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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10/A
(AMENDMENT NO. 1)
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OCTEL CORP.
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C>
DELAWARE 98-0181725
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
P.O. BOX 17, OIL SITES ROAD
ELLESMERE PORT, SOUTH WIRRAL
UNITED KINGDOM L65 4HF
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: 011-44-151-355-3611
Securities to be registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
<S> <C>
Common Stock New York Stock Exchange
par value $0.01 per share
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>
Securities to be registered pursuant to Section 12(G) of the Act:
None.
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OCTEL CORP.
INFORMATION REQUIRED IN REGISTRATION STATEMENT:
CROSS-REFERENCE BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
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ITEM NUMBER CAPTION LOCATION IN INFORMATION STATEMENT
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Item 1. Business............................... Summary; Introduction; The
Distribution; Risk Factors;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Combined
Financial Statements.
Item 2. Financial Information.................. Summary; Risk Factors; Pro Forma
Capitalization; Pro Forma Combined
Financial Statements; Selected
Historical Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Combined Financial Statements.
Item 3. Properties............................. Business.
Item 4. Security Ownership of Certain
Beneficial Owners and Management....... Security Ownership of Certain
Beneficial Owners; Beneficial Ownership
of Management.
Item 5. Directors and Executive Officers....... Management; Liability and
Indemnification of Directors and
Officers.
Item 6. Executive Compensation................. Management; Security Ownership of
Certain Beneficial Owners.
Item 7. Certain Relationships and Related
Transactions........................... Summary; The Distribution; Relationship
Between Great Lakes and the Company
after the Distribution; Certain
Relationships and Related Transactions.
Item 8. Legal Proceedings...................... Business.
Item 9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters.................... Summary; The Distribution; Risk
Factors; Management; Security Ownership
of Certain Beneficial Owners;
Beneficial Ownership of Management;
Description of Company Capital Stock.
Item 10. Recent Sales of Unregistered
Securities............................. Not Applicable.
Item 11. Description of Registrant's Securities
to Be Registered....................... Description of Company Capital Stock.
Item 12. Indemnification of Directors and
Officers............................... Liability and Indemnification of
Directors and Officers.
Item 13. Financial Statements and Supplementary
Data................................... Summary; Pro Forma Combined Financial
Statements; Selected Historical
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Financial
Statements.
Item 14. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................. Not Applicable.
Item 15. Financial Statements and Exhibits...... Index to Combined Financial Statements;
Exhibit Index.
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GREAT LAKES LETTERHEAD
, 1998
Dear Stockholder:
I am pleased to inform you that the Board of Directors of Great Lakes
Chemical Corporation has approved a distribution to our stockholders of all of
the outstanding shares of common stock of Octel Corp. ("Octel"). The stock
distribution will be made to holders of record of Great Lakes common stock on
, 1998. You will receive one share of Octel common stock for
every four shares of Great Lakes common stock you hold on such date.
Following completion of the distribution, Octel and its affiliates will own
and operate substantially all of the businesses which presently comprise Great
Lakes' Petroleum Additives Business Unit, including the lead alkyls, petroleum
specialties and performance chemicals businesses.
Your Board of Directors believes that the distribution will enable Great
Lakes and Octel to focus their respective management teams on enhancing each
company's competitive position in its respective industries with a view towards
increasing the value of each of its businesses, thereby producing greater total
stockholder value over the long term. In addition, the implementation of an
Octel equity-based incentive plan will better enable Octel to attract, retain
and motivate the employees necessary to achieve its business objectives by
offering additional economic rewards tied directly to Octel's performance.
The enclosed Information Statement explains the proposed distribution in
greater detail and provides financial and other important information regarding
Octel. We urge you to read it carefully. Holders of Great Lakes common stock are
not required to take any action to participate in the distribution. A
stockholder vote is not required in connection with this matter and,
accordingly, your proxy is not being sought.
We are enthusiastic about the distribution and look forward to the future
success of Great Lakes and Octel as highly focused, independent publicly traded
companies.
Sincerely,
Mark P. Bulriss
Chief Executive Officer and President
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OCTEL LETTERHEAD
, 1998
Dear Stockholder:
I am very pleased that you will soon be a stockholder of Octel Corp.
("Octel"), and I want to take this opportunity to introduce you to your company.
Octel is predominantly the business which was historically the Petroleum
Additives Business Unit of Great Lakes Chemical Corporation.
The Company is a global leader in the production and marketing of
tetraethyl lead (TEL), an octane enhancer in gasoline. Additionally, it
develops, manufactures and markets specialized chemicals used as fuel additives
and performance chemicals.
Going forward, Octel will strive to maintain its leadership position in TEL
through service differentiation, product stewardship and customer satisfaction.
I believe that, as a free-standing entity, Octel can more effectively focus
on and better manage its business during what is expected to be a period of
declining global demand for TEL. We plan to manage and optimize the cash
generation from the TEL business to pay down debt and return value to our
stockholders through the repurchase of stock and/or the payment of cash
dividends, as and when appropriate, and through the profitable growth of our
non-TEL related businesses.
Particular attention will be given to improving efficiency and controlling
costs as we implement plans to downsize the manufacturing units.
Octel has applied for listing of its shares on the New York Stock Exchange
under the symbol "OTL."
Your Board, our management and our employees are excited about our future
as an independent company and look forward to your participation in our success.
Sincerely,
Dennis J. Kerrison
President and Chief Executive Officer
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
SUBJECT TO COMPLETION, DATED APRIL 21, 1998
INFORMATION STATEMENT
OCTEL CORP.
COMMON STOCK
[OCTEL LOGO] PAR VALUE $0.01 PER SHARE
This Information Statement is being furnished in connection with the
distribution (the "Distribution") by Great Lakes Chemical Corporation ("Great
Lakes") to holders of record of Great Lakes common stock, par value $1.00 per
share (the "Great Lakes Common Stock"), at the close of business on
, 1998 (the "Record Date"), of one share of common stock, par
value $0.01 per share (the "Octel Common Stock"), of Octel Corp. ("Octel" or the
"Company") for every four shares of Great Lakes Common Stock owned on the Record
Date. The Distribution will result in 100% of the outstanding shares of Octel
Common Stock being distributed to holders of Great Lakes Common Stock on a pro
rata basis. The Distribution will be effective on , 1998 (the
"Distribution Date").
The Company is a newly formed company which, as a result of transactions
entered into in connection with the Distribution, will own substantially all of
the businesses and assets of, and will be responsible for substantially all of
the liabilities associated with, Great Lakes' lead alkyls, petroleum
specialities and performance chemicals businesses, as more fully described
herein.
No consideration will be paid by Great Lakes' stockholders for the shares
of Octel Common Stock. There is no current public trading market for the shares
of Octel Common Stock, although it is expected that a "when-issued" trading
market will develop on or about the Record Date. The Company has applied for
listing of the shares of Octel Common Stock on the New York Stock Exchange under
the symbol "OTL."
In reviewing this Information Statement, you should carefully consider the
matters described under the caption "Risk Factors."
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION. WE ARE
NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS SION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Information Statement is , 1998.
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TABLE OF CONTENTS
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PAGE
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SUMMARY..................................................... 1
INTRODUCTION................................................ 7
THE DISTRIBUTION............................................ 7
Reasons for the Distribution................................ 7
Manner of Effecting the Distribution........................ 8
Certain Federal Income Tax Consequences..................... 9
Listing and Trading of Octel Common Stock................... 9
RISK FACTORS................................................ 11
Contracting Demand for TEL Products......................... 11
Competition................................................. 11
Substantial Leverage and Restrictive Covenants.............. 12
Absence of Great Lakes Financial Support.................... 12
Environmental Matters and Plant Closures.................... 13
International Operations.................................... 13
Operating History and Future Prospects; Transition to an
Independent Public Company................................ 13
Dependence on Key Personnel................................. 14
Absence of Prior Trading Market for Octel Common Stock...... 14
Dividends and Share Repurchases............................. 14
Possible Anti-takeover Effects of Certain Charter and By-Law
Provisions and Other Matters.............................. 14
FTC Investigation........................................... 15
RELATIONSHIP BETWEEN GREAT LAKES AND THE COMPANY AFTER THE
DISTRIBUTION.............................................. 16
Distribution Agreement...................................... 16
Tax Disaffiliation Agreement................................ 16
Corporate Services Transition Agreement..................... 17
Supply and Toll Manufacturing Agreements.................... 17
DESCRIPTION OF FINANCINGS................................... 17
PRO FORMA CAPITALIZATION.................................... 20
PRO FORMA COMBINED FINANCIAL STATEMENTS..................... 21
SELECTED HISTORICAL COMBINED FINANCIAL DATA................. 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 27
BUSINESS.................................................... 35
Description of the Company.................................. 35
Reasons for the Distribution................................ 35
Cost Reduction Initiatives.................................. 36
Lead Alkyls Business........................................ 36
Petroleum Specialties Business.............................. 38
Performance Chemicals Business.............................. 39
Raw Materials............................................... 39
Technology.................................................. 39
Patents and Intellectual Property........................... 40
Health, Safety and Environmental Matters.................... 40
Human Resources............................................. 40
Properties.................................................. 41
Legal Proceedings........................................... 41
MANAGEMENT.................................................. 42
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PAGE
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Directors................................................... 42
Classified Board of Directors............................... 43
Committees of the Board of Directors........................ 43
Compensation of Directors................................... 44
Executive Officers.......................................... 44
Compensation of Executive Officers.......................... 45
Stock Options Table......................................... 46
Option Exercises and Year-End Value Table................... 47
Employment Agreements....................................... 47
Compensation Under Retirement Plans......................... 47
Stock Plan.................................................. 48
TREATMENT OF GREAT LAKES EMPLOYEE STOCK OPTIONS IN THE
DISTRIBUTION.............................................. 49
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 50
BENEFICIAL OWNERSHIP OF MANAGEMENT.......................... 50
DESCRIPTION OF COMPANY CAPITAL STOCK........................ 50
Common Stock................................................ 50
Preferred Stock............................................. 51
No Preemptive Rights........................................ 51
Transfer Agent and Registrar................................ 51
Certain Provisions of the Certificate of Incorporation and
By-Laws................................................... 51
Preferred Stock Purchase Rights............................. 53
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS..... 55
INDEPENDENT AUDITORS........................................ 56
ADDITIONAL INFORMATION...................................... 56
INDEX TO FINANCIAL STATEMENTS............................... F-1
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Information Statement. Reference is made to, and this summary is qualified
by, the more detailed information set forth in this Information Statement, which
should be read in its entirety. Unless the context otherwise requires, (i)
references in this Information Statement to Great Lakes or the Company shall
include Great Lakes' or the Company's respective subsidiaries, (ii) references
in this Information Statement to the Company prior to the Distribution Date
shall refer to the Octel Businesses as operated as part of the Petroleum
Additives Business Unit of Great Lakes and (iii) references in this Information
Statement to the Distribution shall, unless the context indicates otherwise,
include the Financings (as defined) and the Special Payments (as defined). See
"Description of Financings."
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.
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. 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 to pay down debt and return value to its stockholders by (a) the
repurchase of stock and/or the payment of cash dividends and (b) 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.
In 1997, the Company had net sales of $539.1 million and an operating
income of $194.7 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.
The Company was formed in January 1998 for the purpose of effecting the
Distribution and, prior to the Distribution, was a wholly owned subsidiary of
Great Lakes. As a result of the Distribution, Great Lakes will own no shares of
Octel Common Stock, and the Company will operate as an independent publicly
traded company. The Company's principal executive offices are located in the
United Kingdom at Oil Sites Road, Ellesmere Port, South Wirral L65 4HF, and its
telephone number is 011-44-151-355-3611.
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RECENT DEVELOPMENTS
Although management expects TEL sales volumes to decrease for the full year
1998, sales volumes in the first quarter of 1998 are expected to be comparable
to the first quarter of 1997. Operating income for the first quarter of 1998 is
expected to increase slightly from the first quarter of 1997 due to a higher
percentage of retail TEL sales versus wholesale TEL sales in the first quarter
of 1998. Retail selling prices in the first quarter of 1998 are expected to be
flat as compared to the first quarter of 1997.
THE DISTRIBUTION
DISTRIBUTING CORPORATION...... Great Lakes Chemical Corporation, a Delaware
corporation ("Great Lakes").
DISTRIBUTED CORPORATION....... Octel Corp., a Delaware corporation ("Octel" or
the "Company"), which, as of the Distribution
Date, will have transferred to it substantially
all of the businesses and assets of, and will
be responsible for substantially all of the
liabilities associated with, Great Lakes' lead
alkyls, petroleum specialties and performance
chemicals businesses, as more fully described
herein (the "Octel Businesses").
PRINCIPAL BUSINESSES TO BE
RETAINED BY GREAT LAKES....... Great Lakes will retain its other businesses,
consisting of all of its current businesses
other than the Octel Businesses (the "Core
Businesses").
PRIMARY PURPOSE OF THE
DISTRIBUTION.................. To separate the Octel Businesses from the Core
Businesses so that each can (i) adopt
strategies and pursue objectives appropriate to
its specific businesses and the industries in
which it operates; (ii) be recognized and
appropriately valued by the financial community
as a separate and distinct business; and (iii)
implement more focused incentive compensation
arrangements that are tied more directly to the
results of its operations.
SHARES TO BE DISTRIBUTED...... Approximately 14,736,075 shares of Octel Common
Stock, based on the number of shares of Great
Lakes Common Stock outstanding on December 31,
1997. The shares to be distributed will
constitute 100% of the outstanding shares of
Octel Common Stock on the Distribution Date.
DISTRIBUTION RATIO............ Each Great Lakes stockholder will receive one
share of Octel Common Stock for every four
shares of Great Lakes Common Stock held on the
Record Date.
RELATED FINANCINGS............ Prior to the Distribution, certain of the
Company's subsidiaries will enter into a $300
million senior credit facility (the "Credit
Facility"), consisting of a revolving credit
facility (the "Revolving Facility") of $20
million and a term loan facility (the "Term
Facility") of $280 million, and a subsidiary of
the Company will issue $150 million of senior
notes (the "Notes") (collectively, the
"Financings"). Proceeds from the Financings
will be used to make the Special Payments (as
defined herein) to Great Lakes and to pay
approximately $17 million, including $12
million in transaction fees associated with the
Distribution and the Financings and $5 million
of associated costs for certain interest rate
swaps related to the Financings. The $20
million Revolving Facility will be
2
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available to the Company for working capital
and general corporate purposes. See "Risk
Factors--Substantial Leverage and Restrictive
Covenants" and "Description of Financings."
SPECIAL PAYMENTS TO GREAT
LAKES......................... Prior to the Distribution, the Company will use
the proceeds of the Financings, together with
$54.7 million of available cash at December 31,
1997 and cash generated by Octel 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 a 10.65% interest in
subsidiaries of the Company held by Chevron
Chemical Company ("Chevron") and $350.9 million
as a special dividend (the "Special Dividend"
and, collectively, the "Special Payments").
LISTING AND TRADING MARKET.... The Company has applied for listing of the
shares of Octel Common Stock on the New York
Stock Exchange, Inc. (the "NYSE") under the
symbol "OTL."
RECORD DATE................... Close of business on , 1998.
DISTRIBUTION DATE............. , 1998.
MANNER OF EFFECTING THE
DISTRIBUTION.................. The Company currently intends to use a direct
registration system to implement the
distribution of shares of Octel Common Stock.
On the Distribution Date, a certificate
representing all issued and outstanding shares
of Octel Common Stock will be delivered to the
Distribution Agent (as defined). An account
statement will be mailed to each Great Lakes
stockholder as soon as practicable thereafter
stating the number of shares of Octel Common
Stock received by such stockholder in the
Distribution.
FRACTIONAL SHARE INTERESTS.... If a stockholder owns fewer than four shares of
Great Lakes Common Stock, such stockholder will
receive cash in lieu of a fractional share. The
account of each Great Lakes stockholder owning
more than four shares of Great Lakes Common
Stock will be credited with all whole and
fractional shares of Octel Common Stock such
stockholder is entitled to receive, unless a
stockholder requests and receives physical
certificates (in which case a stockholder will
receive physical certificates for all whole
shares which such stockholder is entitled to
receive and cash in lieu of fractional shares).
DISTRIBUTION AGENT............ First Chicago Trust Company of New York (the
"Distribution Agent").
TAX CONSEQUENCES.............. Great Lakes has received a private letter
ruling from the U.S. Internal Revenue Service
to the effect that, among other things, the
Distribution will qualify as a tax-free
distribution under Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code").
See "The Distribution--Certain Federal Income
Tax Consequences."
DIVIDEND AND SHARE
REPURCHASE POLICY............. The payment and amount of cash dividends and/or
share repurchases, if any, on or with respect
to, the Octel Common Stock after the
Distribution will be subject to the discretion
of the Company's
3
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Board of Directors. The Company's policy will
be determined and reviewed by the Company's
Board of Directors at such future times as may
be appropriate, and payment of dividends, if
any, on Octel Common Stock will depend upon the
Company's ongoing financial position, capital
requirements, profitability, cash flow,
restrictive covenants contained in the Credit
Facility and the Notes and such other factors
as the Company's Board of Directors deems
relevant.
RELATIONSHIP WITH GREAT LAKES
AFTER THE DISTRIBUTION........ Following the Distribution, Great Lakes and the
Company will be operated as independent
publicly traded companies. Great Lakes and the
Company will, however, continue to have a
relationship as a result of the various
agreements being entered into between Great
Lakes and the Company in connection with the
Distribution, including the Distribution
Agreement, the Tax Disaffiliation Agreement,
the Corporate Services Transition Agreement and
the Supply and Toll Manufacturing Agreements
(each as defined). Except as referred to above
or as otherwise described herein, Great Lakes
and the Company will cease to have any material
contractual or other material relationships
with each other. See "Relationship Between
Great Lakes and the Company After the
Distribution."
RISK FACTORS
Stockholders should carefully consider the matters discussed under the
section entitled "Risk Factors" beginning on page 12 of this Information
Statement.
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SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
The following tables set 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, all of
which are included elsewhere in this Information Statement. This 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 pro forma financial data were derived from the "Pro Forma Combined
Financial Statements" that give pro forma effect to the Distribution. The pro
forma adjustments are based upon available information and certain assumptions
that management believes are reasonable. The pro forma statement of income data
(i) for the year ended December 31, 1997 give effect to the Distribution as if
it had occurred as of January 1, 1997. The pro forma balance sheet data give
effect to the Distribution as if it 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
Distribution 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 included elsewhere herein.
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SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(IN MILLIONS)
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UNAUDITED YEARS ENDED DECEMBER 31,
PRO FORMA -----------------------------------------------------
1997 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ----
(UNAUDITED)
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INCOME STATEMENT DATA:
Net sales.............................. $539.1 $539.1 $597.4 $628.3 $603.1 $569.9
Cost of goods sold..................... 274.4 274.4 298.8 307.0 296.0 260.5
------ ------ ------ ------ ------ ------
Gross profit........................... 264.7 264.7 298.6 321.3 307.1 309.4
Selling, general and administrative.... 41.6 38.6 40.2 42.1 37.5 38.1
Research and development............... 3.8 3.8 5.6 5.6 6.7 9.6
Amortization of intangible assets...... 37.2 27.6 26.7 19.0 16.7 15.0
------ ------ ------ ------ ------ ------
Operating income....................... 182.1 194.7 226.1 254.6 246.2 246.7
Interest expense....................... 34.1 2.2 1.6 10.3 12.5 17.4
Other expenses......................... 5.6 5.6 7.5 4.4 (1.4) 3.4
Interest income........................ (0.1) (3.9) (3.5) (5.1) (4.2) (5.8)
Other income........................... (7.9) (7.9) (1.2) (4.1) (7.9) (3.3)
------ ------ ------ ------ ------ ------
Income before income taxes and minority
interest............................. 150.4 198.7 221.7 249.1 247.2 235.0
Minority interest...................... -- 24.3 29.6 32.3 32.4 31.1
------ ------ ------ ------ ------ ------
Income before income taxes............. 150.4 174.4 192.1 216.8 214.8 203.9
Income taxes........................... 48.9 56.7 63.8 71.7 72.4 40.0
------ ------ ------ ------ ------ ------
Net income............................. $101.5 $117.7 $128.3 $145.1 $142.4 $163.9
====== ====== ====== ====== ====== ======
BALANCE SHEET DATA (AS OF END OF YEAR):
Total working capital.................. $206.2 $179.9 $216.1 $175.8 $190.8 $154.5
Property, plant and equipment, net..... 106.0 106.0 113.4 107.3 84.0 67.1
Total assets........................... 820.2 832.9 841.0 798.4 732.6 634.3
Total debt............................. 430.0 -- -- -- -- --
Total liabilities...................... 540.4 180.1 256.4 267.6 244.2 226.7
Total equity........................... 279.8 652.8 584.6 530.8 488.4 416.6
STATEMENT OF CASH FLOWS DATA:
EBITDA(1).............................. $240.8 $243.8 $262.7 $287.0 $285.1 $272.5
Depreciation........................... 19.2 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(2) 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 GLCC.................. 31.4 103.0 104.6 83.0 140.9
</TABLE>
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(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) Includes $116.8 million for the purchase of Chevron's 10.65% interest in
subsidiaries of the Company. See "The Distribution--Special Payments to
Great Lakes."
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INTRODUCTION
On , 1998, the Board of Directors of Great Lakes declared a
dividend payable to holders of record of Great Lakes Common Stock at the close
of business on the Record Date of one share of Octel Common Stock for every four
shares of Great Lakes Common Stock held on the Record Date. The Distribution
will be effective on , 1998. An account statement will be mailed to
each Great Lakes stockholder as soon as practicable thereafter stating the
number of shares of Octel Common Stock received by such stockholder in the
Distribution. As a result of the Distribution, 100% of the outstanding shares of
Octel Common Stock will be distributed to Great Lakes stockholders.
The Company was formed for the purpose of effecting the Distribution. On or
prior to the Distribution Date, Great Lakes will have transferred to the Company
substantially all of the assets and liabilities of the Octel Businesses. Prior
to the Distribution, Great Lakes generally operated the Octel Businesses as part
of its Petroleum Additives Business Unit.
If you have questions relating to the Distribution, please contact the
Distribution Agent at (800) 317-4445.
For other information relating to Great Lakes, please contact: Great Lakes
Investor Relations Department, Great Lakes Chemical Corporation, One Great Lakes
Boulevard, West Lafayette, Indiana 47996-2220 (telephone: (765) 497-6100). For
questions related specifically to Octel, please contact: Octel Corp. Investor
Relations Department, P.O. Box 17, Oil Sites Road, Ellesmere Port, South Wirral,
United Kingdom (telephone: 011-44-151-356-6100).
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
The Board of Directors of Great Lakes has determined that it is in the best
interest of Great Lakes and its stockholders to undertake the Distribution,
thereby separating the Octel Businesses from Great Lakes, for the reasons
described herein.
The Distribution will permit management of each of the Company and Great
Lakes to focus its exclusive attention on its respective core businesses. In
addition, the Distribution will allow each of the Company and Great Lakes to
allocate its financial resources to address its particular business needs and
capitalize on its business opportunities. With respect to the Company, the
Distribution is designed to establish Octel as a stand alone independent company
that can adopt strategies and pursue objectives appropriate to its specific
businesses. In 1997 approximately 82% of the Company's revenues were derived
from the sale of tetraethyl lead antiknock compounds ("TEL"), a specialized
commodity utilized primarily as an octane enhancer for automobile gasoline.
Businesses, such as the Company, that sell specialized commodity chemical
products must meet certain marketplace standard specifications. Since the
Company is not generally able to increase prices, the Company's ability to
succeed and maintain or increase earnings is dependent primarily upon its
ability to control and/or reduce costs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview." As an
independent company, the Company's management should be better able to structure
and operate the Company in a manner more directly and appropriately tailored to
meet the business opportunities and challenges presented by the competitive TEL
environment in which the Company operates.
Great Lakes believes that the separation of the Octel Businesses from its
specialty chemicals businesses will allow the two entities to be recognized and
appropriately valued by the financial community as distinct businesses with
different investment risk and return profiles. As a result of the Distribution,
Great Lakes should develop and enhance its following in the financial community
primarily as a diversified global specialty chemicals business while the Company
should develop its following primarily as a petroleum additives and performance
chemicals business. In this regard, investors will be better able to evaluate
the merits and future prospects of the businesses of Great Lakes and the
Company, enhancing the likelihood that each will achieve appropriate market
recognition and valuation for its performance and potential. In addition,
current
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<PAGE> 15
stockholders and potential investors will be better able to direct their
investments to their specific areas of interest. The Distribution will also
enable the Company, as and when appropriate, to explore the possibility of
engaging in strategic acquisitions, joint ventures and other collaborative
arrangements.
The Distribution is also designed to allow the Company and Great Lakes to
each establish and tailor its own equity-based compensation plans so that there
will be a more direct alignment between the performance of each business and the
compensation of its management. Among other things, the implementation of a
separate Octel equity-based compensation plan is intended to strengthen and
enhance the Company's ability to achieve cost savings, enhance efficiencies and
better leverage sales opportunities. Following the Distribution, the Company's
management will receive equity-based incentives which will be more closely
aligned with the financial results of the Company, thereby linking each
employee's financial success more directly to the financial success of the
Company. See "Management."
For the reasons stated above, the Great Lakes Board of Directors believes
that the Distribution is in the best interest of Great Lakes and the Company.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set forth
in a Transfer and Distribution Agreement, dated as of , 1998 (the
"Distribution Agreement"), between Great Lakes and the Company.
The Distribution will be made on the basis of one share of Octel Common
Stock for every four shares of Great Lakes Common Stock held on the Record Date.
The actual total number of shares of Octel Common Stock to be distributed will
depend on the number of shares of Great Lakes Common Stock outstanding on the
Record Date. Based upon the shares of Great Lakes Common Stock outstanding on
December 31, 1997, approximately 14,736,075 shares of Octel Common Stock will be
distributed to Great Lakes stockholders. The shares of Octel Common Stock will
be fully paid and nonassessable and the holders thereof will not be entitled to
preemptive rights. See "Description of Company Capital Stock."
Since the Company will use a direct registration system to implement the
Distribution, the Distribution Agent will credit the shares of Octel Common
Stock distributed on the Distribution Date, including fractional interests for
those stockholders who receive at least one whole share of Octel Common Stock,
to book-entry accounts established for all Company stockholders and will mail an
account statement to each stockholder stating the number of shares of Octel
Common Stock, including such fractional interests, received by such stockholder
in the Distribution. Following the Distribution, stockholders may request the
transfer of their interests to a brokerage or other account or may request
delivery of physical stock certificates for their shares of Octel Common Stock.
If a stockholder owns fewer than four shares of Great Lakes Common Stock
and therefore is entitled to receive less than one whole share of Octel Common
Stock, such stockholder will receive cash instead of a fractional share of Octel
Common Stock. If a stockholder requests physical certificates for shares of
Octel Common Stock, such stockholder will receive physical certificates for all
whole shares of Octel Common Stock and cash instead of any fractional share
interest. The Distribution Agent will, promptly after the Distribution Date,
aggregate all such fractional share interests in Octel Common Stock with those
of other similarly situated stockholders and sell such fractional share
interests in Octel Common Stock at then-prevailing prices. The Distribution
Agent will distribute the cash proceeds to stockholders entitled to such
proceeds pro rata based upon their fractional interests in Octel Common Stock.
No interest will be paid on any cash distributed in lieu of fractional shares.
No holder of Great Lakes Common Stock will be required to pay any cash or
other consideration for the shares of Octel Common Stock received in the
Distribution or to surrender or exchange shares of Great Lakes Common Stock in
order to receive shares of Octel Common Stock.
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<PAGE> 16
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the Distribution to Great Lakes' stockholders. Great Lakes has
received a private letter ruling (the "Private Letter Ruling") from the U.S.
Internal Revenue Service (the "Service") to the effect that, among other things,
the Distribution will qualify as a tax-free spin-off to Great Lakes and its
stockholders under Section 355 of the Code and therefore that for U.S. federal
income tax purposes:
1. A Great Lakes stockholder will not recognize any income, gain or
loss as a result of the Distribution, except, as described below, in
connection with cash received in lieu of fractional shares of Octel Common
Stock.
2. A Great Lakes stockholder will apportion his tax basis for his
Great Lakes Common Stock on which Octel Common Stock is distributed between
Great Lakes Common Stock and the Octel Common Stock received in the
Distribution (including any fractional shares of Octel Common Stock deemed
received) in proportion to the relative fair market values of such Great
Lakes Common Stock and Octel Common Stock on the Distribution Date.
3. A Great Lakes stockholder's holding period for the Octel Common
Stock received in the Distribution will include the period during which
such stockholder held the Great Lakes Common Stock, provided that such
Great Lakes Common Stock is held as a capital asset by such stockholder as
of the Distribution Date.
4. A Great Lakes stockholder who requests physical certificates for
shares of Octel Common Stock and who receives cash in lieu of fractional
shares of Octel Common Stock as a result of the sale of such shares by the
Distribution Agent will be treated as if such fractional shares had been
received by the stockholder as part of the Distribution and then sold by
such stockholder. Accordingly, such stockholder will recognize a gain or
loss equal to the difference between the cash so received and the portion
of the tax basis in the Octel Common Stock that is allocable to such
fractional shares. Also, a stockholder who owns fewer than four shares of
Great Lakes Common Stock will receive cash for such stock and will
recognize a gain or loss equal to the difference between the cash so
received and his tax basis in such stock. In either circumstance, such gain
or loss will be capital gain or loss, provided that such fractional shares
were held by such stockholder as a capital asset at the time of the
Distribution.
The Private Letter Ruling is based on certain representations made by Great
Lakes with respect to itself and the Company. The failure of any such
representation to be true and correct in any material respect could alter the
tax consequences described herein. Neither Great Lakes nor the Company is aware
of any present facts or circumstances that would cause any such representations
to be untrue in any material respect.
Current Treasury regulations require each Great Lakes stockholder who
receives Octel Common Stock pursuant to the Distribution to attach to his
federal income tax return for the year in which the Distribution occurs a
detailed statement setting forth such data as may be appropriate in order to
show the applicability of Section 355 of the Code to the Distribution. Great
Lakes will convey the appropriate information to each stockholder of record as
of the Record Date.
THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS WHO ARE NOT
CITIZENS OR RESIDENTS OF THE UNITED STATES, CORPORATIONS (OR OTHER ENTITIES
TAXABLE AS CORPORATIONS) ORGANIZED UNDER THE LAWS OF THE UNITED STATES OR ANY
STATE THEREIN (INCLUDING THE DISTRICT OF COLUMBIA) OR WHO ARE OTHERWISE SUBJECT
TO SPECIAL TREATMENT UNDER THE CODE. ALL STOCKHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
LISTING AND TRADING OF OCTEL COMMON STOCK
The Company has applied for listing of the shares of Octel Common Stock on
the NYSE under the symbol "OTL." The Company is expected to have initially
approximately holders of record, based on the number of stockholders
of record of Great Lakes on , 1998.
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A "when-issued" trading market is expected to develop on or about the
Record Date. The term "when-issued" means that shares can be traded prior to the
time certificates are actually available or issued. Prices at which the shares
of Octel Common Stock may trade on a "when-issued" basis or after the
Distribution cannot be predicted. See "Risk Factors--Absence of Prior Trading
Market for Octel Common Stock."
The shares of Octel Common Stock distributed to Great Lakes stockholders
will be freely transferable, except for shares received by persons who may be
deemed to be "affiliates" of the Company within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"). Persons who may be deemed to be
affiliates of the Company after the Distribution generally include individuals
or entities that control, are controlled by, or are under common control with
the Company and may include the directors and principal executive officers of
the Company as well as any principal stockholder of the Company. Persons who are
affiliates of the Company will be permitted to sell their shares of Octel Common
Stock only pursuant to an effective registration statement under the Securities
Act or an exemption from the registration requirements of the Securities Act,
such as the exemptions afforded by Section 4(2) of the Securities Act and Rule
144 thereunder.
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<PAGE> 18
RISK FACTORS
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
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."
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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
In connection with the Distribution, certain of the Company's subsidiaries
will enter into a $300 million Credit Facility (including a $20 million
Revolving Facility). Concurrently with the Distribution, the Company also
intends to issue $150 million of Notes. As of December 31, 1997, on a pro forma
basis after giving effect to the Distribution, the Company would have had $430
million principal amount of long-term indebtedness and total common
stockholders' equity of $279.8 million. See "Pro Forma Capitalization."
The degree to which the Company is leveraged could have important
consequences to the holders of Octel Common Stock, 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 with respect to
the Notes (the "Indenture"), the ability of the Company to sell assets will be
restricted. See "Description of Financings."
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 and
Great Lakes believe that the Financings have been entered into for a valid
business purpose. Moreover, the Company and Great Lakes have received advice
from their 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 or its ability to pay its debts. See "Description of Financings."
The Credit Facility will require the Company to, among other things,
achieve and maintain certain financial ratios. In addition, the Credit Facility
will contain 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. The Indenture also will contain restrictive covenants, including
restrictions, under certain circumstances, on the ability of the Company to pay
dividends and repurchase shares. See "Description of Financings."
ABSENCE OF GREAT LAKES FINANCIAL SUPPORT
Following the Distribution, the Company will be responsible for obtaining
its own financing and will experience a higher cost of capital than was
historically available to the Company as a subsidiary of Great Lakes. In
addition, the Company will not be 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 Financings."
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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-site 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 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 embargos 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 was formed for the purpose of effecting the Distribution and
does not have any operating history as an independent public 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
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,
following the Distribution, the Company will also be 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 also 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
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<PAGE> 21
"--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 public 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 results of operations and
financial condition. See "Management--Executive Officers."
ABSENCE OF PRIOR TRADING MARKET FOR OCTEL COMMON STOCK
There has not been any established public trading market for Octel Common
Stock, although it is expected that a "when-issued" trading market will develop
on or about the Record Date. The Company has applied for listing of the Octel
Common Stock on the NYSE. However, there can be no assurance either as to the
prices at which shares of Octel Common Stock will trade before or after the
Distribution Date. Until the Octel Common Stock is fully distributed and an
orderly market for those shares develops, the prices at which such shares trade
may fluctuate significantly. Prices for shares of Octel Common Stock will be
determined in the marketplace and may be influenced by many factors, including
the nature and liquidity of the market for the shares, investor perception of
the Company, the competitive environment of the industries in which the Company
participates, and general economic and market conditions.
DIVIDENDS AND SHARE REPURCHASES
The payment and amount of cash dividends or share repurchases, if any, on
the Octel Common Stock after the Distribution will be subject to the discretion
of the Company's Board of Directors. The Company's policy will be reviewed by
the Company's Board of Directors at such future times as may be appropriate, and
payment of dividends on, or share repurchases with respect to, the Octel Common
Stock will depend upon the Company's financial position, capital requirements,
profitability, cash flows, restrictive covenants contained in the Credit
Facility and the Indenture and such other factors as the Company's Board of
Directors deems relevant.
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND BY-LAW PROVISIONS AND
OTHER MATTERS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Amended and Restated
By-Laws (the "By-Laws"), including provisions classifying the Board of
Directors, prohibiting stockholder action by written consent, governing business
transactions with certain stockholders and requiring advance notice for
nomination of directors and stockholder proposals, may inhibit changes of
control of the Company that are not approved by the Company's Board of
Directors. In addition, preferred stock purchase rights which will attach to the
Octel Common Stock could have similar effects. Such Certificate of Incorporation
and By-Law provisions and preferred stock purchase rights could diminish the
opportunities for a stockholder to participate in certain tender offers,
including tender offers at prices above the then-current fair market value of
the Octel Common Stock, and may also inhibit fluctuations in the market price of
the Octel Common Stock that could result from takeover attempts. In addition,
the Company's Board of Directors, without further stockholder approval, may
issue preferred stock that could have the effect of delaying, deferring or
preventing a change in control of the Company. The issuance of preferred stock
could also adversely affect the voting power of the holders of Octel Common
Stock, including the loss of voting control to others. The Company has no
present plans to issue any preferred stock. The provisions of the Certificate of
Incorporation and By-Laws and the preferred stock purchase rights may have the
effect of discouraging or preventing an acquisition of the Company or a
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<PAGE> 22
disposition of certain of the Company's businesses. See "Description of Company
Capital Stock--Certain Provisions of the Certificate of Incorporation and
By-Laws" and "--Preferred Stock Purchase Rights."
Furthermore, for a period of two years following the Distribution, the
Company will be prohibited under the terms of the Tax Disaffiliation Agreement
from engaging in certain transactions that may result in a change of control
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
transaction. See "Relationship Between Great Lakes and the Company After the
Distribution--Tax Disaffiliation Agreement."
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,
subject to the FTC's discretion to review and modify the agreement following a
sixty (60) day public comment period. If the consent decree is not finally
accepted by the FTC after the public comment period, the agency could continue
its investigation and, if after completion of its investigation the FTC has
reason to believe that a violation of law has occurred, it could issue an
administrative complaint alleging violation of Section 5 of the Federal Trade
Commission Act. Although the proposed order is not yet effective, 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
"Business--Legal Proceedings."
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RELATIONSHIP BETWEEN GREAT LAKES
AND THE COMPANY AFTER THE DISTRIBUTION
For purposes of facilitating an orderly transfer on the Distribution Date
of the Octel Businesses to the Company and an orderly transition to the status
of two separate independent companies, Great Lakes and the Company, and various
of their respective subsidiaries, have entered or will enter into various
agreements and relationships, including those described in this section. The
agreements summarized in this section are included as exhibits to the
Registration Statement of which this Information Statement forms a part. For
purposes of agreements described below, the term "Great Lakes" refers to Great
Lakes and its respective subsidiaries and the term "Company" refers to Octel
Corp. and its respective subsidiaries.
DISTRIBUTION AGREEMENT
Prior to the Distribution, Great Lakes and the Company will enter into the
Distribution Agreement, which will provide 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 will enter into a Tax Disaffiliation Agreement
(the "Tax Disaffiliation Agreement") detailing their respective obligations
concerning various tax liabilities. The Tax Disaffiliation Agreement generally
will require 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 will further provide 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 will require 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
16
<PAGE> 24
Code. These actions include (i) a 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 will enter 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 will enter 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 shut-down 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
on-going 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.
DESCRIPTION OF FINANCINGS
Prior to the Distribution, certain subsidiaries of the Company will enter
into a $300 million Credit Facility and a subsidiary of the Company will issue
$150 million of Notes. Proceeds from the $280 Term Facility and the net proceeds
from sale of the Notes, together with available cash, will be used by the
Company to make the Special Payments to Great Lakes and to pay approximately $17
million, including $12 million in transaction fees associated with the
Distribution and the Financings and $5 million of associated costs for certain
interest rate swaps related to the Financings. The $20 million Revolving
Facility will be used for working capital and general corporate purposes of the
Company following the Distribution. The Company has received a commitment letter
(the "Commitment Letter") from Goldman Sachs Credit Partners, L.P.
17
<PAGE> 25
and Barclay Bank (the "Lenders") pursuant to which the Lenders have agreed,
subject to the terms and conditions set forth in the Commitment Letter, to
provide (i) a senior secured Term Facility of up to $280 million and (ii) a
senior secured Revolving Facility of up to $20 million to certain subsidiaries
of the Company (the "Borrowers"). The Company anticipates that the definitive
documentation for the Credit Facility will be executed prior to the
Distribution.
The obligations of the Borrowers under the Credit Facility will be
unconditionally guaranteed by the Company and certain subsidiaries of the
Company. The Credit Facility and the guarantees will be secured by substantially
all of the assets of the Borrowers and certain U.K. subsidiaries of the
Borrowers, including real property not subject to other mortgages and personal
property (including inventory), and also will be secured by the capital stock of
the Borrowers. The obligations of the Borrowers will also be secured by an
interest, granted by the Company, 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 million, $60 million, $60 million and $45 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 1.75%, subject to adjustment under certain
circumstances. The interest rate, under certain circumstances, will adjust to
1.25% over LIBOR when the outstanding balance under the Credit Facility has been
reduced to $140 million. Following the occurrence and during the continuance of
an event of default under the Credit Facility, the loans will bear interest at
LIBOR plus 2.75%.
The Credit Facility will contain a number of covenants that, among other
things, will restrict the ability of the Company and its subsidiaries 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, repay the Notes and otherwise restrict corporate
activities. In addition, the Credit Facility will require compliance with
certain financial covenants, including (i) an EBITDA to net interest coverage
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 and decreasing to 1.25 to 1.0).
The Credit Facility will contain 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 guarantee or security document, certain insolvency events, cross default and
certain change of control events.
Also, in connection with the Distribution, a subsidiary of the Company
intends to issue $150 million in aggregate principal amount of Notes in a
private placement pursuant to Rule 144A and Regulation S under the Securities
Act. The Notes will be general, unsecured obligations of the Company and will
rank pari passu in right of payment with all existing and future unsecured
senior indebtedness of the Company and senior in right of payment to all
existing and future subordinated indebtedness of the Company. The issuer of the
Notes will be a wholly-owned subsidiary of the Company, which will fully and
unconditionally guarantee the Notes on a senior basis. The Notes 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.
The Indenture will contain certain covenants which will limit or preclude,
among other things, (i) the incurrence of additional indebtedness, (ii) the
making of restricted payments, (iii) the incurrence of liens, (iv) certain asset
sales, (v) the issuance and sale of subsidiary stock, (vi) transactions with
affiliates, (vii) mergers, consolidations and sales and transfers of all or
substantially all the assets of the Company and (viii) engaging in unrelated
lines of business. The Indenture will also contain customary events of default.
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after the fourth anniversary of issuance at stated
redemption prices plus accrued and unpaid interest and Additional Interest (as
defined in the Indenture), if any, thereon to the date of repurchase. Prior to
2002, the Notes will
18
<PAGE> 26
be redeemable, in whole or in part, at the option of the Company 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 Note in 2002, and (B) the remaining scheduled payments
of principal and interest thereon to 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 in the Indenture) plus 50 basis points, plus, in either case,
accrued and unpaid interest on the principal amount being redeemed to such
redemption date. The Company is required to redeem $37.5 million principal
amount of the Notes in each of 2003, 2004 and 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 Company'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.
19
<PAGE> 27
PRO FORMA CAPITALIZATION
(DOLLARS IN MILLIONS)
(UNAUDITED)
The following table sets forth the unaudited pro forma capitalization of
the Company at December 31, 1997. This data should be read in conjunction with
the pro forma balance sheet and the introduction to the pro forma financial
statements appearing elsewhere in this Information Statement. The pro forma
information may not reflect the capitalization of the Company in the future or
as it would have been had the Company been a separate, independent company on
December 31, 1997. Assumptions regarding the number of shares of Octel Common
Stock may not reflect the actual number of shares at the Distribution Date. See
"Pro Forma Combined Financial Statements."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Total debt
Credit Facility(a)....................................... -- $ 280.0(b) $280.0
Senior Notes............................................. -- 150.0(b) 150.0
------ ------- ------
Total debt............................................ -- 430.0(b) 430.0
Equity
Great Lakes investment................................... 652.8 (442.7)(c) --
69.7(d)
(279.8)(e)
Common stock............................................... 0.1(e) 0.1
Additional paid-in capital................................. 279.7(e) 279.7
------- ------
Total equity............................................... 652.8 (373.0) 279.8
Total capitalization....................................... $652.8 $ 57.0 $709.8
====== ======= ======
</TABLE>
NOTES TO PRO FORMA CAPITALIZATION TABLE
(a) As of the Distribution Date, the Company estimates that $20.0 million will
be available to the Company under the Revolving Facility. In addition,
management estimates that between January 1, 1998 and the Distribution Date,
the Company will have generated approximately $50.0 million of cash, $25.0
million of which will be utilized for the Special Dividend, with the
remaining $25.0 million available to the Company.
(b) Reflects an estimated $430.0 million of debt the Company expects to incur on
or before the Distribution Date. Approximately $116.8 million of the $430.0
million to be borrowed will be used to repay Great Lakes for amounts
borrowed to complete the acquisition of Chevron's 10.65% interest in
subsidiaries of the Company. An additional $17.0 million is expected to be
used to pay $12.0 million in transaction fees associated with the
Distribution and the Financings and $5.0 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, will be used to fund $325.9 million of the Special Dividend to Great
Lakes. The remaining $25 million of the $350.9 million Special Dividend will
be funded out of cash generated by the Company between January 1, 1998 and
the Distribution Date.
(c) 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 the
Company and $325.9 million to partially fund the Special Dividend.
(d) Transfer of the income tax liabilities to the Great Lakes investment.
(e) Reflects the issuance of an estimated 14.7 million shares of Octel Common
Stock, par value $0.01 per share. This is based on approximately 58.9
million shares of Great Lakes Common Stock outstanding at December 31, 1997
and an assumed distribution of one share of the Company's 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 Common Stock.
20
<PAGE> 28
PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
The Company was formed by Great Lakes for the purpose of effecting 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 Information Statement, adjusted to give effect to the Distribution, which
includes (i) the Financings and (ii) the Special Payments. The Unaudited Pro
Forma Combined Statement of Income for the year ended December 31, 1997 gives
effect to the Distribution as if it had occurred as of January 1, 1997 and the
Unaudited Pro Forma Combined Balance Sheet gives effect to the Distribution as
if it had occurred as of December 31, 1997. The Distribution 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 Distribution 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 Information Statement and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The Pro Forma Financial Statements assume the completion of the
transactions contemplated by the Distribution Agreement and the agreements to be
entered into pursuant to the Distribution Agreement including the completion of
all the asset transfers and contract assignments contemplated thereby.
Assumptions regarding the number of shares of Octel Common Stock may not reflect
the actual numbers at the Distribution Date.
21
<PAGE> 29
PRO FORMA STATEMENT OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- ----------- -----
<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(a) 41.6
Research and development.................................... 3.8 3.8
------ ------ ------
42.4 3.0 45.4
Amortization of intangible assets........................... 27.6 8.1(c) 37.2
1.5(d)
------ ------ ------
Operating income............................................ 194.7 (12.6) 182.1
Interest expense............................................ 2.2 31.9(b) 34.1
Other expenses.............................................. 5.6 5.6
Interest income............................................. (3.9) 3.8(e) (0.1)
Other income................................................ (7.9) (7.9)
------ ------ ------
Income before income taxes and minority interest............ 198.7 (48.3) 150.4
Minority interest........................................... 24.3 (24.3)(c) --
------ ------ ------
Income before income taxes.................................. 174.4 (24.0) 150.4
Income taxes................................................ 56.7 (7.8)(f) 48.9
------ ------ ------
Net income.................................................. $117.7 $(16.2) $101.5
====== ====== ======
Net income per share (g).................................... $ 6.90
======
</TABLE>
The accompanying notes are an integral part of this statement.
22
<PAGE> 30
NOTES TO PRO FORMA STATEMENTS OF INCOME
(a) 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.
(b) Represents the estimated interest expense the Company would have experienced
during the periods with respect to the $280 million outstanding under the
Credit Facility and the $150 million of Notes. The interest rates assumed
were 8.6% and 9.5% 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 million
repayment of the Credit Facility.
(c) Represents the following effects of the Company's purchase of Chevron's
interest in subsidiaries of the Company: (i) amortization of $81.1 million
over 10 years and (ii) elimination of Chevron's minority interest in the
earnings of such subsidiaries.
(d) Represents the additional amortization of the estimated $12 million
transaction fees relating to the Distribution and the Financings, amortized
over eight years.
(e) Represents the estimated reduction in interest income due to reduced cash
balances.
(f) Represents the adjustments to the income tax provision to reflect the
additional expenses and the elimination of the minority interest.
(g) Assumes approximately 14.7 million shares of Octel Common Stock outstanding.
23
<PAGE> 31
PRO FORMA BALANCE SHEET
(AS OF DECEMBER 31, 1997)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Current assets
Cash and cash items.................................... $ 29.7 $ 430.0(a) $ --
(12.0)(b)
(442.7)(c)
(5.0)(d)
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(b) 396.3
5.0(d)
Other assets............................................. 64.9 -- 64.9
------ ------- ------
Total assets................................... $832.9 $ (12.7) $820.2
====== ======= ======
LIABILITIES AND EQUITY:
Current liabilities
Accounts payable....................................... $ 40.0 $ -- $ 40.0
Accrued expenses....................................... 9.0 -- 9.0
Accrued income taxes................................... 53.8 (56.0)(e) (2.2)
------ ------- ------
Total current liabilities...................... 102.8 (56.0) 46.8
Other liabilities........................................ 57.2 57.2
Deferred income taxes.................................... 20.1 (13.7)(e) 6.4
Long-term debt
Credit facility........................................ -- 280.0(a) 280.0
Notes.................................................. -- 150.0(a) 150.0
------ ------- ------
Total debt..................................... -- 430.0(a) 430.0
Equity:
Great Lakes investment................................. 652.8 (442.7)(c) --
69.7(e)
(279.8)(f)
Common stock........................................... 0.1(f) 0.1
Additional paid-in capital............................. 279.7(f) 279.7
------ ------- ------
Total equity................................... 652.8 (373.0) 279.8
------ ------- ------
Total liabilities and equity................... $832.9 $ (12.7) $820.2
====== ======= ======
</TABLE>
The accompanying notes are an integral part of this statement.
24
<PAGE> 32
NOTES TO PRO FORMA BALANCE SHEET
(a) Reflects an estimated $430.0 million of debt the Company expects to incur on
or before the Distribution Date. Approximately $116.8 million of the $430.0
million to be borrowed will be used to repay Great Lakes for amounts
borrowed to complete the acquisition of Chevron's 10.65% minority interest
in subsidiaries of the Company. An additional $17.0 million is expected to
be used to pay $12.0 million of transaction fees associated with the
Distribution and the Financings and $5.0 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, will be used to fund $325.9 million of the Special Dividend. The
remaining $25.0 million of the $350.9 million Special Dividend will be
funded out of cash generated by the Company between January 1, 1998 and the
Distribution Date.
(b) Estimated transaction fees of $12 million associated with the Distribution
and Financings. Transaction fees will be amortized over the term of the
borrowings, eight years.
(c) Payment to Great Lakes, consisting of $116.8 million for the repayment of a
loan used to acquire Chevron's interest in subsidiaries of the Company and
$325.9 million to partially fund the Special Dividend.
(d) Reflects the cost of interest rate swaps arranged to fix a portion of the
interest rate on the borrowing described in (a) above.
(e) Transfer of the income tax liabilities to the Great Lakes investment.
(f) Reflects the issuance of an estimated 14.7 million shares of Octel Common
Stock, par value $0.01 per share. This is based on approximately 58.9
million shares of Great Lakes Common Stock outstanding at December 31, 1997
and an assumed distribution of one share of the Company's 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 Common Stock.
25
<PAGE> 33
SELECTED HISTORICAL COMBINED FINANCIAL DATA
(DOLLARS IN MILLIONS)
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 Information Statement. 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 historical 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.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................... $539.1 $597.4 $628.3 $603.1 $569.9
Gross profit................................. 264.7 298.6 321.3 307.1 309.4
Selling, general and administrative
expenses.................................. 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
Income before income taxes and minority
interest.................................. 198.7 221.7 249.1 247.2 235.0
Net income................................... 117.7 128.3 145.1 142.4 163.9
BALANCE SHEET DATA (AT END OF YEAR):
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 liabilities............................ 180.1 256.4 267.6 244.2 226.7
Total equity................................. 652.8 584.6 530.8 488.4 416.6
</TABLE>
26
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, including the notes thereto, appearing elsewhere in this
Information Statement.
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."
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<PAGE> 35
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
$597.4 million in 1996. Net sales by business are set forth in the following
table ($ 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 TEL sales
volumes 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 to 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 1997. This higher than
normal rate of decline mainly resulted from a Mexican phaseout 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
28
<PAGE> 36
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 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
$628.3 million in 1995. Net sales by business are set forth in the following
table ($ in millions):
<TABLE>
<CAPTION>
INCREASE
1996 1995 (DECREASE)
------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
TEL.................................................. $505.1 85% $547.1 87% (8)%
Petroleum Specialties................................ 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.
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.
29
<PAGE> 37
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 goodwill increased $7.7 million to $26.7 million in 1996
from $19.0 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 were 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 as 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 environmental projects in 1997, 1996 and 1995 was $0.6 million, $1.0 million
and $0.8 million respectively. Capital expenditures for 1998 and 1999 are
expected to be approximately $20 million in each year, including approximately
$8.0 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 $8.0 million in accrued expenses from 1996 to 1997
following the determination of the profit participation payments in 1997 as
described in Note 4 of the Combined Financial Statements.
30
<PAGE> 38
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 is expected to incur approximately
$430 million of indebtedness. $116.8 million of the borrowings will be used to
repay the loan from Great Lakes utilized to acquire the Chevron interest and
approximately $17 million will be used to pay fees and expenses related to the
Distribution and the Financings, including $5 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, will be distributed to Great Lakes in the form of the
Special Payments.
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.
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 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.
31
<PAGE> 39
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 689 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.
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.
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 ("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
$3.0 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, $1.0
million in 1996 and $0.8 million in 1995 and other expenditures of approximately
$9.8 million in
32
<PAGE> 40
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
("Decontamination and Decommissioning Projects") closed 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 final 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.
33
<PAGE> 41
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.
34
<PAGE> 42
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.
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 (a) the repurchase of stock and/or the payment of
cash dividends and (b) 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. 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. 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.
In 1997, the Company had net sales of $539.1 million and an operating
income of $194.7 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.
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 the Company as a
new independent public company.
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. See "The
Distribution--Reasons for the Distribution."
35
<PAGE> 43
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 established
an integrated Supply Chain Department to improve customer service, to utilize
its purchasing power to improve terms and conditions from suppliers and to
improve quality and inventory control.
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, which equals approximately $.03-.08 per gallon. Because
36
<PAGE> 44
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 current 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 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.
37
<PAGE> 45
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, subject to the FTC's discretion to review and modify the agreement
following a sixty (60) day public comment period. Although the proposed order is
not yet effective, 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 operations or
financial condition. See "Risk Factors--FTC Proceeding" and "Legal Proceedings."
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 cetane 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
38
<PAGE> 46
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, 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 its 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.
39
<PAGE> 47
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 licence.
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 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.
40
<PAGE> 48
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.*................................ Octel Corp. Headquarters; Petroleum
Specialties regional office
London, U.K.*.......................................... Sales & Marketing
Ellesmere Port, U.K.................................... AOC Headquarters; Business Teams;
Manufacturing; Research & Development;
Administration
Bletchley, U.K......................................... Fuel Technology Center
</TABLE>
- -------------------------
* 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).
LEGAL PROCEEDINGS
In December 1997, the Company, Great Lakes and the U.S. Federal Trade
Commission (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, subject to the FTC's discretion to review and modify the
agreement following a sixty (60) day public comment period. The proposed consent
decree, if finally approved by the FTC, will not constitute an admission of
wrongdoing on Great Lakes' or the Company's part and will provide, 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 proposed order, both the
Company and Ethyl will be 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. Although the proposed order is not
yet effective, 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 operations 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.
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<PAGE> 49
MANAGEMENT
DIRECTORS
Currently, the Board of Directors of the Company is comprised of Dennis J.
Kerrison, Martin M. Hale and Thomas J. Fulton. As of the Distribution Date, the
Board of Directors of the Company will consist of the seven persons listed
below, 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 designated that does not currently serve on the
Board has agreed to serve as a director of the Company effective as of the
Distribution Date.
The following table sets forth information concerning the individuals who
will serve as directors of the Company 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 the Company:
DR. ROBERT E. BEW will serve as Non-Executive Chairman of Octel Corp. He is
currently Chairman of both EPICC Ltd., an organization specializing in
increasing competitiveness in process industries and The Teeside 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 Petroleum.
DENNIS J. KERRISON will serve as President and Chief Executive Officer of
Octel Corp. and Managing Director, AOC. From May 1996 to the Distribution Date,
Mr. Kerrison was the Managing Director of AOC and Octel Developments PLC and a
Group Vice President and Officer of Great Lakes. Between 1992 and 1996 he was a
Director and Officer of Hickson International plc, lastly 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, 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.
42
<PAGE> 50
JAMES PUCKRIDGE is Chairman of Elf Atochem UK Ltd., a position he assumed
in 1990. Prior to that he was Managing Director of the same organization. He is
also Chairman of Ato Findlay UK and Non-Executive Director of Thomas Swan, a UK
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 UK Ltd. Prior to this he held a number of
directorships in the Montedison Group working in Denmark, Canada, Italy and the
USA. 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.
Following the Distribution, the Company may expand the Board of Directors
to include additional independent directors. The identities of such additional
independent directors have not yet been determined and will not be determined
prior to the Distribution.
CLASSIFIED BOARD OF DIRECTORS
The Company's Certificate of Incorporation will provide for a classified
Board of Directors consisting of three classes as nearly equal in number as
possible with the directors in each class serving staggered three-year terms.
Initially, the Class I directors will be Thomas M. Fulton and Charles M. Hale;
the Class II directors will be Dr. Benito Fiore and James Puckridge; and the
Class III directors will be Dr. Robert E. Bew, Dennis Kerrison and Martin M.
Hale. The terms of the Class I, Class II and Class III Directors will expire
initially in 1999, 2000 and 2001, respectively. At each annual meeting of the
stockholders of the Company, the successors to the class of directors whose term
expires will be elected to hold office for a term expiring at the annual meeting
of stockholders held in the third year following their election. See
"Description of Company Capital Stock."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company 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 the Company.
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.
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<PAGE> 51
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
Following the Distribution, non-employee directors will receive an annual
fee of $23,000. The Chairman of the Board, who is not employed by the Company,
will receive an annual fee of $110,500. Committee chairman, not employed by the
Company, will receive an additional fee of $5,000 per year. Non-employee
directors will be 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 determined by the
Compensation Committee.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the persons
who will serve as executive officers of the Company and its principal subsidiary
following the Distribution Date. Each such person will be elected to the
indicated office with the Company on or prior to the Distribution Date and will
serve 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 Octel
Developments PLC
Alan G. Jarvis................. 48 Chief Financial Officer, Octel Corp. and
Finance Director of AOC and Octel Developments
PLC
Graham M. Leathes.............. 48 Company Secretary and General Counsel, Octel
Corp., AOC and Octel Developments PLC
Steve W. Williams.............. 42 Operations Director, AOC
Robert A. Lee.................. 50 Commercial Director, Lead Alkyls, AOC
Geoff J. Hignett............... 47 Commercial Directors, Specialty Chemicals, AOC
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 or its subsidiaries by each executive officer as well as positions held
prior to the Distribution Date.
DENNIS J. KERRISON -- See description above under the heading
"-- Directors."
ALAN G. JARVIS will serve as Chief Financial Officer of Octel Corp. and
Finance Director of AOC and Octel Developments PLC. 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 will serve as Corporate Secretary and General Counsel for
Octel Corp., AOC and Octel Developments PLC. From July 1989 until the
Distribution Date, Mr. Leathes served in this position for AOC.
STEVE W. WILLIAMS will serve 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,
44
<PAGE> 52
Mr. Williams served for 18 years at the Fawley Oil Refinery of Exxon/Esso, most
recently as Operations Manager.
ALAN HANSLIP will serve 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.
ROBERT A. LEE will serve 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 will serve 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 will serve 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 or its subsidiaries. Therefore, these tables do not
reflect the compensation which will be paid to the executive officers of the
Company. 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
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- -----------------------
NAME AND PROFIT SHARING CASH OTHER ANNUAL OPTIONS GRANTED
PRINCIPAL POSITION SALARY(1) (BONUS)(1)(2) COMPENSATION(3) (# -- NUMBER 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 $50,000 or 10% of salary plus bonus for any of
the Named Executive Officers, except Mr. Hignett.
(4) Payment of starting bonus.
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<PAGE> 53
STOCK OPTIONS TABLE
The following table shows for the Named Executive Officers the specified
information with respect to grants of options to purchase Great Lakes Common
Stock ("Great Lakes Options") during 1997.
OPTION GRANTS IN 1997*
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL VALUE AT ASSUMED
GRANTS % OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(3)(4)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME (#)(1) FISCAL YEAR ($/SH)(2) DATE 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>
- -------------------------
* See "Treatment of Great Lakes Employee Stock Options in the Distribution"
for a description of the effect of the Distribution on such options.
(1) 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.
(2) The exercise price may be paid for by remitting cash or already owned shares
of Great Lakes Common Stock, or by a combination thereof.
(3) 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.
(4) 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 $0.
46
<PAGE> 54
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table shows for each Named Executive Officer the specified
information with respect to exercises of Great Lakes Options during 1997 and the
value of unexercised options at the end of 1997.
AGGREGATED GREAT LAKES OPTION EXERCISES DURING 1997
AND 1997 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY AT
SHARE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ----------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE*
---- ----------- ----------- ----------- ------------- ----------- --------------
<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>
- -------------------------
* 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.
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; Dr. Hignett,
$156,745 -- 0 years; Mr. Leathes, $135,309 -- 8 years; and Mr. Lee, $137,240 --
0 years.
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<PAGE> 55
STOCK PLAN
Prior to the Distribution Date, the Company expects to adopt the Octel
Corp. 1998 Stock Compensation Plan (the "Stock Plan"), which will provide for
the grant of various types of equity-based compensation to employees of the
Company. The Stock Plan will be approved by Great Lakes, as sole stockholder of
the Company, prior to the Distribution Date. The Stock Plan is 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 Plan may not exceed 1,175,000, subject to adjustment as
described below.
The Stock Plan provides for the granting of options, including "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Code and
non-qualified stock options, and the granting of other stock-based awards
(collectively, "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 Company or any of its
subsidiaries.
The Stock Plan will be 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 will be
determined by the Plan Administrator.
The option price payable for the shares of Common Stock subject to each ISO
or non-qualified stock option shall not be less than the fair market value of
the Common Stock on the date such option is granted.
The following table sets forth the estimated number of restricted stock
units to be granted to certain employees under the Stock Plan within six 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
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 of 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 Octel 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.
The Stock Plan will be filed as an exhibit to the Registration Statement of
which this Information Statement is a part.
48
<PAGE> 56
TREATMENT OF GREAT LAKES EMPLOYEE STOCK OPTIONS IN THE DISTRIBUTION
Certain employees of Great Lakes (including certain employees who, as a
result of the Distribution, will become employees of the Company) currently hold
Great Lakes Options pursuant to the Great Lakes 1984 Employee Stock Option Plan
and the Great Lakes 1993 Employee Stock Compensation Plan (collectively, the
"Great Lakes Stock Plans").
In connection with the Distribution, and pursuant to the Great Lakes Stock
Plans and the related option agreements, the number of shares subject to each
Great Lakes Option and the exercise prices thereof will be equitably adjusted to
reflect the Distribution. Great Lakes will remain solely responsible for
satisfying all exercises of Great Lakes Options. All Great Lakes Options held by
employees who are or will become employees of Octel will be immediately vested
as of the Distribution Date.
In addition, the option agreements with respect to Great Lakes Options held
by certain executive officers of Octel will be amended to extend the period
during which such options may be exercised following the Distribution from three
months to three years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The businesses to be conducted by the Company have in the past engaged in
transactions with Great Lakes and its businesses. Following the Distribution,
Great Lakes will continue to have a significant relationship with the Company as
a result of the agreements being entered into by Great Lakes and the Company in
connection with the Distribution. Except as referred to above or as otherwise
described in this Information Statement, Great Lakes and the Company will cease
to have any material contractual or other material relationships with each
other. See "Relationship Between Great Lakes and the Company After the
Distribution."
49
<PAGE> 57
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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 will be the beneficial owner of more
than 5% of the outstanding voting securities of any class of the Company upon
completion of the Distribution:
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS COMMON STOCK
OF BENEFICIAL OWNER NUMBER OF SHARES OUTSTANDING
------------------- ---------------- ------------
<S> <C> <C>
T. Rowe Price Associates, Inc.(1)........................... 1,675,646 11.2%
100 East Pratt Street
Baltimore, Maryland 21202
State Farm Mutual Automobile Insurance...................... 1,135,900 7.6%
Company and Related Entities(2)
One State Farm Plaza
Bloomington, Illinois 61710-0001
</TABLE>
- -------------------------
(1) Based on a Schedule 13G, dated February 12, 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.
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 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.
DESCRIPTION OF COMPANY CAPITAL STOCK
Under the Certificate of Incorporation, the total number of shares of all
classes of stock that the Company has authority to issue is 50 million,
consisting of 10 million shares of preferred stock, par value $.01 per share
("Preferred Stock") and 40 million shares of Octel Common Stock. Based on the
number of shares of Great Lakes Common Stock outstanding at December 31, 1997,
approximately 14,736,075 shares of Octel Common Stock will be issued to
stockholders of Great Lakes.
COMMON STOCK
The holders of Octel Common Stock will be entitled to one vote for each
share on all matters voted on by stockholders, and the holders of such shares
will possess all voting power, except as otherwise required by law
50
<PAGE> 58
or provided in any resolution adopted by the Board of Directors of the Company
with respect to any series of Preferred Stock. It is currently expected that the
first annual meeting of stockholders of the Company will be held
in of 1999. Subject to any preferential or other rights of any
outstanding series of Company preferred stock that may be designated by the
Board of Directors of the Company, the holders of Octel Common Stock will be
entitled to such dividends as may be declared from time to time by the Board of
Directors of the Company from funds available therefor, and upon liquidation
will be entitled to receive pro rata all assets of the Company available for
distribution to such holders. See "Risk Factors -- Dividend Policy."
PREFERRED STOCK
The Board of Directors of the Company will be authorized to provide for the
issuance of shares of Preferred Stock, in one or more series, and to determine,
with respect to any series, the terms and rights of such series, including the
following: (i) the designation of such series; (ii) the rate and time of, and
conditions and preferences with respect to, dividends, and whether such
dividends are cumulative; (iii) the voting rights, if any, of shares of such
series; (iv) the price, timing and conditions regarding the redemption of shares
of such series and whether a sinking fund should be established for such series;
(v) the rights and preferences of shares of such series in the event of
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; and (vi) the right, if any, to convert or exchange shares of
such series into or for stock or securities of any other series or class.
The Company believes that the availability of the Preferred Stock will
provide the Company with increased flexibility in structuring possible future
financings and acquisitions, and in meeting other corporate needs which might
arise. Having such authorized shares available for issuance will allow the
Company to issue shares of Preferred Stock without the expense and delay of a
special stockholders' meeting. The authorized shares of Preferred Stock, as well
as shares of Octel Common Stock, will be available for issuance without further
action by the Company's stockholders, unless action is required by applicable
law or the rules of any stock exchange on which the Company's securities may be
listed or unless the Company is restricted by the Preferred Stock.
NO PREEMPTIVE RIGHTS
No holder of any stock of the Company of any class authorized at the
Distribution Date will then have any preemptive right to subscribe to any
securities of the Company of any kind or class.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Octel Common Stock will be First
Chicago Trust Company of New York.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
The Certificate of Incorporation and By-laws will contain certain
provisions that could make more difficult the acquisition of control of the
Company by means of a tender offer, open market purchases, a proxy contest or
otherwise. Set forth below is a description of such provisions contained in the
Certificate of Incorporation and By-laws. Such description is intended as a
summary only and is qualified in its entirety by reference to the Certificate of
Incorporation and By-laws, the forms of which are included as exhibits to the
Registration Statement of which this Information Statement forms a part.
Classified Board of Directors. The Certificate of Incorporation will
provide that the number of directors shall be fixed from time to time by the
Board of Directors of the Company. The directors shall be divided into three
classes, as nearly equal in number as is reasonably possible, serving staggered
terms so that directors' initial terms will expire either at the 1999, 2000 or
2001 annual meeting of the Company stockholders. Starting with the 1999 annual
meeting of the Company stockholders, one class of directors will be elected each
year for a three-year term. See "Management -- Directors of the Company."
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<PAGE> 59
The Company believes that a classified Board of Directors will help to
assure the continuity and stability of the Company's Board of Directors and the
Company's business strategies and policies as determined by the Board of
Directors of the Company, since a majority of the directors at any given time
will have had prior experience as directors of the Company. The Company believes
that this, in turn, will permit the Board of Directors to more effectively
represent the interests of stockholders.
With a classified Board of Directors, at least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in a
majority of the Board of Directors. As a result, a classified Board of Directors
of the Company may discourage proxy contests for the election of directors or
purchases of a substantial block of Octel Common Stock because its provisions
could operate to prevent obtaining control of the Board of Directors of the
Company in a relatively short period of time. The classification provisions
could also have the effect of discouraging a third party from making a tender
offer or otherwise attempting to obtain control of the Company. In addition,
because Section 141(k)(1) of the Delaware General Corporation Law (the "DGCL")
provides that a director serving on a classified Board of Directors may be
removed only for cause, a classified Board of Directors would delay stockholders
who do not agree with the policies of the Board of Directors from replacing a
majority of the Board of Directors for two years unless they can demonstrate
that the directors should be removed for cause and obtain the requisite vote.
Such a delay may help ensure that the Board of Directors of the Company, if
confronted by a holder conducting a proxy contest or an extraordinary corporate
transaction, will have sufficient time to review the proposal and appropriate
alternatives to the proposal and to act in what it believes is the best
interests of the Company's stockholders.
Special Meetings of Stockholders; Action by Written Consent; Advance Notice
Provisions. The By-laws will provide that special meetings of stockholders of
the Company may be called only by the Board of Directors of the Company or the
Chairman of the Board. The Certificate of Incorporation also requires that
stockholder action be taken at a meeting of stockholders and prohibits action by
written consent.
Stockholder Nominations. The By-Laws will establish procedures that must be
followed for a stockholder to nominate individuals for election to the Company's
Board of Directors. Nominations of persons for election to the Board will be
required to be made by delivering written notice to the Secretary of the Company
not less than 60 nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that in
the event that the annual meeting is called for a date that is not within 10
days before or after such anniversary date, notice by the stockholder to be
timely will be required to be so received before the later of the close of
business on the 10th day following the day on which such annual notice was made,
whichever first occurs and the close of business on the day which is 60 days
prior to the date of the annual meeting. The nomination notice will be required
to set forth certain background information about the persons to be nominated,
including the nominees' principal occupation or employment and the class and
number of shares of capital stock of the Company that are beneficially owned by
such person. If the presiding officer at the annual meeting determines that a
nomination was not made in accordance with these procedures, he may so declare
at the meeting and the nomination may be disregarded.
Stockholder Proposals. The By-Laws establish procedures that must be
followed for a stockholder to submit a proposal at an annual meeting of the
stockholders of the Company. Under these procedures, no proposal for a
stockholder vote will be able to be submitted to the stockholders unless the
submitting stockholder has timely filed with the Secretary of the Company a
written statement setting forth specified information, including the names and
addresses of the persons making the proposal, the class and number of shares of
capital stock of the Company beneficially owned by such persons, a description
of the proposal and the reasons for bringing such business before the annual
meeting and any material interest of the stockholder in such business. If the
presiding officer at any stockholder meeting determines that any such proposal
was not made in accordance with these procedures or is otherwise not in
accordance with applicable law, he may so declare at the meeting and such
defective proposal may be disregarded.
Certain Business Combination Transactions. The Certificate of Incorporation
generally provides that, whether or not a vote of the stockholders is otherwise
required, the affirmative vote of the holders of not less than eighty percent
(80%) of the outstanding shares of Octel Common Stock shall be required for the
approval or authorization of any Business Transaction with a Related Person, or
any Business Transaction in
52
<PAGE> 60
which a Related Person has an interest; provided, however, that the eighty
percent (80%) voting requirement shall not be applicable if (1) the Business
Transaction is approved by the Continuing Directors, or (2) all of the following
conditions are satisfied:
(a) the Business Transaction is a merger or consolidation or sale of
substantially all of the assets of the Company, and the aggregate amount of
cash to be received per share by holders of Octel Common Stock in
connection with such Business Transaction is at least equal in value to the
highest amount of consideration paid by such related person for a share of
Octel Common Stock in the transaction in which such person became a Related
Person, or within one year prior to the date such related Person became a
Related Person, whichever is higher; and
(b) after such Related Person has become the beneficial owner of not
less than ten percent (10%) of the voting power of the stock of the Company
entitled to vote generally in the election of directors, and prior to the
consummation of such Business Transaction, such Related Person shall not
have become the Beneficial Owner of any additional shares of voting stock
or securities convertible into voting stock, except (i) as a part of the
transaction which resulted in such Related Person becoming the beneficial
owner of not less than ten percent (10%) of the voting power of the voting
stock or (ii) as a result of a pro rata stock dividend or stock split; and
(c) prior to the consummation of such Business Transaction, such
Related Person shall not have, directly or indirectly, (i) received the
benefit (other than only a proportionate benefit as a stockholder of the
Company) of any loans, advances, guarantees, pledges, or other financial
assistance or tax credits provided by the Company or any of its
subsidiaries, (ii) caused any material change in the Company's business or
equity capital structure, including, without limitation, the issuance of
shares of capital stock of the Company, or (iii) except as approved by the
Continuing Directors, caused the Company to fail to declare and pay (y) at
the regular date therefor any full quarterly dividends on any outstanding
preferred stock or (z) quarterly cash dividends on the outstanding Octel
Common Stock on a per share basis at least equal to the cash dividends
being paid thereon by the corporation immediately prior to the date on
which the Related Person became a Related Person.
The term "Business Transaction" is generally defined as: (a) any merger or
consolidation involving the Company or a subsidiary of the Company; (b) any
sale, lease, exchange, transfer, or other disposition (in one transaction or a
series of related transactions), including, without limitation, a mortgage or
any other security device, of all or any substantial part of the assets either
of the Company or of a subsidiary of the Company; (c) any sale, lease, exchange,
transfer, or other disposition (in one transaction or a series of related
transactions) of all or any substantial part of the assets of an entity to the
Company; (d) the issuance, sale, exchange, transfer, or other disposition (in
one transaction or a series of related transactions) by the Company or a
subsidiary of the Company of any securities of the Company or any subsidiary of
the Company; (e) any recapitalization or reclassification of the securities of
the Company or other transaction that would have the effect of increasing the
voting power of a Related Person or reducing the number of shares of each class
of voting stock outstanding; (f) any liquidation, spin-off, split-off, split-up,
or dissolution of the Company; and (g) any agreement, contract, or other
arrangement providing for any of the transactions described in this definition
of Business Transaction. "Continuing Director" is generally defined as a member
of the Board of Directors on the Distribution Date and any member of the Board
of Directors whose election was approved by the Continuing Directors. "Related
Person" generally is defined as any individual or entity which, together with
its affiliates and associates owns not less than 10% of the voting power of the
voting stock of the Company.
PREFERRED STOCK PURCHASE RIGHTS
Prior to the Distribution Date, the Board of Directors of the Company will
declare a dividend distribution of one right (a "Right") to purchase one
one-thousandth of a share of Series A Junior Participating Preferred Stock for
each outstanding share of Octel Common Stock to stockholders of record of the
Company on the Record Date. The description and terms of the Rights are set
forth in a Rights Agreement, dated as of , 1998, between the
Company and First Chicago Trust Company of New York (the "Rights Agreement").
53
<PAGE> 61
The Rights remain non-exercisable, nontransferable and non-separable from
Octel Common Stock until the earlier of (i) 10 days after the first date (such
date being the "Stock Acquisition Date") of public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Octel Common Stock, or (ii) 10 business days (or such
later date as may be determined by the Board of Directors) after the
commencement of a tender offer or exchange offer for 15% or more of the Octel
Common Stock or (iii) 10 business days after the Board of Directors determines
that a person is an Adverse Person (to make such a determination the Board of
Directors must determine that a substantial shareholder intends to cause the
Company to repurchase its shares or to take action intended to provide such
person with short-term financial gain inconsistent with the best long-term
interest of the Company, or ownership of shares by such person is reasonable
likely to cause a material adverse impact on the Company) (the earliest of such
dates being referred as the "Distribution Date").
Each Right, when exercisable, currently entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock at a price of $ , subject to adjustment.
After the Declaration Date, in the event that a person becomes an Acquiring
Person (except pursuant to an offer for all outstanding shares of Octel Common
Stock that the independent directors of the Company determine to be fair to and
otherwise in the best interests of the Company and its stockholders (a
"Qualifying Offer") or an Adverse Person, each holder of a Right will thereafter
have the right to receive (in lieu of Series A Junior Participating Preferred
Stock), upon exercise, shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two
times the exercise price of the Rights. In the event that, at any time following
the Stock Acquisition Date, (i) the Company is acquired in a merger or other
business combination transaction in which the Company is not the surviving
corporation (other than a merger that follows a Qualifying Offer and meets
certain other requirements), or (ii) a person consolidates with, or mergers
into, the Company, and although the Company is the continuing or surviving
corporation, all or part of the outstanding shares of Common Stock are changed
into or exchanged for stock or securities of such other person, or cash or any
other property, or (iii) more than 50% of the Company's assets or earning power
is sold or transferred, each holder of a Right shall thereafter have the right
to receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right.
In general, at any time prior to their expiration on , 2008 or
until 15 days following the Stock Acquisition Date, the Board of Directors in
its discretion may redeem the Rights in whole, but not in part, at a price of
$.01 per Right; provided, however, that the Rights may not be redeemed following
a determination that any person is an Adverse Person. Moreover, the Board of
Directors may, at its option, at any time after any person becomes an Acquiring
Person or is determined to be an Adverse Person exchange all or part of the then
outstanding Rights for shares of Common Stock at an exchange ratio of one share
of Common Stock per Right; provided, however, that the Rights may not be so
exchanged at any time after any person becomes a beneficial owner of 50% or more
of the Company's Common Stock then outstanding. In the event any person becomes
an Acquiring Person (except pursuant to a Qualifying Offer) or an Adverse
Person, Rights beneficially owned by such person shall become null and void.
Each share of Series A Junior Participating Preferred Stock, when issued,
will be nonredeemable and entitled to cumulative dividends and will rank junior
to any series of Preferred Stock senior to it. Quarterly dividends are payable
on the Series A Junior Participating Preferred Stock in an amount equal to the
greater of (i) $1.00 per share or (ii) 1,000 times the aggregate per share
amount of all cash and noncash dividends (other than dividends payable in Common
Stock) declared on the Common Stock since the last quarterly dividend payment
date or, with respect to the first such date, since the first issuance of the
Series A Junior Participating Preferred Stock.
Each share of Series A Junior Participating Preferred Stock will entitle
the holder (subject to adjustment) to 1,000 votes on all matters submitted to a
vote of the stockholders of the Company. If at any time dividends on any Series
A Junior Participating Preferred Stock shall be in arrears for six quarters or
more, all holders of Preferred Stock (including holders of the Series A Junior
Participating Preferred Stock) voting as a class, shall have the right to elect
two directors until all such accrued and unpaid dividends have
54
<PAGE> 62
been declared and paid. Upon liquidation, dissolution or winding up of the
Company, no distribution may be made to holders of the Common Stock unless,
prior thereto, holders of the Series A Junior Participating Preferred Stock
shall have received an amount equal to 1,000 times the Purchase Price, plus
accrued and unpaid dividends to the date of such payment. The number of shares
constituting the series of Series A Junior Participating Preferred Stock will be
1,000,000.
The Rights may have certain anti-takeover effects, including deterring
someone from acquiring control of the Company in a manner or on terms not
approved by the Board of Directors. The Rights should not interfere with any
merger or other business combination approved by the Board of Directors, since
the Rights generally may be redeemed at any time by the Company as set forth
above.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Officers and directors of the Company are covered by certain provisions of
the DGCL, the Certificate of Incorporation, the By-laws and insurance policies
which serve to limit, and, in certain instances, to indemnify them against,
certain liabilities which they may incur in such capacities. None of such
provisions would have retroactive effect for periods prior to the Distribution
Date, and the Company is not aware of any claim or proceeding in the last three
years, or any threatened claim, which would have been or would be covered by
these provisions. These various provisions are described below.
Elimination of Liability in Certain Circumstances. In June 1986, Delaware
enacted legislation which authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. This duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations now authorized by such
legislation, directors are accountable to corporations and their stockholders
for monetary damages for conduct constituting negligence or gross negligence in
the exercise of their duty of care. Although the statute does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The Certificate of
Incorporation limits the liability of directors to the Company or its
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by such legislation. Specifically, the
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as director, except for liability: (i) for
any breach of the director's duty of loyalty to the Company or its stockholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) for unlawful payments of
dividends or unlawful share repurchases or redemptions as provided in Section
174 of the DGCL; or (iv) for any transaction from which the director derived an
improper personal benefit.
Indemnification and Insurance. As a Delaware corporation, the Company has
the power, under specified circumstances generally requiring the director or
officer to act in good faith and in a manner he reasonably believes to be in or
not opposed to the Company's best interests, to indemnify its directors and
officers in connection with actions, suits or proceedings brought against them
by a third party or in the name of the Company, by reason of the fact that they
were or are such directors or officers, against expenses, judgments, fines and
amounts paid in settlement in connection with any such action, suit or
proceeding. The By-laws generally provide for mandatory indemnification of the
Company's directors and officers to the full extent provided by Delaware
corporate law.
The Company intends to purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Company, or is or was a
director or officer of the Company serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Company would have the power or
obligation to indemnify him against such liability under the provisions of the
By-laws.
55
<PAGE> 63
INDEPENDENT AUDITORS
The Company has appointed Ernst & Young L.L.P. 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 L.L.P. 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.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
10 (the "Registration Statement," which term shall include any amendments or
supplements thereto) under the Exchange Act with respect to the shares of Octel
Common Stock being received by Great Lakes stockholders in the Distribution.
This Information Statement does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. With respect to each contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto filed by the Company
with the Commission may be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the
Regional Offices of the Commission at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, 13th
Floor, New York, New York 10048. The Commission maintains a web site that
contains reports, proxy statements, registration statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov.
Following the Distribution, the Company intends to furnish to its
stockholders annual reports containing consolidated financial statements audited
by an independent public accounting firm accompanied by an opinion expressed by
such independent public accounting firm and quarterly reports for the first
three quarters of each fiscal year containing unaudited consolidated financial
information, in each case prepared in accordance with generally accepted
accounting principles.
56
<PAGE> 64
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
</TABLE>
F-1
<PAGE> 65
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> 66
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> 67
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> 68
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> 69
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 million senior secured credit facility (the
"Credit Facility") and issue $150 million of Senior Notes due 2006 (the
"Notes"). The Credit Facility will consist 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 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.
PRINCIPLES OF COMBINATION
The combined financial statements include all subsidiaries of the Company
after elimination of significant intercompany accounts and transactions.
F-6
<PAGE> 70
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-7
<PAGE> 71
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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>
F-8
<PAGE> 72
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 British Petroleum, plc., Texaco, Inc. and
Mobil Corporation 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
====== ====== ======
</TABLE>
F-9
<PAGE> 73
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
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
====== ====== ======
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.
F-10
<PAGE> 74
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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> 75
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> 76
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 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
F-13
<PAGE> 77
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 British Petroleum, plc., Texaco Inc. and Mobil Corporation
(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.
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.
F-14
<PAGE> 78
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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> 79
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
OCTEL CORP.
By: /s/ DENNIS J. KERRISON
------------------------------------
Name: Dennis J. Kerrison
Title: President and Chief Executive
Officer
April 21, 1998
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1* Form of Transfer and Distribution Agreement, dated as of
, 1998, between Great Lakes Chemical Corporation
("Great Lakes") and the Registrant.
3.1 Form of Amended and Restated Certificate of Incorporation of
the Registrant.
3.2 Form of Amended and Restated By-Laws of the Registrant.
4.1 Form of Common Stock Certificate
4.2 Form of Rights Agreement between the Registrant and First
Chicago Trust Company of New York, as Rights Agent.
4.3* Form of Certificate of Designations, Rights and Preferences
of Series A Junior Participating Preferred Stock of the
Registrant.
4.4* Form of Indenture with respect to Senior Notes due 2006 of
Octel Developments PLC.
10.1 Form of Tax Disaffiliation Agreement between Great Lakes and
the Registrant.
10.2 Form of Corporate Services Transition Agreement between
Great Lakes and the Registrant.
10.3 Form of Supply Agreement between Great Lakes and the
Registrant for the supply of ethylene dibromide.
10.4 Form of Supply Agreement between Great Lakes and the
Registrant for the Supply of anhydious hydrogen bromide.
10.5 Form of Supply Agreement for the Supply of 10% sodium
hydroxide solution.
10.6* Form of Agreement between Great Lakes and the Registrant for
the Toll Manufacture of Stadis Product.
10.7* Form of Octel Corp. 1998 Stock Compensation Plan.
10.8 Form of Employment Agreement between Associated Octel
Limited and Steve W. Williams, Geoff J. Hignett, Graham M.
Leathes and Robert A. Lee.
10.9 Form of Employment Agreement between Associated Octel
Limited and Dennis J. Kerrison.
10.10 Form of Agreement between Great Lakes and the Registrant for
the Conversion of Feedstock.
21.1* Subsidiaries of the Registrant.
23.1** Consent of Ernst & Young LLP, Independent Auditors
27.1** Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 3.1
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OCTEL CORP.
FIRST: The name of the Corporation is Octel Corp. (the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "DGCL").
FOURTH: (a) The total number of shares of stock which the Corporation
shall have authority to issue is 50,000,000 shares of capital stock (the
"Capital Stock"), consisting of (i) 40,000,000 shares of common stock, par value
$0.01 per share (the "Common Stock") and (ii) 10,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock").
(b) The holders of the Common Stock shall have no preemptive
rights to subscribe for any shares of any class of stock of the Corporation
whether now or hereafter authorized. The holders of the Common Stock shall not
have cumulative voting rights.
(c) The Board of Directors is hereby expressly authorized to
provide for the issuance of all or any shares of the Preferred Stock in one or
more classes or series, and to fix for each such class or series such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series, including, without
limitation, the authority to provide that any such class or series may be (i)
subject to redemption at such time or times and at such price or prices; (ii)
entitled to
<PAGE> 2
receive dividends (which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or any other
series; (iii) entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of stock, of the Corporation at
such price or prices or at such rates of exchange and with such adjustments;
all as may be stated in such resolution or resolutions.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
(b) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide.
(c) The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. The initial division of the Board of Directors
into classes shall be made by the decision of the affirmative vote of a majority
of the entire Board of Directors. The term of the initial Class I directors
shall terminate on the date of the 1999 annual meeting; the term of the initial
Class II directors shall terminate on the date of the 2000 annual meeting; and
the term of the initial Class III directors shall terminate on the date of the
2001 annual meeting. At each succeeding annual meeting of stockholders
beginning in 1999, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director.
2
<PAGE> 3
(d) A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her successor shall
be elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
(e) Subject to the terms of any one or more classes or series
of Preferred Stock, any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring on the Board of Directors may be filled by a majority of the
Board of Directors then in office, even if less than a quorum, or by a sole
remaining director. Any director of any class elected to fill a vacancy
resulting from an increase in the number of directors of such class shall hold
office for a term that shall coincide with the remaining term of that class.
Any director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as that of his
predecessor. Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the Corporation
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least a majority of the voting power of
the Corporation's then outstanding capital stock entitled to vote generally in
the election of directors. Notwithstanding the foregoing, whenever the holders
of any one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation applicable thereto,
and such directors so elected shall not be divided into classes pursuant to this
Article SIXTH unless expressly provided by such terms.
(f) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the DGCL,
this Certificate of Incorporation, and any By-Laws adopted by the stockholders;
provided, however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
By-Laws had not been adopted.
SIXTH: (a) In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-laws of the Corporation, and except as
otherwise expressly provided in Section (b) of this Article SIXTH, any Business
Combi-
3
<PAGE> 4
nation shall require the affirmative vote of at least eighty percent (80%)
of the Voting Shares. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that some lesser percentage may be
specified, by law or in any agreement with any national securities exchange or
otherwise.
(b) The provisions of Section (a) of this Article SIXTH shall
not be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by law and
any other provision of this Certificate of Incorporation, if all of the
conditions specified in either of the following Subparagraphs (i) or (ii) are
met:
(i) The Business Combination has been approved by two-
thirds of the whole Board; or
(ii) The aggregate amount of the cash and Fair Market
Value of consideration other than cash to be received per share by holders of
the Common Stock in such Business Combination shall be in the same form and of
the same kind as the consideration paid by the Interested Stockholder in
acquiring the initial 10% of the Common Stock owned by it and shall be at least
equal to the highest of the following:
(A) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by such
Interested Stockholder for any shares of Common Stock acquired by it within the
two-year period prior to the Business Combination;
(B) the per share book value of the Common Stock as
reported at the end of the fiscal quarter immediately preceding the announcement
of such Business Combination; and
(C) if applicable, the price per share equal to the
earnings per share of Common Stock for the four full consecutive quarters
immediately preceding the record date for solicitation of votes on
such Business Combination, multiplied by the ratio (if any) of the highest
price of the Interested Stockholder's stock during its most recent four fiscal
quarters, to the earnings per share of the Interested Stockholder's stock for
such four full consecutive quarters.
4
<PAGE> 5
(c) For purposes of this Article SIXTH:
(i) The term "Business Combination" shall mean any
transaction which is referred to in any one or more of the following clauses (A)
through (E):
(A) any merger or consolidation of the Corporation or
any Subsidiary with or into (1) any Interested Stockholder or (2) any other
corporation (whether or not itself an Interested Stockholder) which, after such
merger or consolidation, would be an Affiliate or Associate of an Interested
Stockholder;
(B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition or any security arrangement, investment, loan
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other similar arrangement (in one
transaction or a series of related transactions), with or for the benefit of any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder, involving any assets, securities or commitments of the Corporation
or any Subsidiary which, including all contemplated future events, have an
aggregate Fair Market Value of $10,000,000 or more or constituting more than
five percent (5%) of the book value of the total assets (in the case of
transactions involving assets or commitments other than Capital Stock) or more
than five percent (5%) of the stockholders' equity (in the case of transactions
in Capital Stock) of the entity in question (each, a "Substantial Part"), as
reflected in the most recent fiscal year-end consolidated balance sheet of such
entity existing at the time the stockholders of the Corporation would be
required to approve or authorize the Business Combination involving a
Substantial Part of the assets, securities and/or commitments of the
Corporation;
(C) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or for any amendment to the
By-Laws or to this Certificate of Incorporation proposed by or on behalf of an
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder;
(D) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing the
proportionate share of the
5
<PAGE> 6
outstanding shares of any class or series of Capital Stock, or any securities
convertible into Capital Stock or equity securities of any Subsidiary, which is
beneficially owned by any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder; or
(E) any agreement, contract or arrangement providing for
any one or more of the actions specified in the foregoing clauses (A) through
(D).
(ii) The term "person" shall mean any individual, firm,
corporation or other entity and shall include any group comprised of any person
and any other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or indirectly,
for the purpose of acquiring, holding, voting or disposing of Capital Stock.
(iii) The term "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee or fiduciary with respect to any such plan when
acting in such capacity) who or which, as of the record date for the
determination of stockholders entitled to notice of and to vote on such
Business Combination, or immediately prior to the consummation of any such
transaction:
(A) is, or has announced or publicly disclosed a plan or
intention to become, the beneficial owner of ten percent (10%) or more of the
Voting Shares; or
(B) is an Affiliate or Associate of the Corporation and
at any time within the two year period prior to the date in question was the
beneficial owner of ten percent (10%) or more of the Voting Shares.
For purposes of determining whether a person is an Interested Stockholder
pursuant to this Subparagraph (c)(iii) of this Article SIXTH, the number of
Voting Shares shall include shares deemed beneficially owned through application
of Subparagraph (c)(iv) of this Article SIXTH, but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
6
<PAGE> 7
(iv) A person shall be a "beneficial owner" of any Voting
Shares:
(A) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or
(B) which such person or any of its Affiliates or
Associates has (1) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise; (2) the right to vote pursuant to any
agreement, arrangement or understanding; or (3) which are beneficially owned,
directly or indirectly, by any other person with which such first mentioned
person or any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purposes of acquiring, holding, voting or disposing of any
shares of Capital Stock of the Corporation.
(v) The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act
as in effect on the date of filing this Certificate of Incorporation with the
Secretary of State of the State of Delaware (the term "registrant" in such Rule
12b-2 meaning in this case the Corporation).
(vi) The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the definition of
"Interested Stockholder" set forth in Subparagraph (c)(iii) of this Article
SIXTH, the term "Subsidiary" shall mean only a company of which a majority of
each class of equity security is beneficially owned by the Corporation.
(vii) The term "Continuing Director" means a person who was
a member of the Board of Directors of the Corporation elected by the public
stockholders prior to the date as of which the Interested Stockholder became an
Interested Stockholder and who remains a member of the Board of Directors of the
Corporation as of the date in question, or a person designated (before his
initial election as a director) as a Continuing Director by a majority of the
then Continuing Directors and who remains a member of the Board of Directors of
the Corporation as of the date in question.
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(viii) The term "Fair Market Value" shall mean (A) in the
case of cash, the amount of such cash; (B) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on such Composite Tape,
on the New York Stock Exchange, or if such stock is not listed on such exchange,
on the principal United States securities exchange registered under the Exchange
Act on which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
similar system then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (C) in the case of
property other than cash or stock, the fair market value of such property on the
date in question as determined by a majority of the Continuing Directors in good
faith.
(ix) The term "Voting Shares" shall mean the outstanding
shares of Capital Stock of the Corporation entitled to vote generally in the
election of directors, considered for the purpose of this Article SIXTH as one
class.
(d) A majority of the directors shall have the power and the duty to
determine for purposes of this Article SIXTH on the basis of information known
to them, (i) the number of Voting Shares beneficially owned by any person, (ii)
whether a person is an Affiliate or Associate of another, (iii) whether a person
has an agreement, arrangement or understanding with another as to the matters
referred to in Subparagraphs (c)(iii) and (c)(iv), or (iv) for purposes of
Subparagraph (c)(i)(B), whether the assets, securities or commitments subject to
any Business Combination constitute a Substantial Part of the Corporation or any
of its Subsidiaries.
(e) Nothing in this Article SIXTH shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
SEVENTH: No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the DGCL as the same currently exists or may
hereafter be amended. If the DGCL is amended hereafter to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation shall be
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eliminated or limited to the fullest extent authorized by the DGCL, as so
amended. Any repeal or modification of this Article SEVENTH by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification.
EIGHTH: (a) The Corporation shall indemnify its directors and officers
to the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors. The right to indemnification conferred by this
Article EIGHTH shall include the right to be paid by the Corporation the
expenses incurred in defending or otherwise participating in any proceeding in
advance of its final disposition.
(b) The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar to
those conferred in this Article EIGHTH to directors and officers of the
Corporation.
(c) The rights to indemnification and to the advancement of
expenses conferred in this Article EIGHTH shall not be exclusive of any other
right which any person may have or may hereafter acquire under this Certificate
of Incorporation, the By-Laws of the Corporation, any statute, agreement, vote
of stockholders or disinterested directors or otherwise.
(d) Any repeal or modification of this Article EIGHTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer of
the Corporation existing at the time of such repeal or modification with respect
to any acts or omissions occurring prior to such repeal or modification.
NINTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of
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stockholders of the Corporation, and the ability of the stockholders to consent
in writing to the taking of any action is hereby specifically denied.
TENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the By-Laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
ELEVENTH: In furtherance and not in limitation of the powers conferred
upon it by the laws of the State of Delaware and by this Certificate of
Incorporation, the Board of Directors shall have the power to adopt, amend,
alter or repeal the Corporation's By-Laws. The affirmative vote of at least a
majority of the entire Board of Directors shall be required to adopt, amend,
alter or repeal the Corporation's By-Laws. The Corporation's By-Laws also may be
adopted, amended, altered or repealed by the affirmative vote of the holders of
at least eighty percent (80%) of the voting power of the shares entitled to vote
at an election of directors.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed in this Certificate of Incorporation, the
Corporation's By-Laws or the DGCL, and all rights herein conferred upon
stockholders are granted subject to such reservation; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation (and in
addition to any other vote that may be required by law), the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of the shares
entitled to vote at an election of directors shall be required to amend, alter,
change or repeal, or to adopt any provision as part of this Certificate of
Incorporation inconsistent with the purpose and intent of Articles FIFTH,
SIXTH, EIGHTH and ELEVENTH of this Certificate of Incorporation or this Article
TWELFTH.
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EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
OCTEL CORP.
(effective as of ____________, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - OFFICES.................................................................................1
Section 1. Registered Office..............................................................1
Section 2. Other Offices..................................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS...............................................................1
Section 1. Place of Meetings..............................................................1
Section 2. Annual Meetings................................................................1
Section 3. Special Meetings...............................................................2
Section 4. Quorum; Adjournments, Postponements and Cancellations..........................2
Section 5. Proxies........................................................................3
Section 6. Voting.........................................................................3
Section 7. Nature of Business at Meetings of Stockholders.................................4
Section 8. List of Stockholders Entitled to Vote..........................................5
Section 9. Stock Ledger...................................................................6
Section 10. Record Date. ................................................................6
Section 11. Inspectors of Election........................................................6
ARTICLE III - DIRECTORS.............................................................................7
Section 1. Number and Election of Directors...............................................7
Section 2. Nomination of Directors........................................................7
Section 3. Vacancies......................................................................9
Section 4. Duties and Powers..............................................................9
Section 5. Organization...................................................................9
Section 6. Resignations and Removals of Directors.........................................9
Section 7. Meetings......................................................................10
Section 8. Quorum........................................................................10
Section 9. Actions of Board..............................................................10
Section 10. Meetings by Means of Conference Telephone....................................11
Section 11. Committees...................................................................11
Section 12. Compensation.................................................................11
Section 13. Interested Directors.........................................................11
ARTICLE IV - OFFICERS..............................................................................12
Section 1. General.......................................................................12
Section 2. Election......................................................................12
Section 3. Voting Securities Owned by the Corporation....................................13
Section 4. Chairman of the Board of Directors............................................13
</TABLE>
i
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 5. President.....................................................................13
Section 6. Vice Presidents...............................................................14
Section 7. Secretary.....................................................................14
Section 8. Treasurer.....................................................................15
Section 9. Assistant Secretaries.........................................................15
Section 10. Assistant Treasurers.........................................................15
Section 11. Other Officers...............................................................16
ARTICLE V - STOCK..................................................................................16
Section 1. Form of Certificates..........................................................16
Section 2. Signatures....................................................................16
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates.............................16
Section 4. Transfers.....................................................................17
Section 5. Transfer and Registry Agents..................................................17
Section 6. Beneficial Owners.............................................................17
ARTICLE VI - NOTICES...............................................................................17
Section 1. Notices.......................................................................17
Section 2. Waivers of Notice.............................................................18
ARTICLE VII - GENERAL PROVISIONS...................................................................18
Section 1. Dividends.....................................................................18
Section 2. Disbursements.................................................................19
Section 3. Fiscal Year...................................................................19
Section 4. Corporate Seal................................................................19
ARTICLE VIII - INDEMNIFICATION.....................................................................19
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
than Those by or in the Right of the Corporation........................19
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation.........................................20
Section 3. Authorization of Indemnification..............................................20
Section 4. Good Faith Defined............................................................21
Section 5. Indemnification by a Court....................................................21
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 6. Expenses Payable in Advance...................................................22
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses...............................................................22
Section 8. Insurance.....................................................................22
Section 9. Certain Definitions...........................................................22
Section 10. Survival of Indemnification and Advancement of Expenses......................23
Section 11. Limitation on Indemnification................................................23
Section 12. Indemnification of Employees and Agents......................................23
ARTICLE IX - AMENDMENTS, ETC.......................................................................24
Section 1. Amendments....................................................................24
Section 2. Entire Board of Directors.....................................................24
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED BY-LAWS
OF
OCTEL CORP.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places, both within and without the State of Delaware, as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of
stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect directors, and transact
such other business as may properly be brought before the meeting. Written
notice of the annual meeting stating the place, date and hour of the meeting
shall be given to each stockholder entitled to vote at such meeting not less
than ten nor more than sixty days before the date of the meeting.
<PAGE> 6
Section 3. Special Meetings. Unless otherwise prescribed by
law or by the certificate of incorporation of the Corporation, as amended and
restated from time to time (the "Certificate of Incorporation"), special
meetings of stockholders may be called, for any purpose or purposes, by (i) the
Chairman of the Board of Directors, (ii) the President, or (iii) the Board of
Directors. The ability of the stockholders to call a special meeting of
stockholders is hereby specifically denied. At a special meeting of the
stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. Quorum; Adjournments, Postponements and
Cancellations.
(a) Except as otherwise required by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum.
(b) Whether or not a quorum is present, any annual or
special meeting of the stockholders may be adjourned to another date, without
notice other than announcement at the meeting, by the Chairman of the meeting or
by a majority vote of the shares represented at such meeting. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting not less than ten nor more than sixty days before the date of the
meeting.
(c) Any previously scheduled meeting of the
stockholders may be postponed, and (unless the Certificate of Incorporation
provides otherwise) any special meeting of the stockholders may be canceled, by
resolution of the Board of Directors upon public notice given prior to the date
previously scheduled for such meeting of the stockholders.
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<PAGE> 7
Section 5. Proxies. Any stockholder entitled to vote may do so
in person or by his or her proxy appointed by an instrument in writing
subscribed by such stockholder or by his or her attorney thereunto authorized,
delivered to the Secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date, unless such proxy
provides for a longer period. Without limiting the manner in which a stockholder
may authorize another person or other persons to act for him or her as proxy,
either of the following shall constitute a valid means by which a stockholder
may grant such authority:
(a) A stockholder may execute a writing authorizing
another person or other persons to act for such stockholder as proxy. Execution
may be accomplished by the stockholder or such stockholder's authorized officer,
director, employee or agent signing such writing or causing such stockholder's
signature to be affixed to such writing by any reasonable means, including, but
not limited to, by facsimile signature.
(b) A stockholder may authorize another person or
other persons to act for such stockholder as proxy by transmitting or
authorizing the transmission of a telegram or other means of electronic
transmission to the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram or other means of electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram or other electronic transmission was
authorized by the stockholder.
Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission authorizing another person or other persons to act as
proxy for a stockholder may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original writing
or transmission could be used; provided, however, that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
Section 6. Voting. At all meetings of the stockholders at
which a quorum is present, except as otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the total number of votes of the capital stock present in person or
represented by proxy and
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<PAGE> 8
entitled to vote on such question, voting as a single class. The Board of
Directors, in its discretion, or the officer of the Corporation presiding at a
meeting of stockholders, in his or her discretion, may require that any votes
cast at such meeting shall be cast by written ballot.
Section 7. Nature of Business at Meetings of Stockholders. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 7
and on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 7.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not less than sixty (60) days nor more than ninety (90) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which notice of the date of the annual meeting was mailed or public
announcement of the date of the annual meeting was made, whichever first occurs.
In no event shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as described
above.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the
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<PAGE> 9
name and record address of such stockholder, (iii) the class or series and
number of shares of capital stock of the Company which are owned beneficially or
of record by such stockholder, (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in such business and
(v) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 7, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 7 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
For purposes of this Section 7, "public announcement" shall
mean an announcement in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
Section 8. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
5
<PAGE> 10
Section 9. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 8 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 10. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
record date (a) in the case of determination of stockholders entitled to vote at
any meeting of stockholders or adjournment thereof, shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting; and (b) in the
case of any other action, shall not be more than sixty (60) days prior to such
other action. If no record date is fixed: (x) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (y) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 11. Inspectors of Election. In advance of any meeting
of stockholders, the Board by resolution or the Chairman or President shall
appoint one or more inspectors of election to act at the meeting and make a
written report thereof. One or more other persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is present, ready and willing to act at a meeting of stockholders, the
Chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Unless otherwise required by law, inspectors may be officers, employees
or agents of the Corporation. Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his or
her ability. The inspector shall have the duties prescribed by law and shall
6
<PAGE> 11
take charge of the polls and, when the vote is completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by law.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
Directors shall consist of not less than [__________] nor more than
[_________] members, the exact number of which shall be determined from time to
time by resolution adopted by the Board of Directors. Except as provided in
Section 3 of this Article III, directors shall be elected by the stockholders
at the annual meetings of stockholders, and each director so elected shall hold
office until such director's successor is duly elected and qualified, or until
such director's death, or until such director's earlier resignation or removal.
Directors need not be stockholders.
Section 2. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible
for election as directors of the Company, except as may be otherwise provided
in the Certificate of Incorporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board of Directors may be made at any annual meeting of stockholders, or at any
special meeting of stockholders called for the purpose of electing directors,
(a) by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (b) by any stockholder of the Company (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 2 and on the record date for the determination of stockholders
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section 2.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company (a) in the case of an annual meeting, not less than sixty (60) days nor
more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called
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<PAGE> 12
for a date that is not within thirty (30) days before or after such anniversary
date, notice by the stockholder in order to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which notice of the date of the annual meeting was mailed or public announcement
of the date of the annual meeting was made, whichever first occurs, and (b) in
the case of a special meeting of stockholders called for the purpose of electing
directors, not later than the close of business on the tenth (10th) day
following the day on which notice of the date of the special meeting was mailed
or public announcement of the date of the special meeting was made, whichever
first occurs. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class or series and number of shares of capital stock of
the Company which are owned beneficially or of record by such person and (iv)
any other information relating to such person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act, and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice (i) the name and
record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the Company which are owned beneficially or of record
by such stockholder, (iii) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in its
notice and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the
Company unless nominated in accordance with the procedures set forth in this
Section 2. If the Chairman of the meeting determines that a nomination was not
made in accordance
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with the foregoing procedures, the Chairman shall declare to the meeting that
the nomination was defective and such defective nomination shall be disregarded.
For purposes of this Section 2, "public announcement" shall
mean an announcement in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
Section 3. Vacancies. Subject to the terms of any one or more
classes or series of preferred stock, any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled by a majority
of the directors then in office, provided that a quorum is present, and any
other vacancy occurring on the Board of Directors may be filled by a majority of
the Board of Directors then in office, even if less than a quorum, or by a sole
remaining director. Notwithstanding the foregoing, whenever the holders of any
one or more class or classes or series of preferred stock of the Corporation
shall have the right, voting separately as a class, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
Certificate of Incorporation.
Section 4. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws required to be exercised or done by the stockholders.
Section 5. Organization. At each meeting of the Board of
Directors, the Chairman of the Board of Directors, or, in his or her absence, a
director chosen by a majority of the directors present, shall act as Chairman.
The Secretary of the Corporation shall act as Secretary at each meeting of the
Board of Directors. In case the Secretary shall be absent from any meeting of
the Board of Directors, an Assistant Secretary shall perform the duties of
Secretary at such meeting; and in the absence from any such meeting of the
Secretary and all the Assistant Secretaries, the Chairman of the meeting may
appoint any person to act as Secretary of the meeting.
Section 6. Resignations and Removals of Directors. Any
director of the Corporation may resign at any time, by giving written notice to
the Chairman of the Board of Directors, the President or the Secretary of the
Corporation. Such
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resignation shall take effect at the time therein specified or, if no time is
specified, immediately; and, unless otherwise specified in such notice, the
acceptance of such resignation shall not be necessary to make it effective.
Except as otherwise required by law and subject to the rights, if any, of the
holders of shares of preferred stock then outstanding, any director or the
entire Board of Directors may be removed from office at any time, but only for
cause, and only by the affirmative vote of the holders of at least a majority in
voting power of the issued and outstanding capital stock of the Corporation
entitled to vote in the election of directors.
Section 7. Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware. Regular meetings of the Board of Directors may be held at such time
and at such place as may from time to time be determined by the Board of
Directors and, unless required by resolution of the Board of Directors, without
notice. Special meetings of the Board of Directors may be called by the Chairman
of the Board of Directors, the Vice Chairman, if there be one, or a majority of
the directors then in office. Notice thereof stating the place, date and hour of
the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone, facsimile
or telegram on twenty-four (24) hours' notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 8. Quorum. Except as may be otherwise required by law,
the Certificate of Incorporation or these By-Laws, at all meetings of the Board
of Directors, a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting of the time
and place of the adjourned meeting, until a quorum shall be present.
Section 9. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
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Section 10. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 10 shall
constitute presence in person at such meeting.
Section 11. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent permitted by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 12. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary, or such other emoluments as the Board of Directors shall
from time to time determine. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 13. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a
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financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because such person's or their votes are counted for such
purpose if (i) the material facts as to such person's or their relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to such person's or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a Chairman
of the Board of Directors (who must be a director) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
Section 2. Election. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their earlier
resignation or removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative
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vote of a majority of the Board of Directors. Any vacancy occurring in any
office of the Corporation shall be filled by the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
Section 3. Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the President or any Vice
President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Except where by law the signature of
the President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him or her by these By-Laws or by the Board of
Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall execute all bonds, mortgages, contracts
and other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at
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all meetings of the stockholders and the Board of Directors. The President shall
be the Chief Executive Officer of the Corporation. The President shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him or her by these By-Laws or by the Board of
Directors.
Section 6. Vice Presidents. At the request of the President or
in his or her absence or in the event of his or her inability or refusal to act
(and if there be no Chairman of the Board of Directors), the Vice President or
the Vice Presidents if there is more than one (in the order designated by the
Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision the Secretary shall be. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and special meetings of the Board of Directors, and if there be
no Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his or her signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
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Section 8. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the Treasurer shall give the Corporation
a bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of Treasurer and for the restoration to the Corporation, in case of the
Treasurer's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the Treasurer's
possession or under control of the Treasurer belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his or her
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of the Treasurer's disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. If required
by the Board of Directors, an Assistant Treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of Assistant Treasurer and for the restoration to the Corporation, in case of
the Assistant Treasurer's death, resignation, retirement or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in the
Assistant Treasurer's possession or under control of the Assistant Treasurer
belonging to the Corporation.
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Section 11. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. The certificates representing
shares of all classes or series of Stock of the Corporation shall be in such
form or forms as shall be approved by the Board of Directors, or the
Corporation's stock may be represented by uncertificated shares. In the case of
certificated shares, the Corporation shall deliver certificates representing
shares to the stockholders of the Corporation entitled thereto. Certificates
representing such certificated shares shall be signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or the Vice President and
either the Treasurer, Chief Finance Officer, the Assistant Treasurer, the
Secretary or an Assistant Secretary and may, but shall not be required to, bear
the seal of the Corporation or a facsimile thereof. The signatures of such
officers upon the certificate may be facsimiles. In the event the original or
facsimile signature on a certificate is of an officer who has ceased to be an
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if such person were such officer at the date of its
issuance.
Section 2. Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates.
The Board of Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the
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issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such person's legal representative, to advertise the same in
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, properly endorsed for transfer
and payment of all necessary transfer taxes; provided, however, that such
surrender and endorsement or payment of taxes shall not be required in any case
in which the officers of the Corporation shall determine to waive such
requirement. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Cancelled," with the date of cancellation, by the
Secretary or Assistant Secretary of the Corporation or the transfer agent
thereof. No transfer of stock shall be valid as against the Corporation for any
purpose until it shall have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
Section 5. Transfer and Registry Agents. The Corporation may
from time to time maintain one or more transfer offices or agencies and registry
offices or agencies at such place or places as may be determined from time to
time by the Board of Directors.
Section 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of
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a committee or stockholder, such notice may be given by mail, addressed to such
director, member of a committee or stockholder, at such person's address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, facsimile, telex or cable.
Section 2. Waivers of Notice.
(a) Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at
a meeting, present by person or represented by proxy, shall constitute a waiver
of notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
(b) Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
members of a committee of directors need be specified in any written waiver of
notice unless so required by law, the Certificate of Incorporation or these
By-Laws.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Subject to the requirements of the
Delaware General Corporation Law and the provisions of the Certificate of
Incorporation, dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting of the
Board of Directors, and may be paid in cash, in property, or in shares of the
Corporation's capital stock. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for purchasing
any of the shares of capital stock, warrants, rights, options, bonds,
debentures, notes, scrip or other securities or evidences of indebtedness of the
Corporation, or for equalizing dividends, or for repairing or main-
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taining any property of the Corporation, or for any other proper purpose, and
the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings
Other than Those by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against 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 if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, such person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that such person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of
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the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders. To
the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
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Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article VIII, a person shall be deemed to
have acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
his or her conduct was unlawful, if such person's action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another enterprise
in the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section 1 or
2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery of the State of Delaware
or any other court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
21
<PAGE> 26
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any By-Law, agreement,
contract, vote of stockholders or disinterested directors or pursuant to the
direction (howsoever embodied) of any court of competent jurisdiction or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Section 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power or
the obligation to indemnify such person against such liability under the
provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director
22
<PAGE> 27
or officer of such constituent corporation serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VIII, references to
"fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director or officer with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer (or his or her heirs, executors or personal or legal representatives) or
advance expenses in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
23
<PAGE> 28
ARTICLE IX
AMENDMENTS, ETC.
Section 1. Amendments. These By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the Board of
Directors or by the stockholders as provided in the Certificate of
Incorporation.
Section 2. Entire Board of Directors. As used in these
By-Laws, the term "entire Board of Directors" means the total number of
directors which the Corporation would have if there were no vacancies.
24
<PAGE> 1
EXHIBIT 4.1
TRISH 4-6-98
NUMBER
NM
[SPECIMEN SEAL/CORPORATE SEAL]
CM ETHER 29 H-56005
COMMON
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
LOGO
SHARES
[PHOTO]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 675727 10 1
OCTEL CORP.
THIS CERTIFIES THAT
IS THE OWNER OF
FULL PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
OCTEL CORP. transferable on the books of the Corporation by the holder hereof
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate and the shares represented hereby are
issued and shall be held subject to all of the terms and provisions of the
Certificate of Incorporation and all amendments thereto, and the By-Laws of the
Corporation. This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
Witness the seal of the Corporation and the signatures of its duly
authorized officers.
Dated
COUNTERSIGNED AND REGISTERED:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
TRANSFER AGENT
AND REGISTRAR
BY: [SIG] [SIG]
AUTHORIZED SIGNATURE CHAIRMAN OF THE BOARD SECRETARY
<PAGE> 2
OCTEL CORP.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR
SERIES THEREOF WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
ANY SUCH REQUEST IS TO BE ADDRESSED TO THE SECRETARY OF THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ____________ Custodian ____________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act ______________________
survivorship and not as tenants (State)
in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
_______________________________________________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________________
_______________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated ______________________________
AFFIX MEDALLION SIGNATURE X___________________________________________
GUARANTEE IMPRINT BELOW (SIGNATURE)
X___________________________________________
(SIGNATURE)
____________________________________________
ABOVE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY
CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION SUCH AS A
SECURITIES BROKER/DEALER, COMMERCIAL BANK &
TRUST COMPANY, SAVINGS AND LOAN ASSOCIATION
OR A CREDIT UNION PARTICIPATING IN A
MEDALLION PROGRAM APPROVED BY THE SECURITIES
TRANSFER ASSOCIATION, INC.
<TABLE>
<S> <C>
- ------------------------------------------------------- ----------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY PRODUCTION COORDINATOR TRICIA O'CONNOR 215-830-2154
680 BlAIR MILL ROAD PROOF OF APRIL 1, 1998
HORSHAM, PA 19044 OCTEL CORP.
215-657-3480 H 56005bk
- ------------------------------------------------------- ----------------------------------------------------------------------
SALES PERSON P. SHEERIN - 1 708-599-0404 Opr. eg NEW
- ------------------------------------------------------- ----------------------------------------------------------------------
/home/ed/inprogress/home14/Octel/H56005 /net/banknote/home14/O
- ------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 4.2
________________________________________________________________________________
OCTEL CORP.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK,
Rights Agent
____________________________________________
Rights Agreement
Dated as of _______________, 1998
________________________________________________________________________________
<PAGE> 2
Table of Contents
Section Page
Section 1. Certain Definitions............................................1
Section 2. Appointment of Rights Agent....................................5
Section 3. Issue of Rights Certificates...................................5
Section 4. Form of Rights Certificates....................................7
Section 5. Countersignature and Registration..............................8
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates..........................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights...................................................10
Section 8. Cancellation and Destruction of Rights Certificates...........12
Section 9. Reservation and Availability of Capital Stock.................12
Section 10. Preferred Stock Record Date...................................14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights.........................................14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares....23
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.......................................................24
Section 14. Fractional Rights and Fractional Shares.......................26
Section 15. Rights of Action..............................................27
Section 16. Agreement of Rights Holders...................................28
Section 17. Rights Certificate Holder Not Deemed a Stockholder............29
Section 18. Concerning the Rights Agent...................................29
Section 19. Merger or Consolidation or Change of Name of Rights Agent.....29
Section 20. Duties of Rights Agent........................................30
i
<PAGE> 3
Section Page
Section 21. Change of Rights Agent........................................32
Section 22. Issuance of New Rights Certificates...........................33
Section 23. Redemption and Termination....................................33
Section 24. Exchange......................................................34
Section 25. Notice of Certain Events......................................36
Section 26. Notices.......................................................36
Section 27. Supplements and Amendments....................................37
Section 28. Successors....................................................38
Section 29. Determinations and Actions by the Board of Directors, etc.....38
Section 30. Benefits of This Agreement....................................38
Section 31. Severability..................................................38
Section 32. Governing Law.................................................39
Section 33. Counterparts..................................................39
Section 34. Descriptive Headings..........................................39
Exhibit A - Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock
Exhibit B - Form of Rights Certificate
ii
<PAGE> 4
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of ____________, 1998 (the "Agree-
ment"), between OCTEL CORP., a Delaware corporation (the "Company"), and FIRST
CHICAGO TRUST COMPANY OF NEW YORK, a New York trust company (the "Rights
Agent").
W I T N E S S E T H
WHEREAS, on ______________, 1998 (the "Rights Dividend
Declaration Date"), the Board of Directors of the Company authorized and
declared a dividend distribution of one Right for each share of common stock,
par value $0.01 per share, of the Company (the "Common Stock") to be issued in
the distribution of Common Stock (the "Spin-Off") by Great Lakes Chemical
Corporation, a Delaware corporation, to its stockholders, and has authorized and
directed the issuance of one Right (as such number may be hereinafter adjusted
pursuant to Section 11(i) or 11(p) hereof) for each share of Common Stock of the
Company issued between the record date of the Spin-Off (the "Record Date") and
the Distribution Date and, in certain circumstances provided in Section 22
hereof, after the Distribution Date, each Right initially representing the right
to purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock of the Company having the rights, powers and preferences set
forth in the Exhibit A attached hereto, upon the terms and subject to the condi-
tions hereinafter set forth (the "Rights").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include:
(i) the Company,
(ii) any Subsidiary of the Company,
(iii) any employee benefit plan of the Company
or of any Subsidiary of the Company,
(iv) any Person organized, appointed or
established by the Company for or pursuant to the terms of any such
plan,
<PAGE> 5
(v) any Person who has reported or is required
to report such ownership (but less than 25%) on Schedule 13G under the
Exchange Act (or any comparable or successor report) or on Schedule 13D
under the Exchange Act (or any comparable or successor report) which
Schedule 13D does not state any intention to or reserve the right to
control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such Schedule
(other than the disposition of the Common Stock) and, within 10
Business Days of being requested by the Company to advise it regarding
the same, certifies to the Company that such Person acquired shares of
Common Stock representing in excess of 14.9% of the outstanding Common
Stock inadvertently or without knowledge of the terms of the Rights and
who, together with all Affiliates and Associates, thereafter does not
acquire additional shares of Common Stock while the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding, provided,
however, that if the Person described in this clause (v) is requested
to so certify and fails to do so within 10 Business Days, then such
Person shall become an Acquiring Person immediately after such 10
Business Day period or
(vi) any Person who shall have become an
Acquiring Person solely as the result of an acquisition of Common Stock
by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by a
Person to 15% or more of the Common Stock of the Company then
outstanding as determined above; provided, however, that such Person
shall be deemed to be an Acquiring Person if such Person shall have
become the Beneficial Owner of 15% or more of the Common Stock of the
Company then outstanding (as determined in this clause (vi)) solely by
reason of repurchases of Common Stock by the Company and at any time,
after such repurchases, shall have become the Beneficial Owner of any
additional shares of Common Stock by any means whatsoever.
(b) "Adverse Person" shall mean any Person declared to
be an Adverse Person by the Board of Directors upon determination that the
criteria set forth in Section 11(a)(ii)(B) apply to such Person; provided,
however, that the Board of Directors shall not declare any Person who is the
Beneficial Owner of 10% or more of the outstanding Common Stock of the Company
to be an Adverse Person if such Person has reported or is required to report
such ownership on Schedule 13G under the Exchange Act (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or any comparable
or successor report) which Schedule 13D does not state any intention to or
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 of such Schedule
(other than the disposition of the Common
2
<PAGE> 6
Stock) so long as such Person neither reports nor is required to report such
ownership other than as described in this proviso to Section 1(b).
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended and as in
effect on the date of this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, other rights, warrants or options,
or otherwise; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or
any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange or (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of
a Triggering Event;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of (as determined pursuant
to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a
result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or
not in writing), for the
3
<PAGE> 7
purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this
paragraph (d)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (d) shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
(e) "Board of Directors" shall mean the board of
directors of the Company.
(f) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
(g) "Close of business" on any given date shall mean
5:00 P.M., New York City time, on such date; provided, however, that if such
date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the
next succeeding Business Day.
(h) "Common Stock" shall mean the common stock, par
value $0.01 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(i) "Distribution Date" shall have the meaning
ascribed to such term in Section 3(a) hereof.
(j) "Current Market Price" shall have the meaning
ascribed to such term in Section 11(d) hereof.
(k) "Exchange Act" shall have the meaning ascribed to
such term in Section 1(c) hereof.
(l) "Expiration Date" shall have the meaning ascribed
to such term in Section 7 hereof.
(m) "Original Rights" shall have the meaning ascribed
to such term in Section 1(d)(i) hereof.
(n) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
4
<PAGE> 8
(o) "Preferred Stock" shall mean shares of Series A
Junior Participating Preferred Stock, par value $0.01 per share, of the Company,
and, to the extent there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, par value $0.01 per share, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Junior Participating Preferred Stock.
(p) "Purchase Price" shall have the meaning ascribed
to such term in Section 7(b).
(q) "Record Date" shall mean __________ ___, 1998.
(r) "Rights" shall have the meaning ascribed to such
term in the Recitals.
(s) "Rights Certificate" shall have the meaning
ascribed to such term in Section 3(a).
(t) "Section 11 Event" shall mean any event described
in Section 11(a)(ii)(A) or (B) hereof.
(u) "Section 13 Event" shall mean any event described
in clauses (x), (y) or (z) of Section 13(a) hereof.
(v) "Securities Act" shall have the meaning ascribed
to such term in Section 9(c).
(w) "Stock Acquisition Date" shall mean the first date
of public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(x) "Subsidiary" shall mean, with reference to any
Person, any corporation of which an amount of voting securities sufficient to
elect at least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.
(y) "Triggering Event" shall mean any Section 11 Event
or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of
5
<PAGE> 9
the Common Stock) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of business on
the tenth day after the Stock Acquisition Date (or, if the tenth day after the
Stock Acquisition Date occurs before the Record Date, the close of business on
the Record Date), (ii) the close of business on the tenth Business Day (or such
later date as the Board of Directors shall determine) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company or any Person organized, appointed or established by the Company for
or pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
or (iii) the close of business on the tenth Business Day after the Board of
Directors determines, pursuant to the criteria set forth in Section 11(a)(ii)(B)
hereof, that a Person is an Adverse Person (the earliest of clauses (i), (ii)
and (iii) being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of paragraph (b) of this Section
3) by the certificates for the Common Stock registered in the names of the
holders of the Common Stock (which certificates for Common Stock shall be deemed
also to be certificates for Rights) and not by separate certificates, and (y)
the Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). As soon
as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more right certificates,
in substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(i) or
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date, the transfer of any certificates representing shares of Common Stock
6
<PAGE> 10
in respect of which Rights have been issued shall also constitute the transfer
of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of
Common Stock which are issued (whether originally issued or delivered from the
Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date or, in certain circumstances provided
in Section 22 hereof, after the Distribution Date. Certificates representing
such shares of Common Stock shall also be deemed to be certificates for Rights,
and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between Octel
Corp. (the "Company") and First Chicago Trust Company of New York,
dated as of__________ ___, 1998, as from time to time amended (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices
of the Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or an
Adverse Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and
void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election
to purchase and of assignment to be printed on the reverse thereof) shall each
be substantially in the form set forth in Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with
7
<PAGE> 11
any rule or regulation of any stock exchange on which the Rights may from time
to time be listed, or to conform to usage. Subject to the provisions of Section
11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall
be dated as of the Record Date and on their face shall entitle the holders
thereof to purchase such number of one one-thousandths of a share of Preferred
Stock as shall be set forth therein at the price set forth therein (such
exercise price per one one-thousandth of a share, the "Purchase Price"), but the
amount and type of securities purchasable upon the exercise of each Right and
the Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a) or Section 22 hereof that represents Rights beneficially owned by (i) an
Acquiring Person, an Adverse Person or any Associate or Affiliate of an
Acquiring Person or Adverse Person, (ii) a transferee of an Acquiring Person or
Adverse Person (or of any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person or Adverse Person becomes such, or (iii) a transferee
of an Acquiring Person or Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or Adverse
Person to holders of equity interests in such Acquiring Person or Adverse Person
or to any Person with whom such Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person,
Adverse Person or an Affiliate or Associate of an Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement).
Accordingly, this Rights Certificate and the Rights represented hereby
may become null and void in the circumstances specified in Section 7(e)
of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed
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<PAGE> 12
any of the Rights Certificates shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by the
Company, such Rights Certifi cates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its principal office or offices designated as
the appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section
7(e) and Section 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Certificates (other than Rights Certificates
representing Rights that have been exchanged pursuant to Section 24 hereof) may
be transferred, split up, combined or exchanged for another Rights Certificate
or Certificates, entitling the registered holder to purchase a like number of
one one-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the principal office or offices of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate or Certificates until the registered
holder shall have completed and signed the certificate contained in the form of
assignment set forth on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Sections
4(b), 7(e), 14 and 24 hereof, countersign and deliver to the Person entitled
thereto a Rights Certificate or Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to
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<PAGE> 13
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) Subject to Section 7(e) hereof, the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 23(a) hereof) in whole or in part at any time after the Distribution
Date upon surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly executed, to the
Rights Agent at the principal office or offices of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price with
respect to the total number of one one-thousandths of a share of Preferred Stock
(or other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
close of business on ___________, 2008 (the "Final Expiration Date"), (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof, or
(iii), the time at which such Rights are exchanged pursuant to Section 24
hereof (the earliest of clauses (i), (ii) and (iii) being herein referred to as
the "Expiration Date").
(b) The Purchase Price for each one one-thousandth of
a share of Preferred Stock pursuant to the exercise of a Right shall initially
be $_____, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below ("Purchase Price").
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, accompanied by payment, with respect to
each Right so exercised, of the Purchase Price per one one-thousandth of a share
of Preferred Stock (or other shares, securities, cash or other assets, as the
case may be) to be purchased as set forth below and an amount equal to any
applicable transfer tax, the Rights Agent shall, subject to Section 20(k)
hereof, thereupon promptly (i) (A) requisition from any transfer agent of the
shares of Preferred Stock (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the total number of one
one-thousandths of a share of Preferred Stock to be
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<PAGE> 14
purchased, and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of shares of Preferred Stock issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one one-thousandths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Company. In the event that
the Company is obligated to issue other securities (including Common Stock) of
the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
would be issued.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11 Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an Associate
or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an
Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person or Adverse Person becomes such,
or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom the Acquiring
Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has in its sole discretion determined is part of a
plan,
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<PAGE> 15
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action, and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or Adverse Person or any of their respective Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
out of its authorized and unissued shares of Common Stock and/or other
securities or out of any authorized and issued shares held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, shares of Common Stock and/or other securities) that, as
provided in this Agreement including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and/or
other securities) issuable
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<PAGE> 16
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that it
is reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date after the first
occurrence of a Section 11 Event on which the consideration to be delivered by
the Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), or as soon
as is required by law following the Distribution Date, as the case may be, a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained or the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all one one-thousandths of a
share of Preferred Stock (and, following the occurrence of a Triggering Event,
shares of Common Stock and/or other securities) delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable.
Section 10. Preferred Stock Record Date. Each person in whose
name any certificate for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall
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<PAGE> 17
for all purposes be deemed to have become the holder of record of such
fractional shares of Preferred Stock (or Common Stock and/or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares
(fractional or otherwise) on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Stock (or Common Stock and/or
other securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a stockholder of the Company
with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of Preferred
Stock or capital stock, as the case may be, issuable on such date,
shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of
the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such date and at
a time when the Preferred Stock transfer books of the Company were
open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment
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<PAGE> 18
provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) In the event:
(A) any Person shall become an
Acquiring Person, unless the event causing such Person to become an
Acquiring Person is a transaction set forth in Section 13(a) hereof, or
is an acquisition of shares of Common Stock pursuant to a tender offer
or exchange offer for all outstanding shares of Common Stock at a
price and on terms determined by at least a majority of the members of
the Board of Directors who are not officers of the Company and who are
not representatives, nominees, Affiliates or Associates of an
Acquiring Person, after receiving advice from one or more investment
banking firms, to be (a) at a price which is fair to stockholders
(taking into account all factors which such members of the Board deem
relevant, including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (a "Qualifying Offer"),
or
(B) the Board of Directors of the
Company shall declare any Person to be an Adverse Person, upon a
determination that such Person, alone or together with its Affiliates
and Associates, has, at any time after this Agreement has been filed
with the Securities and Exchange Commission as an exhibit to a filing
under the Exchange Act, become the Beneficial Owner of a number of
shares of Common Stock which the Board of Directors of the Company
determines to be substantial (which number of shares shall in no event
represent less than 10% of the outstanding shares of Common Stock) and
a determination by the Board of Directors of the Company, after
reasonable inquiry and investigation, including consultation with such
persons as such directors shall deem appropriate and consideration of
such factors as are permitted by applicable law, that (a) such
Beneficial Ownership by such Person is intended to cause the Company to
repurchase the shares of Common Stock beneficially owned by such Person
or to cause pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide such Person
with short-term financial gain under circumstances where the Board of
Directors determines that the best long-term interests of the Company
would not be served by taking such action or entering into such
transaction or series of transactions at that time or (b) such
Beneficial Ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to
maintain its competitive position) on the business or prospects of the
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<PAGE> 19
Company, on the Company's employees, customers or suppliers or on the
communities in which the Company operates or is located,
then, promptly following the occurrence of any event described in Section
11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof, at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one one-thousandths of a share of Preferred Stock, such number of
shares of Common Stock as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the then number of one one-thousandths of a share
of Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11 Event, and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by 50%
of the Current Market Price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
(iii) In the event that the number of shares
of Common Stock which are authorized by the Company's Certificate of
Incorporation, but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights, are not sufficient to
permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the Company shall:
(A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") over (2)
the Purchase Price (such excess, the "Spread"), and (B) with respect to
each Right, subject to Section 7(e) hereof, make adequate provision to
substitute for the Adjustment Shares, upon the exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of
preferred stock, such as the Preferred Stock, which the Board of
Directors of the Company has deemed to have essentially the same value
or economic rights as shares of Common Stock (such shares or units of
shares of preferred stock are referred to herein as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets,
or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value (less the amount of any reduction in the
Purchase Price), where such aggregate value has been determined by the
Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors
of the Company; provided, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first occurrence
of a Section 11 Event and (y) the date on which the Company's right of
re-
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<PAGE> 20
demption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Board of Directors of the Company shall determine
in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be extended
to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action
should be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section
7(e) hereof, that such action shall apply uniformly to all outstanding
Rights, and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek stockholder
approval for such authorization of additional shares and/or to decide
the appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the value of
each Adjustment Share shall be the Current Market Price per share of
the Common Stock on the Section 11(a)(ii) Trigger Date and the per
share or per unit value of any Common Stock Equivalent shall be deemed
to have the Current Market Price per share of the Common Stock on such
date.
(b) In case the Company shall fix a record date for
the issuance of rights (other than the Rights), options or warrants to all
holders of Preferred Stock entitling them to subscribe for or purchase (for a
period expiring within forty-five (45) calendar days after such record date)
Preferred Stock (or shares having the same rights, privileges and preferences as
the shares of Preferred Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred stock at a price per
share of Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the Current Market Price per share of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Pre-
17
<PAGE> 21
ferred Stock and/or equivalent preferred stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such Current Market Price
per share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Stock for the thirty (30) consecutive Trading Days immediately
prior to such date, and for purposes of computations made pursuant to
Section 11(a)(iii) hereof, the "Current Market Price" per share of
Common Stock on any date shall be deemed to be the average of the daily
closing
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<PAGE> 22
prices per share of such Common Stock for the ten (10) consecutive
Trading Days immediately following such date; provided, however, that
in the event that the Current Market Price per share of Common Stock is
determined during a period following the announcement by the issuer of
the Common Stock of (A) any dividend or distribution on such Common
Stock, payable in shares of such Common Stock or securities convertible
into shares of such Common Stock (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Stock, and
the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification shall not
have occurred prior to the commencement of the requisite thirty (30)
Trading Day period or ten (10) Trading Day period, as set forth above,
then, and in each such case, the "Current Market Price" shall be
properly adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange
or, if the shares of Common Stock are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such
other system then in use, or, if on any such date the shares of Common
Stock are not quoted by any such system, the average of the closing bid
and asked prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the
Common Stock, the fair value of such shares on such date as determined
in good faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, "Current Market Price"
per share shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall
be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "Current Market Price" per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock
in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share of Preferred Stock
19
<PAGE> 23
cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in
clause (i) of this Section 11(d), the "Current Market Price" per share
of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events
as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied
by the Current Market Price per share of the Common Stock. If neither
the Common Stock nor the Preferred Stock is publicly held or so listed
or traded, "Current Market Price" per share of the Preferred Stock
shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding,
no adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share or one millionth of a share of Preferred Stock,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which mandates
such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock other
than Preferred Stock, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of one
one-thousandths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price,
20
<PAGE> 24
that number of one one-thousandths of a share of Preferred Stock (calculated to
the nearest one-millionth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-thousandths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a share of Preferred
Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
one one-thousandths of a share and the number of one one-thousandths of a share
which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated value, if any, of
the number of one one-thousandths
21
<PAGE> 25
of a share of Preferred Stock issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable such number of one one-thousandths of a share of Preferred Stock
at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such record
date the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of Preferred Stock at less than the Current Market Price,
(iii) issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall
not, at any time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would
22
<PAGE> 26
constitute, the "Principal Party" for purposes of Section 13(a) hereof shall
have received a distribution of Rights previously owned by such Person or any of
its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
(q) The failure of the Board of Directors to declare a
Person to be an Adverse Person following such Person becoming the Beneficial
Owner of shares of Common Stock representing 10% or more of the outstanding
shares of Common Stock shall not imply that such Person is not an Adverse Person
or limit the Board of Directors' right at any time in the future to declare such
Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 and Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) mail a brief summary thereof to each holder of a Rights Certificate (or,
if prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
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<PAGE> 27
(a) In the event that, following the Stock Acquisition
Date, directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case (except as may
be contemplated by Section 13(d) hereof), proper provision shall be made so
that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section 11 Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-thousandths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11 Event by
the Purchase Price in effect immediately prior to such first occurrence) and
dividing that product (which, following the first occurrence of a Section 13
Event shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the Current Market Price per share of
the Common Stock of such Principal Party on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of any
Section 13 Event.
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<PAGE> 28
(b) "Principal Party" shall mean:
(i) in the case of any transaction described
in clause (x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities for or into which shares of Common
Stock of the Company are converted in such merger or consolidation, and
if no securities are so issued, the Person that is the other party to
such merger or consolidation; and
(ii) in the case of any transaction
described in clause (z) of the first sentence of Section 13(a), the
Person that is the party receiving the greatest portion of the assets
or earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13
Event unless the Principal Party shall have a sufficient number of authorized
shares of its Common Stock which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any such Section 13
Event, the Principal Party will:
(i) prepare and file a registration
statement under the Securities Act, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Expiration Date;
(ii) use its best efforts to qualify or
register the Rights and the securities purchasable upon exercise of the
Rights under blue sky laws of such jurisdiction, as may be necessary or
appropriate; and
25
<PAGE> 29
(iii) will deliver to holders of the Rights
historical financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the first occurrence of a Section 11 Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons (or a wholly-owned Subsidiary of any such
Person or Persons) who acquired shares of Common Stock pursuant to a Qualifying
Offer, (ii) the price per share of Common Stock offered in such transaction is
not less than the price per share of Common Stock paid to all holders of shares
of Common Stock whose shares were purchased pursuant to such Qualifying Offer,
and (iii) the form of consideration being offered to the remaining holders of
shares of Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such Qualifying Offer. Upon consummation of any
such transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such system, the
26
<PAGE> 30
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock). In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-thousandth of a share
of Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-thousandth of a share of Preferred
Stock shall be one one-thousandth of the closing price of a share of Preferred
Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event,
the Company shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price per share of Common Stock (determined pursuant
to Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the
Rights expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
Section 15. Rights of Action. All rights of action in respect
of this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this
27
<PAGE> 31
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the Rights Agent and
only if surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates fully
executed;
(c) subject to Section 6(a) and Section 7(f) hereof,
the Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
one one-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
28
<PAGE> 32
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or shareholder services business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided, however, that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time
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<PAGE> 33
any of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person or Adverse Person and the determination of "Current Market Price") be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only
for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
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<PAGE> 34
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company or any designee of any of the foregoing, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
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(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or the form of election to purchase, as the
case may be, has either not been completed or indicates an affirmative response
to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by any registered
holder of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any registered holder of a
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of New York or
Delaware (or of any other state of the United States so long as such corporation
is authorized to do business as a banking institution in the State of New York
or Delaware), in good standing, having a principal office in the State of New
York or Delaware which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a com
bined capital and surplus of at least $100,000,000 and which shall otherwise
meet any requirements imposed by the New York Stock Exchange on transfer agents
and registrars. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any
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such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the Rights, Rights Agreement or the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the Stock Acquisition Date (or,
if the Stock Acquisition Date shall have occurred prior to the Record Date, the
close of business on the Record Date), or (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$0.01 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). Notwithstanding the foregoing, the Board of Directors may not redeem
any Rights following a determination pursuant to Section 11(a)(ii)(B) that any
Person is an Adverse Person. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11 Event until such time as the Company's right of
redemption set forth in the first sentence of this Section 23(a) has expired.
The Company may, at its option, pay the Redemption Price in cash, shares of
Common Stock (based on the Current
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Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person or is
determined to be an Adverse Person pursuant to Section 11(a)(ii)(B), exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of fifty percent (50%) or more of the Common Stock then
outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such
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notice of exchange will state the method by which the exchange of the Common
Stock for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(e) hereof) held by each holder of
Rights.
(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute shares of Preferred Stock (or equivalent
preferred stock, as such term is defined in paragraph (b) of Section 11 hereof)
for shares of Common Stock exchangeable for Rights, at the initial rate of one
one-thousandth of a share of Preferred Stock (or equivalent preferred stock)
for each share of Common Stock, as appropriately adjusted to reflect adjustments
in the voting rights of the Preferred Stock pursuant to Section 3(A) of the
rights, powers and preferences attached hereto as Exhibit A, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of
Common Stock shall have the same voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue
fractions of shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of Common
Stock, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional share of Common Stock would otherwise be
issuable, an amount in cash equal to the same fraction of the Current Market
Value of a whole share of Common Stock. For the purposes of this subsection (e),
the "Current Market Value" of a whole share of Common Stock shall be the closing
price of a share of Common Stock (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or
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(iv) to effect any consolidation or merger into or with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one transaction or
a series of related transactions, of more than 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to effect
the liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock, whichever
shall be the earlier.
(b) In case any Section 11 Event shall occur, then, in
any such case, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or other
securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Attention: Graham Leathes
Associated Octel
P. O. Box 17 Oil Sites Road
Ellesmere Port
South Wirral L65 4HF
ENGLAND
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Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
______________________
[ADDRESS]
Attention: ___________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 27,
the Company and, if so directed by the Company, the Rights Agent, shall
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock and associated
Rights. From and after the Distribution Date and subject to the penultimate
sentence of this Section 27, the Company may and the Rights Agent shall, if the
Company so directs, supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order to: (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period hereunder, or (iv) change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person, Adverse Person or an Affiliate or Associate of an
Acquiring Person or Adverse Person); provided, however, that this Agreement may
not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than an
Acquiring Person or Adverse Person and its Associates and Affiliates). Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.
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Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock or any other class of capital stock outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board to
any liability to the holders of the Rights.
Section 30. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Without limiting the foregoing, if any provision requiring a majority of the
members of the Board of Directors who are not officers of the Company and who
are not representatives, nominees,
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Affiliates or Associates of an Acquiring Person to act is held by any court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
such determination shall be made by the Board of Directors of the Company in
accordance with applicable law and the Company's Certificate of Incorporation
and Bylaws.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be performed entirely within such state.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an origi nal, and all such counterparts shall together
constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: OCTEL CORP.
By _______________________ By _____________________
Name: Name: Graham M. Leathes
Title: Title: General Counsel
Attest: __________________
________, as Rights Agent
By _______________________ By _____________________
Name: Name:
Title: Title:
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EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
of
OCTEL CORP.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officer of Octel Corp., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), in accordance with the provisions of Section 103
thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the said Corporation,
the said Board of Directors on __________ ___, 1998 adopted the following
resolution creating a series of ___________ shares of Preferred Stock designated
as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Restated Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be ___________.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Junior Participating
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last day of March, June, September and December
in each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the
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<PAGE> 45
first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock,
par value $0.10 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after__________ ___, 1998 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution
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<PAGE> 46
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A
Junior Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period,
all holders of Preferred Stock (including holders of the Series A
Junior Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2)
directors.
(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that such voting right shall not be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right.
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<PAGE> 47
At any meeting at which the holders of Preferred Stock shall exercise
such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect directors to fill
such vacancies, if any, in the Board of Directors as may then exist up
to two (2) directors or, if such right is exercised at an annual
meeting, to elect two (2) directors. If the number which may be so
elected at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to make such
increase in the number of directors as shall be necessary to permit the
election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect directors in
any default period and during the continuance of such period, the
number of directors shall not be increased or decreased except by vote
of the holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari passu with
the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of
special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the President, a Vice-President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to this
Paragraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him or her at his or her last
address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 20 days and not
later than 60 days after such order or request or in default of the
calling of such meeting within 60 days after such order or request,
such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding. Not
withstanding the provisions of this Paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their right
to elect two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining directors theretofore elected by the
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<PAGE> 48
holders of the class of stock which elected the director whose office
shall have become vacant. References in this Paragraph (C) to directors
elected by the holders of a particular class of stock shall include
directors elected by such directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to
elect directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and (z) the
number of directors shall be such number as may be provided for in the
certificate of incorporation or by-laws irrespective of any increase
made pursuant to the provisions of Paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner
provided by law or in the certificate of incorporation or by-laws). Any
vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled by a
majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Participating Preferred Stock, except dividends paid
ratably on the Series A Junior Participating Preferred Stock and all
such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or
A-5
<PAGE> 49
upon liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred
Stock, or any shares of stock ranking on a parity with the Series A
Junior Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
there to, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to 1,000 times the Purchase Price, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as
set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Junior Participating Pre-
A-6
<PAGE> 50
ferred Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstand ing immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Pre ferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Amendment. The Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the
A-7
<PAGE> 51
powers, preferences or special rights of the Series A Junior Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
Section 10. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holders fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred Stock.
A-8
<PAGE> 52
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this __ day of __________, 1998.
OCTEL CORP.
_______________________________
Name:
Title:
A-9
<PAGE> 53
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- _______Rights
NOT EXERCISABLE AFTER__________ ___, 2008 OR EARLIER IF REDEEMEDBY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.]1
Rights Certificate
OCTEL CORP.
This certifies that _________________, or registered assigns,
is the registered holder of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of__________ ___, 1998 (the "Rights Agreement"),
between OCTEL CORP., a Delaware corporation (the "Company"), and
______________________, a _______________ (the "Rights Agent"), to purchase from
the Company at any time prior to 5:00 PM (New York City time) on ___________
____, 2008, at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one one-thousandth of a fully-paid,
nonassessable share of Series A Junior Participating Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $_____ per one
one-thousandth of a share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase set
_________________________
1 The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
<PAGE> 54
forth on the reverse hereof and the Certificate contained therein duly executed.
The Purchase Price shall be paid in cash. The number of Rights evidenced by this
Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number of Rights, number and Purchase Price as of __________ ___,
1998, based on the Preferred Stock as constituted at such date, and are subject
to adjustment upon the happening of certain events as provided in the Rights
Agreement. The Company reserves the right to require prior to the occurrence of
a Triggering Event (as such term is defined in the Rights Agreement) that a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.
Upon the occurrence of a Section 11 Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person, Adverse Person, Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person who,
concurrently with or after such transfer, became an Acquiring Person, Adverse
Person or an Affiliate or Associate of an Acquiring Person or Adverse Person,
such Rights shall become null and void and no holder hereof shall have any
rights whatsoever with respect to such Rights from and after the occurrence of
such Section 11 Event.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-thousandths
of a share of Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or
Certificates representing the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.01 per Right at any time prior to the earlier of the
close of business on (i) the fifteenth day following
B-2
<PAGE> 55
the Stock Acquisition Date (as such time period may be extended or shortened
pursuant to the Rights Agreement) or (ii) the Final Expiration Date. In
addition, the Rights may be exchanged, in whole or in part, for shares of Common
Stock, or shares of preferred stock of the Company having essentially the same
value or economic rights as such shares. Immediately upon the action of the
Board of Directors of the Company authorizing any such exchange, and without any
further action or any notice, the Rights (other than Rights which are not
subject to such exchange) will terminate and the Rights will only enable holders
to receive the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary receipts),
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder, as such, of this Rights Certificate shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
the shares of Preferred Stock or of any other securities of the Company which
may at any time be issuable on the exercise hereof, nor shall anything contained
in the Rights Agreement or herein be construed to confer upon the holder hereof,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _____________, _____
ATTEST: OCTEL CORP.
________________________ By________________________
Secretary Title:
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<PAGE> 56
Countersigned:
[RIGHTS AGENT]
By________________________
Authorized Signature
B-4
<PAGE> 57
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
Please print social security or other
identifying number of the transferor:________________________
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto:
_____________________________________________________
(Please print name and address of transferee)
_____________________________________________________
(Please print social security or other
identifying number of the transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: __________________, 19__
______________________________
Signature
Signature Guaranteed:__________________________
<PAGE> 58
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse Person.
Dated:_________________, 19__ _________________________
Signature
Signature Guaranteed:________________________
NOTICE
The signatures to the foregoing Assignment and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 59
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to
exercise Rights represented by the Rights Certificate.)
To: OCTEL CORP.
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Rights Certificate to purchase the shares
of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
____________________________________________
(Please print name and address)
____________________________________________
(Please print social security or other
identifying number)
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
____________________________________________
(Please print name and address)
____________________________________________
(Please print social security or other
identifying number)
Dated:_______________, _____
________________
Signature
Signature Guaranteed:__________________________
<PAGE> 60
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being exercised by or on behalf of a Person who is or was an Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse.
Dated:_________________, _____ _________________________
Signature
Signature Guaranteed:________________________
NOTICE
The signatures to the foregoing Assignment and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.1
TAX DISAFFILIATION AGREEMENT
TAX DISAFFILIATION AGREEMENT (the "Agreement") dated as of April __, 1998
by and between Great Lakes Chemical Corporation, a Delaware corporation
("Company"), and Octel Corp., a Delaware corporation and a direct, wholly-owned
subsidiary of the Company ("Octel").
RECITALS
WHEREAS:
A. The Company is the common parent of an affiliated group of corporations
within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the members of the affiliated group have heretofore
joined in filing consolidated Federal income Tax Returns.
B. The Company expects, pursuant to the Transfer and Distribution
Agreement dated as of April , 1998 (the "Distribution Agreement") by and
between the Company and Octel, to spin-off its interest in assets relating to
the Lead Alkyls Business (as defined below), the Performance Chemicals Business
(as defined below) and the Petroleum Specialties Business (as defined
below)(collectively the "Petroleum Additives Business") to its shareholders.
In furtherance of this decision, among other things (i) Subsidiaries (as
hereinafter defined) of the Company intend to transfer certain assets to
Subsidiaries of Octel, (ii) Subsidiaries of Octel intend to transfer certain
assets to Subsidiaries of the Company, (iii) Great Lakes Europe Limited, a
limited company formed under the laws of England and Wales and a wholly owned
subsidiary of the Company, intends to distribute on or before the Distribution
Date (as hereinafter defined) all the equity it owns in Octel Associates, a
partnership existing under the laws of England and Wales that has elected or
will elect to be treated as a corporation for United States Federal tax
purposes (the "Internal Distribution"), (iv) the Company intends on or before
the Distribution Date to transfer all the equity of Octel Associates it owns
and other assets to Octel and/or its Subsidiaries, and (v) the Company intends
to distribute (the "External Distribution") on the Distribution Date
<PAGE> 2
pro rata to the holders of its common stock all of the outstanding shares of
the common stock of Octel (the Internal Distribution and the External
Distribution are referred to collectively as the "Distributions").
C. The Company and Octel intend the Distributions to be tax-free
transactions under Section 355 of the Code. After the External Distribution,
neither Octel nor any of its Subsidiaries will be affiliated with the Company
for Tax (as hereinafter defined) purposes.
D. The Company and Octel desire on behalf of themselves, their
Subsidiaries and their successors to set forth their rights and obligations
with respect to Taxes due for periods before and after the External
Distribution.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement,
1.1 "Code" shall have the meaning set forth on page 1 of this Agreement.
1.2 "Company" shall have the meaning set forth on page 1 of this
Agreement.
1.3 "Company Group" shall mean, for any period, the Company and its
Subsidiaries.
1.4 "Distributions" shall have the meaning set forth on pages 1 and 2 of
this Agreement.
1.5 "Distribution Agreement" shall have the meaning set forth on page 1
of this Agreement.
1.6 "Distribution Date" shall mean the last day on which, due to the
External Distribution, Octel
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could be considered a member of the affiliated group of which the Company is
the common parent.
1.7 "Ernst & Young Tax Analysis" shall mean the tax analysis prepared and
issued by Ernst & Young and dated as of the date of this Agreement, with
respect to the United Kingdom Tax consequences of the Reorganization
Transactions.
1.8 "External Distribution" shall have the meaning set forth on page 1 of
this Agreement.
1.9 "Final Determination" shall mean with respect to any issue (1) a
decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (2) a closing agreement entered into under
Section 7121 of the Code or any other binding settlement agreement (whether or
not with the Internal Revenue Service or U.K. Inland Revenue) entered into in
connection with or in contemplation of an administrative or judicial
proceeding, or (3) the completion of the highest level of administrative
proceedings if a judicial contest is not or is no longer available.
1.10 "Indemnitee" shall have the meaning set forth in Section 4.2.
1.11 "Indemnitor" shall have the meaning set forth in Section 4.2.
1.12 "Internal Distribution" shall have the meaning set forth on page 1
of this Agreement.
1.13 "Lead Alkyls Business" shall have the meaning set forth in the
Distribution Agreement.
1.14 "Lender's Liens" shall have the meaning set forth in the
Distribution Agreement.
1.15 "Octel" shall have the meaning set forth on page 1 of this
Agreement.
1.16 "Octel America" shall mean Octel America, Inc., an indirect wholly
owned subsidiary of the Company.
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1.17 "Octel Group" shall mean, for any period, Octel and its
Subsidiaries.
1.18 "Payor" shall have the meaning set forth in Section 2.5.
1.19 "Payee" shall have the meaning set forth in Section 2.5.
1.20 "Performance Chemicals Business" shall have the meaning set forth in
the Distribution Agreement.
1.21 "Period After Distribution" shall mean any tax year or other tax
period beginning after the Distribution Date and, in the case of any tax year
or other tax period that begins before and ends after the Distribution Date,
that part of the tax year or other tax period that begins after the close of
the Distribution Date.
1.22 "Period Before Distribution" shall mean any tax year or other tax
period that ends on or before the Distribution Date and, in the case of any tax
year or other tax period that begins before and ends after the Distribution
Date, that part of the tax year or other tax period through the close of the
Distribution Date.
1.23 "Petroleum Additives Business" shall have the meaning set forth on
page 1 of this Agreement.
1.24 "Petroleum Specialties Business" shall have the meaning set forth in
the Distribution Agreement.
1.25 "Reorganization Transactions" shall mean collectively (i) the
transactions described under the heading "Proposed Transactions" in the letter
ruling issued by the Internal Revenue Service on March 13, 1998, and (ii) the
transactions described in the Ernst & Young Tax Analysis.
1.26 "Restriction Period" shall mean the two-year period that begins on
the day after the Distribution Date.
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1.27 "Subsidiary" shall mean a current or former corporation, partnership,
joint venture or other business entity where 50% or more of the outstanding
equity or voting power of such entity is owned directly or indirectly by the
Company or Octel. Notwithstanding anything to the contrary in this Agreement,
in determining whether a Subsidiary is a Subsidiary of Octel or the Company with
respect to any period under the Agreement, Octel shall not be considered a
Subsidiary of the Company, and any Subsidiary of Octel immediately after the
Distribution Date shall be considered a Subsidiary of Octel (and not of the
Company) for all periods before and after the Distribution Date.
1.28 "Tax" or "Taxes" means all taxes, charges, fees, levies, imposts,
duties and other assessments, including, without limitation, income, gross
receipts, excise, personal property, real property, sales, ad valorem,
value-added, withholding, social security, occupation, use, service, service
use, leasing, leasing use, license, payroll, franchise, transfer and recording
taxes, fees and charges, imposed by the United States or any state, local, or
foreign governmental authority whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include (including
without limitation regarding any duty to reimburse another party for
indemnified Taxes or refunds or credit of Taxes) any interest, fines, penalties
and additional amounts attributable to, imposed on, or with respect to, any
such taxes, charges, fees, levies, imposts, duties or other assessments, and
interest thereon.
1.29 "Tax Returns" shall mean all returns, reports, statements or company
accounts to be filed or that may be filed for any period with any Tax authority
(whether domestic or foreign) in connection with any Tax or Taxes (whether
domestic or foreign). For purposes of this Agreement, the return of profits of
Octel Associates provided to U.K. Inland Revenue shall be deemed to be a
corporation tax return.
1.30 "Underpayment Rate" shall mean the rate specified under Section
6621(c) of the Code for the applicable period.
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<PAGE> 6
ARTICLE II
TAX RETURNS, TAX PAYMENTS AND EVENT OF LOSS
2.1 Obligation to Prepare and File Tax Returns.
(a) Company's Obligation to File Tax Returns. The Company shall
timely file (or cause to be filed):
(i) all Tax Returns that are filed on a consolidated,
combined or unitary basis and include the Company or any member of
the Company Group,
(ii) all Tax Returns that are filed on a separate basis
with respect to any member of the Company Group, and
(iii) all Tax Returns that are filed with respect to any
member of the Octel Group for any Tax year or period ending on or
before December 31, 1997.
Subject to the obligations set forth in Section 2.3(d), the Company shall have
sole and absolute discretion to take or not take a position in and with respect
to any Tax Return that it is required to file or cause to be filed hereunder;
provided, however, the Company shall not take a position on such Returns that
is not consistent with past practice (other than with respect to the
Reorganization Transactions) that would increase the tax liability of the Octel
Group.
(b) Octel's Obligation to Prepare or File Tax Returns. Octel
shall prepare (or cause to be prepared) in accordance with past practice
pro forma copies of:
(i) Octel America's 1997 Federal income Tax Return and
Octel America's 1998 Federal income Tax Return (for the tax year that
began on January 1, 1998, and that will end for Federal income tax
purposes on the Distribution Date),
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(ii) Octel America's 1997 and 1998 apportionment
schedules for purposes of preparing its United States state income
and franchise Tax Returns, and
(iii) all Tax Returns of each member of the Octel
Group for its 1997 Tax year.
In each case, Octel will deliver copies of such Tax Returns or apportionment
schedules to the Company at least 45 days prior to the due dates (taking into
account all extensions which are granted as a matter of right) of such Tax
Returns or the due dates of Octel America's Tax Returns to which the
apportionment schedules relate. Except as provided in Section 2.1(a)(iii)
above, Octel shall timely file (or cause to be filed) any Tax Return with
respect to the Octel Group or any of its members, provided, however, that at
least 45 days prior to the filing of any such Tax Return with respect to the
tax year or period beginning on January 1, 1998, Octel shall deliver (or cause
to be delivered) a copy of such Tax Return to the Company for its review and
approval (which approval shall not be unreasonably withheld) before submission.
In the case of the 1998 Tax Return of Octel Associates, such income Tax Return
shall also include an allocation of income among those persons that owned an
interest in Octel Associates during 1998 (determined on a pro rata basis,
excluding goodwill, unless otherwise provided for in the Octel Associates
partnership agreement). Each such Tax Return shall be consistent with the
obligations set forth in Section 2.3(d).
2.2 Obligation to Remit Taxes. The Company and Octel shall each remit
or cause to be remitted any Taxes due in respect of any Tax for which it is
required to file a Tax Return under this Agreement and shall be entitled to
reimbursement for such payments only to the extent provided in Section 2.3
below and in the manner set forth in Section 2.5. Notwithstanding the
foregoing, at least 30 days prior to the due date (taking into account all
extensions which are granted as a matter of right) of any Tax Returns which the
Company is required to file pursuant to Section 2.1(a)(iii), the Company shall
deliver copies of such Tax Returns to Octel, and at least 10 days prior to the
due date of such Tax Returns, Octel shall remit to the Company the amount of
Taxes
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<PAGE> 8
shown as due on such Tax Returns that is attributable to a member of the Octel
Group, provided, however, that Octel shall not be responsible for Taxes of
Octel or Octel America or for Taxes attributable to Reorganization Transactions
except to the extent provided in Section 2.3(b)(iv) and Section 2.3(c).
2.3 Certain Tax Sharing Obligations and Prior Agreements.
(a) Company Tax Sharing Obligations. Except as provided in
Section 2.3(b) hereof, and consistent with Section 2.4(b) of this Agreement,
the Company shall be liable for and shall hold the Octel Group harmless against:
(i) any liability of any member of the Company Group
(other than any liability of any member of the Company Group with
respect to its interest in Octel Associates for the period January 1,
1998, through and including the Distribution Date) for Taxes,
regardless of whether attributable to a Period Before Distribution
or a Period After Distribution, including any such Tax liability
asserted against any member of the Octel Group under the provisions
of Treas. Reg. Section 1.1502-6(a) that impose several liability on
members of an affiliated group of corporations that files consolidated
returns, or similar provisions of any foreign, state or local law,
(ii) any liability of Octel or Octel America for Taxes
attributable to a Period Before Distribution,
(iii) except as set forth in Section 2.3(b)(iv) or
Section 2.3(c), any incremental Tax liability attributable to a
Period Before Distribution of the Octel Group resulting solely from
the Reorganization Transactions that would not have been incurred if
such Reorganization Transactions had not been undertaken, and
(iv) any corporation income tax liability imposed directly
against Octel Asso-
8
<PAGE> 9
ciates attributable to a Period Before Distribution (and not
attributable to any member of the Company Group with respect to
its interest in Octel Associates).
The Company shall be entitled to any refund (including without limitation any
refund with respect to advance corporation tax relating to any dividend paid
during or with respect to any Period Before Distribution) or credit of Taxes
which is attributable to both an entity and a taxable year or taxable period
for which the Company has liability hereunder or has otherwise paid (and Octel
will, or will cause each member of the Octel Group to promptly pay to the
Company any such refund or credit received by Octel or any member of the Octel
Group). Octel or Octel America shall not be entitled to any compensation from
the Company or any member of the Company Group in the event that Octel or Octel
America has a net operating loss, capital loss, credit or other tax attribute
in a Period Before Distribution and such tax attribute is used to reduce the
Taxes otherwise payable by a member of the Company Group for a Period Before
Distribution.
(b) Octel Tax Sharing Obligations. Consistent with Section
2.4(b) of this Agreement, Octel shall be liable for and Octel shall hold the
Company Group harmless against:
(i) any liability of any member of the Octel Group
(other than Octel or Octel America with respect to a Period Before
Distribution) for Taxes, regardless of whether attributable to a
Period Before Distribution or a Period After Distribution, including
any such Tax liability asserted against any member of the Company
Group under any provision of law that imposes several liability on
related corporations or entities, except to the extent Section
2.3(a)(iii) above applies,
(ii) any liability of Octel or Octel America for Taxes
attributable to a Period After Distribution,
(iii) any liability attributable to any member of the
Company Group for Taxes
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<PAGE> 10
with respect to its interest in Octel Associates for the period
January 1, 1998, through and including the Distribution Date, and
(iv) any Tax liability attributable to any member of the
Octel Group or the Company Group (including, without limitation,
any such liability resulting from the Reorganization
Transactions) arising out of or resulting from (aa) the breach
by any member of the Octel Group of any of the representations,
warranties, covenants or agreements of Octel set forth in this
Agreement (including, without limitation, the representations,
warranties, covenants and agreements set forth in Sections
2.3(d), (e) and (f) hereof) or the Distribution Agreement, (bb)
any action taken by any member of the Octel Group that breaches
any of the representations, or is contrary to the stated
assumptions, conditions, or facts set forth in the Ernst & Young
Tax Analysis, or (cc) any member of the Octel Group engaging in
any of the transactions set forth in Section 2.3(e)(i)-(iv),
regardless of whether Octel has obtained a ruling from the
Internal Revenue Service reasonably satisfactory to the Company
that the proposed transaction will not adversely affect the Tax
treatment of the Distribution.
Octel's indemnity obligations pursuant to Section 2.3(b)(i-iv) above
will be absolute, unconditional and not subject to reduction or set-off;
provided, however, for an indemnity obligation arising under this
Subsection 2.3(b)(iv)(aa) above, wherein Octel has breached a
representation set forth in Section 2.3(f) or breached the covenant set
forth in 2.3(e)(iv), and such breach is the only act or omission by
Octel that contributes to a Final Determination of Tax liability, Octel
will be entitled to reduce the amount of indemnity payments to be made
to the Company hereunder to the extent, and only to the extent, such
Final Determination of Tax liability is also caused by actions taken by
the Company (such reduction in indemnity payments to be equal to the
percentage of total Tax liability that equals
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<PAGE> 11
the percentage of fault attributable to the Company in causing such Tax
liability).
Subject to the limitations set forth in Section 3.2 below, Octel shall
be entitled to any refund or credit of Taxes which is attributable to
both an entity and a taxable year or taxable period for which Octel has
liability hereunder or has otherwise paid (and the Company will or will
cause each member of the Company Group to promptly pay to Octel such
refund or credit received by any of the Company or member of the Company
Group).
(c) Stamp Duty. Octel agrees and undertakes that it shall not
at any time cause or permit (i) any executed original or counterpart of this
Agreement or any other agreement executed in connection with the Reorganization
Transactions to be brought into the United Kingdom or (ii) the registration of
any of the assets transferred pursuant to the Reorganization Transactions.
Notwithstanding the foregoing, the stock of The Associated Octel Company
Limited (UK) may be registered by Octel Associates upon receipt thereof from
Great Lakes (Europe) Limited; provided, however, the Company shall have the
right to control the registration of such stock and the valuation thereof, and
Octel covenants and agrees it shall not, and shall cause its Subsidiaries not
to, take any position contrary to such registration and valuation and shall
cause its Subsidiaries to cooperate in any claims or declarations necessary to
obtain relief or exemption in respect of any stamp taxes in relation to the
transfer of such stock. The Company shall pay any transfer or stamp taxes
arising in connection with the Reorganization Transactions unless Octel has
breached any of its obligations in Section 2.3(c)(i) and (ii) above, or Octel
or its Subsidiaries takes a position contrary to the Company's control of the
registration or valuation of the stock of The Associated Octel Company Limited,
in which event Octel shall pay such transfer or stamp taxes. The Company and
Octel agree and understand that they shall not argue, plead or in any way raise
in any civil proceeding, arbitration, quasi arbitration or mediation, any
allegation to the effect that this Agreement or any other agreement executed in
connection with the Reorganization Transactions is inadmissable in any such
proceeding by reason of it not bearing a stamp or that a certified copy thereof
is not adequate evidence of its terms.
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(d) Reporting Obligations. Each of the Company and Octel agrees
to (i) report the Distributions as tax-free transactions under Section 355 of
the Code on all Tax Returns and other filings, and (ii) take no position or
make any statement that is inconsistent with the treatment of the Distributions
as tax-free transactions under Section 355, any ruling contained in the letter
ruling issued or to be issued by the Internal Revenue Service, or the Ernst &
Young Tax Analysis. Neither the Company nor Octel shall, nor shall they permit
any of their respective Subsidiaries to, report on any Tax Return, communicate
with any Tax authority, or take any position in any Tax proceeding inconsistent
with the treatment of the Distributions as tax-free transactions under Section
355 of the Code or otherwise adversely affect the Company Group's tax treatment
of the Reorganization Transactions (including, without limitation, the Company
Group's Tax positions regarding allocation of Taxes for foreign tax credit
purposes or distributions from U.K. entities to U.S. entities as distributions
of previously taxed income).
(e) Covenants Specific to Distributions -- Restrictions on the
Operations of Octel. Until the first day after the Restriction Period, Octel
covenants and agrees that no member of the Octel Group:
(i) shall fail to continue the active conduct of the
Petroleum Additives Business through officers and employees of
members of the Octel Group (and not through independent contractors),
(ii) shall liquidate, transfer, dispose of, or otherwise
discontinue the conduct of any material portion or segment of the
Octel Group's business; provided, however, that a disposition of
operating assets of the Octel Group that, taking into account prior
transactions occurring within the Restriction Period, constitute no
more than 30% of the gross fair market value of the Octel Group's
assets (as of the Distribution Date) shall not be subject to this
Section 2.3(e)(ii),
(iii) shall (aa) solicit one or more persons to make a
tender offer for the
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stock or equity of any member of the Octel Group, (bb) participate
in or support any unsolicited tender offer for stock or equity of
any member of the Octel Group, or (cc) participate in or approve
any proposed business combination or transaction, in each case
which, taking into account prior transactions occurring within the
Restriction Period, results in one or more persons owning 50% or
more of the voting power or value of the stock or equity of any
member of the Octel Group; and
(iv) shall redeem or otherwise acquire from any
person, any common stock or other equity securities of Octel;
provided, however, that purchases meeting the requirement of
Section 4.05(1)(b) of Rev. Proc. 96-30 shall not constitute a
redemption or acquisition of equity securities of Octel;
unless in the case of matters involving Sections 2.3(e)(i-iv) above,
Octel has previously obtained a ruling from the Internal Revenue Service,
reasonably satisfactory to the Company in form and content, to the effect
that such proposed transaction will not adversely affect the tax treatment
of the Distributions. The foregoing notwithstanding, the Company Group
shall be indemnified and held harmless by Octel in accordance with Section
2.3(b)(iv) without regard to the fact that Octel may have received a
ruling from the Internal Revenue Service pursuant to this Section 2.3(e)
and such ruling was reasonably satisfactory to the Company. In the event
a transaction is proposed that is described within this Section 2.3(e),
Octel shall, promptly upon becoming aware of such transaction, deliver
written notice to the Company in which it describes in sufficient detail
such proposed transaction. The Company shall keep such proposed
transaction confidential (except it may disclose such proposed transaction
to its agents, to enforce its rights under this Agreement, or as may
otherwise be required by law).
(f) Representations Specific to Distribution Tax Matters. Octel
hereby represents and warrants that it has examined copies of the Internal
Revenue Service ruling request dated September 11, 1997 and the
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supplements thereto dated September 25, 1997, October 24, 1997, November 11,
1997, November 17, 1997, December 12, 1997, March 13, 1998, March 13, 1998,
March 16, 1998, and the Internal Revenue Service private letter ruling issued to
the Company dated March 13, 1998 and, to Octel's best knowledge after due
inquiry, to the extent descriptive of Octel and its Subsidiaries or the
Petroleum Additives Business (including, without limitation, the representations
in such ruling documents to the extent that they relate to the plans, proposals,
intentions or policies of Octel or its Subsidiaries), the facts presented and
the representations made therein are true and correct, except to the extent that
any such facts or representations:
(i) set forth facts about the Company or any member
of the Company Group;
(ii) by their terms, express the opinions of the
management of the Company regarding the management, operation or
financial prospects or results of Octel or its Subsidiaries;
(iii) describe or characterize the views of investors
or analysts in the investment community with respect to Octel's or
its Subsidiaries' financial prospects or results;
(iv) describe or characterize the purpose of the
Company management for the Distribution; or
(v) set forth legal conclusions.
(g) Termination of Existing Agreements. Except as set forth in
this Agreement and in consideration of the mutual indemnities and other
obligations of this Agreement, any and all existing tax sharing agreements and
prior practices regarding Taxes and their payment, allocation, or sharing
between (i) any member of the Company Group and (ii) any member of the Octel
Group, shall be terminated as of the Distribution Date.
(h) Transfer Pricing.
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(i) If, as a result of any investigations by any
Tax authority, any member of the Company Group is deemed for Tax
purposes to have entered into a transaction with any member of
the Octel Group on a non arms length basis and is accordingly
taxed in respect of a sum greater than that (if any) actually
received, or is granted relief in respect of a sum that is less
than the sum that was actually paid, Octel shall or shall
procure (subject to all necessary cooperation being given by the
relevant member of the Company Group) that a reference shall be
made to the Competent Authority under any relevant Double
Taxation Agreement with a view to achieving a corresponding
adjustment in respect of such non arms length transaction. To
the extent that any member of the Octel Group receives relief
for Tax as a result of any such corresponding adjustment whether
pursuant to a relevant Double Taxation Agreement or Section 770
Income and Corporation Taxes Act 1988, Octel shall or shall
procure that a sum equal to the Tax saved shall be paid to the
counterparty that was subject to the initial adjustment such sum
to be payable (a) (where such relief is given by way of
reduction of Tax) on the last day on which the Tax saved would
otherwise have been payable without interest or penalty for late
payment or (b) (where such relief is given by reimbursement of
Tax) forthwith upon receipt of any payment in respect of such
relief. All reasonable costs incurred by the party providing
such cooperation (including costs of outside advisors and
attorneys) shall be borne by or reimbursed by the party for
whose benefit such cooperation is given.
(ii) If, as a result of any investigation by any
Tax authority, any member of the Octel Group is deemed for Tax
purposes to have entered into a transaction with any member of
the Company Group on a non arms length basis and is accordingly
taxed in respect of a sum greater than that (if any) actually
received, or is granted relief in respect of a sum that is less
than the sum that was
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actually paid, the Company shall or shall procure (subject to
all necessary cooperation being given by the relevant member of
the Octel Group) that a reference shall be made to the Competent
Authority under any relevant Double Taxation Agreement with a
view to achieving a corresponding adjustment in respect of such
non arms length transaction. To the extent that any member of
the Company Group receives relief for Tax as a result of any such
corresponding adjustment whether pursuant to a relevant Double
Taxation Agreement or Section 770 Income and Corporation Taxes Act
1988, the Company shall or shall procure that a sum equal to the
Tax saved shall be paid to the counterparty that was subject to the
initial adjustment, such sum to be payable (a) (where such relief
is given by way of reduction of Tax) on the last day on which the
Tax saved would otherwise have been payable without interest or
penalty for late payment or (b) (where such relief is given by
reimbursement of Tax) forthwith upon receipt of any payment in
respect of such relief. All reasonable costs incurred by the party
providing such cooperation (including costs of outside advisors and
attorneys) shall be borne by or reimbursed by the party for whose
benefit such cooperation is given.
(iii) For purposes of this Section 2.3(h), "Double
Taxation Agreement" means any convention between two nation
states for the elimination of double taxation, and "Competent
Authority" means, in accordance with the terms of any relevant
Double Taxation Agreement, the Tax authority responsible for
administering any mutual agreement procedure contained in such
Double Taxation Agreement. The agreements set forth in this
Section 2.3(h) shall apply notwithstanding any other provision
of this Agreement.
2.4 Period That Includes the Distribution Date.
(a) Closing of the Tax Year. The Tax year of the members of the
Octel Group and the members of
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the Company Group shall, to the extent permitted by law or administrative
practice, be treated as closing at the close of business on the Distribution
Date. The parties agree that the Tax year of Octel America and Octel will
close for Federal income tax purposes at that time, and further agree that one
of the Tax Returns to be filed by the Company pursuant to Section 2.1 of this
Agreement is the consolidated Federal income Tax Return of the Company Group
for the tax year that begins January 1, 1998 and that will include Octel
America and Octel for the period beginning on January 1, 1998 and ending at the
close of business on the Distribution Date. The parties further agree that
such short Tax year is a Period Before Distribution under this Agreement and
that such Tax Return properly does, and will, include all transactions
occurring through and including the Distribution Date, including the
Reorganization Transactions.
(b) Interim Closing of the Tax Year. Except as otherwise
provided in Section 2.1(b), if it is necessary for purposes of this Agreement
to determine the Tax liability of any member of the Company Group or the Octel
Group for a Tax year that begins on or before and ends after the Distribution
Date and is not treated under law or administrative practices as closing at the
close of the Distribution Date, the determination shall be made by assuming
that such member of the Octel Group or of the Company Group had a tax year that
ended at the close of the Distribution Date, except that exemptions, allowances
or deductions that are calculated on an annual basis shall be apportioned on a
per diem basis.
2.5 Payments. To the extent that a party owes money (the "Payor") to
another party (the "Payee") pursuant to this Article II, the Payor shall pay
the Payee, no later than the later to occur of (i) 30 days after the Payor
receives the Payee's calculations or (ii) the earlier to occur of 10 days prior
to the due date of the relevant Tax Return (including an estimated Tax Return)
or the payment date for the Tax. The Payee shall submit its calculation of the
amount required to be paid pursuant to this Article II, including sufficient
detail to permit the Payor to understand the basis of such calculation. The
Payor shall have the right to disagree with such calculations and any such
dispute shall be resolved in accordance with Article VII of this Agreement;
provided, however, that the Payor will pay all undisputed
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amounts in accordance with the time frames specified above. All payments
required to be made hereunder shall be made in immediately available funds
denominated in United States dollars. To the extent any Tax liability that
results in an indemnification obligation hereunder is calculated in a currency
other than United States dollars, that amount shall be translated into United
States dollars using the average of the most recent bid and asked spot rates
published in the Wall Street Journal on the earlier of (i) the date the
indemnification is made or (ii) the date the indemnification is due.
2.6 Interest. Any payment required by this Agreement which is not
made on or before the date provided hereunder shall bear interest after such
date at the Underpayment Rate.
ARTICLE III
CARRYBACKS AND REFUNDS
3.1 Carrybacks. Without the prior consent of the Company, which
consent shall be given only in the sole and absolute discretion of the Company,
no member of the Octel Group shall carry back from a Period After Distribution
to a Period Before Distribution any net operating loss, credit, capital loss or
other Tax attribute; provided, however, that if any such net operating loss,
credit, capital loss or other Tax attribute must, under applicable foreign law,
be carried back, such loss, credit or attribute may be carried back (to the
extent required by applicable foreign law) and the Company shall cooperate in
filing for such carryback (pursuant to Octel's reasonable request).
3.2 Amended Returns; Refunds. Except as set forth in Section 3.1, no
member of the Octel Group shall file an amended Tax Return with respect to a
Period Before Distribution or otherwise make any claim for a refund or credit
of Taxes paid with respect to a Period Before Distribution without the consent
of the Company, which consent shall be given only in the sole and absolute
discretion of the Company.
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ARTICLE IV
TAX AUDITS
4.1 General. Except as provided in Section 4.2, each of Octel and the
Company shall have sole responsibility for all audits or other proceedings with
respect to Tax Returns that it is required to file under Section 2.1.
4.2 Indemnified Claims. The Company or Octel shall promptly notify
the other in writing of any proposed adjustment (including any inquiry
regarding foreign Taxes) to a Tax Return that may result in liability, or
entitlement to refund, of the other party (the "Indemnitor") under this
Agreement. The Indemnitor shall have the option of assuming sole
responsibility for contesting the proposed adjustment by providing written
notice to the other party (the "Indemnitee") of its intention to do so within
20 days of receiving written notice of the proposed adjustment; provided,
however, that notwithstanding anything to the contrary herein, with respect to
a proposed adjustment relating to Taxes for which Octel potentially could
reduce its indemnity liability under Section 2.3(b) (unless Octel agrees in
writing to forego any such potential reduction) (i) the Company shall be
entitled to control any proceeding relating to any such Taxes to the extent
such Taxes could be included on a Tax Return of a member of the Company Group;
(ii) the Company shall not settle any such proceeding without the consent of
Octel (such consent not to be unreasonably withheld), (iii) Octel and its
representatives, at Octel's expense, shall be entitled to participate in all
conferences and meetings relating to such proceeding with any Tax authority,
and (iv) the Company shall provide Octel and its representatives with any
documentation, protests, memoranda of fact and law and briefs prior to their
submission in connection with such proceeding and the Company shall consider
any comments that Octel may have with respect to such documents. If the
Indemnitor elects to assume responsibility for contesting a proposed
adjustment, it may employ counsel of its choice at the Indemnitor's expense.
In addition, the Indemnitor shall provide the Indemnitee with information
concerning the proposed adjustments and shall permit the Indemnitee and its
representatives to participate in the
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<PAGE> 20
proceeding at the Indemnitee's expense. If the Indemnitor does not exercise
its options within such 20 day period, the Indemnitee shall be permitted (but
not obligated) to contest or settle the proposed adjustment. If the Indemnitor
does not exercise such option and the Indemnitee contests or settles the
proposed adjustment, the Indemnitor shall reimburse the Indemnitee for the
reasonable expenses incurred (including professional fees) in such contest.
4.3 Payment of Audit Assessments. The obligation for payment or
entitlement to refund of the Indemnitor shall be limited to the net increase or
net decrease in tax liability resulting (for all past and future periods) from
a change in tax treatment required by a Final Determination. The obligation or
entitlement of the Indemnitor shall be adjusted to reflect the present value of
the increase and/or decrease in future tax liabilities of the Indemnitee
resulting from the change in tax treatment using, with respect to tax periods
prior to the date of such Final Determination, the highest marginal tax rate of
the applicable taxing jurisdiction known to be applicable to the entities, tax
periods and items involved, and with respect to tax periods thereafter, using
the highest marginal tax rate of the applicable taxing jurisdiction scheduled
to be in effect as of the date of such Final Determination with respect to the
entities and items involved, and using a discount rate equal to the
Underpayment Rate in effect as of the date of such Final Determination. In
each case, actual or projected Tax liabilities denominated in currencies other
than the United States dollar shall be converted into United States dollars
based upon the average of the most recent bid and asked spot rates published in
the Wall Street Journal on or prior to the date of the Final Determination.
Such conversion into United States dollars shall take place before Tax
liabilities are discounted to their present value as described in the second
sentence of this Section 4.3.
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<PAGE> 21
ARTICLE V
COOPERATION
The Company and Octel shall cooperate (and shall cause their respective
Subsidiaries to cooperate) with each other in the filing and execution of any
Tax Returns (including, without limitation, elections to "check the box" under
Federal Tax law as reasonably requested by the Company) and the conduct of any
audit or other proceeding and each shall execute and deliver such powers of
attorney and make available such other documents and employees as are necessary
to carry out the intent of this Agreement or to obtain any private letter
ruling in connection with the transactions contemplated hereunder (including
without limitation Section 2.3(e) hereof). Each party agrees to notify the
other party of any audit adjustments that do not result in Tax liability, but
can be reasonably expected to affect Tax Returns of the other party, or any of
its Subsidiaries. Each party agrees to treat the Internal and External
Distributions for all income tax purposes as tax-free transactions pursuant to
Section 355(a) of the Code, unless and until there has been a Final
Determination that the Internal or External Distribution, as the case may be,
is not a tax-free transaction under Section 355(a) of the Code.
ARTICLE VI
RETENTION OF RECORDS; ACCESS
The Company Group and the Octel Group shall each (a) until the
expiration of the relevant statute of limitations (including any extensions of
which it has actual notice), retain records, documents, accounting data and
other information (including computer data) necessary for the preparation and
filing of all Tax Returns in respect of Taxes of the Company Group or the Octel
Group or for the audit of such Tax Returns; and (b) give to the other party
reasonable access to and copies of such records, documents, accounting data and
other information (including computer data) and to its personnel (insuring
their cooperation) and premises, for the
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<PAGE> 22
purpose of the review or audit of such Tax Returns to the extent relevant to
an obligation or liability of a party under this Agreement. Prior to
destroying any records, documents, data or other information in accordance with
this Article, the party wishing to destroy such items will give the other party
a reasonable opportunity to obtain such items (at such other party's expense).
Any information provided under this Agreement shall be kept strictly
confidential and shall not be disclosed by the party to which such information
is provided, other than to its agents or to the extent required by law or
requested by a Taxing authority.
ARTICLE VII
DISPUTES
Any controversy or claim arising out of or relating to this Agreement
shall be finally determined as follows:
7.1 General. If the parties disagree as to the calculation of any Tax
or the amount of (but not liability for) any payment to be made under this
Agreement, the parties shall cooperate in good faith to resolve any such
dispute, and any agreed-upon amount shall be paid to the appropriate party. If
the parties are unable to resolve any such dispute within 15 days after notice
has been given by one party to the other of the existence of the dispute, such
dispute shall be resolved by an internationally recognized accounting firm
acceptable to both the Company and Octel, which firm has not performed auditing
services for either party or their Subsidiaries within the prior five years.
For purposes of this paragraph, to the extent practicable, disputes primarily
regarding (i) U.K. Taxes shall be arbitrated in the London office of such firm,
(ii) U.S. Taxes shall be arbitrated in the New York office of such firm, and
(iii) other foreign Taxes shall be arbitrated in the principal office of such
firm. In the event the parties are unable to agree on the selection of an
accounting firm, the selection of an accounting firm shall be made by the
American Arbitration Association. The decision of such firm shall be final and
binding. The fees and expenses incurred in connection with such decision shall
be borne equally by the Company and Octel. Following the decision
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<PAGE> 23
of such accounting firm, the parties shall each take (or cause to be taken) any
action that is necessary or appropriate to implement such decision, including,
without limitation, the prompt payment of underpayments or overpayments, with
interest calculated on such overpayments and underpayments at the Underpayment
Rate from the date such payment was due (the due date of payments governed by
Section 2.5 of this Agreement shall be the date a payment is due thereunder
assuming the party does not dispute the amount owed) through the date such
underpayment or overpayment is paid or refunded.
7.2 Judicial Proceeding. The parties agree that New York has a
substantial relationship to the Distributions, and each party consents to
personal jurisdiction in the courts of New York and further agree that all
claims or controversies between the parties arising out of or relating to this
Agreement, other than those provided for in Section 7.1, shall be finally
determined by the federal and state courts sitting in New York, New York.
7.3 Injunctive Relief. The parties acknowledge that the Company would
be damaged irreparably in the event any of the warranties, covenants or
agreements of any member of the Octel Group set forth herein was not performed
in accordance with its specific terms or was otherwise breached and that money
damages would be an inadequate remedy for any such nonperformance or breach.
Therefore, the Company or its assigns shall be entitled, in addition to any
other rights and remedies existing in their favor, to an injunction or
injunctions to prevent any breach or threatened breach of any such warranties,
covenants or agreements and to enforce such provisions specifically (without
posting a bond or other security). The parties further acknowledge and agree
that this Section 7.3 is an essential part of the bargained-for consideration
of this Agreement.
ARTICLE VIII
TERMINATION OF LIABILITIES
All representations, warranties and covenants under this Agreement
shall survive indefinitely.
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<PAGE> 24
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Notices and Governing Law.
(a) All notices required or permitted to be given pursuant to
this Agreement shall be in writing and shall be deemed to have been duly given
(i) on the date of service if served personally on the party to whom notice is
given, (ii) on the day of transmission if sent via facsimile transmission to
the facsimile number given below, provided facsimile confirmation of receipt is
obtained promptly after completion of transmission, (iii) on the third business
day after delivery by an overnight courier service, provided receipt of
delivery is confirmed, or (iv) 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 the Company:
Great Lakes Chemical Corporation
One Great Lakes Boulevard
West Lafayette, Indiana 47906
United States
Attn: Vice President and General Counsel
Facsimile: (765) 497-6660
If to Octel:
Octel Corp.
c/o The Associated Octel Company Limited
P.O. Box 17, Oil Sites Road
Ellesmere Port
South Wirral L65 4HF
United Kingdom
Attn: Senior Vice President and General
Counsel
Facsimile: 44-151-356-6239
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<PAGE> 25
Any party may change its address by giving the other party written
notice of its new address in the manner set forth above.
(b) New York law, without regard to principles of conflicts of
law, shall govern the interpretation of this Agreement.
9.2 Treatment of Payments. The parties hereto shall treat any
payments made pursuant to the terms of this Agreement as a capital transaction
for all Tax purposes, except to the extent such payments represent interest
paid pursuant to Section 2.6.
9.3 Binding Effect; No Assignment; Third Party Beneficiaries. This
Agreement shall be binding on, and shall inure to the benefit of, the parties
and their respective successors and assigns. The Company and Octel hereby
guarantee the performance of all actions, agreements and obligations provided
for under this Agreement of each member of the Company Group and the Octel
Group, respectively. The Company shall cause Great Lakes Europe Limited and
Great Lakes Chemical (Europe) Limited, and Octel shall cause each of its United
Kingdom Subsidiaries, to execute this Agreement, and by such execution, Great
Lakes Europe Limited, Great Lakes Chemical (Europe) Limited, and Octel's United
Kingdom Subsidiaries, to the extent the same is lawful, hereby guarantee
performance of their respective parent corporation's actions, agreements and
obligations under this Agreement. Except for assignments in connection
with the Lender's Liens, the Company or Octel, and those of their Subsidiaries
executing this Agreement, shall not assign any of its or their rights or
delegate any of its or their duties under this Agreement without the prior
written consent of Octel or the Company, as the case may be, in its sole and
absolute discretion. Except with respect to the Lender's Liens, no person
(including, without limitation, any employee of a party or any stockholder of a
party) shall be, or shall be deemed to be, a third party beneficiary of this
Agreement.
9.4 Entire Agreement; Amendments. This Agreement constitutes the
entire agreement of the parties concerning Taxes of the parties and their
Subsidiaries hereto, including the sharing, payment of and indemnification with
respect to, such Taxes, and supersedes all prior agreements, whether or not
written, concerning such
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<PAGE> 26
subject matter. This Agreement may not be amended except by an agreement in
writing, signed by the parties.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
9.6 Interpretation. Whenever the words "Include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words describing the singular number shall
include the plural and vice versa.
9.7 Effective Date. This Agreement shall be effective as of the
Distribution Date.
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Great Lakes Chemical Corporation
By
------------------------------
Name:
Title:
Great Lakes Europe Limited
By
------------------------------
Name:
Title:
Great Lakes Chemical (Europe)
Limited
By
------------------------------
Name:
Title:
Octel Corp.
By
------------------------------
Name:
Title:
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<PAGE> 28
Associated Octel Company (Plant)
Limited (UK)
By
------------------------------
Name:
Title:
FinanceCo Sub
By
------------------------------
Name:
Title:
Hamsard One Thousand and Thirty
Three
By
------------------------------
Name:
Title:
The Associated Octel Company
Limited (UK)
By
------------------------------
Name:
Title:
AKC Trading Limited
By
------------------------------
Name:
Title:
28
<PAGE> 1
EXHIBIT 10.2
CORPORATE SERVICES TRANSITION AGREEMENT
THIS CORPORATE SERVICES TRANSITION AGREEMENT (the
"Agreement"), dated as of ___________, 1998, between Great Lakes
Chemical Corporation, a Delaware corporation ("Great Lakes"), and The
Associated Octel Company Limited, a United Kingdom limited company
("Octel").
RECITALS
WHEREAS, this Agreement is entered into in
conjunction with a certain Transfer and Distribution Agreement (the
"Distribution Agreement"), dated as of ___________, 1998, between Great
Lakes and Octel Corp., a Delaware corporation;
WHEREAS, as described in the Distribution Agreement,
Great Lakes has been engaged, through its subsidiaries, in the
research, manufacturing and marketing of products in the lead alkyls
business, petroleum specialities business and performance chemicals
business (as more specifically defined therein as the "Transferred
Businesses");
WHEREAS, as described in the Distribution Agreement,
the Transferred Businesses shall not include certain assets, plants,
facilities, businesses and operations (as more specifically defined
therein as the "Excluded Assets");
WHEREAS, the Distribution Agreement provides that
Great Lakes and Octel shall enter into an agreement relating to certain
services to be provided by Octel to Great Lakes with respect to the
operation and maintenance of the Excluded Businesses (as more
specifically defined therein) and the Excluded Assets, as well as the
operation and maintenance of the businesses that were not transferred
to Octel (as more specifically defined therein as the "Non-Transferred
Businesses"), for a period of time from and after the Distribution
Date;
WHEREAS, Great Lakes desires that Octel provide and
perform, and Octel desires to provide and perform, certain services, as
more fully described and for the purposes stated in Schedule 1 to this
Agreement; and
<PAGE> 2
WHEREAS, to provide such services, Great Lakes and
Octel desire hereunder to enter into an agreement for the provision of
such services.
NOW, THEREFORE, in consideration of the premises
stated in the foregoing Recitals and the mutual promises of the parties
contained herein, Great Lakes and Octel, intending to be legally bound,
agree as follows:
Section 1. Definitions. As used in this Agreement,
capitalized terms defined immediately after their use shall have the
respective meanings thereby provided, and the following terms shall
have the following meanings:
(a) Distribution: the distribution as a
dividend to holders of Great Lakes common stock of all the shares of
Octel common stock held by Great Lakes on the basis provided in
the Distribution Agreement, which shall be effective on the close of
business on the date specified for the dividend by the Board of
Directors of Great Lakes.
(b) Distribution Date: the date as of which
the Distribution shall be effected as determined by the Board of
Directors of Great Lakes.
(c) Services: those corporate,
administrative, staff and technical services provided to Great Lakes
in respect of the Excluded Businesses and the Excluded Assets and
Non-Transferred Businesses, which services are set forth in Schedule 1
hereto, as such Schedule may from time to time be amended or revised
by the mutual agreement of the parties.
(d) Affiliate: shall have the meaning ascribed
thereto in the Distribution Agreement.
(e) Earnings Index: the monthly Index of
Average Earnings as published by or under the authority of HM
Government and, if the same is no longer published, there shall be
substituted therefor such other index, whether published by an
official authority or by a private organization, as the parties decide
is a satisfactory alternative thereto for the purposes of this
Agreement.
Section 2. Services to Be Provided by Octel.
(a) During the term of this Agreement, Octel
shall provide, and Great Lakes shall pay for, the Services set forth
in Schedule 1 hereto in accordance with this Agreement. The
Services set forth on Schedule 1 may from time to
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<PAGE> 3
time be amended, as the parties shall agree, to add, omit or redefine
any of the services to be provided hereunder, the term for which such
services are to be rendered, and/or the charges or fees to be charged
therefor. The Services shall be rendered by Octel or its Affiliates to
Great Lakes or its Affiliates.
(b) If Great Lakes requests that Octel
provide any services relating to the Excluded Businesses and the
Excluded Assets or Non-Transferred Businesses in addition to the
Services initially set forth on Schedule 1, Great Lakes and Octel will
mutually discuss the matter and negotiate in good faith with a view
towards the provision of such services.
(c) The Services shall be of a type and
quantity not exceed ing similar services provided by Octel in respect
of the Excluded Assets, the Excluded Businesses and the
Non-Transferred Businesses prior to the Distribution Date.
(d) At any time during the term of this
Agreement, Great Lakes may terminate all or any portion of the
Services upon 60 days prior notice to Octel or as otherwise
provided in Schedule 1.
Section 3. Payments by Great Lakes.
(a) Great Lakes shall pay Octel fees for the
Services calculated as set forth in Schedule 1 hereto, all of which
are exclusive of value added tax at the applicable rate from
time to time which shall be for Great Lakes' account.
(b) The monthly fixed charges or fees for
treasury, accounting, payroll and information technology Services set
forth on Schedule 1 shall be paid on the first day of each month
in which the Services are to be performed. Any fees not payable as
fixed amounts provided under this Agreement shall be invoiced monthly
prior to the 30th calendar day of the calendar month next following
the calendar month in which the applicable services were performed.
Such invoices shall include appropriate supporting detail and payment
shall be due and payable net 30 days from receipt of a properly
completed invoice. Relevant books and records of Octel and its
Affiliates pertaining to the Services provided and to all reimbursed
costs shall be available for inspection and audit by Great Lakes
during normal business hours for a period of three months following
the delivery of the invoice for the period for which such Services
were provided.
(c) In the event Great Lakes reasonably and
in good faith disputes any charges invoiced by Octel pursuant to this
Agreement, Great Lakes shall
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<PAGE> 4
deliver a written statement describing the dispute to Octel within 30
days following receipt of the disputed invoice. The statement shall
provide a description of the disputed items to enable Octel to identify
the nature of the dispute. Fees not so disputed shall be deemed
accepted and shall be paid by Great Lakes. If the parties cannot
resolve the dispute in a mutually satisfactory manner, the dispute
shall be submitted within 60 days from the date of notice, to an
independent public accountant based in the United Kingdom mutually
acceptable to the parties (the "Independent Accountant"). The
Independent Accountant will review the books and records of Great
Lakes, Octel and any Affiliate that performed Services that are the
subject of such disputed invoice, as the case may be, and make such
other investigation as it may deem necessary to verify the invoice. The
costs of the fees of the Independent Accountant shall be borne by Great
Lakes if the disputed portion of the invoice is determined to be
substantially correct, and borne by Octel if the disputed portion of
the invoice is determined to be substantially incorrect, with the
Independent Accountant having the authority to determine whether the
disputed portion of the invoice is substantially correct or
substantially incorrect. In the event that Great Lakes reasonably and
in good faith disputes any invoiced amount, pending any such final
determination, Great Lakes may withhold payment of the disputed amount
to Octel, with appropriate adjustment (including interest calculated on
a daily basis with quarterly rests at a rate equal to the base lending
rate for the time being in force of Barclays Bank Plc from the date
such payment was due until the date of receipt of payment by Octel of
any delayed payment due to it) to be made following such final
determination. The determination of the Independent Accountant shall be
final and binding on the parties.
(d) The prices set forth on Schedule 1 shall
be firm through December 31, 1998 and shall be subject to adjustment
on January 1, 1999 based upon the changes in the Earnings Index
between October 1997 and October 1998 (published in the December 1998
edition of HMSO Central Statistical Information Office), except for
the prices for Amlwch Medical Services, which shall be adjusted from
time to time to reflect Octel's normal commercial terms for such
Services.
Section 4. (a) Staffing. Octel shall make a
sufficient number of competent employees or contractors available to
render the services to be provided pursuant to this Agreement when
required. Except to the extent specific individuals are designated on
Schedule 1, Octel shall, in consultation with Great Lakes, determine
both the staffing required and particular personnel assigned to perform
the Services, including but not limited to, clerical staff,
technicians, professionals or otherwise. The persons assigned by Octel
to perform services under this Agreement shall remain in the employ of
Octel and shall be subject to the Octel salary and benefits programs.
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<PAGE> 5
(b) No Solicitation. Great Lakes undertakes
on behalf of itself and its Affiliates that neither it nor they shall
solicit any employees of Octel assigned by Octel for the performance
of the Services within 6 months of such personnel ceasing to provide
Services to Great Lakes hereunder without Octel's prior written
consent.
Section 5. Independent Contractor Status. Octel shall
perform the Services as an independent contractor, and with respect to
the Treasury Services, Octel will provide two persons acting as
independent contractors to provide such Services. Nothing contained
herein shall be construed, applied or intended to create a relationship
between the parties hereto of principal and agent or of employer and
employee. Great Lakes and Octel shall each be responsible for reporting
its income and paying its own taxes. Neither party undertakes by this
Agreement to perform any obligation of the other party, whether
regulatory or contractual, or, except as set forth in this Agreement,
to assume any responsibility for the other party's employees,
contractors, business or operations or to take any other action to
affect the status of the parties (and their employees) as independent
contractors in the provision of Services hereunder. As between the
parties, Octel has the sole and exclusive right and obligation, and
Great Lakes has no right or obligation, to supervise, manage, contract,
direct, procure, perform or cause to be performed, all Services to be
performed by Octel under this Agreement, including the exclusive right
to hire, fire, discipline, supervise, evaluate, transfer, suspend,
lay-off, recall, promote, assign, reward or compensate employees or
others performing Services under this Agreement, to adjust their
grievances, to provide them benefits and to set the terms and
conditions of their employment.
Section 6. Access. Great Lakes agrees to grant to
representatives of Octel access to Great Lakes' facilities, employees,
agents and consultants to enable Octel to provide the Services.
Section 7. Confidentiality. Each party and its
Affiliates will hold, and will use their best efforts to cause their
respective members, partners, officers, directors, employees and other
agents to hold, in confidence, all confidential documents and
information concerning the other party or the Affiliates of the other
party furnished to such party or its Affiliates in connection with the
transactions effected pursuant to this Agreement, except to the extent
that such information can be shown to have been (i) previously known by
such party on a nonconfidential basis, (ii) in the public domain
through no fault of such party or (iii) obtained by such party on
nonconfidential basis from a source other than the other party or any
of its Affiliates
5
<PAGE> 6
who is rightfully in possession of such information and is under no
obligation of confidentiality to the other party; provided that such
party may disclose such information in connection with the
transactions effected pursuant to this Agreement to the members,
partners, officers, directors, employees and other agents of such party
or its Affiliates that have a need to know such information so long as
such persons are informed by such party of the confidential nature of
such information and have agreed in writing to be bound by the
obligations of confidentiality and non-use as provided in this
Agreement; and provided further that if any person described in the
immediately preceding proviso breaches its confidentiality obligations,
the party to whom the disclosure is attributable will inform the other
party and will use its best efforts at the request of such other party
to enforce such obligation. Notwithstanding the foregoing, each party
may disclose such information if (i) compelled to disclose by judicial
or administrative process or by other requirements of law, (ii)
necessary to establish such party's position in any litigation or any
arbitration or other proceeding based upon or in connection with the
subject matter of this Agreement or (iii) required to comply with the
rules of a stock exchange. Prior to any disclosure pursuant to the
preceding sentence, the disclosing party shall give reasonable prior
notice to the other party to this Agreement of such intended disclosure
and, if requested by such other party, shall use its best efforts to
obtain a protective order or similar protection for such information or
data (at the expense of such other party) and shall otherwise disclose
such information and data to the extent and only to the extent
necessary to comply with any applicable rule, regulation or policy of a
governmental entity or securities exchange. The obligation of a party
hereto to hold any such information in confidence shall be satisfied if
it exercises the same care with respect to such information as it would
take to preserve the confidentiality of its own similar information.
The provisions of this Section 7 shall survive for a period of ten
years (or such longer period as may be required by law) following any
termination of this Agreement. All confidential documents and
information furnished pursuant to this Agreement may be used only in
connection with the transactions effected pursuant to this Agreement.
If all or any part of the Services are terminated, each party and its
Affiliates will, and will use their best efforts to cause their
respective members, partners, officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or
deliver to the other party, upon request, all documents and other
materials, and all copies thereof, obtained by such party or its
Affiliates or on their behalf from the other party in connection with
the Services so terminated that are subject to such confidence.
Section 8. Force Majeure. Octel shall be excused for
failure to perform any of its obligations under this Agreement (other
than the payment of any sums due to Great Lakes under this Agreement)
due to fire, storm, flood, earthquake,
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<PAGE> 7
explosion, accident, acts of the public enemy, riots and other civil
disturbances, sabotage, strikes or other labor disputes, injunctions,
transportation embargoes or delays, acts of God, failure of performance
of third parties necessary to Octel's performance under this Agreement,
or the laws or regulations of national, state, regional and local
government or branch or agency thereof, or any other event or
circumstance beyond Octel's reasonable control, in each case for
reasons other than the adverse financial condition of Octel. Upon the
occurrence of any such event, Octel shall notify Great Lakes in writing
of the events causing delay or default in performance and shall use its
best efforts to remove or otherwise address the impediment to action as
soon as reasonably practicable, provided, however, that nothing herein
shall require Octel to settle any strike or other labor disputes other
than on terms which Octel considers to be reasonable and appropriate in
all the circumstances.
Section 9. Standard of Performance. Octel hereby
agrees and acknowledges that, in performing the Services, (a) it shall
perform the Services in a competent and workmanlike manner, and in
accordance with applicable statutes, rules and regulations of
governmental and regulatory agencies having jurisdiction (provided that
Octel is in no way guaranteeing that the Services provided hereunder
are in compliance with such statutes, rules and regulations) and (b) it
shall use at least the standard of care and good faith as it uses in
performing the Services for its own account.
Section 10. Effective Date and Term. This Agreement
shall become effective as of the Distribution Date. The initial term of
this Agreement shall commence on the Distribution Date and, except as
subject to early termination in accordance with Sections 2(d) and 11,
continue with respect to each of the Services for the term provided in
Schedule 1.
Section 11. Termination. This Agreement or the
Services may be reduced, suspended or terminated as follows:
(a) Termination Without Prior Notice.
Either party hereto may terminate this Agreement immediately upon
written notice to the other party in the event (i) of the other
party's voluntary bankruptcy or insolvency, (ii) that the other party
shall make an assignment for the benefit of creditors or (iii) that a
petition shall have been filed by or against the other party under a
bankruptcy law, a corporate reorganization law or any other law for
relief of debtors (or other law similar in purpose or effect), which
has caused such other party to have its business effectively
discontinued in its then present form.
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(b) Termination With Prior Notice. Either party
hereto may terminate this Agreement on 30 days' written notice to the
other if the other is in breach of this Agreement in any material
respect unless the breaching party, within such 30 day period, remedies
such breach, or, in the case of a breach which cannot reasonably be
remedied within such 30 day period, initiates action which can
reasonably be expected to cure such breach within the 60 day period
commencing upon receipt of such written notice.
(c) Suspension of Services. Subject to Great Lakes'
right pursuant to Section 3(c) to dispute charges invoiced by Octel, if
Great Lakes shall fail to pay the undisputed charges, fees or costs it
has agreed to pay under the provisions of this Agreement for the
Services, Octel may, upon 30 days prior written notice, withhold or
cease performing the Services and continue to due so until full payment
shall have been received.
(d) Suspension of Payment Obligation. If Octel shall
fail to timely perform any of the Services, Great Lakes may withhold or
cease payment of the charges, fees or costs it has agreed to pay under
the provisions of this Agreement for such Services and continue to do
so until full performance of such Services shall have been rendered.
Section 12. Employer's Liability Insurance;
Indemnification.
(a) Octel shall comply with all applicable
workers' compensation statutes and carry employer's liability
insurance covering all of Octel's personnel engaged in the performance
of the Services. Octel shall indemnify Great Lakes and its Affiliates
and their respective directors, officers, employees, agents and
representatives from and against any and all claims, losses, damages
or liabilities, including reasonable attorneys' fees (i) arising from
any claims by any person that by virtue of providing Services under
this Agreement such person is a de facto or de jure employee of Great
Lakes or its Affiliates or that Great Lakes or its Affiliates owes any
contractual duty or duty under any applicable law, regulation or
statute relating to wages, employee benefits, hiring, terms and
conditions of employment and like matters or (ii) for taxes or related
charges imposed upon any person providing Services to Great Lakes or
its Affiliates under this Agreement or upon such person's
compensation.
(b) Except as provided in the following
sentence, Octel agrees to indemnify, defend and hold harmless Great
Lakes and its Affiliates and their respective directors, officers,
employees, agents and representatives against any and
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all claims, losses, damages and liabilities, including reasonable
attorneys' fees, incurred by any of them and arising out of an
unintentional breach of this Agreement or any act of negligence by
Octel in its performance of the Services; provided, however, (i) that
any such indemnification shall not exceed the amount paid by Great
Lakes or its Affiliate for such Services; and (ii) Octel shall not be
required to provide indemnity for the unintentional breaches or acts of
negligence of the independent contractors provided by Octel to perform
Treasury Services. Octel agrees to indemnify, defend and hold harmless
Great Lakes and its Affiliates and their respective directors,
officers, employees, agents and representatives against any and all
claims, losses, damages and liabilities, including reasonable
attorneys' fees, incurred by any of them and arising out of an
intentional breach of this Agreement or any act of gross negligence or
willful misconduct by Octel in its performance of the Services;
provided, however, that Octel shall not be required to provide
indemnity for intentional breaches or acts of gross negligence or
willful misconduct by the independent contractors provided by Octel to
perform Treasury Services.
(c) Each party shall indemnify, defend and
hold harmless the other party and its Affiliates and their respective
directors, officers, employees, agents and representatives against any
and all claims, losses, damages and liabilities, including reasonable
attorneys' fees, incurred by any of them and arising out of or in
connection with any death, injury or industrial disease sustained by
the indemnifying party's employees, servants, agents and/or
representatives, irrespective of the cause of such death, injury or
industrial disease, including, without limitation, the negligence or
other breach of legal duty of an indemnified party hereunder.
Section 13. Provision of Information; License Fees.
During the term of this Agreement or any extension thereof, and subject
to Section 7.5 (Confidentiality) of the Distribution Agreement, each
party shall provide to the other party, free of any charge or cost, any
information, data or documents which either party reasonably requests
to fulfill the requesting party's reporting or compliance obligations
with any governmental entity, agency or authority; provided, however,
that, the provision of such information, data or documents does not
result in any undue burden or expense to the party supplying the
information. Great Lakes shall pay any license or other fees as shall
be required to permit Octel to perform the Services under this
Agreement; provided, however, that Great Lakes shall have the option,
at its sole discretion, to negotiate the terms of such licenses or the
amount of such fees on its own behalf.
Section 14. Notice. 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
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notice is given, (b) on the day of transmission if sent via facsimile
transmission 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 Great Lakes: Great Lakes Chemical Corporation
One Great Lakes Boulevard
West Lafayette, Indiana 47906
United States
Attn: Vice President and General Counsel
Telecopy: (765) 497-6660
If to Octel: The Associated Octel Company Limited
P.O. Box 17, Oil Sites Road
Ellesmere Port
South Wirral L65 4HF
United Kingdom
Attn: Company Secretary and General
Counsel
Telecopy: (151) 356-6298
Any party may change its address by giving the other party written
notice of its new address in the manner set forth above.
Section 15. Successors and Assigns. This Agreement
and all of the provisions hereof shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party without the
prior written consent of the other party.
Section 16. No Third-Party Beneficiaries. This
Agreement is solely for the benefit of the parties hereto and is not
intended to confer upon any other person except the parties hereto any
rights or remedies hereunder, except in respect of indemnification
provisions contained herein conferring indemnification rights to third
parties to this Agreement.
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Section 17. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 18. Schedules. The Schedules to this
Agreement shall be construed with, and shall be an integral part of,
and are hereby expressly incorporated into, this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 19. Severability. If any provision hereof is
or becomes illegal, invalid, or unenforceable under the laws of a
particular jurisdiction, such provision shall be fully severable with
respect to such laws; this Agreement shall be construed and enforced in
such jurisdiction as if such provision had never comprised a part
hereof; the remaining provisions hereof shall remain in full force and
effect in such jurisdiction and shall not be affected by such provision
or by its severance herefrom; and all of the provisions hereof shall
remain in full force and effect in all other jurisdictions and shall
not be affected by the severance of such provision under the laws of
such jurisdiction. Furthermore, in lieu of such provision there shall
be added automatically for purposes of such jurisdiction as part of
this Agreement a provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and be legal,
valid and enforceable in such jurisdiction.
Section 20. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of England, and
except as provided in Section 3(c) hereof, the parties hereby agree
that any dispute which may arise out of or in connection with this
Agreement shall be subject to the dispute resolution provisions set
forth in Article XI of the Distribution Agreement.
Section 21. Amendment and Modification.
(a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to
this Agreement, or in the case of a waiver, by the party against whom
the waiver is to be effective.
(b) No failure or delay by either party in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof or the
exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not be exclusive of
any rights or remedies provided by law.
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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed and delivered as of the day and year
first above written.
GREAT LAKES CHEMICAL CORPORATION
By:
---------------------------------
Name:
Title:
THE ASSOCIATED OCTEL COMPANY LIMITED
By:
---------------------------------
Name:
Title:
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EXHIBIT 10.3
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, W1X
6DT, England ("Buyer"); and,
(2) GREAT LAKES CHEMICAL (EUROPE) LIMITED having its registered office at
Groat Avenue, Aycliffe Industrial Estate, Newton Aycliffe, Durham, DL5
5HA ("Seller").
WHEREAS:
A) Buyer is in need of ethylene dibromide conforming to the specification
set out in Appendix 1 ("Product") for the manufacture of lead alkyl
antiknock compound and EDDS; and,
B) Seller desires to supply the Product to Buyer in accordance with this
Agreement; and,
C) Buyer desires to purchase the Product from Seller in accordance with
this Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, THE UNDERTAKINGS OF THE
PARTIES PURSUANT TO THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, IT
IS AGREED AS FOLLOWS:
1. TERM
1.1 The term of this Agreement shall commence on the Distribution
Date (as defined in the Transfer and Distribution Agreement),
and shall end on the third anniversary of the Distribution
Date, (the Initial Term); provided, however, that Buyer may,
upon written notice to Seller on or before the second
anniversary of the Distribution Date, elect to extend the
term of this Agreement for an additional year until the fourth
anniversary of the Distribution Date and, having done so,
Buyer may, upon written notice to Seller on or before the
third anniversary of the Distribution Date, elect to extend
the term of this Agreement for an additional year until the
fifth anniversary of the Distribution Date (such additional
periods to be hereinafter referred to as the Extended Term).
In this Agreement, the Initial Term and any Extended Term are
sometimes collectively referred to as the Term.
2. QUANTITY
2.1 The quantities to be purchased by Buyer during the Initial
Term and any Extended Term(s) are set forth in Appendix 2.
3. QUALITY
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3.1 All Product supplied shall conform to the specification shown
in Appendix 1 or any other specification substituted by
written agreement between the parties, as determined by the
analytical methods shown in Appendix 1 or by any other
analytical methods substituted by written agreement between
the parties ("the Product Specification").
3.2 Each separate lot of Product supplied shall be in a homogenous
state immediately prior to being delivered.
3.3 All Product delivered shall be accompanied by a certificate of
analysis signed and dated on behalf of the Seller showing the
lot number, order number and quality parameters as defined in
Appendix 1.
3.4 Buyer shall, at Buyer's expense and upon giving reasonable
notice to Seller, have the right to inspect Seller's quality
assurance procedures as a quality assurance audit.
3.5 Seller shall not make any change in process, facilities, or
raw materials used to manufacture Product in accordance with
ISO procedures except with the prior consent of Buyer, which
consent shall not be unreasonably withheld.
4. INSPECTION AND LIABILITY LIMITATION
4.1 Promptly after receiving each shipment of Product, Buyer shall
examine such Product for any damage, defect, non-conformance
or shortage. Buyer shall notify Seller within thirty (30) days
of receipt of Product if the Product does not comply with the
Product Specification and Seller shall, upon Buyer's request
and as soon as reasonably possible, replace the non-conforming
Product with Product meeting the Product Specification.
Failure of Buyer to notify Seller within the thirty (30) day
period of non-conformity with such specification shall
constitute irrevocable acceptance of Product by Buyer and
shall ban Buyer from making any claim that such Product is
non-conforming in any respect (under any theory, including
without limitation, negligence, strict liability, contract,
warranty or otherwise).
4.2 Except for breaches of the warranties in Sections 12, Buyer's
exclusive remedy shall be for damages, and Seller' total
liability for any and all losses and damages arising out of
any cause whatsoever under this
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Agreement (whether such cause be based in contract,
negligence, strict liability, other tort or otherwise) shall
not exceed the price under this Agreement for the quantity of
Product in respect to which such cause arises, or at Seller's
option, the replacement of such Product, and in no event shall
Seller be liable for incidental, consequential or punitive
damages resulting from any such cause.
4.3 If either Party furnishes technical or other advice to the
other Party, whether or not at the request of the Party
receiving the technical or other advice, with respect to
processing, further manufacture, other use or resale of the
Products, the Party supplying the advice shall not be liable
for, and the Party receiving the advice assumes all risk of,
such advice and the results which flow from it.
4.4 Subject to this section 4 and unless otherwise expressly
provided herein, Great Lakes warrants title to the Product and
that the Product conforms to the specifications set forth on
Appendix 1. Subject to the preceding sentence, SELLER MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS
TO MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, OR ANY
OTHER MATTER WITH RESPECT TO THE PRODUCT, whether the Product
is used alone or in combination with any other material.
5. PRICES
5.1 The price for Product shall be calculated as described in
Appendix 3.
5.2 The pricing shown on Appendix 3 does not include value added
tax now or hereafter levied which shall be for Buyer's
account. Neither Party shall be liable for any tax imposed
upon the other Party's income or privilege of doing business.
6. PURCHASE ORDERS
6.1 Buyer shall purchase Product from Seller as evenly as possible
during the course of each year consistent with Buyer's needs.
Buyer shall place written orders on Seller for Product not
less than thirty days before the required delivery date and
Seller shall deliver such Product in accordance with Buyer's
orders and this paragraph 6.1. Seller's maximum delivery
obligation is set forth in section App. 4.1 of Appendix 4.
7. DELIVERIES
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7.1 Seller shall deliver Product in road tankers or ISO containers
supplied by Seller.
7.2 Delivery shall be made DDP (Incoterms, 1990) at Buyer's plant
at Ellesmere Port. Title shall pass upon delivery. The parties
recognize that Buyer will need to perform quality control
tests on delivered Product and that delays associated with
these tests may result in demurrage costs. Buyer shall conduct
its quality control tests as expeditiously as possible in
order to minimize such costs.
8. INVOICES
8.1 Invoices shall be submitted to Buyer at P.O. Box 17, Oil Sites
Road, Ellesmere Port, South Wirral, L65 4HF, England or such
other address as Buyer shall notify to Seller.
9. TERMS OF PAYMENT
9.1 Payment shall be made on or before the 30th day of the month
following the month of invoice by electronic transfer to a
bank account nominated in writing by Seller to Buyer.
10. ADDITIONAL MATTERS
10.1 Buyer and Seller shall have the rights described in section
App. 4.2 of Appendix 4.
10.2 Buyer and Seller shall have the rights set forth in section
App. 4.3 of Appendix 3.
11. CHLORINE PRODUCT CREDIT
11.1 Seller shall pay to Buyer the chlorine product credit as
described in section App. 4.4 of Appendix 4.
12. INTELLECTUAL PROPERTY RIGHTS
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12.1 Seller warrants to Buyer that the manufacture and delivery of
Product will not infringe any patent, trademark, copyright,
trade secret or other intellectual property rights of any
third party in any jurisdiction. Buyer warrants to Seller
that use, reuse, further manufacture, sale or resale of the
Product will not infringe the patent, trademark, copyright,
trade secret or other intellectual property rights of any
third party in any jurisdiction. Each Party (the Indemnifying
Party) shall defend, indemnify, and save harmless the other
Party, its Affiliates, and their respective officers,
directors and employees from and against any loss, damage,
liability or expense (including attorneys fees) arising from
any breach of either of the foregoing warranties made by the
Indemnifying Party.
13. FORCE MAJEURE
13.1 Seller's failure or inability to make, or Buyer's failure or
inability to take or be able to use, any delivery or
deliveries when due, or the failure or inability of either
party to effect timely performance of any other obligation
required of it hereunder, if caused by a "force majeure" as
hereinafter defined, shall not constitute a default hereunder
or subject the party affected by the force majeure to any
liability to the other; provided, however, that such excuse
for the force majeure shall only apply if (a) the party so
affected shall promptly notify the other of the existence
thereof, of its expected duration, and of the estimated effect
thereof upon its ability to perform its obligations hereunder,
and (b) such party proceeds in a commercially reasonable
manner to overcome the same promptly. Such party shall
promptly notify the other party when such force majeure
circumstance has ceased to affect its ability to perform its
obligations hereunder. The party affected by force majeure
shall discuss with the other party the likely duration of the
force majeure event, shall reasonably cooperate with the other
party to mitigate the impact on such other party, and shall
keep the other party reasonably apprised of matters relating
to the force majuere. The quantity to be delivered hereunder
shall be reduced to the extent of the deliveries omitted for
such cause or causes, unless both parties agree that the
total quantity to be delivered hereunder shall remain
unchanged. To the extent Seller is legally able to do so
(under then applicable law and the terms and conditions of
agreements to which the Seller is then subject), Seller shall
preferentially allocate available Product to Buyer vis-a-vis
other customers. During the time that Seller is unable to
make deliveries or otherwise perform, it shall not be
obligated to procure any quantity of Product from any
alternate producer or supplier; provided, however, that
Seller shall use commercially reasonable efforts to obtain
Product from alternate producers or suppliers.
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If, despite such commercially reasonable efforts, Seller is
unable to obtain Product from alternate producers or
suppliers, Buyer shall be excused, to the extent of Seller's
inability, and for the duration of the force majeure event,
from the obligation under Appendix 2 to purchase specific
quantities from Seller. As used herein, the term "force
majeure" shall mean and include any act of God, nature or the
public enemy; accident; explosion; operational malfunction or
interruption; fire; storm; earthquake; flood; drought; perils
of the sea; strikes; lockouts or labor disputes; riots;
sabotage; embargo; war (whether or not declared and whether or
not the United Kingdom is a participant); legal restriction or
limitation or compliance therewith; failure or delay of
transportation; shortage of, or inability to obtain, raw
materials, supplies, equipment, fuel, power, labor, or other
operational necessity; interruption or curtailment of power
supply; or any other circumstance beyond the reasonable
control of the party affected thereby. A party shall not be
required to resolve labor disputes, or disputes with suppliers
of raw materials, supplies, equipment, fuel or power, except
in accordance with such party's business judgment as to its
best interest.
14. TERMINATION
14.1 Either Party shall have the right to terminate this Agreement
effective upon written notice to the other Party (the
Defaulting Party) if one or more of the following described
events of default shall occur:
14.1.1 the Defaulting Party shall fail to
materially comply with any term or
requirement contained in this Agreement and
such failure to comply shall not have been
cured thirty (30) days after written notice
thereof to the Defaulting Party provided,
however, that: (1) for material failures to
comply other than failure to supply Product
conforming to the Product Specification, if
the failure to comply cannot be cured
within thirty days, this Agreement shall
not be subject to termination under this
provision if the Defaulting Party
commences, and thereafter diligently
pursues, a cure within the thirty day
period; (2) if the material failure to
comply is a failure of Seller to provide
Product conforming to the Product
Specifications and Seller is unable to cure
within thirty days, if Seller commences,
and thereafter diligently pursues a cure
within the thirty day period, this
Agreement shall not be subject to
termination for an additional period of up
to thirty days but, if Seller is unable to
cure during this sixty day period, Buyer
shall be entitled to terminate
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effective on the sixty first day; and, (3)
no advance written notice or opportunity to
cure shall be necessary in order to
terminate this Agreement pursuant to
Sections 14.1.2 through 14.1.7; or
14.1.2 the filing by the Defaulting Party of a
voluntary petition in bankruptcy or a
voluntary petition or answer seeking
reorganization, rearrangement or
readjustment of its debts or for any other
relief under the bankruptcy or insolvency
act or law of any jurisdiction, now or
hereafter existing, or any other agreement
by the Defaulting Party indicating consent
to, approval or acquiescence in, any such
petition or proceeding; or
14.1.3 the application by the Defaulting Party or
the consent or acquiescence of the
Defaulting Party in the appointment of a
receiver or trustee for all or a substantial
part of any of its properties; or
14.1.4 the making by the Defaulting Party of a
general assignment for the benefit of
creditors; or
14.1.5 the inability of the Defaulting Party or the
admission of the Defaulting Party in writing
of its inability to pay its debts as they
mature; or
14.1.6 the filing of an involuntary petition
against the Defaulting Party seeking
reorganization, rearrangement or
readjustment of its debts, or for any other
relief under the bankruptcy or insolvency
act or law of any jurisdiction, now or
hereafter existing, or the involuntary
appointment of a receiver or trustee of the
Defaulting Party 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 the
Defaulting Party and the continuance of
such for sixty (60) days undismissed or
undischarged; provided, however, that in
the event of an appointment of a receiver
or trustee, this Agreement shall not
terminate if the receiver or trustee agrees
to assume the Defaulting Party's
liabilities and obligations under this
Agreement; or
14.1.7 The assignment by the Defaulting Party of
this Agreement to or
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any of its rights under this Agreement in
violation of Section 18.
14.2 Rights Surviving Termination. The termination of this
Agreement shall not affect the rights and liabilities of
either Party arising during the period in which the Agreement
was in effect or release either from the obligation to pay
arising under this Agreement.
15. ENTIRE AGREEMENT; MODIFICATION
15.1 This Agreement constitutes the entire understanding between
the parties and there are no other agreements or
understandings, written or oral, between the parties with
respect to the subject matter of this Agreement.
15.2 The Parties contemplate that, from time to time during the
term of this Agreement, either or both of the Parties will
utilize various documents in order to conveniently facilitate
the purchase and delivery of Product, and that these documents
(including, but not limited to, purchase orders, delivery
orders and negotiable and non-negotiable instruments of title)
may include terms and conditions different from those of this
Agreement. The Parties agree that these documents shall not
modify the terms and conditions of this Agreement, and that
terms and conditions contained in such documents which purport
to modify this Agreement shall have no force or effect. The
Parties also contemplate that there will be routine dealings
between their employees. Each party acknowledges that the
employees of the other party have no authority to waive,
modify or interpret this Agreement. Each party agrees that
statements, representations, warranties and promises of the
other party's employees supplemental to, or varying from, the
terms and conditions of this
Agreement shall not be binding and each party shall conduct
its business without reliance upon or regard to such
statements, representations, warranties and promises.
15.3 This Agreement may be modified only by a written document
signed by both of the Parties which specifically references
this Section 15 and this subsection 15.3 cannot be orally
waived or modified.
16. WAIVER
16.1 No waiver, acquiescence or forbearance by either party hereto
of any breach or default this Agreement, and no course of
conduct or dealings between the parties which varies from the
terms and conditions of this Agreement, shall: (i) be deemed a
waiver as to any subsequent and/or
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similar breach or default by either party; or, (ii) constitute
or be deemed a modification of this Agreement; or, (iii)
affect the rights or obligations of the parties under this
Agreement in any way.
17. INDEMNITY
17.1 Except as provided in Section 4, Buyer shall defend, indemnify
and hold Seller, its Affiliates and their respective officers,
employees, affiliates, successors or assigns, harmless from
and against any and all suits, claims, losses, liabilities,
demands, judgments, costs, fines, penalties or expenses
(including, without limitation, attorneys' fees) with respect
to bodily injury, personal injury, property damage or economic
injury sustained by any person and resulting or arising, or
allegedly resulting or arising, directly or indirectly, from
the sale, transportation, possession, processing, treatment,
storage, disposal, further manufacture, use, other reuse or
resale of the Product delivered to Buyer by Seller or any
other product, incorporating the Product. This provision shall
survive expiration or other termination of this Agreement and
shall be unlimited in amount.
18. ASSIGNABILITY
18.1 Neither party shall without the consent in writing of the
other party assign any of its rights or obligations arising
from this Agreement, such consent not to be unreasonably
withheld or delayed.
19. NOTICES
19.1 Notices and other communications sent by either party to the
other in pursuance of the provisions of this Agreement shall
be in writing and shall be sent to the recipient at the
address shown above as its registered office or at such other
address as either party may notify the other in writing is to
be substituted as the address of the notifying party. Where
Buyer is the recipient copies shall also be sent to Buyer at
P.O. Box 17, Oil Sites Road, Ellesmere Port, South Wirral, L65
4HF, England, to the attention of both the Purchasing Manager
and the Company Secretary. The copy to the Company Secretary
shall be sent by facsimile to 151-356-6298 or such other
number as may be notified from time to time.
20. INTERPRETATION
20.1 The headings of the clauses of this Agreement have been
inserted for
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convenience only and they shall not affect its interpretation.
21. DISPUTES
21.1 Any disputes between the parties arising out of or in
connection with this agreement shall be referred to the chief
executive officers of the parties (or their nominees) for
resolution. Failing such resolution, such disputes shall be
settled by alternative dispute resolution or arbitration, if
both parties agree to such a course, but failing agreement
such disputes shall be settled by the English courts applying
English Law.
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On behalf of THE ASSOCIATED OCTEL COMPANY LIMITED
Signature:__________________________________
Name:_______________________________________
Position:___________________________________
Date:_______________________________________
On behalf of GREAT LAKES CHEMICAL (EUROPE) LIMITED
Signature:__________________________________
Name:_______________________________________
Position:___________________________________
Date:_______________________________________
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EXHIBIT 10.4
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, W1X
6DT, England ("Buyer"); and,
(2) GREAT LAKES CHEMICAL (EUROPE) LIMITED having its registered office at
Groat Avenue, Aycliffe Industrial Estate, Newton Aycliffe, Durham, DL5
5HA ("Seller").
WHEREAS:
A) Buyer is in need of anhydrous hydrogen bromide conforming to the
specification set out in Appendix 1 ("Product") for the manufacture of
EDDS; and,
B) Seller desires to supply the Product to Buyer; and,
C) Buyer desires to purchase the Product from Seller;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, THE UNDERTAKINGS OF THE
PARTIES PURSUANT TO THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, IT
IS AGREED AS FOLLOWS:
1. TERM
1.1 The Term of this Agreement shall commence on the Distribution
Date (as defined in the Transfer and Distribution Agreement)
and shall end on December 31, 2002 ("Term"). Thereafter, the
Term shall automatically extend from year to year, except that
either Party may terminate this Agreement effective on
December 31, 2002, or on any subsequent anniversary of that
date, by providing written notice to the other Party at least
twelve months' prior to the date on which termination is to
become effective.
2. QUANTITY
2.1 Buyer will purchase Product from Seller.
2.2 Buyer's estimated needs for Product are set forth on Appendix
2.
2.3 At least three months before the end of each calendar year,
Buyer shall provide a forecast of its anticipated purchases of
Product during the forthcoming calendar year broken down by
calendar quarter and shall update its forecast requirements on
a quarterly basis for the remainder of the year in question.
3. QUALITY
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3.1 All Product supplied shall conform to the specification shown
in Appendix 1 or any other specification substituted by
written agreement between the parties, as determined by the
analytical methods shown in Appendix 1 or by any other
analytical methods substituted by written agreement between
the parties ("the Product Specification").
3.2 Each separate lot of Product supplied shall be in a homogenous
state immediately prior to being delivered.
3.3 All Product delivered shall be accompanied by a certificate of
analysis signed and dated on behalf of the Seller showing the
lot number, weight, order number and quality parameters as
defined in Appendix 1.
3.4 Buyer shall, at Buyer's expense, upon giving reasonable notice
to Seller, have the right to inspect Seller's quality
assurance procedures as a quality assurance audit.
3.5 Seller shall not make any change in process, facilities, or
raw materials used to manufacture Product in accordance with
ISO procedures, except with the prior consent of Buyer which
shall not be unreasonably withheld.
4. INSPECTION AND LIABILITY LIMITATION
4.1 Promptly after receiving each shipment of Product, Buyer shall
examine such Product for any damage, defect, non-conformance
or shortage. Buyer shall notify Seller within thirty (30) days
of receipt of Product if the Product does not comply with the
Product Specification and Seller shall, upon Buyer's request
and as soon as reasonably possible, replace the non-conforming
Product with Product meeting the Product Specification.
Failure of Buyer to notify Seller within the thirty (30) day
period of non-conformity with such specification shall
constitute irrevocable acceptance of Product by Buyer and
shall ban Buyer from making any claim that such Product is
non-conforming in any respect (under any theory, including
without limitation, negligence, strict liability, contract,
warranty or otherwise).
4.2 Except for breaches of the warranties in Section 11, Buyer's
exclusive remedy shall be for damages, and Seller's total
liability for any and all losses and damages arising out of
any cause whatsoever (whether such cause be based in
contract, negligence, strict liability, other tort or
otherwise) shall in no event exceed the price under this
Agreement for the quantity of Product in respect to which
such cause arises, or at Seller's
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option, the replacement of such Product, and in no event shall
Seller be liable for incidental, consequential or punitive
damages resulting from any such cause.
4.3 If either Party furnishes technical or other advice to the
other Party, whether or not at the request of the Party
receiving the technical or other advice, with respect to
processing, further manufacture, other use or resale of the
Products, the Party supplying the advice shall not be liable
for, and the Party receiving the advice assumes all risk of,
such advice and the results which flow from it.
5. PRICES
5.1 The pricing for product supplied shall, unless otherwise
agreed in writing, be the pricing shown in Appendix 3.
5.2 The pricing shown on Appendix 3 does not include value added
tax now or hereafter levied, which shall be for Buyer's
account. Neither Party shall be liable for any tax imposed
upon the other Party's income or privilege of doing business.
6. PURCHASE ORDERS
6.1 Buyer shall purchase Product from Seller as evenly as possible
during the course of each year consistent with its needs.
Buyer shall place written orders on Seller for Product not
less than thirty days before the required delivery date and
Seller shall deliver such Product in accordance with Buyer's
orders. Seller's maximum delivery obligation hereunder is set
forth in section App. 4.1 of Appendix 4.
7. DELIVERIES
7.1 Seller shall deliver Product in approved cylinders supplied by
Seller.
7.2 Delivery shall be made CPT (Incoterms, 1990) Buyer's plant at
Ellesmere Port. Title shall pass upon delivery.
8. INVOICES
8.1 Invoices shall be submitted to Buyer at P.O. Box 17, Oil Sites
Road, Ellesmere Port, South Wirral, L65 4HF, England or such
other address as Buyer shall notify to Seller.
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9. TERMS OF PAYMENT
9.1 Payment shall be made on or before the 30th day of the month
following the month of invoice by electronic transfer to a
bank account nominated in writing by Seller to Buyer.
10. ADDITIONAL MATTERS
10.1 Buyer and Seller shall have the rights set forth in section
App. 4.2 of Appendix 4
10.2 Buyer and Seller shall have the rights set forth in section
App. 4.3 of Appendix 4.
11. INTELLECTUAL PROPERTY RIGHTS
11.1 Seller warrants to Buyer that the manufacture and delivery of
Product will not infringe any patent, trademark, copyright,
trade secret or other intellectual property rights of any
third party in any jurisdiction . Buyer warrants to Seller
that use, reuse, further manufacture, sale or resale of the
Product will not infringe the patent, trademark, copyright,
trade secret or other intellectual property rights of any
third party in any jurisdiction. Each Party (the Indemnifying
Party) shall defend, indemnify, and save harmless the other
Party, its Affiliates, and their respective officers,
directors and employees from and against any loss, damage,
liability or expense (including attorneys fees) arising from
any breach of either of the foregoing warranties made by the
Indemnifying Party.
12. FORCE MAJEURE
12.1 Seller's failure or inability to make, or Buyer's failure or
inability to take or be able to use, any delivery or
deliveries when due, or the failure or inability of either
party to effect timely performance of any other obligation
required of it hereunder, if caused by a "force majeure" as
hereinafter defined, shall not constitute a default hereunder
or subject the party affected by the force majeure to any
liability to the other; provided, however, that such excuse
for the force majeure shall only apply if (a) the party so
affected shall promptly notify the other of the existence
thereof, of its expected duration, and of the estimated
effect thereof upon its ability to perform its obligations
hereunder, and (b) such party proceeds in a commercially
reasonable manner to overcome the same promptly. Such party
shall promptly notify the other party when such force majeure
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circumstance has ceased to affect its ability to perform its
obligations hereunder. The quantity to be delivered hereunder
shall be reduced to the extent of the deliveries omitted for
such cause or causes, unless both parties agree that the total
quantity to be delivered hereunder shall remain unchanged.
During a force majeure period, Seller will allocate its total
production of such goods among its various requirements
therefore (e.g., manufacturing and sales) in an equitable
manner. During the time that Seller is unable to make
deliveries or otherwise perform, it shall not be obligated to
procure, or to use its best efforts to procure, any quantity
of goods sold hereunder from any alternate producer or
supplier. As used herein, the term "force majeure" shall mean
and include any act of God, nature or the public enemy;
accident; explosion; operational malfunction or interruption;
fire; storm; earthquake; flood; drought; perils of the sea;
strikes; lockouts or labor disputes; riots; sabotage; embargo;
war (whether or not declared and whether or not the United
Kingdom is a participant); legal restriction or limitation or
compliance therewith; failure or delay of transportation;
shortage of, or inability to obtain, raw materials, supplies,
equipment, fuel, power, labor, or other operational necessity;
interruption or curtailment of power supply; or any other
circumstance beyond the reasonable control of the party
affected thereby. A party shall not be required to resolve
labor disputes, or disputes with suppliers of raw materials,
supplies, equipment, fuel or power, except in accordance with
such party's business judgment as to its best interest.
13. TERMINATION
13.1 Either Party shall have the right to terminate this Agreement
effective upon written notice to the other Party (the
Defaulting Party) if one or more of the following described
events of default shall occur:
13.1.1 the Defaulting Party shall fail to materially comply
with any term or requirement contained in this
Agreement and such failure to comply shall not have
been cured thirty (30) days after written notice
thereof to the Defaulting Party provided, however,
that: (1) in the event a failure to comply cannot be
cured within thirty days, this Agreement shall not
be subject to termination under this provision if
the Defaulting Party commences, and thereafter
diligently pursues, a cure within the thirty day
period; and, (2) no advance written notice or
opportunity to cure shall be necessary in order to
terminate this Agreement pursuant to Sections 13.1.2
through 13.1.7; or
13.1.2 the filing by the Defaulting Party of a voluntary
petition in
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bankruptcy or a voluntary petition or answer seeking
reorganization, rearrangement or readjustment of its
debts or for any other relief under the bankruptcy or
insolvency act or law of any jurisdiction, now or
hereafter existing, or any other agreement by the
Defaulting Party indicating consent to, approval or
acquiescence in, any such petition or proceeding; or
13.1.3 the application by the Defaulting Party or the
consent or acquiescence of the Defaulting Party in
the appointment of a receiver or trustee for all or a
substantial part of any of its properties; or
13.1.4 The making by the Defaulting Party of a general
assignment for the benefit of creditors; or
13.1.5 the inability of the Defaulting Party or the
admission of the Defaulting Party in writing of its
inability to pay its debts as they mature; or
13.1.6 the filing of an involuntary petition against the
Defaulting Party seeking reorganization,
rearrangement or readjustment of its debts, or for
any other relief under the bankruptcy or insolvency
act or law of any jurisdiction, now or hereafter
existing, or the involuntary appointment of a
receiver or trustee of the Defaulting Party 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 the Defaulting Party and the continuance
of such for sixty (60) days undismissed or
undischarged; provided, however, that in the event of
an appointment of a receiver or trustee, this
Agreement shall not terminate if the receiver or
trustee agrees to assume the Defaulting Party's
liabilities and obligations under this Agreement; or
13.1.7 the assignment by the Defaulting Party of this
Agreement or any of its rights under this Agreement
in violation of Paragraph 17 (ASSIGNMENTS).
13.2 Rights Surviving Termination. The termination of this
Agreement shall not affect the rights and liabilities of
either Party arising during the period for which it is
effective or release either from the obligation to pay arising
under this Agreement during its effective period.
14. ENTIRE AGREEMENT, MODIFICATION
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14.1 This Agreement constitutes the entire understanding between
the parties and there are no other agreements or
understandings, written or oral, between the parties with
respect to the subject matter of this Agreement.
14.2 The Parties contemplate that, from time to time during the
term of this Agreement, either or both of the Parties will
utilize various documents in order to conveniently facilitate
the purchase and delivery of Product, and that these documents
(including, but not limited to, purchase orders, delivery
orders and negotiable and non-negotiable instruments of title)
may include terms and conditions different from those of this
Agreement. The Parties agree that these documents shall not
modify the terms and conditions of this Agreement, and that
terms and conditions contained in such documents which purport
to modify this Agreement shall have no force or effect. The
Parties also contemplate that there will be routine dealings
between their employees. Each party acknowledges that the
employees of the other party have no authority to waive,
modify or interpret this Agreement. Each party agrees that
statements, representations, warranties and promises of the
other party's employees supplemental to, or varying from, the
terms and conditions of this Agreement shall not be binding
and each party shall conduct its business without reliance
upon or regard to such statements, representations,
warranties and promises.
14.3 This Agreement may be modified only by a written document
signed by both of the Parties which specifically references
this Section 14 and this subsection 14.3 cannot be orally
waived or modified.
15. WAIVER
15.1 No waiver, acquiescence or forbearance by either party hereto
of any breach or default this Agreement, and no course of
conduct or dealings between the parties which varies from the
terms and conditions of this Agreement, shall: (i) be deemed a
waiver as to any subsequent and/or similar breach or default
by either party; or, (ii) constitute or be deemed a
modification of this Agreement; or, (iii) affect the rights or
obligations of the parties under this Agreement in any way.
16. INDEMNITY
16.1 Buyer shall defend, indemnify and hold Seller, its Affiliates
and their
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respective officers, employees, affiliates, successors or
assigns, harmless from and against any and all suits, claims,
losses, liabilities, demands, judgments, costs, fines,
penalties or expenses (including, without limitation,
attorneys' fees) with respect to bodily injury, personal
injury, property damage or economic injury sustained by any
person and resulting or arising, or allegedly resulting or
arising, directly or indirectly, from the sale,
transportation, possession, processing, treatment, storage,
disposal, further manufacture, use, other reuse or resale of
the Product delivered to Buyer by Seller or any other product
incorporating the Product. This provision shall survive
expiration or other termination of this Agreement and shall be
unlimited in amount.
17. ASSIGNABILITY
17.1 Neither party shall without the consent in writing of the
other party assign any of its rights or obligations arising
from this agreement, such consent not to be unreasonably
withheld or delayed.
18. NOTICES
18.1 Notices and other communications sent by either party to the
other in pursuance of the provisions of this agreement shall
be in writing and shall be sent to the recipient at the
address shown above as its registered office or at such other
address as either party may notify the other in writing is to
be substituted as the address of the notifying party. Where
Buyer is the recipient a copy shall also be sent to Buyer at
P.O. Box 17, Oil Sites Road, Ellesmere Port, South Wirral, L65
4HF, England to the attention of both the Purchasing Manager
and the Company Secretary.
The copy to the Company Secretary shall be sent by facsimile
to 151-356-6298 or such other number as may be notified from
time to time.
19. INTERPRETATION
19.1 The headings of the clauses of this agreement have been
inserted for convenience only and they shall not affect its
interpretation.
20. DISPUTES
20.1 Any disputes between the parties arising out of or in
connection with this agreement shall be referred to the chief
executive officers of the parties (or their nominees) for
resolution. Failing such resolution, such disputes shall
be settled by alternative dispute resolution or arbitration,
if both parties agree to such a course, but failing agreement
such disputes shall
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be settled by the English courts applying English Law.
On behalf of THE ASSOCIATED OCTEL COMPANY LIMITED
Signature:__________________________________
Name:_______________________________________
Position:___________________________________
Date:_______________________________________
On behalf of GREAT LAKES CHEMICAL (EUROPE) LIMITED
Signature:__________________________________
Name:_______________________________________
Position:___________________________________
Date:_______________________________________
<PAGE> 1
EXHIBIT 10.5
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,
W1X 6DT, England ("Seller"); and,
(2) GREAT LAKES CHEMICAL (EUROPE) LIMITED having its registered office at
Groat Avenue, Aycliffe Industrial Estate, Newton Aycliffe, Durham, DL5
5HA ("Buyer").
WHEREAS:
A) Buyer is in need of 10% sodium hydroxide solution ("Product") ; and,
B) Seller desires to supply the Product to Buyer; and,
C) Buyer desires to purchase the Product from Seller;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, THE UNDERTAKINGS OF THE
PARTIES PURSUANT TO THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, IT
IS AGREED AS FOLLOWS:
1. TERM
1.1 The Term of this Agreement shall commence on the Distribution Date (as
defined in the Transfer and Distribution Agreement) and shall continue
until terminated: (i) by either party on or after 31 December 1998,
such termination not to be effective unless preceded by at least six
(6) months written notice given by the party wishing to terminate; or,
(ii) by Buyer upon written notice to Seller that Buyer shall
immediately take or pay for all Product in inventory of Seller and any
Product as to which Seller has irrevocably begun manufacture.
2. QUANTITY
2.1 Buyer will purchase Product from Seller.
2.2 Quantities of Product to be ordered by Buyer are set forth on App. 2.2
of Appendix 3.
2.3 At least three months before the end of each calendar year, Buyer
shall provide a forecast of its anticipated purchases of Product
during the forthcoming calendar year broken down by calendar quarter
and shall update its forecast requirements on a quarterly basis for
the remainder of the year in question.
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2.4 Certain maximum quantities Seller is obligated to provide are set
forth on App. 2.4 of Appendix 3.
2.5 Minimum order quantities are set forth on App. 2.5 of Appendix 3.
3. QUALITY
3.1 All Product supplied shall conform to the specification shown in
Appendix 1 or any other specification substituted by written agreement
between the parties, as determined by the analytical methods shown in
Appendix 1 or by any other analytical methods substituted by written
agreement between the parties ("the Product Specification").
3.2 Each separate lot of Product supplied shall be in a homogenous state
immediately prior to being delivered.
3.3 All Product delivered shall be covered by a certificate of analysis
signed and dated on behalf of the Seller showing the lot number,
weight, order number and quality parameters as defined in Appendix 1.
3.4 Buyer shall, at Buyer's expense, upon giving reasonable notice to
Seller, have the right to inspect Seller's quality assurance
procedures as a quality assurance audit.
3.5 Seller shall not make any change in process, facilities, or raw
materials used to manufacture Product in accordance with ISO
procedures, except with the prior consent of Buyer which shall not be
unreasonably withheld.
4. INSPECTION AND LIABILITY LIMITATION
4.1 Promptly after receiving each shipment of Product, Buyer shall examine
such Product for any damage, defect, non-conformance or shortage.
Buyer shall notify Seller within thirty (30) days of receipt of
Product if the Product does not comply with the Product Specification.
Failure of Buyer to notify Seller within the thirty (30) day period of
non-conformity with such specification shall constitute irrevocable
acceptance of Product by Buyer and shall ban Buyer from making any
claim that such Product is non- conforming in any respect (under any
theory, including without limitation, negligence, strict liability,
contract, warranty or otherwise).
4.2 Except for breaches of the warranties in Section 11, Buyer's exclusive
remedy shall be for damages, and Seller' total liability for any and
all
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losses and damages arising out of any cause whatsoever (whether such
cause be based in contract, negligence, strict liability, other tort
or otherwise) shall in no event exceed the market price as determined
by Seller for the quantity of Product in respect to which such cause
arises, or at Seller's option, the replacement of such Product, and in
no event shall Seller be liable for incidental, consequential or
punitive damages resulting from any such cause.
4.3 If either Party furnishes technical or other advice to the other
Party, whether or not at the request of the Party receiving the
technical or other advice, with respect to processing, further
manufacture, other use or resale of the Products, the Party supplying
the advice shall not be liable for, and the Party receiving the advice
assumes all risk of, such advice and the results which flow from it.
5. PRICES
5.1 The pricing for product supplied shall, unless otherwise agreed in
writing, be the pricing shown in Appendix 2.
5.2 The pricing shown on Appendix 2 does not include value added tax now
or hereafter levied, which shall be for Buyer's account. Neither Party
shall be liable for any tax imposed upon the other Party's income or
privilege of doing business.
6. PURCHASE ORDERS
6.1 Buyer shall purchase Product from Seller as evenly as possible during
the course of each year consistent with its needs. Buyer shall place
written orders on Seller for Product not less than thirty days before
the required delivery date and Seller shall deliver such Product in
accordance with Buyer's orders. Certain maximum quantities Seller
shall be obligated to provide are set forth on App. 6.1 of Appendix 3.
7. DELIVERIES
7.1 Seller shall deliver Product in tank wagons supplied by Seller.
7.2 Delivery shall be made CPT (Incoterms, 1990) Buyer's plant at Amlwch,
Anglesey. Title shall pass upon delivery.
8. INVOICES
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8.1 Invoices shall be submitted to Buyer at Groat Avenue, Aycliffe
Industrial Estate, Newton Aycliffe, Durham, DL5 5HA Attn. Accounts
Payable or such other address as Buyer shall notify to Seller.
9. TERMS OF PAYMENT
9.1 Payment shall be made on or before the 30th day of the month following
the month of invoice by electronic transfer to a bank account
nominated in writing by Seller to Buyer.
10. OTHER MATTERS
10.1 Buyer and Seller shall have the rights set forth in App. 10.1 of
Appendix 3.
10.2 Buyer and Seller shall have the rights set forth in App. 10.2 of
Appendix 3.
11. INTELLECTUAL PROPERTY RIGHTS
11.1 Seller warrants to Buyer that the manufacture and delivery of Product
will not infringe any patent, trademark, copyright, trade secret or
other intellectual property rights of any third party in any
jurisdiction. Buyer warrants to Seller that use, reuse, further
manufacture, sale or resale of the Product will not infringe the
patent, trademark, copyright, trade secret or other intellectual
property rights of any third party in any jurisdiction. Each Party
(the Indemnifying Party) shall defend, indemnify, and save harmless
the other Party, its Affiliates, and their respective officers,
directors and employees from and against any loss, damage, liability
or expense (including attorneys fees) arising from any breach of
either of the foregoing warranties made by the Indemnifying Party.
12. FORCE MAJEURE
12.1 Seller's failure or inability to make, or Buyer's failure or inability
to take, any delivery or deliveries when due, or the failure or
inability of either party to effect timely performance of any other
obligation required of it hereunder, if caused by a "force majeure" as
hereinafter defined, shall not constitute a default hereunder
or subject the party affected by the force majeure to any liability
to the other; provided, however, that such excuse for the force
majeure shall only apply if (a) the party so affected shall promptly
notify the other of the existence thereof, of its expected duration,
and of the estimated effect thereof upon its ability to perform its
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obligations hereunder, and (b) such party proceeds in a commercially
reasonable manner to overcome the same promptly. Such party shall
promptly notify the other party when such force majeure circumstance
has ceased to affect its ability to perform its obligations hereunder.
The quantity to be delivered hereunder shall be reduced to the extent
of the deliveries omitted for such cause or causes, unless both
parties agree that the total quantity to be delivered hereunder shall
remain unchanged. During a force majeure period, Seller will allocate
its total production of such goods among its various requirements
therefore (e.g., manufacturing and sales) in an equitable manner.
During the time that Seller is unable to make deliveries or otherwise
perform, it shall not be obligated to procure, or to use its best
efforts to procure, any quantity of goods sold hereunder from any
alternate producer or supplier. As used herein, the term "force
majeure" shall mean and include any act of God, nature or the public
enemy; accident; explosion; operational malfunction or interruption;
fire; storm; earthquake; flood; drought; perils of the sea; strikes;
lockouts or labor disputes; riots; sabotage; embargo; war (whether or
not declared and whether or not the United Kingdom is a participant);
legal restriction or limitation or compliance therewith; failure or
delay of transportation; shortage of, or inability to obtain, raw
materials, supplies, equipment, fuel, power, labor, or other
operational necessity; interruption or curtailment of power supply; or
any other circumstance beyond the reasonable control of the party
affected thereby. A party shall not be required to resolve labor
disputes, or disputes with suppliers of raw materials, supplies,
equipment, fuel or power, except in accordance with such party's
business judgment as to its best interest.
13. TERMINATION
13.1 Either Party shall have the right to terminate this Agreement
effective upon written notice to the other Party (the Defaulting
Party) if one or more of the following described events of default
shall occur:
13.1.1 the Defaulting Party shall fail to materially comply with any
term or requirement contained in this Agreement and such
failure to comply shall not have been cured thirty (30) days
after written notice thereof to the Defaulting Party
provided, however, that: (1) in the event a failure to comply
cannot be cured within thirty days, this Agreement shall not
be subject to termination under this provision if the
Defaulting Party commences, and thereafter diligently pursues,
a cure within the thirty day period; and, (2) no advance
written notice or opportunity to cure shall be necessary in
order to terminate this Agreement pursuant to Sections 13.1.2
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through 13.1.7; or
13.1.2 the filing by the Defaulting Party of a voluntary petition in
bankruptcy or a voluntary petition or answer seeking
reorganization, rearrangement or readjustment of its debts or
for any other relief under the bankruptcy or insolvency act or
law of any jurisdiction, now or hereafter existing, or any
other agreement by the Defaulting Party indicating consent to,
approval or acquiescence in, any such petition or proceeding;
or
13.1.3 the application by the Defaulting Party or the consent or
acquiescence of the Defaulting Party in the appointment of a
receiver or trustee for all or a substantial part of any of its
properties; or
13.1.4 the making by the Defaulting Party of a general assignment for
the benefit of creditors; or
13.1.5 the inability of the Defaulting Party or the admission of the
Defaulting Party in writing of its inability to pay its debts
as they mature; or
13.1.6 the filing of an involuntary petition against the Defaulting
Party seeking reorganization, rearrangement or readjustment of
its debts, or for any other relief under the bankruptcy or
insolvency act or law of any jurisdiction, now or hereafter
existing, or the involuntary appointment of a receiver or
trustee of the Defaulting Party 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 the Defaulting Party and
the continuance of such for sixty (60) days undismissed or
undischarged; provided, however, that in the event of an
appointment of a receiver or trustee, this Agreement shall not
terminate if the receiver or trustee agrees to assume the
Defaulting Party's liabilities and obligations under this
Agreement; or
13.1.7 the assignment by the Defaulting Party of this Agreement or any
of its rights under this Agreement in violation of Paragraph 17
(ASSIGNMENTS).
13.2 Rights Surviving Termination. The termination of this Agreement shall
not affect the rights and liabilities of either Party arising during
the period for which it is effective or release either from the
obligation to pay arising
<PAGE> 7
The Associated Octel Company, Ltd. and Great Lakes Chemical (Europe) Ltd.
Agreement for the Supply of 10% Sodium Hydroxide Solution
Page 7 of 9
under this Agreement during its effective period.
14. ENTIRE AGREEMENT, MODIFICATION
14.1 This Agreement constitutes the entire understanding between the
parties and there are no other agreements or understandings, written
or oral, between the parties with respect to the subject matter of
this Agreement.
14.2 The Parties contemplate that, from time to time during the term of
this Agreement, either or both of the Parties will utilize various
documents in order to conveniently facilitate the purchase and
delivery of Product, and that these documents (including, but not
limited to, purchase orders, delivery orders and negotiable and
non-negotiable instruments of title) may include terms and conditions
different from those of this Agreement. The Parties agree that these
documents shall not modify the terms and conditions of this Agreement,
and that terms and conditions contained in such documents which
purport to modify this Agreement shall have no force or effect. The
Parties also contemplate that there will be routine dealings between
their employees. Each party acknowledges that the employees of the
other party have no authority to waive, modify or interpret this
Agreement. Each party agrees that statements, representations,
warranties and promises of the other party's employees supplemental
to, or varying from, the terms and conditions of this Agreement shall
not be binding and each party shall conduct its business without
reliance upon or regard to such statements, representations,
warranties and promises.
14.3 This Agreement may be modified only by a written document signed by
both of the Parties which specifically references this Section 14 and
this subsection 14.3 cannot be orally waived or modified.
15. WAIVER
15.1 No waiver, acquiescence or forbearance by either party hereto of any
breach or default this Agreement, and no course of conduct or dealings
between the parties which varies from the terms and conditions of this
Agreement, shall: (i) be deemed a waiver as to any subsequent and/or
similar breach or default by either party; or, (ii) constitute or be
deemed a modification of this Agreement; or, (iii) affect the rights
or obligations of the parties under this Agreement in any way.
16. INDEMNITY
<PAGE> 8
The Associated Octel Company, Ltd. and Great Lakes Chemical (Europe) Ltd.
Agreement for the Supply of 10% Sodium Hydroxide Solution
Page 8 of 9
16.1 Buyer shall defend, indemnify and hold Seller, its Affiliates and
their respective officers, employees, affiliates, successors or
assigns, harmless from and against any and all suits, claims, losses,
liabilities, demands, judgments, costs, fines, penalties or expenses
(including, without limitation, attorneys' fees) with respect to
bodily injury, personal injury, property damage or economic injury
sustained by any person and resulting or arising, or allegedly
resulting or arising, directly or indirectly, from the sale,
transportation, possession, processing, treatment, storage, disposal,
further manufacture, use, other reuse or resale of the Product
delivered to Buyer by Seller or any other product incorporating the
Product. This provision shall survive expiration or other termination
of this Agreement and shall be unlimited in amount.
17. ASSIGNABILITY
17.1 Neither party shall without the consent in writing of the other party
assign any of its rights or obligations arising from this agreement,
such consent not to be unreasonably withheld or delayed.
18. NOTICES
18.1 Notices and other communications sent by either party to the other in
pursuance of the provisions of this agreement shall be in writing and
shall be sent to the recipient at the address shown above as its
registered office or at such other address as either party may notify
the other in writing is to be substituted as the address of the
notifying party. Where Seller is the recipient, a copy shall also be
sent to Seller at P.O. Box 17, Oil Sites Road, Ellesmere Port, South
Wirral, L65 4HF, England, to the attention of both the Purchasing
Manager and the Company Secretary.
The copy to the Company Secretary shall be sent by facsimile to
151-356-6298 or such other number as may be notified from time to
time.
19. INTERPRETATION
19.1 The headings of the clauses of this agreement have been inserted for
convenience only and they shall not affect its interpretation.
20. DISPUTES
20.1 Any disputes between the parties arising out of or in connection with
this agreement shall be referred to the chief executive officers of
the parties (or their nominees) for resolution. Failing such
resolution, such disputes
<PAGE> 9
The Associated Octel Company, Ltd. and Great Lakes Chemical (Europe) Ltd.
Agreement for the Supply of 10% Sodium Hydroxide Solution
Page 9 of 9
shall be settled by alternative dispute resolution or arbitration, if
both parties agree to such a course, but failing agreement such
disputes shall be settled by the English courts applying English Law.
On behalf of THE ASSOCIATED OCTEL COMPANY LIMITED
Signature: _________________________________
Name: ______________________________________
Position: __________________________________
Date: ______________________________________
On behalf of GREAT LAKES CHEMICAL (EUROPE) LIMITED
Signature: _________________________________
Name: ______________________________________
Position: __________________________________
Date: ______________________________________
<PAGE> 1
EXHIBIT 10.8
FORM OF EMPLOYMENT AGREEMENT
[Name]
[Date]
Dear __________
Following our recent discussions, we have pleasure in offering you employment
with The Associated Octel Company Limited. You will initially be employed as
[Title] located at our Ellesmere Port Works, at a basic salary of (pound)_______
per annum.
As a Director on the Company's Executive Committee you will automatically
qualify for the GLCC Corporate Bonus, currently with a target bonus of 35% and a
maximum of 50%. You will be eligible for the GLCC Corporate Share Option scheme.
This offer of employment is subject to the completion of a medical examination
and the receipt of two references, the results of which are satisfactory to us.
This offer assumes your acceptance of the Company's terms and conditions of
employment, which, unless otherwise expressed in this letter, are as set out in
Part 1 of the enclosed copy of the Staff Handbook.
HOLIDAY ENTITLEMENT
You will be entitled to 30 days annual holiday in a full holiday year which runs
from 1 March to 28 or 29 February. Your entitlement in the first year will
depend on your start date.
BUPA MEMBERSHIP
You will be offered membership of the Company's BUPA Bulk Scheme for yourself
and your wife on a non-contributory basis. The current taxable benefit arising
from the Company's contribution is (pound)674 per annum. Membership can be
extended to cover any unmarried children under 21 years of age, on a
contributory basis, at the current monthly rate of (pound)14.04. The Scheme is
renewable at 1 July 1997.
<PAGE> 2
HOLIDAY GIFT AND OVERSEAS TRAVEL ALLOWANCE
With reference to Sections 7 and 23 of the Staff Handbook respectively, please
note that as a member of the Executive Committee you are not entitled to Holiday
Gift or the Overseas Travel Allowances.
PENSION PLAN
The Company maintains a Pension Plan for the benefit of employees and you will
be eligible to join. Further details of the Plan are contained in the enclosed
copy of the Pension Plan Booklet.
COMPANY CAR
You will be provided with a fully funded Company car, typically a BMW 523 or
equivalent. You may take a cash equivalent in lieu of a car. Further details
will be furnished to you on joining the Company.
TERMINATION OF CONTRACT
Should you wish to terminate your employment you must give the Company six
months notice. You will be entitled to receive twelve months notice from the
Company to terminate your services. The Company notice period will not apply if
your service is terminated as a result of gross misconduct.
CHANGE OF CONTROL PROTECTION
In the event of the takeover or fundamental restructuring of the Company which
results in the loss of your current position, you will be entitled to receive
compensation comprising two years' salary plus 25% for loss of bonus and
(pound)30,000 for loss of benefits.
The above offer is also subject to your acceptance of certain employment
policies of Great Lakes Chemical Corporation, copies of which are enclosed,
viz:-
- - Great Lakes Chemical Corporation Anti-trust Policy.
Please read the statement enclosed and by signing this letter you
signify your acceptance of this policy.
- - Great Lakes Chemical Corporation Code of Ethical Conduct.
2
<PAGE> 3
- - Great Lakes Chemical Corporation Confidentiality Agreement. Please note
that Articles 7 and 8 of this Agreement are replaced by the following
new Article 7:-
"this agreement shall be governed and construed in all respects in
accordance with English Law and the parties hereby submit to the
non-exclusive jurisdiction of the English courts".
Should you wish to accept our offer would you please sign your acceptance on the
duplicate of this letter and EITHER the enclosed Pension Plan Membership
Application Form OR Waiver Form, and one copy of each of the Great Lakes
Chemical Corporation Code of Ethical Conduct and Confidentiality Agreement and
return them to me.
3
<PAGE> 4
I apologise for the formality of this letter, but I am sure you understand the
necessity. I would be grateful if you could send me the names of two references
we can contact and also your earliest start date. If you have any queries,
please give me a call.
Yours sincerely,
ALAN HANSLIP
DIRECTOR OF HUMAN RESOURCES
Signed: _________________________________________________ Dated: _____________
Enc.
4
<PAGE> 1
EXHIBIT 10.9
ASSOCIATED OCTEL
Mr D Kerrison
York House
Ripley
Nr Harrogate
North Yorkshire
HG3 3AY
13 May 1996
Dear Mr Kerrison
Further to your discussions with Mr R B McDonald, Dr L D Simpson and Mr M
Roberts of Great Lakes Chemical Corporation of Great Lakes Boulevard, West
Lafayette, USA ("GLCC"), I have pleasure in confirming an offer of employment
with The Associated Octel Company Limited (the "Company") to begin on 13 May
1996 and your continuous employment for the purpose of calculating statutory
employment rights shall run from such date. You will be employed as Managing
Director, located at the Company's Ellesmere Port Work, at a basic salary of
(pound)175,002 per annum having been appointed a Director of the Company by
resolution. You will also be appointed a Vice-President of GLCC. Your salary
will be reviewed annually by the Board of Directors of GLCC (the Company's
ultimate controlling parent company).
In your capacity as Managing Director of Octel you will report to Dr L Donald
Simpson, Senior Vice-President of GLCC.
Upon commencement of employment you will be awarded 7,000 options in the stock
of GLCC subject to approval by the Board of Directors of GLCC. Thereafter you
will be eligible for consideration for stock options in accordance with the
normal policy and practice of GLCC.
You will participate in the GLCC 1996 Management Incentive Compensation Plan at
a target bonus level of 35% of your annual base salary. Your bonus opportunity
may be as high as 52.5% of your annual base salary. Your 1996 bonus will be
prorated based on the number of complete months you are employed by the Company
during 1996 beginning 1 June 1996.
You will be provided with details of both the Stock Option Plan and the
Management Incentive Compensation Plan after you commence employment, together
with a statutory statement of the terms and conditions of employment.
<PAGE> 2
2
Following your acceptance of the Company's offer detailed in this letter and
upon commencement of employment, arrangements will be made to pay you a one off
lump sum payment of (pound)25,000.
This will be paid to you in your first payroll month and will be subject to tax
and National Insurance deductions where applicable. This payment will be in
addition to your base salary. This offer of employment is subject to the
Company's receipt of a medical report following examination acceptable to the
Company and the receipt of at least two satisfactory references.
The offer in this letter assumes your unconditional acceptance in full of the
Company's terms and conditions of employment, which, unless otherwise expressed
in this letter, are as set out in Part 1 of the enclosed copy of the Company
Staff Handbook and which it is expressly agreed are fully incorporated into your
contract of employment, save where the contrary is expressed herein.
Duties
You shall during your employment:
a) perform the duties and exercise the powers which the Board of Directors of
the Company or GLCC may from time to time properly assign to you in
connection with the business of the Company, or in connection with the
business of any Associated Company;
b) in the absence of any specific directions from the Board of Directors of
the Company or GLCC (but subject always to the Memorandum & Articles of
Association of the Company) have the general control and management of the
business of the Company;
c) comply with the Memorandum & Articles of Association of the Company and the
requirements of any subsidiary related documents thereto;
d) comply with the requirements of the Company and GLCC under the Partnership
Agreement of Octel Associates (a partnership in which GLCC have a
controlling interest whose other partners are effectively Chevron, Mobil,
British Petroleum and Texaco and for which the Company acts as Managing
Agent), and of any subsidiary related documents thereto;
e) not knowingly permit yourself or the Company to act in a manner contrary to
the interests of the Company or GLCC or the duties cast on the Company by
the corporate or partnership documents referred to in sub-paragraphs (c)
and (d) above; and
f) do all in your power to promote, develop and extend the business and
protect and further the interests of the Company and the Associated
Companies.
3
<PAGE> 3
3
You shall work in any place within Europe or the United States of America which
the Company or GLCC may reasonably require for the proper performance and
exercise of your duties and powers. You will be required to travel overseas on
the business of the Company or GLCC.
Without prejudice to your right as Director to exercise discretion in acting at
all times in the best interests of the Company, you may not, without the advance
express approval of the Company or GLCC (including through the delegated powers
of the President, Chief Executive Officer and Senior Vice-President responsible
for the Petroleum Additives Business Unit), undertake to make significant and
substantial arrangements of material importance to the Company including (but
not limited to) the following:
a) acquire, sell, mortgage, rent or let companies or property;
b) make single investments exceeding any authority as stipulated from time to
time by the Board of Directors of the Company or GLCC;
c) establish subsidiaries, participate in other companies, establish branches
or offices; or
d) establish or execute an employment contract between the Company and a third
party having an annual value of emoluments exceeding (pound)40,000.
Generally, you shall comply with the delegation of authority as issued from time
to time by the GLCC Chief Executive Officer's office as it similarly applies to
other GLCC Business Units and Associated Companies and their Officers.
In this letter, "Associated Company" shall mean GLCC, or a subsidiary of the
Company or GLCC, or any other company which is for the time being a holding
company of the Company or other subsidiary of GLCC (or such other holding
company) and "Associated Companies" shall mean two or more such companies.
Office of Director
During your employment you shall not, without GLCC's prior express consent:
a) voluntarily resign as a Director of the Company;
b) voluntarily do or refrain from doing any act whereby your office as a
Director of the Company or of any Associated Company is or becomes liable
to be vacated; or
c) do anything which would cause you to be disqualified from continuing to act
as a Director of the company or of any Associated Company, as it is a
requirement of your employment that you are a Director of the Company.
Hours of Work
<PAGE> 4
4
You shall work a minimum of 38 hours per week Monday to Friday and generally
such other hours and at other times as are necessary to fulfil your duties and
obligations without additional pay or other benefits for such further hours
worked.
Sick Pay
You will be paid during any period of absence due to material personal
incapacity (such payment being inclusive of statutory sick pay) as set forth in
the Company Staff Handbook.
Holiday Entitlement
You will be entitled to 30 days annual holiday in each full holiday year which
shall run from 1 March to 28 (or 29) February each year. You entitlement in the
first year until 28 February 1997 will be 23 days holiday.
BUPA Membership
You will be offered membership of the Company's BUPA Bulk Scheme for yourself
and your wife on a non-contributory basis. The current taxable benefit arising
from the Company's contribution is (pound)674 per annum. Membership can be
extended to cover any unmarried children under 21 years of age, on a
contributory basis, at the current monthly rate of (pound)14.04. The Scheme is
renewable on 1 July 1996. The Company reserves the right to alter the private
health insurance provider and the benefits afforded by such insurance and the
terms on which it is offered.
Termination of Contract
Your employment shall continue until terminated upon written notice by you or by
the Company of not less than 12 months, provided that such notice may not be
given by either party (except as otherwise provided in this letter) until 13 May
1997.
Your employment as Managing Director shall terminate automatically in the event
of your resigning as a Director of the Company without the approval of GLCC. In
such event you agree to forego any claim for damages against GLCC or the
Company.
Your employment may also be terminated by the Company without notice or payment
in lieu of notice if you are guilty of gross default, misconduct or material
breach of the terms of your employment in relation to the Company or any
Associated Company; or if you are made bankrupt, enter into a deed or
arrangement with creditors, convicted of an arrestable offence (other than minor
road traffic offences), disqualified from holding office because of wrongful
trading under the Insolvency Act 1986, or if you become of unsound mind or a
patient under the Mental Health Acts or as otherwise set forth in this letter.
Upon termination you will forthwith resign all Directorships of Associated
Companies. Should you fail to do so the Company Secretary is hereby irrevocably
authorised as your
<PAGE> 5
5
attorney to sign such documents and do such tasks as are necessary to effect the
resignation of your Directorships as are necessary.
Garden Leave
Should the Company give you notice it may require you to continue working or
undertake such other work as it may direct or request you not to report for work
during the notice period. If requested not to report to work you will continue
to receive your contractual benefits until the date of termination or other date
by mutual agreement. Alternatively, the Company reserves the right to terminate
your employment without notice, but in such event the Company shall pay you a
sum equal to the value of the contractual net remuneration and benefits you
would have received during the notice period had you continued working.
No Other Employment
During your employment with the Company until termination including any period
of Garden Leave, you agree that you will not be employed by or concerned in the
business of any other person, firm or company (other than holding shares
constituting less than 1% of a company quoted on any recognised stock exchange).
You will devote your whole time and attention to the business of the Company and
GLCC (unless prevented by incapacity).
Pension Plan
As you are probably aware, the UK Finance Act of 1989 introduced a Pension Cap
for employees who join a pension plan after June 30th 1989. This cap would limit
your pension benefit under any new employers' pension plan. In your case your
benefits from the Company Pension Plan would be based on a current pensionable
salary of (pound)82,200 p.a. (earnings cap). This earnings cap is reviewed by
the Government in April each year.
Should you elect to join the Company Pension Plan on taking up your employment
the calculation of your contributions will take no account of the earnings cap.
On your retirement the Company will ensure that your pension benefits will be
augmented or supplemented so that the total pension in respect of your
pensionable service with Octel will be calculated using a formula of 1/40th for
each year of service. In all other respects the Rules of the Company's Pension
Plan will apply.
The Company will determine the means of providing any benefits not paid by the
Pension Plan.
Competition
Without prejudice to any existing or separate agreement between you and the
Company or GLCC you agree to be bound by each of the following separate
covenants which are intended to be distinct and severable one from another:
a) for a period of 18 months after the termination of your employment you
shall not be in competition with the business in which the Company or GLCC
were engaged during the
<PAGE> 6
6
12 month period prior to the termination of your employment and in which
you have been directly concerned, or, whether in person or by any agent or
proxy, be involved in the manufacturing, dealing or selling of either
bromine related compounds or lead alkyl additives for gasoline and other
fuel additives; and in particular will not be employed by or otherwise
involved in any capacity in the lead alkyl business of either Alcor Chemie
AG, Novoktan GmbH, Ethyl Corporation or Syntez (an organisation currently
based in Russia which manufactures and sells such products), or any person,
firm, or company acting as agent for the same or any person, firm or
company who are the successors in title to the lead alkyl additives
business interests of the same; and
b) without prejudice to a) above, for a period of 12 months after termination
of your employment you shall not be involved whether directly or
indirectly, in competition with the Company in soliciting business of the
sort in which the Company was engaged during the 9 months prior to
termination of your employment, from or dealing with, or carrying out work
for, or supplying any products to, any person, firm or company, which was a
customer or client of the Company, or prospective client or customer of the
Company, with whom the Company had dealings during the 9 months prior to
the termination of your employment and with whom you have been directly
concerned.
The parties agree that each of the covenants set out in (a) and (b) above are
separate, severable and enforceable, and whilst the restrictions are considered
by the parties to be reasonable, it is acknowledged that restrictions of such
nature may be invalid because of changes in circumstances or unforeseen reasons
and accordingly if any of the restrictions shall be adjudged to be void or
ineffective for whatever reason, but would be adjudged valid and effective if
part of the wording of the restrictions were deleted or the periods reduced,
they shall apply with such modifications as may be necessary to make them valid
and effective.
Company Car
The Company shall during the continuance of the Agreement provide a motor car
deemed by the Company to be suitable in relation to your position within the
Company. Any motor car so provided shall remain the property of the Company
which shall pay the Vehicle Excise Duty, insurance premiums and certain running
expenses thereof including maintenance and repair.
You shall be permitted to use the motor car for your own private purposes
subject to such rules as shall exist from time to time which will include a
requirement that you shall pay for petrol and oil for private motoring.
You shall take good care of the car and ensure that the provisions and
conditions of any insurance policy relating to it are observed. You shall return
the car and keys to the Company at its registered office or such other place as
the Company may reasonably nominate immediately upon the termination of your
employment however arising.
Relocation
<PAGE> 7
7
The Company will assist you in relocating yourself and your family to an area
suitable for your place of work in Ellesmere Port. This will include reasonable
expenses not exceeding an amount which will be notified to you for house
hunting, legal fees and initial temporary accommodation for yourself. You will
also receive a disturbance allowance of up to (pound)14,500 to assist with
incidental costs incurred as a consequence of your relocation, such as payments
for modification or replacement of essential fixtures, fittings, furniture,
carpets and curtains. This allowance may not be claimed until completion of the
purchase of the property. Original VAT receipts must be produced to claim
reimbursements for these items. Requests for payments should be made within six
months of the completion date through Manager, Employee Relations.
Further detailed discussions will take place with you with a view to reaching
agreement regarding assistance with the sale of your existing property and
purchase of a new one through the use of the Octel Homesale Plan. A brochure
broadly outlining this has already been provided.
Expenses
You shall be entitled to be reimbursed expenses wholly, exclusively and
necessarily incurred by yourself in or about the performance of your duties of
your employment. Claims for reimbursement of such expenses are to be made in
accordance with the expense account policy as stipulated by the Company from
time to time.
Holiday Gift and Overseas Travel Allowances
With reference to Sections 7 and 23 of the Staff Handbook respectively, please
note that you are not entitled to Holiday Gift or the Overseas Travel
Allowances.
GLCC Antritrust Policy
Please read both copies of the GLCC Antitrust Policy enclosed herewith which
forms part of this letter and the terms of your employment. By signing this
letter you are deemed to unconditionally accept this Policy. Confidentiality
Agreement Please read and sign as your unconditional acceptance both copies of
the Company and GLCC Confidentiality Agreement enclosed herewith which forms
part of this letter and the terms of your employment. Please note that you are
deemed to agree that Articles 7 and 8 of the Confidentiality Agreement shall be
deleted and replaced by the following new Article 7:
"7. This Agreement shall be governed and construed in all respects in
accordance with English law and the parties hereby submit to the
non-exclusive jurisdiction of the English Courts. " GLCC Code of Ethical
Conduct
<PAGE> 8
8
Please read and sign as your unconditional acceptance both copies of the GLCC
Code of Ethical Conduct enclosed herewith which forms part of this letter and
the terms of your employment.
General
Your contract of employment will be governed by English law and you and the
Company and GLCC submit to the non-exclusive jurisdiction of the English Courts.
It contains our entire understanding and supersedes all previous arrangements
relating to your proposed employment by the Company.
Should there be other matters which need clarification, then please do not
hesitate to contact me.
Yours sincerely,
L.D. Simpson
Managing Director
for and on behalf of the Company and Great Lakes Chemical Corporation
Should you wish to accept our offer, would you please sign the duplicate of this
letter, together with EITHER the enclosed Pension Plan Membership Application
Form OR Waiver Form and one signed copy each of the Great Lakes Chemical
Corporation Policy on Antitrust, the Code of Ethical Conduct and the
Confidentiality Agreement. Your joining instructions are enclosed and we look
forward to you joining the Company.
SIGNED DATED:
----------------------------------------------------- ---------------
<PAGE> 1
EXHIBIT 10.10
Form of Agreement between Great Lakes and the Registrant
for the Conversion of Feedstock.
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 LAKES 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 Trademark)425 and Stadis (Registered
Trademark)450(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.
<PAGE> 2
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.
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 _________, 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 Sections 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
<PAGE> 3
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.
2.4 Contractor shall be in default if any of one or more of the following
events happen:
(a) Contractor shall fail 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
<PAGE> 4
(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.
(a) Contractor may terminate this Agreement if it is prevented from
increasing the Conversion Charge as provided in Section 9.8.
(b) This Agreement may be terminated by either party due to a Force
Majeure as provided in Article 8.
(c) 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 receivor or trustee, the Agreement
may not be terminated if the receivor 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
<PAGE> 5
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.
(a) 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 Process as
provided 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 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,
<PAGE> 6
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.
(c) 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)(ii), (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.
(d) 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 reasonably assist Owner
<PAGE> 7
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 Plant 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
<PAGE> 8
(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
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 consent 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
<PAGE> 9
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 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
<PAGE> 10
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.
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
<PAGE> 11
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.
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
<PAGE> 12
shall be adjusted as provided in this Section 9.1(b). Any payments made by
Contractor in settlement, or in satisfaction of any judgment 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 10-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 in 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
Distribution 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 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 expenditure 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
<PAGE> 13
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 change 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 the 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 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
<PAGE> 14
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, worldwide, 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 case 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 (registration mark) 425 and Stadis (registration mark)
450
<PAGE> 15
(Enhanced) to be supplied pursuant thereto, from a manufacturer other than
a subsidiary, parent company or corporate affiliate of 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 quantity of each of Stadis
(registration mark) 425 and Stadis (registration mark) 450 (Enhanced) to be
supplied. Contractor shall then give notice to Owner stating whether it
is willing to 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
<PAGE> 16
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.
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 OF MERCHANTABILITY OR
WARRANTIES OF FITNESS FOR AN INTENDED PURPOSE OR FOR ANY OTHER PARTICULAR
PURPOSE, WHETHER ARISING BY LAW, CUSTOM, CONDUCT OR USAGE OF TRADE.
<PAGE> 17
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
(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 receipt 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
<PAGE> 18
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 than
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 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
attorneys' 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 (z) 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
<PAGE> 19
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.
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, understandings, 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.
<PAGE> 20
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
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.
<PAGE> 21
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.
<PAGE> 22
The Associated Octel Company Limited
Signature:
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Date:
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Name:
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Title:
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Great Lakes Chemical Corporation
Signature:
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Date:
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Name:
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Title:
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