock. Owner shall place orders with its suppliers of Feedstock with
sufficient advance notice, based on Owner's past practices with said
suppliers, to assure delivery to Contractor in such quantities, and on or
before the delivery date reasonably requested by Contractor.
6.5 Owner shall pay the Conversion Charge (as defined herein) for a minimum of
500,000 pounds of Product per Contract Year ("Annual Minimum Volume"). If
Owner does not pay an invoice which is dated in a Contract Year until after
the end of the Contract Year, but does pay said invoice within the thirty
(30) day period set forth in Section 9.5, Owner shall be deemed to have
paid for said Product during the relevant Contract Year. If Owner has not
paid for at least the Annual Minimum Volume in any Contract Year, Owner
shall, within thirty days following the
7
<PAGE> 8
end of said Contract Year, pay to Contractor the Conversion Fee for the
difference between the Annual Minimum Volume and the quantity of Product
actually paid for by Owner in said Contract Year.
ARTICLE 7 -- DELIVERY
7.1 (a) Contractor shall analyze each shipment of Product before delivery to
confirm that such Product complies with all parts of the Specification, and
with each shipment of Product Contractor shall provide a certificate of
analysis signed by Contractor's designated analytical person or quality
control manager referring to all Specification items. Promptly after
receipt of each shipment of Product at the destination designated by Owner
pursuant to Section 7.2, Owner shall examine such Product for any damage,
nonconformance or shortage. Owner shall notify Contractor within twenty-one
(21) days of the receipt of such shipment of Product whether the Product
complies with the Specification. Failure of Owner to notify Contractor
within the twenty-one day period of non-conformity with Specification shall
constitute irrevocable acceptance of Product and shall bar Owner from
making any claim that such Product is non-conforming to Specification in
any respect (under any theory, including without limitation, negligence,
strict liability, contract, warranty or otherwise).
(b) If Owner has notified Contractor in a timely manner that Owner
believes that Product does not conform with Specification, the parties
agree to consult with each other in order to explain and resolve any
discrepancy between each other's determinations. If such consultation does
not resolve the discrepancy, Owner and Contractor shall nominate an
independent reputable laboratory, acceptable to each, to carry out tests on
representative samples taken from such shipment in dispute and/or any
samples retained by Contractor, and the resulting determination shall be
binding on the parties and the cost thereof shall be paid by the party
whose results were in error. Owner's sole and exclusive remedy for a
failure by Contractor to supply Product complying with Specifications shall
be that remedy specified in Section 12.3(a).
7.2 Product shall be delivered, at Owner's expense, from Contractor's Plant to
the destination designated by Owner. Product will be delivered in rail car,
truck or drum, as specified by Owner. Owner shall provide, or shall cause
the driver of any truck used to deliver Product to provide to Contractor a
written certification confirming that the storage tank on such truck into
which Product will be pumped has been cleaned and decontaminated of all
substances previously contained in the storage tank. Owner is responsible
for and assumes all liability with respect to the suitability and
compliance with law of all trucks used to deliver Product. Owner further
assumes all responsibility for the suitability of the cleaning and
decontamination of storage tanks on delivery trucks such that the storage
tanks do not cause Product to fail to comply with its Specification. Owner
shall select all drums to be used to package Product for delivery to
Owner's designated destinations, and shall purchase and deliver to
Contractor all such drums on or before the delivery date requested by
Contractor. Owner shall be solely liable for the suitability and compliance
with law of all drums. Drums shall be labeled in accordance with Owner's
instructions. Owner shall pay to Contractor the sum of USD 0.14 as a
filling charge for each drum filled by Contractor. Owner shall take
delivery of all Product manufactured by Contractor during a manufacturing
campaign so that at the conclusion of any manufacturing campaign no Product
shall remain at Contractor's Plant.
8
<PAGE> 9
7.3 Contractor will retain all Product samples for one (1) calendar year.
Thereafter, all Product samples will be disposed of by Contractor, or at
Owner's request, said samples will be delivered to Owner, at Owner's cost.
ARTICLE 8 -- FORCE MAJEURE
8.1 "Force Majeure" shall mean and include any circumstance to the extent
beyond the reasonable control of the party so affected (other than an
obligation to pay money), including without limitation, the following:
any act of nature or public enemies, explosion, fire, storm, earthquake,
flood, drought, perils of the sea, the elements, casualty, breakdown of
plant, strikes, lock-outs, labor controversies (regardless of whether such
strikes, lock-outs or labor controversies are within the reasonable control
of the party), riots, sabotage, embargo, war (whether or not declared or
whether or not the United States of America is a participant), governmental
laws, regulations, orders or decrees, the refusal of a required
governmental license, registration or permit, or seizure, in each case for
reasons other than the adverse financial condition of the party so
affected. Shortage of Feedstock shall not be deemed to be an event of Force
Majeure if invoked by Owner under circumstances where Owner has failed to
place orders with its suppliers of Feedstock with sufficient advance
notice, based on Owner's past practices with said suppliers, in order to
obtain delivery to Contractor of Feedstock in such quantities, and on or
before the delivery date reasonably requested by Contractor.
8.2 (a) Contractor shall not be liable for its failure to produce or sell
Product, or to otherwise perform its obligations hereunder, if such
failure is due to an event of Force Majeure. Similarly, Owner shall not be
liable for its failure to purchase Product or to otherwise perform its
obligations hereunder if such failure is due to an event of Force Majeure;
provided however that an event of Force Majeure shall not suspend or
otherwise affect Owner's obligations to pay the Conversion Fee for Product
or any other sums due and owing Contractor as provided herein. Any party
suffering an event of Force Majeure shall use all commercially reasonable
efforts to remove such cause or causes with reasonable dispatch and shall
promptly notify the other party of the existence of the event of Force
Majeure, and the expected delays and the estimated effect upon performance
to result therefrom. The requirement that any Force Majeure be remedied
using all commercially reasonable efforts shall not require the settlement
of strikes, lock-outs or labor controversies by acceding to the demands of
the opposing party or parties. If a Force Majeure event affecting a
party's performance is projected to be permanent or of a duration of at
least twelve (12) months, the other party may terminate the Agreement on
60 days notice.
(b) During the time Contractor is unable to produce or sell Product, or
to otherwise perform its obligations hereunder, it shall not be obligated
to procure Product from any alternative producer or supplier. Any Product
omitted hereunder due to either party's failure to perform its obligations
hereunder due to an event of Force Majeure shall be omitted from this
Agreement and the contracted quantity shall be so reduced for the
applicable contract period, provided, however, upon the termination of a
Force Majeure declared by Contractor, Contractor shall have the option,
with the written consent of Owner, to produce for sale to Owner in the
remaining contract period the quantities of Product omitted (or any
portion of such omitted quantities) due to the event of Force Majeure
declared by Contractor.
9
<PAGE> 10
ARTICLE 9 -- CONVERSION CHARGE
9.1 (a) Owner shall pay to Contractor a conversion charge ("Conversion
Charge") for converting Feedstock to Product by use of the Conversion
Process as set forth in Appendix I.
9.1 (b) Effective on the first day of each Contract Year (other than the
first Contract Year) the unit cost then in effect for labor, power,
utilities, caustic and wastewater shall be reviewed and compared with the
unit cost of such factors in effect on the first day of the preceding
Contract Year, and each of the Conversion Charges in Appendix I shall be
increased, but not to exceed 4% for any Contract Year, by the amount of the
net increase of labor, power, utilities, caustic and wastewater taken as a
whole (e.g., if the net increase of labor, power, utilities, caustic and
wastewater is 5%, each of the Conversion Charges in Schedule I will
increase by 4%). If the change in these unit cost factors, taken as a
whole, is a net decrease, the Conversion Charges shall decrease in a like
manner, but not to exceed 4% for any Contract Year. Owner shall have the
right, at its expense, to have an independent auditor that has no
affiliation with Owner or its parent, subsidiary and affiliate entities and
that has entered into a confidentiality agreement reasonably satisfactory
to Contractor, review the records of Contractor to confirm the accuracy of
each change in the unit cost factors made by Contractor. The undertaking of
the independent auditor shall be limited solely to confirming the accuracy
of any changes in the unit cost of labor, power, utilities, caustic and
wastewater. Set forth in Appendix G is an example of how the Conversion
Charge shall be adjusted as provided in this Section 9.1(b). Any payments
made by Contractor in settlement, or in satisfaction of any judgement
rendered in the matter of Great Lakes Chemical Corporation, pending before
the National Labor Relations Board at case numbers 10-CA - 21446, 10-CA -
21640, 10-CA - 24463 and 19-CA - 28118, shall not be considered in
connection with the adjustment of the Conversion Charges as provided in
this Section 9.1(b).
9.2 Subject to the adjustment set forth in Section 9.3, the Conversion
Charge invoiced during a Contract Year shall be the Conversion Charge
corresponding to the quantity forecast as being the Owner's aggregate
requirements of Product during such Contract Year (as provided by Owner to
Contractor accordance with Section 6.1).
9.3 No later than forty-five (45) days after the end of each Contract Year
the parties shall calculate the difference between the Conversion Charge
due and owing pursuant to Appendix I for the quantity (in pounds) of
Product actually invoiced in the preceding Contract Year and the Conversion
Charge that was invoiced pursuant to Section 9.2 for such quantity of
Product in the preceding Contract Year, and the difference shall be paid to
or refunded by the Contractor.
9.4 (a) The term "Regulatory Change" shall mean a change effective after
the Division Date by any government, agency, legislative body, court,
utility board or similar entity with respect to (i) any environmental or
safety laws, rules, ordinances or regulations, wastewater or air emission
standards, permits or permit conditions, or (ii) any other or similar
requirements of any kind (regardless of whether they relate to
environmental or safety issues), which would increase Contractor's
operating costs and/or require capital expenditure by Contractor hereunder.
If Contractor or Owner learns that any Regulatory Change is under
consideration, the party learning same will immediately notify the other
and the parties shall work together to attempt to minimize the impact of
any such proposed Regulatory Change. If a Regulatory Change is adopted, the
party learning same will immediately notify the other party. Contractor
shall notify Owner of the amount of any required capital expenditure or the
amount of Contractor's increased operating costs, and shall provide Owner
with information supporting such capital expenditures
10
<PAGE> 11
or increased operating costs. In the event of a Regulatory Change, Owner
will as soon as possible after receiving the notice of a required capital
expenditure or increased operating costs, but in no event more than forty
(40) days after such receipt, notify Contractor as to whether or not Owner
agrees to accept an increase in the Conversion Charge or reimburse
Contractor for the required capital expenditures as a result of said
Regulatory Change.
(b) If Contractor has notified Owner of a Regulatory Change affecting
Contractor as described in Section 9.4(a)(i) or (ii) above, and if Owner
gives timely written notice to Contractor that Owner accepts the price
increase or will reimburse Contractor for the required capital expenditure,
the Conversion Charge will be increased in accordance with the following.
If the Regulatory Change will result in an increase in operating costs, the
amount of the increase in operating costs per pound of Product converted
will be added to the Conversion Charge then existing. If the Regulatory
Change requires a capital investment, the parties shall negotiate in good
faith to determine an equitable formula for Contractor to recoup its
capital expenditure, including a twenty percent (20%) return on such
capital, and once the parties have reached agreement on the formula for
Contractor to recoup its capital investment, Contractor will make the
capital investment.
(c) If Contractor has notified Owner of a Regulatory Change affecting
Contractor as described in Section 9.4(a)(i) or (ii) above and if Owner
has provided timely written notice that Owner does not accept the price
increase or will not reimburse Contractor for the required capital
expenditure, or if the parties cannot agree on an equitable formula for
Contractor to recoup its capital investment as provided in the final
sentence of Section 9.4(b) above, or if Owner fails to give timely written
notice that it accepts the price increase or will reimburse Contractor for
the required capital expenditure, then Contractor may in its sole
discretion elect (i) to absorb the increased cost or pay the required
capital expenditure without reimbursement, in which case this Agreement
will remain in full force and effect without change, or (ii) to provide
written notice to Owner that Contractor is terminating the Agreement,
which termination shall become effective six (6) months after receipt
of said notice by Owner, provided, however, if Contractor would be
required to make the capital expenditure or would incur the increase
in operating costs during such 6 month period, (x) Owner shall (1) within
the 6 month period, reimburse Contractor the full amount of such capital
investment, including a twenty percent (20%) return on such capital, and
(2) pay Contractor the amount of its increased operating costs for each
pound of Product manufactured within the 6 month period, or (y) the
Agreement shall terminate immediately upon receipt of Contractor's notice
of termination.
9.5 Conversion Charges shall be invoiced to Owner on the date Product is
shipped by Contractor to the destination designed by Owner. Payment shall
be due 30 days from the date of invoice.
9.6 (a)(i) Contractor will retain the full benefit of all Manufacturing
Improvements for the production of Product. "Manufacturing Improvement"
means any changes in equipment or methods employed by Great Lakes in
undertaking the Conversion Process (but specifically excludes any change
in the Conversion Process) to produce Product which results in decreased
cycle times or a reduction in cost to produce the Product.
9.6 (a)(ii) Contractor will share equally with Owner in full benefit of any
reduction in cost to produce the Product caused by any change in the
Conversion Process (which change shall have been mutually agreed to by
the parties), after Contractor has recouped the full amount of any capital
invested (as provided in the following sentence) to implement the change
in Conversion
11
<PAGE> 12
Process. Once Contractor has recouped one hundred percent (100%) of said
capital investment, including a twenty percent (20%) return on such
capital, with such recoupment to be at the rate provided in the following
sentence, the benefits of the change in Conversion Process shall be shared
between the parties by reducing the Conversion Charge in an amount equal
to 50% of the resulting reduction in cost per pound to undertake the
Conversion Process to produce Product (the "Cost Reduction Factor"). The
Conversion Charge payable by Owner shall not be reduced by the Cost
Reduction Factor until the Contractor has recouped the capital invested
(as provided above) to implement the change in Conversion Process, with
the capital to be recouped at the rate of the Cost Reduction Factor
applied to each pound of Product converted by Contractor.
(b) Any improvements, inventions or modifications to the Conversion
Process ("Inventions"), whether or not patentable, conceived by Contractor
or jointly by Contractor and Owner, shall be owned by Owner, and
Contractor shall be granted a non-exclusive, royalty free license to
utilize the Inventions for any purpose other than the manufacture of
Product. Any Inventions,whether or not patentable, conceived by Owner,
shall be owned by Owner. Any Manufacturing Improvement conceived by either
Owner or Contractor, or jointly conceived by Contractor and Owner shall be
owned by Contractor, and Owner shall be granted an exclusive, worldwide,
royalty free license to utilize the Manufacturing Improvement in
connection with (i) the Product or (ii) any product based on the Product
and which incorporates an Invention.
9.7 (a) Contractor shall add to the Conversion Charge an amount equal to any
tax now in effect or hereafter imposed or levied, with respect to the
manufacture, sale, use or delivery of Product and imposed by law at the
point of sale or delivery of such Product (other than taxes based upon
the income or profits of Contractor), including but not limited to, sales
tax, use tax, retailer's occupational tax, gross receipts tax, and value
added tax, in each ease to the extent payable by Contractor or required
to be collected by Contractor.
(b) All taxes now or hereafter imposed or levied with respect to the
manufacture, sale, use or delivery of the Product (other than taxes based
upon the income or profits of Contractor), which are required to be paid
or collected by Contractor and which are not imposed by law at the point
of sale or delivery of Products, including but not limited to, ad valorem
tax, or any environmental tax, shall be paid by Contractor and reimbursed
by Owner. Contractor will periodically calculate any allocation of such
taxes to the Product purchased by Owner and will prepare a separate
invoice to Owner for reimbursement of such taxes.
(c) Owner shall be responsible for and pay any duties which are levied
upon the export or import of Product manufactured by Contractor
hereunder. Both parties will work together to attempt to eliminate any
such duty.
9.8 If Contractor is prevented from increasing the Conversion Charge in
effect at any time by any governmental law, order, regulation or ruling,
then at Contractor's option and upon one hundred and twenty (120) days
notice from Contractor to Owner, Contractor may terminate this Agreement.
9.9 If during the term of this Agreement Owner receives a written offer to
supply Owner's requirements of Product (by the conversion of Feedstock
into Product by use of the Conversion Process) for the following Contract
Year or multiple Contract Years, with such offer describing the specific
quantities of Stadis(R) 425 and Stadis(R) 450 (Enhanced) to be supplied
pursuant thereto, from a manufacturer other than a subsidiary, parent
company or corporate affiliate of
12
<PAGE> 13
Owner, at a conversion price lower than the Conversion Charge in effect
under this Agreement, and upon terms and conditions comparable to those
stated in this Agreement, Owner may request Contractor in writing to meet
the lower price offer, provided such request is presented to Contractor
within thirty (30) days of Owner's receipt thereof. Owner's request shall
describe the competitive offer in sufficient detail to reasonably permit
Contractor to verify same, including but not limited to the quality of each
of Stadis(R) 425 and Stadis(R) 450 (Enhanced) to be supplied. Contractor
shall then give notice to Owner stating whether it is willing to adjust the
applicable Conversion Charge under this Agreement to meet the lower price
competitive offer of such other manufacturer. If Contractor does not adjust
the then applicable Conversion Charge under this Agreement to meet the
lower price competitive offer within thirty (30) days after Contractor's
receipt of such request, Owner may, by written notice to Contractor elect
to accept such offer, in which event this Agreement may be terminated by
Contractor any time thereafter on six (6) months written notice to Owner,
provided, however, if Owner has commenced purchasing Product from a third
party pursuant to the lower price competitive offer, Contractor may
terminate the Agreement with no notice. During any Contract Year in which
Owner is purchasing Product pursuant to a lower price competitive offer but
Contractor has not terminated this Agreement, the Annual Minimum Volume
shall not be applicable.
ARTICLE 10 -- RECORDS
10.1 At the end of each manufacturing campaign, Contractor shall supply to Owner
a statement showing the conversion ratio of Feedstock to Product achieved
during such manufacturing campaign. In addition, at the end of each month,
Contractor shall supply to Owner a statement showing:
a) the amount of Feedstock received from the Owner during that calendar
month and the dates of receipt; and
b) the amount of Product shipped during that calendar month and the dates
of shipment; and
c) the amount of Feedstock held in inventory at the Contractor's Plant
awaiting processing; and
d) the amount of Product held in inventory awaiting delivery upon receipt
of instructions from Owner; and
e) the amount of work in process, expressed as Feedstock.
10.2 Owner shall have the right, at Owner's expense, to appoint the independent
auditor identified in Section 9.1(b) to review the records of Contractor on
reasonable notice and during normal business hours, in order to verify (a)
the reduction in cost to produce Product caused by a change in the
Conversion Process and the application of the Cost Reduction Factor to
Owner as provided in Section 9.6(a)(ii) and (b) the statements supplied to
Owner as provided in Section 10.1. The independent auditor shall undertake
the review of records and verification of the matters set forth in clauses
(a) and (b) under the same requirements of confidentiality as provided in
Section 9.1(b). The undertaking of the independent auditor shall be limited
solely to confirming the matters set forth in clauses (a) and (b) above.
13
<PAGE> 14
ARTICLE 11 -- TITLE AND RISK
Owner shall have title to Feedstock at all times. Owner shall have risk of
loss for Feedstock until Feedstock is received at Contractor's Plant, at which
time risk of loss shall shift to Contractor. Contractor shall have title to
and risk of loss for Product until the originating carrier takes possession of
the Product at Contractor's Plant for delivery to the destination designated by
Owner, at which time title to and risk of loss for Product shall shift to Owner.
ARTICLE 12 -- REPRESENTATIONS, WARRANTIES AND INDEMNITY
12.1 (a) Contractor represents and warrants that:
(i) Product converted hereunder will meet its Specification, except to
the extent that (x) any failure of Product to meet its Specification is
caused by a failure of Feedstock to meet the Feedstock Specification, or
(y) any failure of Product to meet its Specification is caused by the
failure of any storage tank in a delivery truck to have been cleaned and
decontaminated immediately prior to receiving Product for delivery; and
(ii) Product furnished under this Agreement shall be manufactured,
processed and packaged in material compliance with all applicable
federal, state and local laws, regulations, orders and guidelines and
good industry practice, except to the extent any failure to package
Product in material compliance with all applicable federal, state and
local laws, regulations, orders and guidelines and good industry practice
is caused by the trucks or drums selected by Owner; and
(iii) Product will be conveyed free of any liens and encumbrances, except
to the extent any liens and encumbrances attributable to Owner attach to
the Feedstock or Product; and
(iv) as of the Distribution Date it is aware of no Regulatory Change (as
that term is defined in Section 9.4(a)) which has been proposed or is
under consideration.
(b) CONTRACTOR MAKES NO WARRANTIES OTHER THAN AS PROVIDED IN SECTION
12.1(a) AND CONTRACTOR EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR WARRANTIES
OF FITNESS FOR AN INTENDED PURPOSE OR FOR ANY OTHER PARTICULAR PURPOSE,
WETHER ARISING BY LAW, CUSTOM, CONDUCT OR USAGE OF TRADE.
12.2 Owner represents and warrants that:
(a) It will at all times comply in all material respects with all
applicable laws, regulations, orders and guidelines and good industry
practice, and that it presently has, and will use its best efforts to
maintain, all licenses, permits and similar authorizations required for
the manufacture, processing, packaging, sale and delivery of Product; and
(b) It has the full legal right to use Feedstock and the Conversion
Process to produce Product, and there are no restrictions under law or any
patent, nor is Owner party to any contracts which prohibit Owner from
contracting to have Contractor produce Product as contemplated by this
Agreement; and
14
<PAGE> 15
(c) as of the Distribution Date it is aware of no Regulatory Change (as
that term is defined in Section 9.4(a)) which has been proposed or is under
consideration; and
(d) as of the Distribution Date it has provided to Contractor all safety,
health, environmental, hazard and medical information in its possession
relating to Product, the Conversion Process, Feedstock and other raw
materials used to make Product, and it will continue to supply any such
safety, health, environmental, hazard and medical information obtained
after the Distribution Date to Contractor for as long as this Agreement
remains in effect;
(e) all Feedstock will meet the Feedstock Specification; and
(f) all drums in which Product is packaged for delivery, and all trucks
used to deliver Product are suitable for such delivery and comply in all
respects with applicable law; and
(g) the storage tanks in any truck used to deliver Product from
Contractor's Plant to Owner's designated destination shall have been
cleaned and decontaminated immediately prior to receipts of Product for the
delivery such that the use of the storage tank shall not cause the Product
to fail to comply with its Specification.
12.3 (a) In the event that any Product hereunder fails to conform to the
warranty in Section 12.1(a)(i), as Owner's sole remedy for said failure, if
Owner has provided timely notice of such non-conformity under Section
7.1(a), Contractor shall, at its option, (i) supply Owner with the
applicable volume of conforming Product as soon as reasonably practicable,
or (ii) refund the Conversion Charge paid by Owner for the non-conforming
Product. Contractor shall have the right, at Contractor's expense, to
reclaim and rework non-conforming Product, provided, however, if
non-conforming Product cannot be reclaimed and reworked into conforming
Product, Contractor shall reimburse Owner for the cost of the replacement
of all Feedstock used in the non-conforming Product as provided in Appendix
E.
(b) Neither party shall be liable to the other under or in connection with
this Agreement for lost profits or for special, indirect, incidental,
consequential, punitive or exemplary damage of any kind, whether arising in
contract, tort, product liability or otherwise, even if advised of the
possibility of such lost profits or damages. This section shall not serve
to reduce a party's indemnity obligations in connection with claims by
third persons or entities against a party entitled to indemnification under
Section 12.4, nor to reduce Owner's obligations, if any; to pay the sums
provided in Section 6.5. Notwithstanding the preceding sentence or any
other provision of this Agreement, Contractor shall not under any
circumstances be required to pay damages for default or breach or indemnity
in an amount greater that the total amount it has received from Owner in
payment for that Product which is actually involved in the claim for
damages or indemnity.
12.4 (a) Subject to the limitation in the last sentence in Section 12.3(b),
Contractor will indemnify and hold Owner harmless from and against all
claims, actions, judgments, losses, and expenses, including reasonable
attorneys fees, sustained or incurred by Owner, which arise or result from
(i) breach of any warranty by Contractor hereunder (subject to the
limitations set forth in Sections 7.1(a), 7.1(b) and 12.3(a)), (ii) acts,
omissions, or events taking place in connection with the production,
storage, packaging and handling of Feedstock or of Product, in each case
while Owner has the risk of loss therefore (excluding however, claims
relating to the
15
<PAGE> 16
suitability or compliance with law of drums in which Product is packaged,
or trucks in which Product is delivered, which shall be Owner's sole
responsibility), and (iii) any negligent acts or omissions of Contractor in
failing to properly seal any drum or railcar in which Product is to be
shipped to the destination designated by Owner, which negligent act or
omission causes Product to be released from such drum or railcar prior to
being received at its destination, provided that, except as set forth in
clause (iii) above, Contractor shall not under any circumstance be
obligated to indemnify or hold Owner harmless from product liability,
recall costs or liability, negligence, breach of warranty, breach of
contract or similar claims made by any person or entity who purchases,
uses, is exposed to or otherwise claims to have been injured or damaged by
or in connection with Product (including any product into which Product has
been incorporated) after risk of loss for said Product passes to Owner.
(b) Owner will indemnify and hold Contractor harmless from and against all
claims, actions, judgments, losses and expenses, including reasonable
attorney's fees, sustained or incurred by Contractor, which arise or result
from (i) breach of any warranty by Owner hereunder, (ii) the ordering,
shipping, handling and delivery of Feedstock before Contractor takes
possession thereof at Contractor's Plant, (iii) except as provided in
Section 12.4(a)(iii), all acts, omissions or events taking place in
connection with Product after risk of loss passes to Owner hereunder,
including without limitation (x) all product liability, recall costs or
liability, negligence, breach of warranty, breach of contract or similar
claims by any person or entity who purchases, uses, is exposed to or
otherwise claims to have been injured or damaged by or in connection with
Product (including any product into which Product has been incorporated),
(w) storage of Product, (x) packaging of Product, (y) handling of Product
or (2) shipment of Product, in each case after risk of loss for said
Product passes to Owner, (iv) claims relating to the suitability or
compliance with law of drums in which Product is packaged or trucks in
which Product is delivered, and (v) any litigation or claim by any third
person or entity alleging that performance by Contractor hereunder, or that
manufacture, sale or use of Product (including any product into which
Product has been incorporated), infringes upon any patent right or any
other intellectual property rights of any third person or entity.
ARTICLE 13 -- MISCELLANEOUS
13.1 All waivers and consents given hereunder shall be in writing. No waiver by
any party of any breach or anticipated breach of any provision hereof shall
be deemed a waiver of any other contemporaneous, preceding or succeeding
breach or anticipated breach, whether or not similar, on the part of the
same or any other party.
13.2 The article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.3 Other than with respect to any receivor or trustee that agrees to assume
the liabilities and obligations under this Agreement of the party for whom
it is appointed, this Agreement shall not be assigned by either party
without the prior written consent of the other party, such consent not to
be unreasonably withheld. Subject to the foregoing restriction, this
Agreement shall inure to the benefit of, and be binding upon, the parties
hereto and their respective successors and assigns.
13.4 This Agreement may be executed in two or more counterparts, all of which
taken together shall constitute one and the same instrument.
16
<PAGE> 17
13.5 This Agreement, including all appendices annexed hereto (each of which is
incorporated herein by reference), contains the entire understanding of
the parties hereto with respect to the subject matter contained herein or
therein, and supersedes all prior negotiations, understanding, or
agreements whether oral or written. The parties agree and acknowledge that
the Agreement has been reached as a result of negotiation between the
parties, each represented by counsel. As a result, if any dispute ever
arises regarding the construction of any provision, neither party shall be
entitled to any favorable or detrimental construction preference.
13.6 This Agreement may not be changed orally, nor shall any modification of
this Agreement be affected by the use of purchase orders, invoices,
acknowledgments, acceptances or other forms at variance with or in addition
to the terms and conditions herein. In case of a conflict between any of
the terms contained in a written purchase order, invoice, acknowledgment,
acceptance or other form and any of the terms of this Agreement, the terms
of this Agreement shall control. No additional terms or conditions of sale
other than those contained in this Agreement shall be effective unless
approved in writing by the representatives of Owner and Contractor
identified in Section 13.8.
13.7 In Case any provision in this Agreement shall be held invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions hereof will not in any way be affected or impaired thereby.
13.8 All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given
(a) on the date of service if served personally on the party to whom
notice is given, (b) on the day of transmission if sent via facsimile to
the facsimile number given below, provided facsimile confirmation of
receipt is obtained promptly after completion of transmission, (c) on the
third business day after delivery to an overnight courier service,
provided receipt of delivery has been confirmed, or (d) on the tenth day
after mailing, provided receipt of delivery is confirmed, if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, properly addressed and
return-receipt-requested, to the party as follows:
If to Contractor: Great Lakes Chemical Corporation
One Great Lakes Boulevard
West Lafayette, IN 47906
United States
Attn: General Manager-Fine Chemicals
Telecopy: (765) 497-6123
with a copy to (which shall
not serve as notice): Great Lakes Chemical Corporation
One Great Lakes Boulevard
West Lafayette, IN 47906
Attn: Assistant General Counsel
Telecopy: (765) 497-6660
17
<PAGE> 18
If to Owner: The Associated Octel Company Limited
P.O. Box 17, Oil Sites Road
Ellesmere Port
South Wirral L65 4HF
United Kingdom
Attn: Company Secretary
Telecopy: 44-151-356-6239
13.9 This Agreement shall be interpreted and the rights and liabilities of the
parties determined in accordance with the substantive law of the State of
New York, without giving effect to any choice of law rules or provisions
(whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of New York. The parties hereby adopt and incorporate by reference
the dispute resolution provisions in Article XI of the Transfer and
Distribution Agreement dated as of , 1998 between Contractor and Octel
Corp.
13.10 The termination of the Agreement shall not impair or prejudice any right
or remedy which either party may have against the other at law or in
equity under this Agreement and which has arisen or accrued prior to or at
the time of termination, including, without limitation, any right or
remedy by reason of any breach hereof. The termination of this Agreement
shall not relieve either party from any covenants or agreements hereunder
which, by their terms, are expressly or impliedly intended to survive
termination, including, but not limited to, Articles 5 and 12 and Section
9.6(b).
ARTICLE 14 -- TRANSITIONAL PHASE
During an initial period until the Owner gives written notice to the Contractor
to the contrary, the Contractor shall purchase Feedstock on behalf of Owner, at
the most commercially advantageous price available instead of Owner itself
purchasing said Feedstock. The Contractor shall then invoice Owner the cost of
purchasing the Feedstock used to make Product. Title and risk of loss for such
Feedstock shall be as provided in Article 11.
18
<PAGE> 19
The Associated Octel Company Limited
Signature: ................................................
Date: ................................................
Name: ................................................
Title: ................................................
Great Lakes Chemical Corporation
Signature: ................................................
Date: ................................................
Name: ................................................
Title: ................................................
19
<PAGE> 20
APPENDIX A
Part 1
LIST OF FEEDSTOCK
Lupersol
Arquad 2C Nitrate
Dinonylnapthalene sulfonic acid
Dodecyl Mercaptan
Polyflo 130
Kerosene
1-Decene
Dodecylbenzene sulfonic acid
Isopropyl alcohol
Sulfur dioxide
Toluene
20
<PAGE> 21
APPENDIX A
PART 2
FEEDSTOCK SPECIFICATION
See Attached
21
<PAGE> 22
APPENDIX B
PRODUCT SPECIFICATION
<TABLE>
<CAPTION>
STADIS(R) 425
PROPERTY** UNITS MINIMUM MAXIMUM TYPICAL METHOD
<S> <C> <C> <C> <C> <C>
Appearance* Clear, Bright, Amber Liquid Pass Octel America
Method 97-24
Conductivity pS/m 380 460 400 Octel America
Method 96-21
FlashPoint, *F Report 72 ASTM D93
PMCC
SpGr 60/60F Report 0.850 ASTM D1298
(16/16C)
Color 5.5 3.0 ASTM D1500
Manufacturing Control Specification
ph, Apparent 3.5 5.2 4.4 Octel America
Method 96-2
</TABLE>
<TABLE>
<CAPTION>
STADIS(R) 450 (Enhanced)
PROPERTY** UNITS MINIMUM MAXIMUM TYPICAL METHOD
<S> <C> <C> <C> <C> <C>
Appearance* Clear, Bright, Amber Liquid Pass Octel America
Method 97-24
Conductivity pS/m 420 540 440 Octel America
Method 96-21
Ash, mass % 0.10 <0.10 ASTM D482
SpGr 60/60F 0.910 0.930 0.920 ASTM D1298
(16/16C)
FlashPoint, *F Report 72 ASTM D93
PMCC
Color 6.5 3.0 ASTM D1500
Manufacturing Control Specification
ph, Apparent 3.7 5.2 4.6 Octel America
Method 96-2
</TABLE>
*Parties may agree on instrumental method.
**If Contractor utilizes the process equipment in which Product is manufactured
for the toll manufacture of material other than Product (the "Material") the
parties shall add the Material as a new property to the Specification. The
parties shall negotiate in good faith to establish maximum limits for the
Material that are both measurable and agreeable to the parties. The cost of
sampling each shipment of Product for conformance to such new property shall be
borne equally by the parties.
22
<PAGE> 23
APPENDIX C
CONVERSION PROCESS
The Conversion Process is described in its entirety in the documents listed in
Sections A and B below. The documents in Section A were written by the
Contractor with the exceptions as noted, and all bear the signature of Mark
Anderson, dated 8/29/97. Appendix C constitutes the entire agreement of the
parties as to the description of the Conversion Process and shall not be
changed, modified, amended or supplemental in anyway unless expressly agreed in
writing by the parties.
Section A
1) OPERATING INSTRUCTIONS POLYSULFONE AND STADIS 125 BUILDING 8 REVISION 3,
DATED SEPTEMBER 5, 1997
This document requires correction on page 5 Part V Materials to show 473 lbs of
Arquad 2C Nitrate per batch, and on page 19, under Part F Final Additive Mixing,
7.0 to show 473 lbs Arquad 2C Nitrate.
2) OPERATING INSTRUCTIONS STADIS 425 CONCENTRATE AND BULK BUILDING 8
REVISION 2 DATED SEPTEMBER 5, 1997
This document requires correction of Part 1, Process Description, to state in
the second to last sentence in the first paragraph under "Concentrate" to read
as follows: "The R-801 contents are agitated for 50 minutes." This will agree
with XIII Part A Charging R-801/Reaction, paragraph 15.0.
3) OPERATING INSTRUCTIONS STADIS 450 -- REVERSE ADDITION (RA) BUILDING 8,
REVISION 2, DATED SEPTEMBER 5, 1997
This document requires revision on page 2 under I, Process Description, first
paragraph, second sentence to read: "The temperature is adjusted to about
25 degree C and agitated for 50 minutes."
4) OPERATING INSTRUCTIONS STADIS 450 -- REGULAR (REG) BUILDING 8 REVISION 2
DATED SEPTEMBER 5, 1998.
5) OPERATING INSTRUCTIONS STADIS 450 -- ENHANCED BUILDING 8 REVISION 2 DATED
SEPTEMBER 5, 1997.
These instructions under part XIV Charge Calculations, show how to calculate
the amounts of Stadis(R) 450 RA and Stadis(R) 450 REG components. Since the
minimum conductivity requirement is slightly increased in the Specifications,
commensurate changes shall be effective in paragraph 4.0 in part XIV.
23
<PAGE> 24
Section B
Test Authorization TA-C-95-287 "Stadis" 450-Enhanced Dated July 31, 1995
Test Authorization TA-C-95-286 "Stadis" 450D Dated July 28, 1995
Test Authorization TA-C-95-285 "Stadis" 425D Conc. Dated July 28, 1995
"Stadis" 425 Concentrate Document No. 115-892 047 Dated July 1994
Operating Procedure No. 63, SO(2), Cylinder Handling, Dated August 1994
Test Authorization TA-C-95-273 "Stadis" 425 Concentrate Dated July 14, 1995
Test Authorization TA-C-95-274 "Stadis" Polysulfone Intermediate Dated
July 14, 1995
Orchem Method 96-1-1-1 Infrared Spectrophotometric Determination of
1-Decene Polysulfone, Dated 2-28-73
Method No. S6250.005.01.CW Determination of Sulfur Dioxide (SO(2))
Dated July 17, 1992
24
<PAGE> 25
APPENDIX D
COMPENSATION
<TABLE>
The following is a table of Compensation payments to be made by Owner to
Contractor upon termination of the Agreement as provided in Section 2.6. The
Compensation payments represent the balance of the undepreciated capital
investment made by Contractor in connection with this Agreement. The
Compensation payments are calculated assuming a December 31 termination, and if
the termination occurs earlier in the calendar year the Compensation payments
shall be increased proportionately to account for the termination not occurring
on December 31.
<CAPTION>
<S> <C>
TERMINATION DATE COMPENSATION PAYMENT
December 31, 1998 USD 581,191.92
December 31, 1999 USD 512,034.80
December 31, 2000 USD 442,877.68
December 31, 2001 USD 373,720.56
December 31, 2002 USD 304,563.44
December 31, 2003 USD 235,406.32
December 31, 2004 USD 166,249.20
December 31, 2005 USD 97,092.08
December 31, 2006 USD 27,934.96
December 31, 2007 USD 0
</TABLE>
25
<PAGE> 26
APPENDIX E
FEEDSTOCK VALUES
The value of Feedstock shall be the delivered cost (expressed on a unit basis)
to replace the following Feedstock items:
*Price
Lupersol USD 8.26/pound
Arquad 2C Nitrate USD 3.60/pound
Dinonylnapthalene
sulfonic acid USD 2.44/pound
Dodecyl
Mercaptan USD 1.90/pound
Polyflo 130 USD 1.88/pound
Kerosene USD 1.60/gallon
1-Decene USD 0.78/pound
Dodecylbenzene
sulfonic acid USD 0.74/pound
Isopropyl alcohol USD 0.33/pound
Sulfur dioxide USD 0.25/pound
Toluene USD 0.17/pound
*Estimated prices as of April 1, 1998
26
<PAGE> 27
APPENDIX F
CLOSURE FEE
As provided in Section 2.6, upon termination of the Agreement, Owner shall pay
Contractor the sum of $32,500, plus all costs to dispose of, or ship to a
destination specified by Owner, all Feedstock and Product, as well as any
demurrage charges incurred by Contractor for Product or Feedstock.
<PAGE> 28
APPENDIX G
The following is an example of how the Conversion Charge would, under the
assumptions set forth for Years 1 and 2, be increased pursuant to Section
9.1(b) after the first Contract Year of the Agreement:
<TABLE>
<CAPTION>
Factor Year 1 Year 2 Difference Unit Unit Cost % Increase
Consumption Per Increase (Decrease) for
Pound of Product (Decrease) for $1.00 per pound
Converted $1.00 per Pound Conversion
Conversion Charge
Charge
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Labor USD 15.58/hr USD 16.08/hr USD 0.50 0.015 USD 0.00750 .75%
Power USD 0.048/kw hr USD 0.054/kw hr USD 0.006 0.025 USD 0.00012 .012%
Caustic USD 0.075/lb USD 0.15/lb USD 0.075 0.045 USD 0.00338 .338%
Gas USD 0.415/therm USD 0.428/therm USD 0.013 0.02 USD 0.00026 .026%
Wastewater USD 1.40/m gal USD 1.35/m gal USD (0.10) 0.0012 USD(0.00012) (.012%)
- ------------------------------------------------------------------------------------------------------------------------
USD 0.01114 1.114%
Increase in Conversion Charge in Year 2 (USD 0.011)
Less than 1.0 USD 1.511
Not less than 1.0
but less than 1.2 USD 1.361
Not less than 1.2
but less than 1.4 USD 1.261
Not less than 1.4
but less than 1.6 USD 1.161
Not less than 1.6
but less than 1.8 USD 1.011
Not less than 1.8
but less than 2.0 USD 0.971
Not less than 2.0 USD 0.951
</TABLE>
28
<PAGE> 29
APPENDIX H
FEEDSTOCK RATE
For the first six months of the first Contract Year (the "Trial Period"),
Contractor shall use no more than the quantities of Feedstock set forth in
Table 1 below to produce one (1) pound of Product, provided, however, if during
the Trial Period, Contractor uses more than the quantities of Feedstock set
forth in Table 1 to produce one (1) pound of Product, Contractor shall not be
responsible for the cost of the additional Feedstock.
The parties shall work together in good faith during the Trial Period to explore
ways to reduce the quantities of Feedstock used in the Conversion Process and to
develop accurate baseline data on the Feedstock usage rate for the Conversion
Process. During the Trial Period the parties will have ongoing discussions
regarding the batch to batch performance of the Conversion Process and the usage
of Feedstock therein, as well as formal monthly reviews of Feedstock usage in
the Conversion Process. After the Trial Period the parties shall negotiate in
good faith to establish a permanent Feedstock usage rate for the production of
Product during the remainder of the Agreement. If the parties cannot agree on a
Feedstock usage rate after the Trial Period, the Feedstock usage rate shall be
the average Feedstock usage rate experienced by Contractor during the Trial
Period, plus a factor to account for process variability experienced during the
Trial Period.
TABLE 1
[CAPTION]
<TABLE>
RAW MATERIAL STADIS (R) 450 (ENHANCED) STADIS (R) 425
LB. FEEDSTOCK/LB. LB. FEEDSTOCK/LB.
PRODUCT PRODUCT
<S> <C> <C>
Arquad 2C Nitrate .0262 .0150
1 Decene .1280 .0800
Dinonylnapthalene sulfonic seld .3920 0
Dodecylbenzene sulfonic acid 0 .1150
Isopropyl alcohol .0705 .0700
Lupersol .0042 .0024
Dodecyl Mercaptan .0040 .0035
Polyflo 130 .1601 .1284
Sulfur dioxide .0958 .0534
Toluene .4620 .1930
Kerosene 0 1.500
</TABLE>
29
<PAGE> 30
APPENDIX I
CONVERSION CHARGE
Owner shall pay to Contractor a Conversion Charge which shall vary based on the
quantity of Product (measured in pounds) invoiced by Contractor to Owner
pursuant to this Agreement. In each Contract Year. The Conversion Charge,
subject to any adjustment provided for in this Agreement, shall be that shown in
the following table:
<TABLE>
<CAPTION>
Quantity Invoiced during any Contract Conversion Charge per
Year expressed in Millions of Pounds of Product Pound of Product
<S> <C>
Less than 1.0 USD 1.50
Not less than 1.0 but less than 1.2 USD 1.35
Not less than 1.2 but less than 1.4 USD 1.25
Not less than 1.4 but less than 1.6 USD 1.15
Not less than 1.6 but less than 1.8 USD 1.00
Not less than 1.8 but less than 2.0 USD 0.96
Not less than 2.0 USD 0.94
</TABLE>
30
<PAGE> 1
Exhibit 12.1
For the purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents net income before income taxes plus fixed charges, less
capitalized interest. "Fixed charges" consists of interest expense, including
amortization of debt discount and financing costs, capitalized interest and the
portion of rental expense which the Company believes is representative of the
interest component of rental expense.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our reports (a) dated April 4, 1998, with respect to
the combined financial statements of Octel Corp., (b) dated April 30, 1998, with
respect to the pro forma adjustments to the combined financial statements of
Octel Corp., and (c) dated September 28, 1998 with respect to the unaudited
interim consolidated financial statements of Octel Corp., in Amendment No. 1 to
the Registration Statement (Form S-4 No. 333-xxxx) and related Prospectus of
Octel Developments PLC for the registration of $150,000,000 of 10% Senior Notes
due 2006 and Guarantee of 10% Senior Notes due 2006.
Indianapolis, Indiana
September 28, 1998
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (B) (2)
IBJ SCHRODER BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Stephen Giurlando, Assistant Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
OCTEL DEVELOPMENT PLC
OCTEL CORP.
(Exact name of obligor as specified in its charter)
England and Wales None
Delaware 98-0181725
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 17, Oil Sites Road
Ellesmere Port, South Wirral England
(Address of principal executive office) (Zip code)
10% SENIOR NOTES DUE 2006
(Title of Indenture Securities)
<PAGE> 2
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or
supervising authority to which it is subject.
New York State Banking
Department, Two Rector Street,
New York, New York
Federal Deposit Insurance
Corporation, Washington, D.C.
Federal Reserve Bank of New
York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate
trust powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee,
describe each such affiliation.
The obligors are not an affiliate of the trustee.
Item 13. Defaults by the Obligors.
(a) State whether there is or has
been a default with respect to the
securities under this indenture. Explain
the nature of any such default.
None
<PAGE> 3
(b) If the trustee is a trustee
under another indenture under which any
other securities, or certificates of
interest or participation in any other
securities, of the obligors are
outstanding, or is trustee for more than
one outstanding series of securities under
the indenture, state whether there has been
a default under any such indenture or
series, identify the indenture or series
affected, and explain the nature of any
such default.
None
List of exhibits.
List below all exhibits filed as part of this
statement of eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No.
22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a
reference to the copy of the Exhibit heretofore filed with the Securities
and Exchange Commission, to which there have been no amendments or
changes.
<PAGE> 4
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligors and its directors
or officers, the trustee has relied upon information furnished to it by
the obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1,
2 and 16 of this form since to the best knowledge of the trustee as
indicated in Item 13, the obligors are not in default under any indenture
under which the applicant is trustee.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility & qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 23rd day of September, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Stephen J. Giurlando
--------------------------
Stephen J. Giurlando
Assistant Vice President
<PAGE> 6
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issue by Octel Developments PLC, of
its 10% Senior Subordinated Notes due 2006, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Stephen J. Giurlando
---------------------------
Stephen J. Giurlando
Assistant Vice President
Dated: September 23, 1998
<PAGE> 7
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF JUNE 30, 1998
<TABLE>
DOLLAR AMOUNTS
IN THOUSANDS
----------------
<S> <C> <C> <C>
ASSETS
1. Cash and balance due from depository institutions:
a. Non-interest-bearing balances and currency and coin ...... $ 36,963
b. Interest-bearing balances ................................ $ 13,296
2. Securities:
a. Held-to-maturity securities .............................. $ 189,538
b. Available-for-sale securities ............................ $ 101,159
3. Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements
to resell...................................................... $ 327,500
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income.................. $1,800,351
b. LESS: Allowance for loan and lease losses................. $ 65,836
c. LESS: Allocated transfer risk reserve..................... $ -0-
d. Loans and leases, net of unearned income, allowance,
and reserve............................................... $1,814,515
5. Trading assets held in trading accounts ....................... $ 572
6. Premises and fixed assets (including capitalized leases) ...... $ 2,194
7. Other real estate owned ....................................... $ 819
8. Investments in unconsolidated subsidiaries and
associated companies .......................................... $ -0-
9. Customers' liability to this bank on acceptances
outstanding.................................................... $ 640
10. Intangible assets ............................................. $ 11,293
11. Other assets .................................................. $ 58,872
12. TOTAL ASSETS .................................................. $2,557,361
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices ...................................................................... $ 657,513
(1) Noninterest-bearing ...................................................................... $ 178,024
(2) Interest-bearing ......................................................................... $ 479,489
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ............................ $1,362,365
(1) Noninterest-bearing ...................................................................... $ 20,278
(2) Interest-bearing ......................................................................... $1,342,087
14. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase ................ $ 60,000
15. a. Demand notes issued to the U.S. Treasury ............................................... $ 5,000
b. Trading Liabilities .................................................................... $ 406
16. Other borrowed money:
a. With a remaining maturity of one year or less .......................................... $ 49,916
b. With a remaining maturity of more than one year ........................................ $ 1,375
c. With a remaining maturity of more than three years ..................................... $ 1,550
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding .................................. $ 640
19. Subordinated notes and debentures ......................................................... $ 100,000
20. Other liabilities ......................................................................... $ 69,920
21. TOTAL LIABILITIES ......................................................................... $2,308,685
22. Limited-life preferred stock and related surplus .......................................... $ N/A
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus ............................................. $ -0-
24. Common stock .............................................................................. $ 29,649
25. Surplus (exclude all surplus related to preferred stock) .................................. $ 217,008
26. a. Undivided profits and capital reserves ................................................. $ 1,885
b. Net unrealized gains (losses) on available-for-sale securities ......................... $ 134
27. Cumulative foreign currency translation adjustments ....................................... $ -0-
28. TOTAL EQUITY CAPITAL ...................................................................... $ 248,676
29. TOTAL LIABILITIES AND EQUITY CAPITAL ...................................................... $2,557,361
</TABLE>
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10% SENIOR NOTES DUE 2006
OF
OCTEL DEVELOPMENTS PLC
OCTEL CORP.
Pursuant to the Prospectus dated September , 1998
_______________________________________________________________________________
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME ON , 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
______________________________________________________________________________
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed, and submitted to the Exchange Agent
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or Hand:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing Window
Attn: Reorganization Operations Department Subcellar One, (SC-1)
To Confirm by Telephone or For Information: By Facsimile Transmission:
(212) 858-2103 (212) 858-2611
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT.
The undersigned hereby acknowledges receipt of the Prospectus dated
September , 1998 (as it may be supplemented and amended from time to time, the
"Prospectus") of Octel Developments plc, a company organized under the laws of
England and Wales (the "Issuer") and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuer's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its 10% Senior Notes due 2006
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement,
for each $1,000 in principal amount of its outstanding 10% Senior Notes due 2006
(the "Notes"), of which $150,000,000 aggregate principal amount is outstanding.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instruction to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
-1-
<PAGE> 2
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns and transfers to, or upon the
order of, the Issuer all right, title, and interest in, to and under the
Tendered Notes
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "SPECIAL
DELIVERY INSTRUCTIONS" below (see Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Issuer upon receipt by the
Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owner(s) hereunder shall
be binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, and adverse claims
when the Tendered Notes are acquired by the Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuer, and
(iv) the undersigned and each Beneficial Owner acknowledge and agree that any
person participating in the Exchange Offer with the intention or for the purpose
of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), in connection with a secondary resale of the Exchange Notes acquired by
such person and cannot rely on the position of the Staff of the Securities and
Exchange Commission (the "Commission") set forth in the no-action letters that
are discussed in the section of the Prospectus entitled "The Exchange Offer." In
addition, by accepting the Exchange Offer, the undersigned hereby (i) represents
and warrants that, if the undersigned or any Beneficial Owner of the Notes is a
Participating Broker-Dealer, such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other trading
activities and has not entered into any arrangement or understanding with the
Issuer or any "affiliate" of the Issuer (within the meaning of Rule 405 under
the Securities Act) to distribute he Exchange Notes to be received in the
Exchange Offer, and (ii) acknowledges that, by receiving Exchange Notes for its
own account in exchange for Notes, where such Notes were acquired as a result of
market-making activities or other trading activities, such
-2-
<PAGE> 3
Participating Broker-Dealer will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes.
Holders of Notes that are tendering by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC") can execute the tender
through the DTC Automated Tender Offer Program ("ATOP"), for which the
transaction will be eligible. DTC participants that are accepting the Exchange
Offer must transmit their acceptance to DTC, which will verify the acceptance
and execute a book-entry delivery to the Exchange Agent's DTC account. DTC will
then send an Agent's Message to the Exchange Agent for its acceptance. DTC
participants may also accept the Exchange Offer prior to the Expiration Date by
submitting a Notice of Guaranteed Delivery as described herein under
Instruction 2, "Guaranteed Delivery Procedures."
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE "USE OF GUARANTEED DELIVERY" BELOW (Box 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW
(BOX 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
________________________________________________________________________________
BOX 1
DESCRIPTION OF NOTES TENDERED
(Attach additional signed pages, if necessary)
________________________________________________________________________________
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), EXACTLY AS CERTIFICATE AMOUNT AGGREGATE PRINCIPAL
NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
- ---------------------------------------------------------------- ------------ ------------------- -------------------
<S> <C> <C> <C>
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
Total
____________________________________________________________________________________________________________________________________
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000 of principal amount.
Unless otherwise indicated in this column, the principal amount of all Note
Certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
________________________________________________________________________________
<PAGE> 4
_______________________________________________________________________________
BOX 2
BENEFICIAL OWNER(S)
_______________________________________________________________________________
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5,6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
__________________________________________________________________________
(please print)
Address:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
(include Zip Code)
Tax Identification or
Social Security No.:
_____________________________________________________________________________
<PAGE> 5
______________________________________________________________________________
BOX 4
USE OF GUARANTEED DELIVERY
(See Instruction 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): ______________________________________________
Window Ticket No. (if any): ___________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________________
Name of Institution that Guaranteed Delivery: _________________________________
If Delivered by Book-Entry Transfer:
Account Number with DTC: ___________________________________________
Transaction Code Number: __________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
BOX 5
USE OF BOOK-ENTRY TRANSFER
(See Instruction 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution: ________________________________________________
Account Number: _______________________________________________________________
Transaction Code Number: ______________________________________________________
_______________________________________________________________________________
<PAGE> 6
________________________________________________________________________________
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
________________________________________________________________________________
<TABLE>
<S> <C>
X _______________________________________________________ Signature Guarantee
(If required by Instruction 5)
X _______________________________________________________ Authorized Signature
(Signature of Registered Holder(s)
or Authorized Signatory)
X ______________________________________________________
Note: The above lines must be signed by the registered
holder(s) of Notes as their name(s) appear(s) on the Name: __________________________________________________
Notes or by person(s) authorized to become registered (please print)
holder(s) (evidence of such authorization must be
transmitted with this Letter of Transmittal (or by a Title: _________________________________________________
participant in DTC whose name appears on a security
position listing as the owner of such Notes). If Name of Firm:___________________________________________
signature is by a trustee, executor, administrator, (Must be an Eligible Institution as
guardian, attorney-in-fact, officer, or other person defined in Instruction 2)
acting in a fiduciary or representative capacity, such
person must set forth his or her full title below. See Address: _______________________________________________
Instruction 5.
_______________________________________________
Name(s): ________________________________________________ _______________________________________________
(Zip Code)
Capacity: _______________________________________________ Area Code and Telephone Number:
Street Address: _________________________________________ _______________________________________________
_________________________________________
(Zip Code) Dated: _______________________________________________
Area Code and Telephone Number:
___________________________________________________
</TABLE>
Tax Identification or Social Security Number:
___________________________________________________
________________________________________________________________________________
________________________________________________________________________________
BOX 7
BROKER-DEALER STATUS
________________________________________________________________________________
[ ] Check this box if the Beneficial Owner of the Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer
acquired the Notes for its own account as a result of market-making
activities or other trading activities. IF THIS BOX IS CHECKED,
REGARDLESS OF WHETHER YOU ARE TENDERING BY BOOK-ENTRY TRANSFER
THROUGH ATOP, AN EXECUTED COPY OF THIS LETTER OF TRANSMITTAL MUST
BE RECEIVED WITHIN THREE NYSE TRADING DAYS AFTER THE EXPIRATION
DATE BY OCTEL DEVELOPMENTS, PLC, ATTENTION: GRAHAM LEATHES,
FACSIMILE +44-(0)-151-356-6298.
_______________________________________________________________________________
-6-
<PAGE> 7
_______________________________________________________________________________
PAYORS' NAME: IBJ SCHRODER BANK & TRUST COMPANY
_______________________________________________________________________________
Name (if joint names, list first and circle the
name of the person or entity whose number you
enter in Part 1 below. See instructions if your
name has changed.)
__________________________________________________
Address
__________________________________________________
City, State and ZIP Code
SUBSTITUTE
__________________________________________________
List account number(s) here (optional)
Form W-9
__________________________________________________
Department of the Treasury
Part 1 - PLEASE PROVIDE YOUR TAXPAYER Social
Internal Revenue Service IDENTIFICATION NUMBER (''TIN'') IN THE Security
BOX AT RIGHT AND CERTIFY BY SIGNING Number
AND DATE BELOW or TIN
___________________________________________________
Part 2 - Check the box if you are NOT subject to
backup withholding under the provisions of section
3406(a)(1)(C) of the Internal Revenue code because
(1) you have not been notified that you are subject
to backup withholding as a result of failure to
report all interest or dividends or (2) the
Internal Revenue Service has notified you that you
are no longer subject to backup withholding. [ ]
________________________________________________________________________________
CERTIFICATION - UNDER THE PENALTIES PART 3 -
OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM Awaiting
IS TRUE, CORRECT AND COMPLETE. TIN [ ]
SIGNATURE ___________ DATE ___________
________________________________________________________________________________
Note: IF YOU ARE A UNITED STATES PERSON PAID WITHIN THE UNITED STATES, FAILURE
TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 8
OCTEL DEVELOPMENTS PLC
OCTEL CORP.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. This Letter of
Transmittal is to be completed by registered Holders of Notes if certificates
representing such Notes are to be forwarded herewith pursuant to the procedures
set forth in the Prospectus under "The Exchange Offer -- Procedures for
Tendering," unless delivery of such certificates is to be made by book-entry
transfer to the Exchange Agent's account maintained by DTC through ATOP. For a
holder to properly tender Notes pursuant to the Exchange Offer, a properly
completed and duly executed copy of this Letter of Transmittal, including
Substitute Form W-9, or an Agent's Message in lieu thereof, and any other
documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein, and either (i) certificates for
Tendered Notes must be received by the Exchange Agent at its address set forth
herein, or (ii) such Tendered Notes must be transferred pursuant to the
procedures for book-entry transfer described in the Prospectus under the caption
"The Exchange Offer -- Procedures for Tendering" (and a confirmation of such
transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of certificates
for Tendered Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the tendering holder and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the Holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Tendered Notes should be sent to the Issuer. Neither the Issuer
nor the Exchange Agent is under any obligation to notify any tendering holder of
the Issuer's acceptance of tendered Notes prior to the closing of the Exchange
Offer.
2. GUARANTEED DELIVERY PROCEDURES. If a registered Holder desires to tender
Notes pursuant to the Exchange Offer and (a) certificates representing such
tendered Notes are not immediately available, (b) time will not permit such
Holder's Letter of Transmittal, certificates representing such tendered Notes
and all other required documents to reach the Exchange Agent on or prior to the
Expiration Date, or (c) the procedures for book-entry transfer cannot be
completed on or prior to the Expiration Date, such Holder may nevertheless
tender such tendered Notes with the effect that such tender will be deemed to
have been received on or prior to the Expiration Date if the procedures set
forth below and in the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures" (including the completion of Box 4 above) are followed.
Pursuant to such procedures, (i) the tender must be made by or through an
Eligible Institution (as defined), (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the Issuer
herewith, must be received by the Exchange Agent on or prior to the Expiration
Date, and (iii) the certificates for the tendered Notes, in proper form for
transfer (or a Book-Entry Confirmation of the transfer of such tendered Notes to
the Exchange Agent's account at DTC as described in the Prospectus), together
with a Letter of Transmittal (or manually signed facsimile thereof) properly
completed and duly executed, with any required signature guarantees and any
other documents required by the Letter of Transmittal or a properly transmitted
Agent's Message, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the date of execution of the Notice of
Guaranteed Delivery. Any holder who wishes to tender Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery relating to such tendered Notes
prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to
complete the guaranteed delivery procedures outlined above will not, of itself,
affect the validity or effect a revocation of any Letter of Transmittal form
properly completed and executed by an Eligible Holder who attempted to use the
guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
-8-
<PAGE> 9
through the execution and delivery to the registered holder of the "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes Tendered" (see Box 1)
above. The entire principal amount of Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Notes issued in exchange for any Notes tendered and
accepted will be sent to the Holder at his or her registered address, unless a
different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Notes is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by a Medallion Signature Guarantor (as defined below).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by a Medallion
Signature Guarantor.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Signatures on this Letter of Transmittal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program (each a "Medallion Signature Guarantor"), unless the Tendered Notes are
tendered (i) by a registered Holder of Tendered Notes (or by a participant in
DTC whose name appears on a security position listing as the owner of such
Tendered Notes) who has not completed Box 3 ("Special Delivery Instructions") on
this Letter of Transmittal, or (ii) for the account of a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc. ("NASD") or a commercial bank or trust company having
an office or correspondent in the United States (each of the foregoing being
referred to as an "Eligible Institution"). If the Tendered Notes are registered
in the name of a person other than the signor of the Letter of Transmittal or if
Notes not tendered are to be returned to a person other than the registered
Holder, then the signature on this Letter of Transmittal accompanying the
Tendered Notes must be guaranteed by a Medallion Signature Guarantor as
described above. Beneficial owners whose Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if they
desire to tender such Notes.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate in Box
3 the name and address to which the Exchange Notes and/or substitute Notes for
principal amounts not tendered or not accepted for exchange are to be sent, if
different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
-9-
<PAGE> 10
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder who is a United States person paid in the United States and who holds any
Tendered Notes which are accepted for exchange must provide the Exchange Agent
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual, is his or her social security number.
If the Exchange Agent is not provided with the correct TIN, the Holder may be
subject to backup withholding and a $50 penalty imposed by the Internal Revenue
Service. (If withholding results in an over-payment of taxes, a refund may be
obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) if previously so notified,
the Internal Revenue Service has notified the holder that such holder is no
longer subject to backup withholding. If the Tendered Notes are registered in
more than one name or are not in the name of the actual owner, consult the
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for information on which TIN to report.
The Issuer reserve the right in their sole discretion to take whatever
steps are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will be
determined by the Issuer in their sole discretion, which determination will be
final and binding. The Issuer reserve the right to reject any and all Notes not
validly tendered or any Notes the Issuer's acceptance of which would, in the
opinion of the Issuer or their counsel, be unlawful. The Issuer also reserve the
right to waive any conditions of the Exchange Offer or defects or irregularities
in tenders of Notes or as to any ineligibility of any holder who seeks to tender
Notes in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Issuer shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must be cured
within such time as the Issuer shall determine. Neither the Issuer, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of Notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. WAIVER OF CONDITIONS. The Issuer reserve the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
-10-
<PAGE> 11
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted Tendered Notes when, as and if the Issuer have given
written or oral notice (immediately followed in writing) thereof to the
Exchange Agent. If any Tendered Notes are not exchanged pursuant to the
Exchange Offer for any reason, such unexchanged Notes will be returned, without
expense, to the undersigned at the address shown in Box 1 or at a different
address as may be indicated herein under "Special Delivery Instructions"
(Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal
of Tenders."
<PAGE> 1
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
IN RESPECT OF
10% SENIOR NOTES DUE 2006
OF
OCTEL DEVELOPMENTS PLC
OCTEL CORP.
PURSUANT TO THE PROSPECTUS DATED SEPTEMBER __, 1998
The Exchange Agent for the Exchange Offer is:
IBJ SCHRODER BANK & CO.
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or Hand:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing Window
Attn: Reorganization Operations Department Subcellar One, (SC-1)
To Confirm by Telephone or For Information: By Facsimile Transmission:
(212) 858-2103 (212) 858-2611
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
As set forth in the Prospectus dated September __, 1998 (as it may be
supplemented and amended from time to time, the "Prospectus") of Octel
Developments plc, a company organized under the laws of England & Wales (the
"Issuer") under "The Exchange Offer -- Guaranteed Delivery Procedures," and in
the Instructions to the related Letter of Transmittal (the "Letter of
Transmittal"), this form, or one substantially equivalent hereto, must be used
to accept the Issuer's offer (the "Exchange Offer") to exchange any and all of
its outstanding 10% Senior Notes due 2006 (the "Notes"), for new 10% Senior
Notes due 2006 (the "Exchange Notes"), if time will not permit the Letter of
Transmittal, certificates representing such Notes and other required documents
to reach the Exchange Agent, or the procedures for book-entry transfer cannot
be completed, on or prior to the Expiration Date (as defined).
This form must be delivered by an Eligible Institution (as defined herein)
by mail or hand delivery or transmitted via facsimile to the Exchange Agent as
set forth above. If a signature on the Letter of Transmittal is required to be
guaranteed by a Medallion Signature Guarantor under the instructions thereto,
such signature guarantee must appear in the applicable space provided in the
Letter of Transmittal. This form is not to be used to guarantee signatures.
Questions and requests for assistance and requests for additional copies
of the Prospectus may be directed to the Exchange Agent at the address above.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON __________, 1998, UNLESS EXTENDED ("THE EXPIRATION DATE").
- 1 -
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Issuer, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal (receipt of which is hereby acknowledged), the principal amount of
the Notes specified below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures" and in Instruction 2 to the Letter of Transmittal. The
undersigned hereby authorizes the Exchange Agent to deliver this Notice of
Guaranteed Delivery to the Issuer with respect to the Notes tendered pursuant
to the Exchange Offer.
The undersigned understands that Notes will be exchanged only after timely
receipt by the Exchange Agent of (i) such Notes, or a Book-Entry Confirmation of
the transfer of such Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility, and (ii) a Letter of Transmittal (or a manually signed
facsimile thereof), with respect to such Notes, properly completed and duly
executed, with any signature guarantees, or an Agent's Message in lieu thereof,
and any other documents required by the Letter of Transmittal within five New
York Stock Exchange, Inc. trading days after the execution hereof. The
undersigned also understands that the method of delivery of this Notice of
Guaranteed Delivery and any other required documents to the Exchange Agent is at
the election and sole risk of the holder, and the delivery will be deemed made
only when actually received by the Exchange Agent.
The undersigned understands that tenders of Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof. The
undersigned also understands that tenders of Notes may be withdrawn at any time
prior to the Expiration Date.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
All capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Prospectus.
- 2 -
<PAGE> 3
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signature(s) of Registered Holder(s) or Date:____________________________
Authorized
Signatory:_____________________________ Address:_________________________
_______________________________________ _________________________________
_______________________________________ Area Code and Telephone
No._____________________________
Name(s) of Registered
Holder(s):_____________________________ If Notes will be delivered by
book-entry transfer, check
_______________________________________ book-entry transfer facility
below:
_______________________________________
[ ] The Depository Trust Company
Principal Amount of Notes
Tendered:______________________________
_______________________________________
Depository
Certificate No.(s) of Notes Account
(if available)_________________________ No.______________________________
</TABLE>
This Notice of Guaranteed Delivery must be signed by the holder(s)
exactly as their name(s) appear(s) on certificate(s) for Notes or on a
security position listing as the owner of Notes, or by person(s)
authorized to become Holder(s) by endorsements and documents transmitted
with this Notice of Guaranteed Delivery without alteration, enlargement
or any change whatsoever. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting
in a fiduciary or representative capacity, such person must provide the
following information.
Please print name(s) and address(es)
Name(s):__________________________________________________________________
__________________________________________________________________________
Capacity:_________________________________________________________________
Address(es):______________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
DO NOT SEND NOTES WITH THIS FORM. NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
- 3 -
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of the Securities Transfer Agents Medallion Program,
the Stock Exchange Medallion Program or the New York Stock Exchange, Inc.
Medallion Signature Program (each, an "Eligible Institution"), hereby (i)
represents that the above-named persons are deemed to own the Notes tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 14e-4"), (ii) represents that such
tender of Notes complies with Rule 14e-4 and (iii) guarantees that the Notes
tendered hereby are in proper form for transfer (pursuant to the procedures
set forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures"), and that the Exchange Agent will receive (a) such Notes, or a
Book-Entry Confirmation of the transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility and (b) a properly completed and
duly executed Letter of Transmittal or facsimile thereof (or Agent's message)
with any required signature guarantees and any other documents required by the
Letter of Transmittal within five New York Stock Exchange, Inc. trading days
after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal (or
the Agent's Message) and Notes (or a Book-Entry Confirmation) to the Exchange
Agent within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution.
Name of Firm:________________________________________________________________
Authorized Signature:________________________________________________________
Title:_______________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________________
(Zip Code)
Area Code and Telephone Number:______________________________________________
Dated: _____________________________, 1998
- 4 -
<PAGE> 1
Exhibit 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
OCTEL DEVELOPMENTS PLC
OCTEL CORP.
10% SENIOR NOTES DUE 2006
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
September __, 1998 (as the same may be amended or supplemented from time to
time, the "Prospectus") of Octel Developments plc, a company organized under
the laws of England and Wales (the "Issuer") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the Issuer
offer (the "Exchange Offer"). Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 10% Senior Notes (the "Notes") held by you for the
account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of 10% Senior Notes
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED,
IF ANY): $
[ ] NOT TO TENDER any Notes held by you for the account of the
undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iv)
the undersigned acknowledges that any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Act"), in connection with a secondary resale transaction
of the Exchange Notes acquired by such person and cannot rely on the position
of the Staff of the Securities and Exchange Commission set forth in no-action
letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer--Resale of the Exchange Notes," and (v) the undersigned is not
an "affiliate," as defined in Rule 405 under the Act, of the Issuer or any
Guarantor; (b) to agree, on behalf of the undersigned, as set forth in the
Letter of Transmittal; and (c) to take such other action as necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Notes.
Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired
the Notes for its own account as a result of market-making activities
[ ] or other trading activities. IF THIS BOX IS CHECKED, A COPY OF
THESE INSTRUCTIONS MUST BE RECEIVED WITHIN THREE NEW YORK STOCK
EXCHANGE TRADING DAYS AFTER THE EXPIRATION DATE BY OCTEL DEVELOPMENTS
PLC, ATTENTION GRAHAM LEATHES, FACSIMILE +44-151-356-6192.
SIGN HERE
Name of beneficial owner(s):_________________________________________________
Signature(s):________________________________________________________________
Name (please print):_________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Telephone number:____________________________________________________________
Taxpayer Identification or Social Security Number:___________________________
Date:________________________________________________________________________
- 5 -
<PAGE> 2
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our reports (a) dated April 4, 1998, with respect to
the combined financial statements of Octel Corp., (b) dated April 30, 1998, with
respect to the pro forma adjustments to the combined financial statements of
Octel Corp., and (c) dated September 28, 1998 with respect to the unaudited
interim consolidated financial statements of Octel Corp., in Amendment No. 1 to
the Registration Statement (Form S-4 No. 333-xxxx) and related Prospectus of
Octel Developments PLC for the registration of $150,000,000 of 10% Senior Notes
due 2006 and Guarantee of 10% Senior Notes due 2006.
Indianapolis, Indiana
September 28, 1998
