<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form F-4
Registration Statement Under The Securities Act of 1933
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Texon International plc
(Exact Name of Registrant as Specified in its Charter)
England and Wales Not Applicable
(Primary Standard (I.R.S. Employer
(State or Other Industrial Classification Identification Number)
Jurisdiction of Code Number)
Incorporation or
Organization)
3021
---------------
100 Ross Walk CT Corporation System
Leicester, U.K. 1633 Broadway
LE4 5BX New York, NY 10019
(Telephone: 44-116-261- (Telephone: 212-664-1666)
0123)
(Name, address and
(Address ndatelephone number of Registrant's telephone number of agent
principal executive for service)
offices)
---------------
Copy to:
Kathleen A. Walsh, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of each class
of securities to be Amount to be Proposed maximum Proposed maximum aggregate Amount of
registered registered offering price per unit(1)(2) offering price(1)(2) registration fee(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Series A Senior
Notes due 2008......... DM 245,000,000 100% DM 245,000,000 US$39,100.00
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Estimated solely for the purpose of calculating the registration fee.
(2)Exclusive of accrued interest, if any.
(3)Calculated pursuant to Rule 457.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
Texon International plc
[LOGO]TEXON
-------------
INTERNATIONAL
Offer to Exchange its
10% Series A Senior Notes due 2008,
which have been registered under the
Securities Act for
any and all of its Outstanding
10% Senior Notes due 2008
-----------
Texon International plc, a public limited company incorporated under the laws
of England and Wales (the "Company"), hereby offers, upon the terms and subject
to the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal ("Letter of Transmittal") (which together constitute the "Exchange
Offer"), to exchange an aggregate principal amount of up to DM 245 million of
its 10% Series A Senior Notes due 2008 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933 (the "Securities Act"), pursuant to
a Registration Statement of which this Prospectus constitutes a part, for a
like principal amount of its outstanding 10% Senior Notes due 2008 (the "Old
Notes" and, collectively with the Exchange Notes, the "Notes"), of which DM 245
million aggregate principal amount is outstanding. The terms of the Exchange
Notes are substantially identical to the terms of the Old Notes.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED.
The Notes will be unsecured, will rank pari passu with all existing and
future senior indebtedness of the Company and will be senior in right of
payment to all existing and future Subordinated Obligations (as defined) of the
Company. The Notes will be effectively subordinated to any secured indebtedness
of the Company to the extent of the value of the assets securing such
indebtedness and to all liabilities of the Company's subsidiaries. At December
31, 1997 on a pro forma basis after giving effect to the Transactions (as
defined) and the application of the proceeds thereof, the only outstanding
indebtedness of the Company (excluding its consolidated subsidiaries) other
than the Notes would have been secured senior indebtedness of (Pounds)4.3
million borrowed under a (Pounds)15.0 million secured revolving credit facility
and the total liabilities of the subsidiaries of the Company (including trade
payables and deferred taxes and excluding the Notes and the Senior
Indebtedness) would have been (Pounds)38.7 million. The Indenture under which
the Notes will be issued permits the Company and its Restricted Subsidiaries
(as defined) to incur additional indebtedness, subject to certain limitations.
See "Description of Notes--Ranking."
Interest on the Notes will be payable semi-annually on February 1 and August
1 of each year, commencing on August 1, 1998. The Notes will mature on February
1, 2008. Except as described below, the Company may not redeem the Notes prior
to February 1, 2003. On or after such date, the Company may redeem the Notes,
in whole or in part, at the redemption prices set forth herein, together with
accrued and unpaid interest and Additional Amounts (as defined), if any, to the
date of redemption. In addition, at any time on or prior to February 1, 2001,
the Company may, subject to certain requirements, redeem up to 33 1/3% of the
original aggregate principal amount of the Notes with the cash proceeds of one
or more Public Equity Offerings (as defined) at a redemption price equal to
100% of the principal amount to be redeemed, together with accrued and unpaid
interest and Additional Amounts, if any, provided that at least 66 2/3% of the
original aggregate principal amount of the Notes remains outstanding
immediately after each such redemption. The Notes may also be redeemed at the
option of the Company, in whole but not in part, at any time at 100% of the
principal amount thereof plus accrued and unpaid interest and Additional
Amounts, if any, to the redemption date in the event of certain changes
affecting United Kingdom withholding taxes or, in certain circumstances, in the
event Definitive Notes (as defined) are issued. The Notes will not be subject
to any sinking fund requirement. Upon the occurrence of a Change of Control (as
defined), the Company will be required to make an offer to repurchase the Notes
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest and Additional Amounts, if any, to the date of repurchase.
See "Description of Notes."
(Continued on next page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND THAT PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES SHOULD CONSIDER IN
CONNECTION WITH SUCH INVESTMENT.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998.
<PAGE>
The Old Notes were issued and sold on January 30, 1998 (the "Old Note
Offering"), in a transaction not registered under the Securities Act of 1933,
as amended (the "Securities Act"), in reliance upon the exemption provided in
Section 4(2) of the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange
Notes are being offered for exchange in order to satisfy certain obligations
of the Company under an Exchange and Registration Rights Agreement (as
defined) between the Company and the Initial Purchasers (as defined). The
Exchange Notes will be obligations of the Indenture (as defined), which
governs both the Old Notes and the Exchange Notes. The form and terms
(including principal amount, interest rate, maturity and ranking) of the
Exchange Notes are the same as the form and terms of the Old Notes, except
that the Exchange Notes (i) will be registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable
to the Old Notes, (ii) will not be entitled to registration rights and (iii)
will not provide for any Liquidated Damages (as defined). See "The Exchange
Offer--Registration Rights; Liquidated Damages."
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Commission") as set
forth in certain no-action letters addressed to other parties in other
transactions. However, the Company has not sought its own no-action letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Based upon these interpretations by the staff of the
Commission, the Company believes that the Exchange Notes issued pursuant to
this Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by a holder thereof (other than (i) a broker-
dealer who acquired the Old Notes as a result of market making activities or
other trading activities, (ii) an Initial Purchaser who acquired the Old Notes
directly from the Company solely in order to resell pursuant to Rule 144A of
the Securities Act or any other available exemption under the Securities Act,
or (iii) a person that is an "affiliate" (as defined in Rule 405 of the
Securities Act) of the Company) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in the distribution (within the
meaning of the Securities Act) of such Exchange Notes. Holders of Old Notes
accepting the Exchange Offer will represent to the Company in the Letter of
Transmittal that such conditions have been met. Any holder who participates in
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may not rely on the position of the staff of the Commission as
set forth in these no-action letters and would have to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the date of this Prospectus, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "The Exchange Offer" and "Plan of Distribution."
Prior to the Exchange Offer, there has been no established trading market
for the Old Notes or the Exchange Notes. The Company does not intend to apply
for listing or quotation of the Exchange Notes on any securities exchange or
stock market other than the Luxembourg Stock Exchange. Therefore, there can be
no assurance as to the liquidity of any trading market for the Exchange Notes
or that an active public market for the Exchange Notes will develop. Any Old
Notes not tendered and accepted in the Exchange Offer will remain outstanding.
To the extent that Old Notes are tendered and accepted in the Exchange Offer,
a holder's ability to sell untendered, or tendered but unaccepted, Old Notes
could be adversely affected. Following the consummation of the Exchange Offer,
the holders of Old Notes will continue to be subject to the existing
restrictions on transfer thereof and the Company will have no further
obligations to such holders to provide for the registration of the Old Notes
under the Securities Act. See "Risk Factors--Consequences of Exchange and
Failure to Exchange Old Notes" and "The Exchange Offer--Consequences of
Exchange and Failure to Exchange Old Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on
, 1998, unless the Exchange Offer is extended (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being tendered or exchange. The
Company has agreed to pay the expenses for the Exchange Offer. There will be
no cash proceeds to the Company from the Exchange Offer. See "Use of
Proceeds."
i
<PAGE>
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE U.S. SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING,
WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S FUTURE FINANCIAL
POSITION, STRATEGY, PROJECTED COSTS AND PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS, MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. ALTHOUGH
THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPLANATIONS
WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY
STATEMENTS") ARE DISCLOSED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS, INCLUDING, WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-
LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS, ALL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON THEIR BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
THE COMPANY HAS NOT AUTHORISED THE NOTES TO BE OFFERED TO THE PUBLIC IN THE
UNITED KINGDOM (WITHIN THE MEANING OF THE U.K. PUBLIC OFFERS OF SECURITIES
REGULATIONS 1995) AND NEITHER THIS PROSPECTUS NOR ANY OTHER DOCUMENT ISSUED IN
CONNECTION WITH THE OFFERING MAY BE PASSED ON TO ANY PERSON IN THE UNITED
KINGDOM UNLESS THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE
FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER
1996 OR IS A PERSON TO WHOM THE DOCUMENT MAY OTHERWISE LAWFULLY BE ISSUED OR
PASSED ON. ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT 1986 MUST
BE COMPLIED WITH IN RESPECT OF ANYTHING DONE IN RELATION TO THE NOTES IN, FROM
OR OTHERWISE INVOLVING THE UNITED KINGDOM.
PRESENTATION OF FINANCIAL INFORMATION AND CERTAIN DEFINITIONS
The Company's consolidated financial statements and the related notes
thereto have been prepared in accordance with U.K. generally accepted
accounting principles ("U.K. GAAP"), which differ in certain material respects
from U.S. generally accepted accounting principles ("U.S. GAAP"). For a
discussion of the significant differences between U.K. GAAP and U.S. GAAP with
respect to the Company's consolidated financial statements and notes thereto,
see Note 26 of the Notes to the Consolidated Financial Statements. Unless
otherwise indicated, all financial information stated herein is in accordance
with U.K. GAAP.
The Company prepares its consolidated financial statements in Sterling.
Solely for the convenience of the reader, this Prospectus contains
translations of certain Sterling amounts into U.S. dollars. These translations
should not be construed as representations that the converted amounts actually
represent such U.S. dollar amounts or that they have been or could be
converted into U.S. dollars at the rates indicated or at any other rate.
Unless otherwise stated, the translations of Sterling into U.S. dollars have
been made at the rate of $1.64 to (Pounds)1.00, the noon buying rate in the
City of New York for cable transfers in Sterling as certified for customs
purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") on
December 31, 1997, the date of the most recent consolidated balance sheet of
the Company included herein. See "Exchange Rate Information" for information
regarding the Noon Buying Rate for the past five years. See "Risk Factors--
Risk of Foreign Exchange Rate Fluctuations; Introduction of the Euro" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--General" for a discussion of the effects of changes in exchange
rates on the Company. On March 23, 1998, the Noon Buying Rate was $1.68 to
(Pounds)1.00.
ii
<PAGE>
All references herein to the "United States" or the "U.S." are to the United
States of America, references to "U.S. dollars," "dollars," "cents" or "$" are
to the currency of the United States, references to the "U.K." are to the
United Kingdom and references to "Pounds Sterling," "Sterling" or "(Pounds)"
are to the currency of the U.K. References to "Deutsche Marks" or "DM" are to
the currency of Germany. References to "fiscal years" are to the Company's
fiscal years which, for each fiscal year, end on December 31 of that calendar
year.
Certain amounts and percentages set out in this Prospectus have been rounded
and accordingly may not total.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a public limited company incorporated under the laws of
England and Wales, and all of its assets, and a significant majority of those
of its subsidiaries, are located outside of the United States. In addition,
most of the Company's directors and officers are residents of the U.K. and
their assets are located outside of the United States. As a result, it may be
difficult for investors to effect service of process within the United States
upon such persons or to realize against them upon judgments of courts of the
United States predicated upon any civil liability provisions of the U.S.
federal securities laws. The Company has been advised by its U.K. counsel,
Dickson Minto W.S., that there is also doubt as to the enforceability in
England in original actions or in actions for enforcement of judgments of U.S.
courts predicated upon any civil liability provisions of the U.S. federal
securities laws.
iii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and note thereto appearing
elsewhere in this Prospectus. Unless the context otherwise requires, the term
the "Company" refers to Texon International plc, the subsidiaries it acquired
pursuant to the Acquisition and/or their predecessors in business and excludes
the Machinery business (as defined below), which has been transferred to the
shareholders. See "The Transactions." For the purposes of "Summary--The
Offering," "The Transactions" and "Description of Notes," the "Company" means
Texon International plc only and does not include its subsidiaries.
THE COMPANY
The Company is the world's largest manufacturer and marketer of structural
materials that are essential in the manufacture of footwear. The Company,
founded in Leicester, England in 1899, operates a global business, which
generates sales that are widely diversified by geographic region and product
line. The Company's primary products include materials for insoles, which form
the structural foundation of shoes; stiffeners, which support and shape the toe
and heel of shoes; and other products used in the manufacture of footwear, such
as linings, tacks, nails, steel shanks and adhesives. The world's largest
manufacturer of insole materials, the Company also commands leading positions
in the markets for its other footwear products. While the products sold by the
Company represent a small percentage of the total cost of materials contained
in footwear, they are critical to the performance and manufacture of footwear
and are not fashion sensitive. In 1997, approximately 90% of sales were to the
footwear manufacturing industry. By leveraging its expertise in the manufacture
of these structural materials, the Company has developed several related niche
industrial products such as carpet gripper pins and cellulose air freshener
material. These industrial products are sold to a wide range of industries.
The Company supplies most of the major footwear manufacturers in the world
and believes that its global presence gives it a unique competitive advantage
to exploit industry trends favoring suppliers who provide footwear companies
with a "global partner." The Company supplies over 6,000 customers worldwide,
servicing global athletic footwear companies such as Nike and Adidas, designers
and producers of casual shoes including Timberland and R. Griggs & Co (Dr
Martens) and manufacturers of men's and women's formal shoes such as Church's
and Bally. The Company has seven manufacturing sites strategically located in
Europe, the United States and China and sells its products in more than 90
countries through an extensive marketing and distribution network. In 1997,
sales of insoles, stiffeners, other footwear materials and industrial products
accounted for 50%, 17%, 23% and 10% of total sales, respectively. In 1997, 48%
of the Company's sales were made to Europe, 27% to Asia and the Pacific, 18% to
the Americas and 7% to the rest of the world.
THE INDUSTRY
The Shoe and Allied Trades Research Association, or SATRA, the leading trade
association in the footwear industry, projects that the industry will continue
to enjoy steady growth at a compound annual growth rate of approximately 3%
through 2000 due to favorable demographic trends, including continued
population and economic growth, which increase the demand for and consumption
of shoes. The Company believes that the growth rate for its products is higher,
as footwear manufacturers produce more footwear that utilizes structural
materials to improve the structural quality and durability of shoes. In
addition, the Company believes that manufacturers increasingly utilize
structural products such as the Company's, which allow for environmentally
conscious production processes.
1
<PAGE>
As the worldwide footwear industry has grown, there has been a shift in
production capacity to Asia, primarily to capitalize on low labor costs. Asia's
share of global production increased from 61% in 1991 to 70% in 1995, the last
year for which data is available. The Company is well positioned with its
production and marketing presence in the region.
The structural footwear materials industry is highly fragmented, with very
few companies operating beyond a national or regional level. While the footwear
manufacturing industry is also fragmented, there is a growing trend towards
globalization as shoe designers and branded footwear companies, which outsource
the manufacturing of their footwear, increasingly seek a global solution to
their supply and specification requirements. The Company has been able, and
believes it is well poised to continue, to take advantage of this trend by
providing its customers with high quality, state-of-the-art products and
servicing their requirements in each significant market through its worldwide
distribution network.
COMPETITIVE ADVANTAGES
The Company believes that it benefits from the following competitive
advantages which have enabled it to increase sales and operating profitability
and maintain its leadership position in the structural footwear materials
industry.
Leading Market Position Driven by Strong Brands and High Quality
Products. The Company is recognized in the footwear industry for high standards
of quality across its full range of products and for providing innovative
technical solutions and support to its customers worldwide. The Company is the
world's largest producer of insole material, stiffeners and tacks and nails for
footwear. The Company's products are marketed under brand names which enjoy
extremely wide recognition within the footwear industry, such as "Texon,"
"Tufflex," "Formo," and "Unifast." The Company believes that its leading market
position is due to successful branding of its products, reliability and high
performance. As a U.K. based global enterprise, the Company also benefits from
the reputation of the U.K. footwear industry for quality production and
technological leadership.
Global Presence. The Company supplies most of the world's footwear
manufacturing industry across Europe, the Americas and Asia through its direct
presence in each of those markets. The Company has seven manufacturing plants
in six countries and 27 strategically located field warehouses. An extensive
marketing and distribution network enhances the Company's ability to provide
high quality, local service to its customers and to global branded footwear
companies' worldwide sourcing networks. The Company recently established a
bonded warehouse in India to service the needs of local manufacturers supplying
primarily North American and European footwear companies. The Company believes
that it is uniquely positioned to benefit from the continuing globalization
within the footwear industry.
Strong Relationships with a Diverse Customer Base. The Company benefits from
long-established relationships with many of the most important footwear
companies in the world. The Company has been supplying products for Nike since
its entry into the footwear market and for R. Griggs & Co (Dr Martens) and
Church's for nearly a century. The Company believes that its customer
relationships are strengthened by its high quality products, brand names,
leading market position, and the high level of technical support it provides to
its clients. The Company's customer base is geographically diverse and covers a
wide spectrum of footwear (athletic, traditional and safety; men's, women's and
children's), minimizing the Company's exposure to individual markets. In 1997,
no single customer accounted for more than 3% of sales, and the top ten
customers totaled less than 14% of sales.
Diverse and Customized Products. The Company offers a broad range of
products, many of which are customized to meet the needs of individual footwear
manufacturers. By satisfying its
2
<PAGE>
customers' preference for a "one-stop shop," the Company's broad and
comprehensive product range contributes to its leading market position. The
Company continually develops and evolves its product lines to meet the precise
and changing requirements of footwear manufacturers. The Company believes that
no competitor produces or provides as broad a range of products.
Attractive Ancillary Businesses. The Company leverages its global
distribution channels to distribute products it does not produce itself and
utilizes its manufacturing capacity to manufacture related industrial products.
The Company manufactures and distributes products not related to the footwear
industry but which employ the Company's core manufacturing techniques, such as
air filters, materials for air fresheners and machine-applied nails. The
Company is the market leader in materials for automotive air fresheners in the
United States and carpet gripper pins in Europe.
Technological Leadership. The Company was the first to develop cellulose
insole material and non-woven insole material. These are now the two most
commonly used types of insole material in the world. The Company seeks to be at
the forefront of product development and to maintain a technological advantage
over its competitors through continued improvements in product performance,
manufacturing techniques and efficiency. For example, the Company employs
specialized technology to assist anti-counterfeiting programs that are
especially important to branded athletic shoe manufacturers.
Experienced and Incentivized Management Team. Many of the Company's senior
managers have more than a decade of experience with the Company. Individually,
the Company's managers have established track records in delivering revenue and
profit growth, developing new products, penetrating new markets, improving
production efficiency and streamlining supply chains. Senior management has a
significant equity stake in the Company.
BUSINESS STRATEGY
The Company's strategy is to expand sales, increase profitability and
strengthen its position as the industry leader and supplier of choice through
the following key initiatives:
Increase Global Market Share. Management plans to leverage its strong
customer relationships to expand the Company's market share. The Company's
customers and markets served have grown rapidly in recent years. Recognizing
the movement of manufacturing capacity to Asia, the Company established a
facility in China in 1994 which manufactures and supplies cellulose insole
material to local footwear manufacturers producing principally for the export
market. The Company intends to establish a non-woven manufacturing facility in
China to further enhance its market position.
Provide Preeminent Customer Service Worldwide. The Company intends to improve
further its responsiveness to the needs of its customers. To enhance access to
its products and address specific customers' needs, the Company recently
established a centralized customer care center and a comprehensive catalog for
part of its branded product line. The Company plans to build a new production
facility in China which will produce new generation non-woven products for
global athletic footwear companies manufacturing there for the world market.
The new facility will shorten the supply chain between the Company and
manufacturers based in China thereby reducing delivery times and increasing
responsiveness.
Develop New Products. The Company has successfully developed many new
products for the footwear industry and intends to accelerate its new product
launch rate. The Company recently developed an innovative non-woven insole
material particularly suited to the process used in the
3
<PAGE>
manufacture of athletic shoes. The Company will continue to adapt technologies
developed for the footwear industry for use in other applications such as "no-
dig" installed-pipe repair liners and high-temperature air filters.
Increase Operating Efficiencies. Management continuously reviews the
Company's operations for opportunities to further reduce costs and increase
manufacturing efficiencies through implementing world-class manufacturing
techniques, procurement and supply chain processes. The Company also plans to
replace and upgrade certain of its information technology systems. The majority
of the Company's manufacturing facilities are ISO 9001/2 certified.
Reduce Raw Materials Cost. The Company continues to improve its operating
results by reducing raw material costs and dependence on certain raw materials.
At its Russell, Massachusetts facility, the Company implemented a process to
use less expensive secondary fibers from recycled pulp products to complement
primary wood pulp, a basic component of cellulose production. The Company plans
to extend the use of this process to its other cellulose manufacturing plants.
The Company is also working with its suppliers to develop ways of using less
expensive raw materials in various production processes while maintaining the
quality and specifications of the finished product.
Pursue Strategic Growth Opportunities. The Company believes that the
fragmented nature of the footwear materials industry provides opportunities for
organic growth and growth through potential joint ventures and strategic
acquisitions. The Company intends to pursue selective acquisitions that
complement its existing product offering and enable it to expand in selected
geographic areas. Attractive acquisition targets would have relatively small
sales compared to the Company's, a fixed cost base that is easily eliminated,
and a complementary market position. The Company also will consider joint
ventures which would give it access to new products, markets or technologies.
OWNERSHIP AND MANAGEMENT OF THE COMPANY
Apax Partners & Co. Strategic Investors Limited and Apax Partners & Co.
Ventures Limited, Chase Capital Partners, other institutional investors and
certain members of management caused the Company to be formed for the purpose
of completing the Acquisition (as defined below).
Apax. Apax is part of an international group of investment management
companies (together, "Apax") that provides private equity funding to
entrepreneurial businesses worldwide. The group manages over (Pounds)2.0
billion of institutional money provided by pension funds, insurance companies
and foundations. Those funds are currently invested in over 150 companies
spanning all stages of development from technology start-ups to leveraged buy-
outs. The U.S. partner of Apax is Patricof & Co. Ventures Inc. Apax operates
through 13 offices around the world of which the U.K. office, with over 30
investment professionals and approximately (Pounds)800 million under
management, is the largest. See "Principal Shareholders."
Management. The management group of the Company includes Peter Selkirk, Chief
Executive, and Neil Fleming, Finance Director ("Senior Management"). Senior
Management own approximately 8.5% of the outstanding Voting Ordinary Shares (as
defined below) of the Company. See "Management" and "Principal Shareholders."
The Company is incorporated in England and Wales. Its principal executive
offices are located at 100 Ross Walk, Leicester, U.K., LE4 5BX. Its telephone
number is (44) 116 261 0123.
4
<PAGE>
THE TRANSACTIONS
In 1995, Apax led an institutional buy-out (the "1995 Acquisition") of USM
(Holdings) Limited and its subsidiaries, which at the time operated both the
footwear materials business carried on by the Company and described in more
detail under "Business" (the "Materials business") and a machinery business
which sells and services machines used to manufacture shoes (the "Machinery
business"). During 1997, the Materials business and the Machinery business were
separated into two groups and, as of December 31, 1997, were demerged (the
"Machinery Disposal"). United Texon Limited retained the Materials business,
and the Machinery business was transferred to another company principally owned
by the shareholders of United Texon Limited.
In December 1997, the Company and the shareholders of United Texon Limited
entered into an acquisition agreement (the "Acquisition Agreement") pursuant to
which the Company agreed to acquire the entire issued share capital of United
Texon Limited (the "Acquisition"). The Company had been established in late
1997 for the purpose of entering into the Acquisition. The Acquisition was
conditioned upon (i) consummation of the Old Note Offering and (ii) the
Revolving Facility (as defined below) being made available unconditionally.
Under the terms of the Acquisition Agreement, the Company had control of the
financial and operational management of the Materials business effective 18:00
hours December 31, 1997.
In connection with the Acquisition, the Company borrowed (Pounds)4.3 million
under a revolving credit facility of (Pounds)15.0 million (the "Revolving
Facility"). The establishment of and initial drawings under the Revolving
Facility, the Old Note Offering, the Machinery Disposal and the Acquisition
(including the use of the proceeds of such financings and the payment of
related fees and expenses) are referred to collectively as the "Transactions."
See "Use of Proceeds" and "Certain Transactions."
In order to complete the Acquisition, the Company took the following steps:
(a) issued to shareholders of United Texon Limited preference shares with a
redemption value of (Pounds)52.0 million and (Pounds)3.6 million of
ordinary shares representing 91.5% of the total outstanding Voting
Ordinary Shares in exchange for:
(i) approximately 88% of the outstanding ordinary shares and all of the
preference shares of United Texon Limited; and
(ii) a portion of the accreted value of certain discount bonds issued by
United Texon Limited to its shareholders in connection with the
1995 Acquisition (the "1995 Acquisition Debt");
(b) caused to be repaid existing indebtedness of United Texon Limited and
its subsidiaries consisting of:
(i) indebtedness to a syndicate of banks led by The Chase Manhattan
Bank, an affiliate of one of the shareholders of the Company and the
Initial Purchasers;
(ii) other indebtedness to shareholders and management of United Texon
Limited incurred in connection with the 1995 Acquisition; and
(iii) indebtedness to unrelated third parties;
(c) purchased for (Pounds)20.6 million the remaining portion of the 1995
Acquisition Debt;
(d) purchased the remaining approximately 12% of the outstanding ordinary
shares of United Texon Limited acquired by management of United Texon
Limited pursuant to the exercise of management share options; and
(e) to the extent not already issued to Senior Management, issued 8.5% of
the outstanding Voting Ordinary Shares of the Company to Senior
Management for (Pounds)0.3 million.
5
<PAGE>
Under the Company's articles of association (the "Articles"), holders of
preference shares will be entitled to receive a fixed cumulative dividend,
calculated as a percentage of the redemption value of (Pounds)52.0 million of
the preference shares, payable semi-annually at a rate which will be exclusive
of any associated tax credit. The ability of the Company to pay these dividends
in cash is subject to certain restrictions contained in the Revolving Facility
and the Indenture. See "Description of Credit Facilities" and "Description of
Notes--Limitation on Restricted Payments." The dividend shall be 15% through
September 30, 2002. However, any preference dividend payments due on or prior
to December 31, 2000, which are paid on or prior to the due date, shall be
deemed to satisfy three times the amount of the preference dividend so paid,
provided that arrears of accrued but unpaid preference dividends in respect of
previous periods have been paid. See "Principal Shareholders--Articles of
Association and Shareholders Agreement." Until December 31, 2000, in the event
that the dividend is not paid on the due date, it shall accumulate at a rate of
15%.
The following table sets forth the sources and uses of cash used to effect
the Transactions as if they had occurred on December 31, 1997:
<TABLE>
<CAPTION>
AMOUNTS
--------------------
(POUNDS IN MILLIONS)
<S> <C>
SOURCES
Revolving Facility.................................... (Pounds) 4.3
Senior Notes offered hereby........................... 82.2
Issue of ordinary shares.............................. 0.3
------------
Total............................................... (Pounds)86.8
============
USES
Repayment of existing indebtedness(a)................. (Pounds)58.9
Purchase of 1995 Acquisition Debt(b).................. 20.6
Purchase of management option shares.................. 2.8
Senior Notes issuance cost............................ 4.0
Other Transaction costs............................... 0.5
------------
Total............................................... (Pounds)86.8
============
</TABLE>
--------
(a) Includes (i) (Pounds)48.1 million of indebtedness to a syndicate of
banks led by The Chase Manhattan Bank, (ii) (Pounds)3.5 million of
indebtedness to shareholders and management of United Texon Limited and
(iii) (Pounds)7.3 million of indebtedness to unrelated third parties.
See "Use of Proceeds."
(b) The 1995 Acquisition Debt is held by shareholders of the Company. See
"Certain Transactions."
6
<PAGE>
THE EXCHANGE OFFER
Securities Offered.... DM 245 million principal amount of 10% Series A Senior
Notes due 2008. The terms of the Exchange Notes and the
Old Notes are identical in all material respects,
except for certain transfer restrictions and
registration rights relating to the Old Notes and
except for certain Liquidated Damages provisions
relating to the Old Notes described below under "--
Summary Description of the Exchange Notes."
Issuance of Old
Notes; Registration
Rights............... The Old Notes were issued on January 30, 1998 to Chase
Manhattan Bank AG, Chase Securities Inc. and Chase
Manhattan International Limited (collectively, the
"Initial Purchasers"), which placed the Old Notes with
"qualified institutional buyers" (as such term is
defined in Rule 144A promulgated under the Securities
Act). In connection therewith, the Company executed and
delivered for the benefit of the holders of Old Notes a
certain registration rights agreement (the "Exchange
and Registration Rights Agreement"), pursuant to which
the Company agreed (i) to file a registration statement
(the "Registration Statement") on or prior to 60 days
after January 30, 1998 with respect to the Exchange
Offer and (ii) to use their reasonable best efforts to
cause the Registration Statement to be declared
effective by the Commission on or prior to 120 days
after January 30, 1998. In certain circumstances, the
Company may be required to provide a shelf registration
statement (the "Shelf Registration Statement") to cover
resales of the Old Notes by the holders thereof. If the
Company does not comply with its obligations under the
Registration Rights Agreement, it will be required to
pay Liquidated Damages to holders of the Old Notes
under certain circumstances. See "The Exchange Offer--
Registration Rights; Liquidated Damages." Holders of
Old Notes do not have any appraisal rights in
connection with the Exchange Offer.
The Exchange Offer.... The Company is offering to exchange pursuant to the
Exchange Offer an aggregate principal amount of up to
DM 245 million principal amount of its Old Notes for a
like principal amount of its Exchange Notes. The
Company will issue the Exchange Notes on or promptly
after the Expiration Date. As of the date of this
Prospectus, DM 245 million aggregate principal amount
of Old Notes is outstanding. The terms of the Exchange
Notes are identical in all material respects to the
terms of the Old Notes for which they may be exchanged
pursuant to this offer, except that the Exchange Notes
have been registered under the Securities Act and are
issued free from any covenant regarding registration,
and except that if the Exchange Offer is not
consummated by June 29, 1998, the Company will be
obligated to pay each holder of the Old Notes an amount
equal to DM 0.192 per week per DM 1,000 of the Old
Notes until the Exchange Offer is consummated
("Liquidated Damages"). The Exchange Notes will
evidence the same debt as the Old Notes and will be
issued under and be entitled to the same benefits under
the Indenture as the Old Notes. The Issuance of the
Exchange Notes and the Exchange Offer is intended to
satisfy certain obligations of the Company under the
7
<PAGE>
Purchase Agreement and pursuant to certain registration
rights granted under the Exchange and Registration
Rights Agreement. See "The Exchange Offer" and
"Description of the Notes."
Interest Payments..... Interest on the Exchange Notes shall accrue from the
last Interest Payment Date (February 1 or August 1) on
which interest was paid on the Old Notes surrendered
or, if no interest has been paid on such Old Notes,
from January 30, 1998. See "The Exchange Offer--
Interest on the Exchange Notes."
Expiration Date....... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless extended by the
Company in its sole discretion. See "The Exchange
Offer--Expiration Date; Extensions."
Exchange Date......... The date of acceptance for exchange of the Old Notes
and the consummation of the Exchange Offer will be the
first business day following the Expiration Date unless
extended. See "The Exchange Offer--Terms of the
Exchange."
Withdrawal Rights..... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date;
otherwise, all tenders will be irrevocable. See "The
Exchange Offer--Withdrawal Rights."
Exchange Offer
Procedures...........
Tendering holders of Old Notes must complete and sign
the Letter of Transmittal in accordance with the
instructions contained therein and forward the same by
mail, facsimile or hand delivery, together with any
other required documents, to the Exchange Agent, either
with the Old Notes to be tendered or in compliance with
the specified procedures for guaranteed delivery of Old
Notes. Holders of the Old Notes desiring to tender such
Old Notes in exchange for Exchange Notes should allow
sufficient time to ensure timely delivery. Certain
brokers, dealers, commercial banks, trust companies and
other nominees may also effect tenders by book-entry
transfer. Holders of Old Notes registered in the name
of a broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person promptly
if they wish to tender Old Notes pursuant to the
Exchange Offer. Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender and
requests for information should be directed to the
Exchange Agent. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities
or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale
of such Exchange Notes. See "The Exchange Offer--
Exchange Offer Procedures" and "Plan of Distribution."
Federal Income Tax
Consequences.........
The exchange of Old Notes for the Exchange Notes
pursuant to the Exchange Offer will not result in any
income, gain or loss to holders who participate in the
Exchange Offer or to the Company for U.S. income tax
purposes. See "Tax Considerations--United States Tax
Considerations."
8
<PAGE>
Resale................ The Company is making the Exchange Offer in reliance on
the position of the staff of the Commission as set
forth in certain no-action letters addressed to other
parties in other transactions. However, the Company has
not sought its own no-action letter and there can be no
assurance that the staff of the Commission would make a
similar determination with respect to the Exchange
Offer as in such other circumstances. Based on these
interpretations by the staff of the Commission, the
Company believes that the Exchange Notes issued
pursuant to this Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a
broker-dealer who acquired the Old Notes as a result of
market making activities or other trading activities,
(ii) an Initial Purchaser who acquired the Old Notes
directly from the Company solely in order to resell
pursuant to Rule 144A of the Securities Act or any
other available exemption under the Securities Act, or
(iii) a person that is an "affiliate" (as defined in
Rule 405 of the Securities Act) of the Company) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary
course of such holder's business and that such holder
is not participating, and has no arrangement or
understanding with any person to participate, in the
distribution of such Exchange Notes. Holders of Old
Notes accepting the Exchange Offer will represent to
the Company in the Letter of Transmittal that such
conditions have been met. Any holder who participates
in the Exchange Offer for the purpose of participating
in a distribution of the Exchange Notes may not rely on
the position of the staff of the Commission as set
forth in these no-action letters and would have to
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with
any secondary resale transaction. Each broker-dealer
who receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it
acquired the Old Notes as the result of market-making
activities or other trading activities and will deliver
a prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-
making activities or other trading activities. In
addition, pursuant to Section 4(3) under the Securities
Act, until , 1998, all dealers effecting
transactions in the Exchange Notes, whether or not
participating in the Exchange Offer, may be required to
deliver a Prospectus. The Company has agreed that, for
a period of 180 days after the date of this Prospectus,
it will make this Prospectus available to any broker-
dealer for use in connection with any such resale. See
"The Exchange Offer" and "Plan of Distribution."
9
<PAGE>
Remaining Old Notes... Holders of Old Notes who do not tender their Old Notes
in the Exchange Offer or whose Old Notes are not
accepted for exchange will continue to hold such Old
Notes and will be entitled to all the rights and
preferences, and will be subject to the limitations,
applicable thereto under the Indenture. All untendered
and tendered but unaccepted Old Notes (collectively,
the "Remaining Old Notes") will continue to bear
legends restricting their transfer. In general, the Old
Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. To
the extent that the Exchange Offer is effected, the
trading market, if any, for Remaining Old Notes could
be adversely affected. See "Risk Factors--Consequences
of Exchange and Failure to Exchange Old Notes" and "The
Exchange Offer--Terms of the Exchange."
Use of Proceeds....... There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. See "Use of
Proceeds."
Appraisal Rights...... Holders of Old Notes will not have dissenters' rights
or appraisal rights in connection with the Exchange
Offer.
Exchange Agent........ The exchange agent with respect to the Exchange Offer
is The Chase Manhattan Bank (the "Exchange Agent"). The
address and telephone number of the Exchange Agent are
set forth in "The Exchange Offer--Exchange Agent."
CONSEQUENCES OF NOT EXCHANGING THE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Except under certain circumstances, the
Company does not currently intend to register the Old Notes under the
Securities Act. See "Risk Factors--Consequences of Exchange and Failure to
Exchange Old Notes" and "The Exchange Offer--Consequences of Exchange and
Failure to Exchange Old Notes."
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
The terms of the Exchange Notes and the Old Notes are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Old Notes and except that, if the Exchange Offer is not
consummated by June 29, 1998, subject to certain exceptions, the Company will
be obligated to pay Liquidated Damages to each holder of Old Notes in an amount
equal to DM 0.192 per week for each DM 1,000 principal amount of Old Notes, as
applicable, held by such holder.
The Exchange Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from January 30, 1998. Accordingly, registered holders of Exchange
Notes on the relevant record date for the first interest payment date following
the consummation of the Exchange Offer will receive interest accruing from the
most recent date to which interest has been paid or, if no interest has been
paid, from January 30, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment in respect of interest on such Old Notes otherwise payable on any
interest payment date which occurs on or after the consummation of the Exchange
Offer.
10
<PAGE>
THE EXCHANGE NOTES
Company............... Texon International plc
Notes Offered......... DM 245 million aggregate principal amount of 10% Series
A Senior Notes due 2008.
Maturity Date......... February 1, 2008.
Interest Payment February 1 and August 1 of each year, commencing on
Dates................. August 1, 1998.
Sinking Fund.......... None.
Optional Redemption... Except as described below, the Company may not redeem
the Notes prior to February 1, 2003. On or after such
date, the Company may redeem the Notes, in whole or in
part, at the redemption prices set forth herein,
together with accrued and unpaid interest and
Additional Amounts (as defined below), if any, to the
date of redemption. In addition, at any time and from
time to time on or prior to February 1, 2001, the
Company may, subject to certain requirements, redeem up
to 33 1/3% of the original aggregate principal amount
of the Notes with the cash proceeds of one or more
Public Equity Offerings (as defined below) at a
redemption price equal to 110% of the principal amount
to be redeemed, together with accrued and unpaid
interest and Additional Amounts, if any, to the date of
redemption, provided that at least 66 2/3% of the
original aggregate principal amount of the Notes
remains outstanding after each such redemption. The
Notes may also be redeemed at the option of the
Company, in whole but not in part, at any time at 100%
of the principal amount thereof plus accrued but unpaid
interest, if any, to the redemption date and all
Additional Amounts then due and which will become due
as a result of the redemption or otherwise, in the
event of certain changes affecting U.K. withholding
taxes or, in certain circumstances, in the event
Definitive Notes (as defined below) are issued. See
"Description of Notes--Optional Redemption," "--
Redemption for Taxation Reasons" and "--Withholding
Taxes."
Change of Control..... Upon the occurrence of a Change of Control (as defined
below), the Company will be required to make an offer
to repurchase the Notes at a price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest and Additional Amounts, if any, to the
date of purchase. The Revolving Facility, however, will
effectively prevent the repurchase of the Notes in the
event of a Change of Control unless and until the
indebtedness under the Revolving Facility is repaid in
full. See "Description of Credit Facilities" and
"Description of Notes--Change of Control." There can be
no assurance that sufficient funds will be available if
necessary to make any such required repurchases.
Ranking............... The Notes will be unsecured, will rank pari passu with
any future Senior Indebtedness (as defined below) of
the Company and will be senior in right of payment to
all existing and future Subordinated Obligations (as
defined below) of the Company. The Notes will be
11
<PAGE>
effectively subordinated to any secured Indebtedness of
the Company to the extent of the value of the assets
securing such Indebtedness and to all liabilities of
the Company's subsidiaries. At December 31, 1997 on a
pro forma basis after giving effect to the
Transactions, the only outstanding Indebtedness of the
Company (excluding its consolidated subsidiaries) other
than the Notes would have been secured Senior
Indebtedness of (Pounds)4.3 million borrowed under the
(Pounds)15.0 million Revolving Facility and the total
liabilities of the subsidiaries of the Company
(including trade payables and deferred taxes and
excluding the Notes and the Senior Indebtedness) would
have been (Pounds)38.7 million. The Indenture under
which the Notes will be issued permits the Company and
its Restricted Subsidiaries (as defined below) to incur
additional Indebtedness subject to certain limitations.
See "Description of Notes--Ranking."
Restrictive The Indenture limits (i) the incurrence of additional
Covenants............. Indebtedness by the Company and its Restricted
Subsidiaries, (ii) the creation of liens, (iii) the
payment of dividends on, and redemption of, capital
stock of the Company and its Restricted Subsidiaries
and the redemption of certain subordinated obligations
of the Company, (iv) certain other restricted payments,
including, without limitation, certain investments, (v)
sales of assets and the sale or issuance of capital
stock and preferred stock of the Company's Restricted
Subsidiaries, (vi) transactions with affiliates, (vii)
the lines of business in which the Company may operate
and (viii) consolidations, mergers and transfers of all
or substantially all the Company's assets. The
Indenture also prohibits certain restrictions on
distributions from Restricted Subsidiaries. In the
event of an Asset Disposition (as defined below), the
Company will be required to use the proceeds to repay
Indebtedness under the Revolving Facility or certain
other Indebtedness, to reinvest in the Company's
business or to offer to purchase the Notes at 100% of
the principal amount thereof, plus accrued and unpaid
interest and Additional Amounts, if any, to the date of
purchase. All of these limitations and prohibitions are
subject to a number of important qualifications and
exceptions. See "Description of Notes--Certain
Covenants."
Form of Notes......... The Exchange Notes will be issued initially in the form
of the Global Exchange Note in bearer form without
coupons and, pursuant to the Note Depositary Agreement
(as defined below), will be held by The Bank of New
York, as Book-Entry Depositary. The Book-Entry
Depositary will issue certificateless depositary
interests to DTC, which then will record the Book-Entry
Interests. Ownership of the Book-Entry Interests will
be limited to persons that have accounts with DTC
("Participants") or persons that may hold interests
through such participants ("Indirect Participants").
Book-Entry Interests will be shown on, and transfers
thereof will be effected only through, records
maintained in book-entry form by DTC and its
participants, including the Euroclear Operator and
Cedel. See "Description of Notes--General" and
"Description of the Note Depositary Agreement."
Except as set forth under "Description of the Note
Depositary Agreement," participants or indirect
participants will not be entitled to
12
<PAGE>
receive physical delivery of Exchange Notes in
definitive form or to have Exchange Notes issued and
registered in their names and will not be considered
the owners or Holders (as defined below) thereof under
the Indenture pursuant to which the Notes are issued.
Absence of a Public
Market for the
Exchange Notes........ The Exchange Notes are new securities and there is
currently no established market for the Exchange Notes.
The Exchange Notes generally will be freely
transferable (subject to the restrictions discussed
elsewhere herein) but will be new securities for which
there will not initially be a market. Accordingly,
there can be no assurance as to the development or
liquidity of any market for the Exchange Notes.
Application has been made to list the Exchange Notes on
the Luxembourg Stock Exchange. The Initial Purchasers
have advised the Company that they currently intend to
make a market in the Exchange Notes. However, they are
not obligated to do so, and any market making with
respect to the Exchange Notes may be discontinued
without notice. The Company does not intend to apply
for listing of the Exchange Notes on any U.S. national
securities exchange or for their quotation through the
National Association of Securities Dealers Automated
Quotation System. See "Risk Factors--Absence of Public
Market for the Notes; Restrictions on Transfer" and
"Plan of Distribution."
RISK FACTORS
Prospective investors should carefully consider all the information set forth
in this Prospectus and, in particular, should evaluate the specific factors set
forth under "Risk Factors" for risks involved with an investment in the
Exchange Notes.
13
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
AND OTHER DATA
The following table presents as of the dates and for the periods indicated
(i) selected historical consolidated financial information of the Company and
(ii) unaudited pro forma consolidated financial information of the Company,
after giving effect to the Transactions. The historical consolidated financial
information of USM (Holdings) Limited for the period from January 1, 1995 to
April 24, 1995, and of United Texon Limited for the period from April 25, 1995
to December 31, 1995 and for the years ended December 31, 1996 and 1997 has
been derived from the audited consolidated financial statements of the Company
(including the Machinery business) included elsewhere herein.
The unaudited pro forma consolidated financial and other information does not
purport to represent what the Company's financial position or results of
operations would actually have been had the Transactions in fact occurred on
the assumed dates or to project the Company's financial position or results of
operations for any future date or future period. The information contained in
the following tables should also be read in conjunction with "Capitalization,"
"The Transactions," "Unaudited Pro Forma Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's historical Consolidated Financial Statements and
related notes included elsewhere in this Prospectus.
The summary historical consolidated statement of operations data for the four
year period ended December 31, 1997 reflects the results of operations of the
Materials business only. Historical consolidated information set forth in the
table under "Other Data" for these periods also reflects the results of the
Materials business only.
The Company prepares its Consolidated Financial Statements in accordance with
U.K. GAAP which differs in certain material respects from U.S. GAAP. These
differences have a material effect on net loss and the composition of
shareholder's deficit and are summarized in Note 26, to the Notes to the
Consolidated Financial Statements of the Company included elsewhere in this
Prospectus.
14
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
AND OTHER DATA
<TABLE>
<CAPTION>
TEXON INTERNATIONAL
USM (HOLDINGS) LIMITED UNITED TEXON LIMITED PLC
------------------------------ ----------------------------------------------- --------------------
HISTORICAL PRO FORMA(b)
------------------------------------------------------------------------------ --------------------
PERIOD PERIOD
YEAR FROM FROM YEAR YEAR YEAR
ENDED JANUARY 1, APRIL 25, TO ENDED ENDED ENDED
DECEMBER 31, TO APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994(C) 1995 1995 1996 1997 1997
--------------- -------------- --------------- --------------- --------------- ---------------
(POUNDS STERLING IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Amounts in accordance
with U.K. GAAP:
<S> <C> <C> <C> <C> <C> <C>
Sales turnover(a)... (Pounds)109,847 (Pounds)38,401 (Pounds)77,295 (Pounds)128,602 (Pounds)122,343 (Pounds)122,343
Gross profit........ 36,726 12,337 22,650 44,281 42,541 42,541
Operating profit
from continuing
operations......... 12,268 3,928 5,933 16,280 9,609 9,609
Exceptional
items(d)........... 463 -- 1,634 -- -- --
Interest expense,
net................ 8,307 2,972 7,106 10,044 10,199 9,634
Amortization of
deferred financing
costs.............. -- -- -- -- -- 400
Net income/(loss)--
continuing
operations......... (Pounds) 2,815 (Pounds) 657 (Pounds)(3,380) (Pounds) 3,556 (Pounds) (2,387) (Pounds) (2,222)
=============== ============== =============== =============== =============== ===============
OTHER DATA:
Amounts in accordance
with U.K. GAAP:
Depreciation and
amortization....... 1,902 805 1,424 2,161 2,355 2,355
Capital
expenditures....... 1,770 496 1,455 3,188 1,722 1,722
</TABLE>
<TABLE>
<CAPTION>
TEXON INTERNATIONAL PLC
-------------------------------------------------
HISTORICAL PRO FORMA(b)
-------------------------------- ---------------
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
--------------- --------------- ---------------
(POUNDS STERLING IN THOUSANDS)
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Amounts in accordance with U.S. GAAP:
<S> <C> <C> <C>
Sales turnover(a)...... (Pounds)128,602 (Pounds)122,343 (Pounds)122,343
Gross profit........... 44,281 42,541 42,541
Operating profit from
continuing
operations............ 11,963 5,214 5,214
Interest expense, net.. 10,044 10,199 9,634
Amortization of
deferred financing
costs................. -- -- 400
Net loss--continuing
operations............ (Pounds) (1,031) (Pounds) (6,798) (Pounds) (6,633)
=============== =============== ===============
OTHER DATA:
Amounts in accordance with U.S. GAAP:
Depreciation and
amortization.......... 6,647 6,412 6,412
Capital expenditures... 3,188 1,722 1,722
Ratio of earnings to
fixed charges(e)...... 1.2x 0.5x 0.5x
</TABLE>
See Notes to Summary Historical and Pro Forma Consolidated Financial
Information and Other Data.
15
<PAGE>
NOTES TO SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION AND OTHER DATA
(a) Sales turnover includes amounts from transactions with the discontinued
business to reflect the total sales of the Materials business. These
amounts have been eliminated in the consolidated financial statements.
(b) The unaudited Pro Forma Consolidated Statement of Operations Data and
other Data for the year ended December 31, 1997 gives effect to the
Transactions as if they had occurred on January 1, 1997.
(c) The Consolidated Statement of Operations Data and Other Data presented for
the year ended December 31, 1994 contains unaudited information that
reflects the operating results of the Materials business only. The audited
financial statements for this period do not reflect the segregation of the
Materials business and the Machinery business.
(d) Exceptional items under U.K. GAAP for the period from April 25, 1995 to
December 31, 1995 and the year ended December 31, 1994 relate to
restructuring costs for employee severance costs of (Pounds)1,634,000 and
aborted flotation costs of (Pounds)463,000 respectively.
(e) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as net income before provision for income taxes, plus
fixed charges. Fixed charges consist of interest expense on all
indebtedness and one-third of rental expense on operating leases,
representing that portion of rental expense deemed by the Company to be
attributable to interest.
16
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to other
information contained in this Prospectus, the following risk factors in
evaluating the Company and its business before purchasing the Exchange Notes
offered hereby. To the extent any of the information contained in this
Prospectus constitutes a "forward-looking statement" as defined in Section
21E(i)(1) of the Exchange Act, the risk factors set forth below are cautionary
statements identifying important factors that could cause actual results to
differ materially from those in the forward-looking statement.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Except
under certain limited circumstances, the Company does not currently intend to
register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes
registered under the Securities Act or to any rights under the Exchange and
Registration Rights Agreement. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected. See "The
Exchange Offer--Consequences of Exchange and Failure to Exchange Old Notes."
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties in other transactions substantially
similar to the Exchange Offer, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than
(i) a broker-dealer who acquired the Old Notes as a result of market making
activities or other trading activities, (ii) an Initial Purchaser who acquired
the Old Notes directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act, or (iii) a person that is an "affiliate" (as defined in Rule
405 of the Securities Act) of the Company) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes. Holders of Old Notes accepting the
Exchange Offer will represent to the Company in the Letter of Transmittal that
such conditions have been met. Any holder who participates in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
may not rely on the position of the staff of the Commission as set forth in
these no-action letters and would have to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Each broker-dealer who receives Exchange Notes
for its own account pursuant to the Exchange Offer must acknowledge that it
acquired the Old Notes as the result of market-making activities or other
trading activities and will deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. In addition, pursuant to Section 4(3) under the
Securities Act, until , 1998, all dealers effecting transactions in
the Exchange Notes, whether or not participating in the Exchange Offer, may be
required to deliver a Prospectus. See "The Exchange Offer--Purpose of the
Exchange Offer," "--Consequences of Exchange and Failure to Exchange Old
Notes" and "Plan of Distribution."
17
<PAGE>
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
Following the consummation of the Transactions, the Company is highly
leveraged. As of December 31, 1997, on a pro forma basis after giving effect
to the Transactions and the application of the net proceeds thereof, the
Company would have had consolidated total indebtedness of approximately
(Pounds)92,012,000 and a stockholders' deficit of (Pounds)68,322,000. In
addition, the Indenture permits the Company to incur additional indebtedness,
subject to certain limitations. See "Use of Proceeds," "Capitalization,"
"Selected Historical and unaudited Pro Forma Consolidated Financial
Information and Other Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Description of Credit Facilities" and "Description of the Notes--
Certain Covenants." The Company's high degree of leverage could have important
consequences to holders of the Notes, including the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired in
the future; (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of interest on, and the repayment
of principal of, its indebtedness, thereby reducing the funds available to the
Company for other purposes; (iii) certain of the Company's borrowings will be
at variable rates of interest, which will expose the Company to the risk of
increased interest rates; (iv) the indebtedness outstanding under the
Revolving Facility, secured by the stock of United Texon Limited, will mature
prior to the Notes; (v) the Company may be substantially more leveraged than
certain of its competitors, which may place the Company at a competitive
disadvantage; and (vi) the Company's leveraged financial position may make it
more vulnerable in the event of a downturn in general economic conditions or
in its industry or business, reduce its ability to withstand competitive
pressures and limit its flexibility to adjust to changing market conditions.
The Company's flexibility in operating its business, including its ability to
make capital expenditures, has in the past been restricted for substantial
periods as a result of continuing breaches of covenants under credit
facilities, and there can be no assurance that similar circumstances will not
arise in the future.
The Company's ability to make scheduled payments on or refinance the Notes
and the Company's other indebtedness, or to fund planned capital expenditures
or finance acquisitions will depend on its future financial and operating
performance, which is subject to prevailing economic conditions and to
financial, business and other factors, including factors that are beyond the
control of the Company. For the year ended December 31, 1997 on a pro forma
basis, the Company's ratio of earnings under U.K. GAAP to fixed charges would
have been 1.0 to 1.0. Although the Company believes that based on current
levels of operations, it will have sufficient cash flow to cover its debt
service obligations, there can be no assurance that the Company will be able
to meet such obligations. If the Company is not able to generate sufficient
cash flow to meet its obligations under the Notes and its other indebtedness,
the Company may be forced to adopt one or more alternatives, including
delaying capital expenditures, attempting to restructure or refinance its
indebtedness, sell material assets or operations or equity. There can be no
assurance that any such actions could be effected on satisfactory terms, that
they would enable the Company to satisfy its debt service obligations or that
they would be permitted under the Revolving Facility or the Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Description of Credit Facilities" and "Description of Notes."
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
The Company is a holding company whose only material assets are its
investments in its subsidiaries. The Company conducts no business and is
completely dependent on distributions from its subsidiaries to service its
debt obligations, including the payment of all amounts due in respect of the
Notes. The holders of the Notes will have no direct claim against such
subsidiaries. See "U.K. Insolvency Law and Other Considerations." Except to
the extent that the Company may itself be a creditor with recognized claims
against a subsidiary, the rights of holders of the Notes to participate in any
distribution of assets of any subsidiary upon liquidation, bankruptcy,
reorganization or otherwise may, as is the case with other unsecured creditors
of the Company, be subject to prior claims of
18
<PAGE>
creditors (including trade creditors) and preferred stockholders (if any) of
that subsidiary and any other subsidiary of the Company that is a direct or
indirect parent company of that subsidiary. The Indenture contains covenants
which restrict the ability of the Company's subsidiaries to enter into any
agreement limiting transfers and distributions, including dividends. However,
the ability of the Company's subsidiaries to pay dividends and make other
payments may be restricted by, among other things, applicable laws and
regulations or by terms of agreements to which they may become party. See
"Description of Notes."
RESTRICTIVE DEBT COVENANTS
The Revolving Facility contains a number of significant covenants that,
among other things, restrict the ability of the Company and its subsidiaries
to repay principal amounts of the Notes, dispose of assets, grant security,
make loans, acquire assets, enter into agreements of merger or consolidation,
incur additional indebtedness, incur guarantee obligations, conduct certain
investment activities, declare or pay dividends or redeem or purchase capital
stock, make capital expenditures and otherwise restrict certain corporate
activities. In addition, under the Revolving Facility, the Company is required
to comply with specified financial ratios and tests, including a minimum
interest coverage ratio, a maximum total debt to earnings before interest,
tax, depreciation and amortization ratio, a minimum fixed charge ratio and
maximum leverage ratios. See "Description of Credit Facilities."
The Company believes that it and its subsidiaries will be in compliance with
the covenants and restrictions contained in the Revolving Facility and in the
Indenture upon consummation of the Exchange Offer. However, their ability to
continue to comply with the covenants and restrictions contained in such
agreements may be affected by events beyond their control, including
prevailing economic, financial and industry conditions. The breach of any of
such covenants or restrictions could result in a default under the Revolving
Facility and/or the Indenture, which would permit the lenders under the
Revolving Facility or the holders of the Notes, as the case may be, to declare
all amounts borrowed thereunder to be due and payable, together with accrued
and unpaid interest, and the commitments of the lenders to make further
extensions of credit under the Revolving Facility could be terminated. In
recent years, the Company has been unable to comply with restrictive covenants
in previous credit facilities and has been in breach of covenants under such
facilities for substantial periods of time, and there can be no assurance that
the Issuer and its subsidiaries will be able to continue to comply with the
covenants under the Revolving Facility.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, holders of the Notes will be
entitled to require the Company to make an offer to purchase all of the
outstanding Notes at a price equal to 101% of the principal amounts thereof to
the date of repurchase plus accrued and unpaid interest and Additional
Amounts, if any, to the date of repurchase. The occurrence of certain of the
events which would constitute a Change of Control would require mandatory
prepayment under the Senior Credit Facility. In addition, the Senior Credit
Facility will effectively prevent the purchase of the Notes by the Company in
the event of a Change of Control unless and until such time as the
indebtedness under the Senior Credit Facility is repaid in full. The Company's
failure to purchase the Notes would result in a default under the Indenture
and the Revolving Facility. The inability to repay the indebtedness under the
Revolving Facility, if accelerated, would also constitute an event of default
under the Indenture, which could have adverse consequences to the Company and
the holders of the Notes. In the event of a Change of Control, there can be no
assurance that the Company would have sufficient assets to satisfy all of its
obligations under the Revolving Facility and the Notes. Future indebtedness of
the Company may also contain prohibitions of certain events or transactions
which would constitute a Change of Control or require such indebtedness to be
repurchased upon a Change of Control. The Change of Control purchase feature
of the Notes may in certain circumstances delay, discourage or prevent a sale
or takeover of the Company. See "Description of Credit Facilities" and
"Description of Notes--Change of Control."
19
<PAGE>
HISTORIC BUSINESS LIABILITIES
Certain of the Company's subsidiaries have historically carried on a
business other than the ongoing business of the Company described in this
Prospectus. In particular, the Company may have unidentified contingent
liabilities relating to the Machinery business previously carried out by
certain of its subsidiaries. See "Certain Transactions." Accordingly,
liabilities relating to this past business activity could arise, and affect
the ability of the Company to pay interest on the Notes and to satisfy its
other debt obligations. The Company generally is not indemnified for any such
unidentified contingent liabilities, and no assurance can be given that such
liabilities are not material.
COMPETITION
The footwear manufacturing business is a fragmented and highly competitive
industry. Competition is generally based on product quality, price, customer
service and timely delivery. While there are few global suppliers to the
industry that compete with the Company in all of its markets, certain of the
Company's competitors may have greater financial and other resources than the
Company and be able to compete more effectively in certain local markets. In
addition, new global or local competitors may enter the market. To the extent
that any competitor offers higher quality products, more attractive pricing,
better service or faster delivery, it could have a material adverse effect on
the Company's business, results of operations and financial condition. See
"Business--Competition."
YEAR 2000 COMPLIANCE
The Company is in the process of formulating and implementing a program
designed to ensure that the software used in connection with the Company's
business and operations will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such dates. The Company currently
estimates that the additional costs to be incurred in connection with such a
program shall be approximately (Pounds)200,000 although there can be no
assurance that this will be the case or that the Company will not incur
additional costs in connection with such program. Furthermore, there can be no
assurance that Year 2000 projects will be successful or that the date change
from 1999 to 2000 will not materially affect an organization's operations and
financial results. Businesses may also be affected by the inability of third
parties to manage the Year 2000 problem.
PRICE FLUCTUATIONS OF RAW MATERIALS
The Company purchases most of the raw materials for its products on the open
market, and the Company's sales may be affected by changes in the market price
of such raw materials. The Company does not generally engage in commodity
hedging transactions for raw materials. Although the Company has generally
been able to pass on increases in the price of raw materials to its customers,
there can be no assurance that it will be able to do so in the future, on a
timely basis or at all. The results of operations for the Company have in the
past been affected by fluctuations in the price of the primary raw material,
wood pulp, for its cellulose insoles. Wood pulp represented 27.6% of the
Company's raw material costs in 1997 and 17.9% of the Company's total cost of
sales in that year. Additionally, significant increases in the price of the
Company's products due to increases in the cost of raw materials could have a
negative effect on demand for its products and a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Raw Materials and Suppliers."
INTERNATIONAL OPERATIONS
The majority of the Company's operations are conducted in foreign countries,
including anticipated growth in Asia, and are subject to risks that are
inherent in operating abroad, including governmental
20
<PAGE>
regulation, changes in import duties, trade restrictions, work stoppages,
currency restrictions and other restraints and burdensome taxes.
The Company's operations worldwide and the products it sells are subject to
numerous governmental regulations and inspections. Although the Company
believes it is substantially in compliance with such regulations, changes in
legislation or regulations and actions by regulators, including changes in
administration and enforcement policies, may from time to time require
operational improvements or modifications at various locations or the payment
of fines and penalties, or both.
The Company is subject to a variety of governmental regulations in certain
countries where it markets its products, including import quotas and tariffs,
and taxes.
RISK OF ENVIRONMENTAL LIABILITIES
The Company's facilities, several of which have been operated as industrial
establishments for long periods of time, are subject to comprehensive
environmental laws and requirements, including those governing discharges to
the air and water, the handling of disposal of solid and hazardous substances
and wastes and remediation of contamination associated with the release of
hazardous substances at the Company's facilities and offsite disposal
locations. The Company has made, and will continue to make, expenditures to
comply with such laws and requirements. The Company believes, based upon
information currently available to management, that it is currently in
substantial compliance with all applicable environmental laws and requirements
and that the Company will not require material capital expenditures to
maintain such compliance during 1998 or in the foreseeable future. However,
future events, such as changes in existing laws and regulations or the
discovery of contamination at the Company's facilities, adjacent sites or
offsite waste disposal locations, may give rise to additional compliance or
remediation costs which could have a material adverse effect on the Company's
results of operations or financial condition. Moreover, the nature of the
Company's business exposes it to some risk of claims with respect to
environmental matters, and there can be no assurance that material costs or
liabilities will not be incurred in connection with any such claims.
CONTROLLING STOCKHOLDERS
75.95% of the voting ordinary shares in the capital of the Company (the
"Voting Ordinary Shares") which are outstanding are owned by funds advised by
Apax and its affiliates. As a result, subject to the Shareholders Agreement
(as defined below), Apax effectively will be able to elect the majority of the
members of the Board of Directors of the Company and therefore direct the
management and policies of the Company. The interests of Apax and its
affiliates may differ from the interests of holders of the Notes. Chase Equity
Associates L.P., an affiliate of the Initial Purchasers, owns 4.99% of the
Voting Ordinary Shares and 100% of the non-voting ordinary shares in the
capital of the Company (the "Non Voting Ordinary Shares" and, together with
the Voting Ordinary Shares, the "Ordinary Shares"). See "The Transactions,"
"Principal Shareholders" and "Certain Transactions."
U.K. INSOLVENCY LAW AND FINANCIAL ASSISTANCE CONSIDERATIONS
The procedural and substantive provisions of U.K. insolvency and
administrative laws generally are more favorable to secured creditors than
comparable provisions of U.S. law. As a result, the ability of the holders of
the Notes to protect their interests may be more limited than would be the
case with a U.S. issuer. In addition, under U.K. insolvency law, the
liabilities of the Company in respect of the Notes will be paid in the event
of a bankruptcy or similar proceeding after certain debts of the Company,
which are entitled to priority under U.K. law. Such debts may include (i)
amounts owed to U.K. Inland Revenue, (ii) amounts owed to U.K. Customs and
Excise, (iii) amounts owed in respect of U.K. social security contributions,
(iv) amounts owed in respect of occupational pension schemes and (v) amounts
owed to employees.
The net proceeds of the Old Note Offering were used in effecting the
Acquisition. Under U.K. insolvency law, the liquidator or administrator of a
company may apply to the court to rescind a
21
<PAGE>
transaction entered into by such company at less than fair value, if such
company was insolvent at the time of, or immediately after, the transaction
and enters into a formal insolvency process within two years of the completion
of the transaction. A transaction might be so challenged if it involved a gift
by the company or the company received consideration of significantly less
value than the benefit given by such company. A court generally will not
intervene, however, if the company entered the transaction in good faith for
the purposes of carrying on its business and there were reasonable grounds for
believing the transaction would benefit the company. The Company believes that
the Notes will not be issued on terms which would amount to a transaction at
less than fair value and further that the issue is in good faith for the
purposes of carrying on the Company's business and that there are reasonable
grounds for believing that the transaction would benefit the Company. There
can be no assurance, however, that the issuance of the Notes will not be
challenged by a liquidator or administrator or that a court would support
management's analysis.
Under the provisions of U.K. corporate and other local laws, the making of
loans from subsidiaries to the Company to discharge the Notes or to pay
interest on the Notes may constitute unlawful financial assistance in so far
as the proceeds of the Notes were applied in acquiring shares of United Texon
Limited (see "The Transactions" and "Use of Proceeds") or in repaying
indebtedness originally incurred in ongoing subsidiaries of United Texon
Limited.
RISK OF FOREIGN EXCHANGE RATE FLUCTUATIONS; INTRODUCTION OF THE EURO
The Company's operations are conducted by entities in many countries, and
accordingly, the Company's results of operations are subject to currency
translation risk and currency transaction risk. With respect to currency
translation risk, the financial condition and results of operations of each of
these entities is reported in the relevant local currency and then translated
into Sterling at the applicable currency exchange rate for inclusion in the
Company's financial statements. The appreciation of Sterling against certain
European currencies will have a negative impact on the reported sales and
operating margin. Based on average exchange rates throughout 1997, Sterling
appreciated 20.9% against the Deutsche Mark compared to 1996. For this purpose
the Deutsche Mark is taken as representative of the currencies which are
members of the European Monetary System ("EMS"). Conversely, the depreciation
of Sterling against such currencies will have a positive impact. Fluctuations
in the exchange rate between Sterling and other currencies may also affect the
book value of the Company's assets and the amount of the Company's
shareholders equity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
In addition to currency translation risk, the Company incurs currency
transaction risk because the Company's operations involve transactions in a
variety of currencies. Fluctuations in currency exchange rates may
significantly affect the Company's results of operations because many of its
subsidiaries' costs are incurred in currencies different from those that are
received from the sale of their products, and there is normally a time lag
between the incurrence of such costs and collection of the related sales
proceeds. Currency hedging is generally used by businesses to protect against
transaction risk. The Company engages in currency hedging only to a limited
extent due, in large part, to the fact that its ability to finance additional
hedging is limited by its high degree of leverage. Given the volatility of
currency exchange rates, there can be no assurance that the Company will be
able to effectively manage its currency transaction risks or that any
volatility in currency exchange rates will not have a material adverse effect
on the Company's financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--General" and "--International Operations."
A significant portion of the Company's revenues and expenses will be
denominated in currencies other than the Deutsche Mark, the currency in which
interest on and the principal of the Notes must be paid. Significant increases
in the value of the Deutsche Mark relative to other currencies in which the
Company conducts its operations could have an adverse effect on the Company's
ability to meet interest and principal obligations on foreign currency
denominated debt, including the Notes.
22
<PAGE>
Under the treaty on the European Economic and Monetary Union (the "Treaty"),
to which the Federal Republic of Germany is a signatory, on or before January
1, 1999, and subject to the fulfillment of certain conditions, the "Euro" may
replace all or some of the currencies of the Member states of the European
Union (the "EU"), including the Deutsche Mark. If, pursuant to the Treaty, the
Deutsche Mark is replaced by the Euro, the payment of principal of, of
interest on, the Notes will be effected in Euro in conformity with legally
applicable measures taken pursuant to, or by virtue of, the Treaty. In
addition, the regulations of the EU relating to the Euro will apply to the
Notes and the Indenture. The circumstances and consequences described in this
paragraph do not entitle the Company or any holder of the Notes to early
redemption, rescission, notice, repudiation, adjustment or renegotiation of
the terms and conditions of the Notes or the Indenture or to raise other
defenses or to request any compensation claim, nor will they affect any of the
other obligations of the Company under the Notes or the Indenture.
ABSENCE OF PUBLIC MARKET FOR THE NOTES; RESTRICTIONS ON TRANSFERS
The Exchange Notes are being offered to holders of the Old Notes. The Old
Notes were issued on January 30, 1998 to a small number of institutional
investors and are eligible for trading in the Private Offering, Resale and
Trading through Automated Linkages (PORTAL) Market, the National Association
of Securities Dealers' screenbased, automated market for trading of securities
eligible for resale under Rule 144A. The Exchange Notes are new securities for
which there currently is no market. Although the Initial Purchasers have
advised the Company that they currently intend to make a market in the
Exchange Notes, they are not obligated to do so and may discontinue such
market making at any time without notice. The Company does not intend to list
the Notes on any national securities exchange other than the Luxembourg Stock
Exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. Accordingly, no
assurance can be given that an active market will develop for any of the Notes
or as to the liquidity of the trading market for any of the Notes. If a
trading market does not develop or is not maintained, holders of the Notes may
experience difficulty in reselling such Notes or may be unable to sell them at
all. If a market for the Notes develops, any such market may be discontinued
at any time. If a trading market develops for the Notes, future trading prices
of such Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the Notes may trade at a discount from their principal amount.
U.K. TAX CONSEQUENCES OF ISSUANCE OF DEFINITIVE NOTES
Upon the occurrence of certain events, holders of Book-Entry Interests will
be entitled to receive Definitive Notes. Under current U.K. tax law, upon the
issuance of such Definitive Notes, such holder may become subject to U.K.
income tax (currently 20%) to be withheld on any payments of interest on the
Notes. In certain circumstances, the Company will not be required to pay
Additional Amounts with respect to such Notes. See "Description of the Notes--
Withholding Taxes," "Description of the Note Depositary Agreement--Issuance of
Definitive Notes" and "Tax Considerations--Material U.K. Tax Consequences."
BOOK-ENTRY INTERESTS; DEPENDENCE ON INTERMEDIARIES
Until and unless Definitive Notes are issued in exchange for the Book-Entry
Interests, holders of the Book-Entry Interests will not be considered the
owners or Holders of Notes under the Indenture. After payment to the Book-
Entry Depositary, the Company will have no responsibility or liability for the
payment of interest, principal or other amounts to DTC or to holders of Book-
Entry Interests. The Book-Entry Depositary, or its nominee, will be the sole
Holder of the Notes in the form of the Global Exchange Note. Accordingly, each
person owning a Book-Entry Interest must rely on the procedures of the Book-
Entry Depositary and DTC, and, if such person is not a participant in DTC, on
the procedures of the participant through which such person owns its interest
(including, if applicable, the Euroclear Operator or Cedel), to exercise any
rights of a Holder under the Indenture.
23
<PAGE>
Payments of principal and interest on, and other amounts due in respect of,
the Global Exchange Note will be made to the Book-Entry Depositary (as Holder
of the Global Exchange Note), which will in turn distribute payments to Cede &
Co. (as nominee of DTC) or as otherwise directed by DTC. DTC, upon receipt of
any payment from the Book-Entry Depositary, will promptly credit participants'
accounts with payments in amounts proportionate to their respective ownership
of Book-Entry Interests, as shown on the records of DTC. The Company expects
that payments by participants or indirect participants to owners of interests
in Book-Entry Interests held through such participants or indirect
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants or indirect participants. None of the
Company, the Trustee, the Book-Entry Depositary, any Paying Agent or the
Registrar will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, the Book-Entry Interests
or for maintaining, supervising or reviewing any records relating to such
Book-Entry Interests.
Unlike Holders of the Notes themselves, holders of the Book-Entry Interests
will not have the direct right under the Indenture to act upon solicitations
by the Company of consents or requests by the Company for waivers or other
actions from Holders of the Notes. Instead, a holder of Book-Entry Interests
will be permitted to act only to the extent it has received appropriate
proxies to do so from DTC and, if applicable, DTC participants. There can be
no assurance that procedures implemented for the granting of such proxies will
be sufficient to enable holders of Book-Entry Interests to vote on any
requested actions on a timely basis. Similarly, upon the occurrence of an
Event of Default under the Notes, holders of Book-Entry Interests will be
restricted to acting through DTC and the Book-Entry Depositary if and until
such Holders request Definitive Notes to be issued. There can be no assurance
that the procedures to be implemented by DTC and the Book-Entry Depositary
under such circumstances will be adequate to ensure the timely exercise of
remedies under the Indenture. For a description of the terms of the Note
Depositary Agreement, see "Description of the Note Depositary Agreement."
24
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds in connection with the Exchange
Offer.
The net proceeds received by the Company from the Old Note Offering, after
deduction for underwriting discounts, fees and expenses were approximately DM
233.1 million ((Pounds)78.2 million). The net proceeds from the Old Note
Offering, together with proceeds from the Revolving Facility and from the
issue of shares, were used by the Company to (i) repay indebtedness of
approximately (Pounds)48.1 million under the credit agreements described
below; (ii) repay indebtedness of (Pounds)3.5 million to current and former
shareholders and management of United Texon Limited incurred in connection
with the 1995 Acquisition (the "A Notes"); (iii) repay (Pounds)7.3 million of
indebtedness to unrelated third parties; (iv) purchase for (Pounds)20.6
million the majority of the 1995 Acquisition Debt; (v) purchase stock from
current and former management of the Company for (Pounds)2.8 million; and (vi)
pay other fees and expenses relating to the Transactions. The foregoing
repayment amounts reflect the Transactions as if they had occurred on December
31, 1997. See "The Transactions".
The credit agreements repaid consisted of senior term loan and revolving
credit facilities of approximately (Pounds)48.1 million outstanding (including
accrued interest), which bore interest at LIBOR plus 2.25% per annum and had a
final repayment date of March 31, 2002. The senior term loan and revolving
credit facilities were provided by, among others, The Chase Manhattan Bank,
which is an affiliate of one of the Company's shareholders and of the Initial
Purchasers. The A Notes were due June 30, 1999 and bore interest at 5% per
annum until June 30, 1999 and at LIBOR plus 3% per annum thereafter.
(Pounds)184,240 principal amount of the A Notes were held by shareholders, and
(Pounds)15,628 by management of the Company. The (Pounds)7.3 million of
indebtedness to unrelated third parties consisted of (i) (Pounds)0.45 million
principal amount of loan notes issued in connection with the 1995 Acquisition,
which were due June 30, 1999 and were not interest-bearing and (ii) a
mezzanine term loan of (Pounds)6.9 million outstanding (including accrued
interest), which bore interest at LIBOR plus 9.5% per annum and had a final
repayment date of September 30, 2002. The 1995 Acquisition Debt consisted of
discount bonds with an issue price of (Pounds)16.0 million which were held by
shareholders of the Company. See "Certain Transactions."
EXCHANGE RATE INFORMATION
The following table sets forth, for the periods indicated, certain
information concerning the Noon Buying Rate for Sterling expressed in dollars
per Pound Sterling. Such rates are provided solely for the convenience of the
reader and should not be construed as a representation that Sterling amounts
actually represent such dollar amounts or that such Sterling amounts could
have been, or could be, converted into dollars at that rate or at any other
rate. Such rates are not used by the Company in the preparation of its
consolidated financial statements included elsewhere herein. See "Risk
Factors--Risk of Foreign Exchange Rate Fluctuations; Introduction of the Euro"
and Note 26 to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
PERIOD-
FISCAL YEAR ENDED DECEMBER 31, AVERAGE RATE(/1/) HIGH LOW END RATE
------------------------------ ----------------- ---- ---- --------
<S> <C> <C> <C> <C>
1993.................................. 1.50 1.59 1.42 1.48
1994.................................. 1.54 1.64 1.46 1.57
1995.................................. 1.58 1.64 1.53 1.55
1996.................................. 1.57 1.71 1.50 1.71
1997.................................. 1.64 1.71 1.58 1.64
</TABLE>
- --------
(/1/The)average of the Noon Buying Rates on the last business day of each
month during the relevant period. On March 23, 1998, the Noon Buying Rate
was $1.68 to (Pounds)1.00.
On March 23, 1998 The Chase Manhattan Bank's noon buying rate for Deutsche
Marks per Pound Sterling was DM 3.07 to (Pounds)1.00.
25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 on a pro forma basis after giving effect to the
Transactions. Except as set forth herein, there have been no material changes
in the Company's capitalization since December 31, 1997. This table should be
read in conjunction with the "Selected Historical and unaudited Pro Forma
Consolidated Financial Information and Other Data," "Unaudited Pro Forma
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PRO FORMA AS OF
DECEMBER 31, 1997
-------------------------------
(POUNDS STERLING IN THOUSANDS)
(UNAUDITED)
U.S. GAAP U.K. GAAP
--------------- --------------
<S> <C> <C>
DEBT:
Revolving Facility(a)........................ (Pounds) 4,342 (Pounds) 4,342
Assumed Indebtedness(b)...................... 5,470 5,470
Senior Notes offered hereby.................. 82,200 82,200
--------------- --------------
Total debt................................... 92,012 92,012
Debt issuance costs netted off against debt
raised(c) .................................. -- (4,000)
--------------- --------------
92,012 88,012
SHAREHOLDERS' EQUITY:
Ordinary shares(d)........................... 3,920 3,920
Preference shares(d)......................... 52,000 52,000
--------------- --------------
55,920 55,920
Goodwill write-off reserve(e)................ -- (124,242)
Profit and loss account...................... (57,405) --
--------------- --------------
Total shareholders' deficit.................. (1,485) (68,322)
Minority interest(f)......................... 1,431 1,431
--------------- --------------
(Pounds)21,121
Total capitalization......................... (Pounds) 91,958
=============== ==============
</TABLE>
- --------
(a) The Revolving Facility provides revolving loans of up to (Pounds)15.0
million for working capital and general corporate purposes. The Company
used (Pounds)4.3 million of borrowings under the Revolving Facility to
partially fund the Acquisition. See "The Transactions" and "Description of
Credit Facilities."
(b) The Assumed Indebtedness consisted of borrowings under bilateral borrowing
arrangements by certain of the Company's subsidiaries. See "Description of
Credit Facilities--Other Credit Facilities."
(c) Under U.K. GAAP, debt issuance costs are netted from the calculation of
total debt and amortized over the life of the debt; however, gross
financial obligations should not exclude this netted amount. Under U.S.
GAAP, such costs are recorded as an asset and amortized over the life of
the debt as additional interest cost.
(d) In connection with the Acquisition, the Company issued ordinary shares and
preference shares to certain shareholders of United Texon Limited in
exchange for their shareholdings in United Texon Limited. See "The
Transactions."
(e) Under U.K. GAAP, the Acquisition Agreement constitutes an acquisition and
the resulting goodwill can be charged for this period to a goodwill write-
off reserve, a component of the other reserves account in shareholders'
deficit. Under U.S. GAAP, the Acquisition Agreement for the Company is not
considered an acquisition, therefore no goodwill is recognized. In
addition, under U.S. GAAP, the Company's pre-existing goodwill is
capitalized and amortized over its useful life (see Note 26, of the Notes
to the Consolidated Financial Statements).
(f) Minority interest relates to the 42.4% interest held by the counterparty
to the Company's joint venture operations in China.
26
<PAGE>
THE TRANSACTIONS
In 1995, Apax led the 1995 Acquisition of USM (Holdings) Limited and its
subsidiaries, which at the time operated both the Materials business and the
Machinery business. During 1997, the Materials business and the Machinery
business were separated into two groups and, as of December 31, 1997, were
demerged. United Texon Limited retained the Materials business, and the
Machinery business was transferred to another company principally owned by the
shareholders of the Company.
In December 1997, the Company and the shareholders of United Texon Limited
entered into the Acquisition Agreement pursuant to which the Company agreed to
acquire the entire issued share capital of United Texon Limited. The Company
had been established in late 1997 for the purpose of entering into the
Acquisition. The Acquisition was conditional upon (i) consummation of the Old
Note Offering and (ii) the Revolving Facility being made available
unconditionally. Under the terms of the Acquisition Agreement, the Company has
control of the financial and operational management of the Materials business
as of 18:00 hours on December 31, 1997.
In connection with the Acquisition, the Company borrowed (Pounds)4.3 million
under the Revolving Facility. See "Use of Proceeds" and "Certain
Transactions."
In order to consummate the Acquisition, the Company took the following
steps:
(a) issued to shareholders of United Texon Limited preference shares with a
redemption value of (Pounds)52.0 million and (Pounds)3.6 million of
ordinary shares representing 91.5% of the outstanding Voting Ordinary
Shares in exchange for:
(i) approximately 88% of the outstanding ordinary shares and all of the
preference shares of United Texon Limited; and
(ii) a portion of the 1995 Acquisition Debt;
(b) caused to be repaid existing indebtedness of United Texon Limited and
its subsidiaries consisting of:
(i) indebtedness to a syndicate of banks led by The Chase Manhattan
Bank, an affiliate of one of the shareholders of the Company and
the Initial Purchasers;
(ii) other indebtedness to shareholders and management of United Texon
Limited incurred in connection with the 1995 Acquisition; and
(iii) indebtedness to unrelated third parties;
(c) purchased for (Pounds)20.6 million the remaining portion of the 1995
Acquisition Debt;
(d) purchased the remaining approximately 12% of the outstanding ordinary
shares of United Texon Limited acquired by management of United Texon
Limited pursuant to the exercise of management share options; and
(e) to the extent not already issued to Senior Management, issued 8.5% of
the outstanding Voting Ordinary Shares of the Company to Senior
Management for (Pounds)0.3 million.
Under the Articles, holders of preference shares will be entitled to receive
a fixed cumulative dividend, calculated as a percentage of the redemption
value of (Pounds)52.0 million of the preference shares, payable semi-annually
at a rate which will be exclusive of any associated tax credit. The ability of
the Company to pay these dividends in cash is subject to certain restrictions
contained in the Revolving Facility and the Indenture. See "Description of
Credit Facilities" and "Description of Notes--Limitation on Restricted
Payments." The dividend shall be 15% through September 30, 2002. However, any
preference dividend payments due on or prior to December 31, 2000, which are
paid on or prior to the due date, shall be deemed to satisfy three times the
amount of the preference dividend so paid, provided that arrears of accrued
but unpaid preference dividends in respect of previous periods have
27
<PAGE>
been paid. See "Principal Shareholders--Articles of Association and
Shareholders Agreement." Until December 31, 2000, in the event that the
dividend is not paid on the due date, it shall accumulate at a rate of 15%.
The following table sets forth the sources and uses of cash used to effect
the Transactions as if they had occurred on December 31, 1997:
<TABLE>
<CAPTION>
AMOUNTS
--------------------
(POUNDS IN MILLIONS)
<S> <C>
SOURCES
Revolving Facility.................................... (Pounds) 4.3
Senior Notes offered hereby........................... 82.2
Issue of ordinary shares.............................. 0.3
------------
Total............................................... (Pounds)86.8
============
USES
Repayment of existing indebtedness(a)................. (Pounds)58.9
Purchase of 1995 Acquisition Debt(b).................. 20.6
Purchase of management option shares.................. 2.8
Senior Notes issuance cost............................ 4.0
Other Transaction costs............................... 0.5
------------
Total............................................... (Pounds)86.8
============
</TABLE>
--------
(a) Includes (i) (Pounds)48.1 million of indebtedness to a syndicate of
banks led by The Chase Manhattan Bank, (ii) (Pounds)3.5 million of
indebtedness to shareholders and management of United Texon Limited and
(iii) (Pounds)7.3 million of indebtedness to unrelated third parties.
See "Use of Proceeds."
(b) The 1995 Acquisition Debt is held by shareholders of the Company. See
"Certain Transactions."
28
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
AND OTHER DATA
The following table presents as of the dates and for the periods indicated
(i) selected historical consolidated financial information of the Company and
(ii) unaudited pro forma consolidated financial information of the Company,
after giving effect to the Transactions. The historical consolidated financial
information of USM (Holdings) Limited for the period from January 1, 1995 to
April 24, 1995, and of United Texon Limited for the period from April 25, 1995
to December 31, 1995, and for the years ended December 31, 1996 and 1997 and
of United Texon Limited as of December 31, 1996 and 1997 and of Texon
International plc as of December 31, 1997 has been derived from the audited
consolidated financial statements of the Company (including the Machinery
business) included elsewhere herein.
The unaudited pro forma consolidated financial and other information does
not purport to represent what the Company's financial position or results of
operations would actually have been had the Transactions in fact occurred on
the assumed dates or to project the Company's financial position or results of
operations for any future date or future period. The information contained in
the following tables should also be read in conjunction with "Capitalization,"
"The Transactions," "Unaudited Pro Forma Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's historical Consolidated Financial Statements and
related notes included elsewhere in this Prospectus.
The selected historical consolidated statement of operations data for the
five year period ended December 31, 1997 reflects the results of operations of
the Materials business only. Historical consolidated information set forth in
the table under "Other Data" for these periods also reflects the results of
the Materials business only. The Texon International plc historical
consolidated balance sheet data as of December 31, 1997 reflects the financial
position of the Materials business only. Historical consolidated balance sheet
data for all other periods reflect the financial position of both the
Materials business and the Machinery business as U.K. GAAP does not require
the restatement of prior year balance sheets for discontinued operations. The
unaudited pro forma consolidated financial information reflects the results of
operations and financial position of the Materials business only. See
"Unaudited Pro Forma Consolidated Financial Information."
The Company prepares its Consolidated Financial Statements in accordance
with U.K. GAAP which differs in certain material respects from U.S. GAAP.
These differences have a material effect on net income/(loss) and the
composition of shareholder's deficit and are summarized in Note 26 to the
Notes to the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus.
29
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
AND OTHER DATA
<TABLE>
<CAPTION>
USM (HOLDINGS) LIMITED UNITED TEXON LIMITED
------------------------------------------------ -------------------------------------------------
HISTORICAL
---------------------------------------------------------------------------------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED JANUARY 1, APRIL 25, YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, TO APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993(c) 1994(c) 1995 1995 1996 1997
--------------- --------------- -------------- --------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
(POUNDS STERLING IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Amounts in
accordance with
U.K. GAAP:
Sales
turnover(a).... (Pounds)101,808 (Pounds)109,847 (Pounds)38,401 (Pounds)77,295 (Pounds)128,602 (Pounds)122,343
Cost of goods
sold........... 66,498 73,121 26,064 54,645 84,321 79,802
--------------- --------------- -------------- --------------- --------------- ---------------
Gross profit.... 35,310 36,726 12,337 22,650 44,281 42,541
Operating
expenses(d).... 21,750 24,458 8,409 16,717 28,001 32,932
--------------- --------------- -------------- --------------- --------------- ---------------
Income from
continuing
operations..... 13,560 12,268 3,928 5,933 16,280 9,609
Exceptional
items(e)....... -- 463 -- 1,634 -- --
--------------- --------------- -------------- --------------- --------------- ---------------
Income before
taxes and
interest....... 13,560 11,805 3,928 4,299 16,280 9,609
Interest
expense, net... 9,325 8,307 2,972 7,106 10,044 10,199
Amortization of
deferred
financing
costs.......... -- -- -- -- -- --
--------------- --------------- -------------- --------------- --------------- ---------------
Income before
taxes and
minority
interests...... 4,235 3,498 956 (2,807) 6,236 (590)
Income tax
expense........ 670 921 367 682 2,387 1,492
--------------- --------------- -------------- --------------- --------------- ---------------
Income before
minority
interests...... 3,565 2,577 589 (3,489) 3,849 (2,082)
Minority
interests in
(earnings)
losses......... 8 238 68 (109) (293) (305)
--------------- --------------- -------------- --------------- --------------- ---------------
Net
income/(loss)
continuing
operations..... 3,573 2,815 657 (3,380) 3,556 (2,387)
Net
income/(loss)
discontinued
operations..... (12) 450 307 (11,091) (4,285) (1,931)
--------------- --------------- -------------- --------------- --------------- ---------------
Net
income/(loss).. (Pounds) 3,561 (Pounds) 3,265 (Pounds) 964 (Pounds)(14,471) (Pounds) (729) (Pounds) (4,318)
=============== =============== ============== =============== =============== ===============
OTHER DATA:
Amounts in
accordance with
U.K. GAAP:
Depreciation and
amortization... (Pounds) 1,745 (Pounds) 1,902 (Pounds) 805 (Pounds) 1,424 (Pounds) 2,161 (Pounds) 2,355
Capital
expenditures... 6,510 1,770 496 1,455 3,188 1,722
Ratio of
earnings to
fixed
charges(g)..... 1.4x 1.4x 1.3x 0.6x 1.6x 0.9x
<CAPTION>
TEXON
INTERNATIONAL
PLC
---------------
PRO FORMA(b)
---------------
YEAR ENDED
DECEMBER 31,
1997
---------------
(UNAUDITED)
<S> <C>
STATEMENT OF
OPERATIONS DATA:
Amounts in
accordance with
U.K. GAAP:
Sales
turnover(a).... (Pounds)122,343
Cost of goods
sold........... 79,802
---------------
Gross profit.... 42,541
Operating
expenses(d).... 32,932
---------------
Income from
continuing
operations..... 9,609
Exceptional
items(e)....... --
---------------
Income before
taxes and
interest....... 9,609
Interest
expense, net... 9,634
Amortization of
deferred
financing
costs.......... 400
---------------
Income before
taxes and
minority
interests...... (425)
Income tax
expense........ 1,492
---------------
Income before
minority
interests...... (1,917)
Minority
interests in
(earnings)
losses......... (305)
---------------
Net
income/(loss)
continuing
operations..... (Pounds) (2,222)
===============
Net
income/(loss)
discontinued
operations.....
Net
income/(loss)..
OTHER DATA:
Amounts in
accordance with
U.K. GAAP:
Depreciation and
amortization... (Pounds) 2,355
Capital
expenditures... 1,722
Ratio of
earnings to
fixed
charges(g)..... 1.0x
</TABLE>
<TABLE>
<CAPTION>
TEXON INTERNATIONAL PLC
-------------------------------------------------
HISTORICAL PRO FORMA(b)
-------------------------------- ---------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
--------------- --------------- ---------------
(UNAUDITED)
(POUNDS STERLING IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Amounts in accordance with U.S. GAAP:
Sales turnover(a).......................................................... (Pounds)128,602 (Pounds)122,343 (Pounds)122,343
Cost of goods sold......................................................... 84,321 79,802 79,802
--------------- --------------- ---------------
Gross profit............................................................... 44,281 42,541 42,541
Operating expenses (including amortization of goodwill)(d )................ 32,318 37,327 37,327
--------------- --------------- ---------------
Income from continuing operations(f)....................................... 11,963 5,214 5,214
Interest expense, net...................................................... 10,044 10,199 9,634
Amortization of deferred financing costs................................... -- -- 400
--------------- --------------- ---------------
Income before taxes and minority interests................................. 1,919 (4,985) (4,820)
Income tax expense......................................................... 2,657 1,508 1,508
--------------- --------------- ---------------
Income before minority interests........................................... (738) (6,493) (6,328)
Minority interests in (earnings) losses.................................... (293) (305) (305)
--------------- --------------- ---------------
Net loss from continuing operations........................................ (Pounds) (1,031) (Pounds) (6,798) (Pounds) (6,633)
=============== =============== ===============
OTHER DATA:
Amounts in accordance with U.S. GAAP:
Depreciation and amortization.............................................. (Pounds) 6,647 (Pounds) 6,412 (Pounds) 6,412
Capital expenditures....................................................... 3,188 1,722 1,722
Ratio of earnings to fixed charges(g)...................................... 1.2x 0.5x 0.5x
</TABLE>
See Notes to Selected Historical and Pro Forma Consolidated Financial
Information and Other Data.
30
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIALINFORMATION
AND OTHER DATA
<TABLE>
<CAPTION>
USM (HOLDINGS) LIMITED UNITED TEXON LIMITED
------------------------------------------------- -------------------------------
HISTORICAL
-----------------------------------------------------------------------------------
AS OF AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, AS OF APRIL 24, DECEMBER 31, DECEMBER 31,
1993(c) 1994(c) 1995 1995 1996
--------------- --------------- --------------- --------------- --------------
(UNAUDITED) (UNAUDITED) (POUNDS STERING IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Amounts in ac-
cordance with
U.K. GAAP:
Total assets.... (Pounds)115,410 (Pounds)118,447 (Pounds)121,770 (Pounds)114,628 (Pounds)99,386
Total debt(h)... 99,960 98,812 92,967 104,059 87,221
Obligations under
finance lease.. 138 616 581 509 1,092
Total shareholders'
deficit........ (56,488) (51,724) (51,613) (70,588) (66,066)
<CAPTION>
TEXON INTERNATIONAL PLC
-------------------------------
PRO FORMA(b)
---------------
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1997 1997
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Amounts in ac-
cordance with
U.K. GAAP:
Total assets.... (Pounds)54,315 (Pounds)54,315
Total debt(h)... 87,660 92,012
Obligations under
finance lease.. 922 922
Total shareholders'
deficit........ (68,629) (68,322)
</TABLE>
<TABLE>
<CAPTION>
TEXON INTERNATIONAL PLC
-------------------------------------------------
HISTORICAL PRO FORMA(b)
-------------------------------- ---------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
--------------- --------------- ---------------
(UNAUDITED)
(POUNDS STERLING IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Amounts in accordance with
U.S. GAAP:
Total assets............... (Pounds)128,600 (Pounds)121,346 (Pounds)125,346
Total debt(h).............. 87,221 87,660 92,012
Total shareholders' (defi-
cit)...................... (26,244) (1,792) (1,485)
</TABLE>
See Notes to Selected Historical and Pro Forma Consolidated Financial
Information and Other Data.
31
<PAGE>
NOTES TO SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION AND OTHER DATA
(a) Sales turnover includes amounts from transactions with the discontinued
business to reflect the total sales of the Materials business. These
amounts have been eliminated in the consolidated financial statements.
(b) The unaudited Pro Forma Consolidated Statement of Operations Data and
Other Data for the year ended December 31, 1997 give effect to the
Transactions as if they had occurred on January 1, 1997. The unaudited
Pro Forma Consolidated Balance Sheet Data as of December 31, 1997 gives
effect to the Transactions as if they had occurred on such date.
(c) The Consolidated Statement of Operations Data and Other Data presented
for the years ended December 31, 1994 and 1993 contain unaudited
information that reflects the operating results of the Materials business
only. The audited financial statements for these periods do not reflect
the segregation of the Materials business and the Machinery business.
(d) Operating expenses for the year ended December 31, 1997 include certain
non-recurring expenses totalling (Pounds)5.6 million. These expenses
include (Pounds)1.7 million relating to fees incurred in connection with a
contemplated sale of the Materials business, which sale was abandoned by
the shareholders in October 1997, (Pounds)1.1 million in refinancing costs
and (Pounds)2.8 million as the cost of the exercise of management share
options on completion of the Offering.
(e) Exceptional items under U.K. GAAP for the period from April 25, 1995 to
December 31, 1995 and the year ended December 31, 1994 relate to
restructuring costs for employee severance costs of (Pounds)1,634,000 and
aborted flotation costs of (Pounds)463,000, respectively.
(f) Income from continuing operations under U.S. GAAP is arrived at after
taking into account the differences relating to the amortization of
goodwill the treatment of pensions and other post-retirement benefits and
the United Texon Limited acquisition costs as set out in Note 26 to the
Consolidated Financial Statements included elsewhere herein. The
continuing operations portion of the goodwill amortization differences for
the years ended December 31, 1997 and 1996 amounts to (Pounds)4,057,000
and (Pounds)4,486,000 respectively. The continuing operations portion of
the difference relating to pensions and post-retirement benefits for the
years ended December 31, 1997 and 1996 amounts to (Pounds)162,000 and
(Pounds)169,000 respectively. The continuing operations portion of the
difference relating to United Texon Limited acquisition costs for the year
ended December 31, 1997 amounts to (Pounds)500,000.
(g) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as net income before provision for income taxes,
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness and one-third of rental expense on operating leases,
representing that portion of rental expense deemed by the Company to be
attributable to interest.
(h) Under U.K. GAAP, costs associated with the issuance of debt are deducted
from the amounts raised for the purposes of balance sheet presentation and
amortized over the life of the debt. Pro forma debt as of December 31,
1997 is shown before deduction of debt issuance costs.
32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet of the Company
as of December 31, 1997 gives effect to the Transactions as if they had
occurred on such date. The unaudited pro forma consolidated statement of
operations for the year ended December 31, 1997 gives effect to the
Transactions as if they had occurred on January 1, 1997. See "The
Transactions."
The unaudited pro forma consolidated balance sheet and statement of
operations are based on the historical consolidated financial statements for
the Company and the assumptions and adjustments described in the accompanying
notes. The unaudited pro forma consolidated statements of operations do not
purport to represent what the Company's results of operations actually would
have been if the Transactions described above had occurred as of the date
indicated or what the results will be for any future periods. The unaudited
pro forma consolidated financial information is based upon assumptions that
the Company believes are reasonable and should be read in conjunction with the
Consolidated Financial Statements and the related notes thereto included
elsewhere in this Prospectus.
33
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------------------------------
PRO FORMA
TEXON ADJUSTMENTS FOR TEXON
INTERNATIONAL THE INTERNATIONAL
PLC TRANSACTIONS PLC PRO FORMA
-------------- --------------- --------------
<S> <C> <C> <C>
(POUNDS STERLING IN THOUSANDS)
ASSETS:(A)
Cash at bank and in hand.............................. (Pounds) 1,156 (Pounds)-- (Pounds) 1,156
Debtors............................................... 19,345 -- 19,345
Stocks................................................ 16,716 -- 16,716
-------------- ---------- --------------
Total currents assets............................... 37,217 -- 37,217
Tangible assets....................................... 17,098 -- 17,098
-------------- ---------- --------------
Total assets........................................ 54,315 -- 54,315
============== ========== ==============
LIABILITIES:(A)
Creditors (amounts falling due within one year)
Short-term debt..................................... 64,396 (58,926)(b) 5,470
Short-term obligations.............................. 49,997 (23,923)(c) 26,074
Creditors (amounts falling due after more than one
year)
Long-term debt...................................... -- 82,542(b) 82,542
Long-term obligations............................... 698 -- 698
Provisions for liabilities and charges................ 6,422 -- 6,422
-------------- ---------- --------------
Total liabilities................................... 121,513 (307) 121,206
SHAREHOLDERS' EQUITY:(A)
Ordinary shares and share premium..................... 13 3,907(d) 3,920
Preference shares..................................... -- 52,000(d) 52,000
Shares to be issued................................... 55,600 (55,600)(d) --
Goodwill write-off reserve............................ (124,242) -- (124,242)
Profit and loss account............................... -- -- --
-------------- ---------- --------------
Total shareholders' deficit......................... (68,629) (307) (68,322)
Total liabilities and shareholders' equity.......... 52,884 -- 52,884
Minority Interest................................... 1,431 -- 1,431
-------------- ---------- --------------
(Pounds)54,315 (Pounds)-- (Pounds)54,315
============== ========== ==============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(POUNDS STERLING IN THOUSANDS)
(a) Presentation of consolidated balance sheet items differs between U.K.
GAAP and U.S. GAAP. Certain U.K. GAAP consolidated balance sheet asset
accounts correspond to U.S. GAAP accounts as follows: "cash at bank and
in hand" to "cash and cash equivalents"; "debtors" to "accounts
receivable"; "stocks" to "inventory"; and "tangible assets" to "fixed
assets." Certain U.K. GAAP consolidated balance sheet liabilities
accounts correspond to U.S. GAAP accounts as follows: "creditors
(amounts falling due within one year)" to "short-term liabilities,"
which includes short-term debt and other short-term obligations;
"creditors (amounts falling due after more than one year)" to "long-
term liabilities," which includes long-term debt and other long-term
liabilities; and "provisions for liabilities and charges" to "other
liabilities and accruals."
Certain U.K. GAAP equity accounts correspond to U.S. GAAP accounts as
follows: "ordinary shares" to "par value of common stock"; "share
premium" to "additional paid-in capital"; "preference shares" to
"preferred stock"; and, "profit and loss account" to "retained
earnings". Under U.K. GAAP, the Acquisition qualifies for this period as
an acquisition and the resulting goodwill may be charged for this period
to a goodwill write-off reserve, a component of the other reserves
account in shareholders' equity. According to U.S. GAAP, the Acquisition
is not considered an acquisition, therefore no goodwill is recognized.
In addition, under U.S. GAAP, the Company's pre-existing goodwill is
capitalized and amortized over its useful life.
(b) Represents indebtedness incurred and existing indebtedness repaid in
connection with the Transaction, as follows:
<TABLE>
<S> <C>
(Pounds)000
---------------
Short-term debt
Repayment of existing indebtedness...................... (Pounds)(58,926)
Long-term debt
Incurred
Revolving Facility.................................... 4,342
Senior Notes.......................................... 82,200
---------------
86,542
===============
Net long-term debt incurred............................. 86,542
Less: Senior Notes issuance costs netted off against
debt raised.......................................... (4,000)
---------------
Net increase in long-term debt....................... (Pounds) 82,542
===============
Total short- and long-term debt repaid in cash.......... (Pounds) 58,926
===============
</TABLE>
(c) Represents settlement of short-term obligations in connection with the
Transactions.
<TABLE>
<S> <C>
(Pounds)000
-----------
Payments in cash................................................ 23,923
-----------
23,923
===========
</TABLE>
35
<PAGE>
(d) Represents new share capital issued by the Company in connection with
the Transactions as follows:
<TABLE>
<CAPTION>
(Pounds)000
-----------
<S> <C>
Preference shares............................................... 52,000
Ordinary shares................................................. 3,907
</TABLE>
Less shares to be issued already included in shareholders equity:
<TABLE>
<S> <C>
Preference shares................................................. (52,000)
Ordinary shares................................................... (3,600)
-------
Additional ordinary shares issued for cash........................ 307
=======
</TABLE>
(e) U.K. GAAP differs in certain significant respects from U.S. GAAP. A
summary of the significant differences as they affect the Company are
set forth in Note 26 to the historical consolidated financial
statements of the Company included elsewhere in the Prospectus.
Calculation of unaudited pro forma consolidated shareholders' equity
under U.S. GAAP follows:
<TABLE>
<CAPTION>
(Pounds)000
<S> <C>
Shareholders' deficit in
accordance with U.K. GAAP
......................... (68,322)
Adjustments to conform to
U.S. GAAP:
Goodwill................ 68,288
United Texon Limited ac-
quisition.............. (1,257)
Pensions and other post-
retirement employee
benefits............... 22
Taxation................ (216)
-------
Pro forma shareholders'
equity in accordance
with U.S. GAAP......... (1,485)
=======
</TABLE>
36
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------
TEXON
PRO FORMA INTERNATIONAL
ADJUSTMENTS FOR PLC
UNITED THE ---------------
TEXON LIMITED TRANSACTIONS PRO FORMA
--------------- --------------- ---------------
(POUNDS STERLING IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
AMOUNTS IN ACCORDANCE
WITH U.K. GAAP:
Sales.................. (Pounds)122,343 (Pounds) -- (Pounds)122,343
Cost of goods sold..... 79,802 -- 79,802
--------------- ------------ ---------------
Gross profit........... 42,541 -- 42,541
Income from
operations............ 9,609 -- 9,609
--------------- ------------ ---------------
Income before taxes and
interest.............. 9,609 -- 9,609
Interest expense, net.. 10,199 (565)(a) 9,634
Amortization of
deferred financing
costs................. -- 400(b) 400
--------------- ------------ ---------------
Income before taxes.... (590) (165) (425)
Income tax expense..... (1,492) -- (1,492)
--------------- ------------ ---------------
Income before minority
interests............. (2,082) (165) (1,917)
Minority interests in
(earnings) losses..... (305) -- (305)
--------------- ------------ ---------------
Net income/(loss)
continuing
operations............ (Pounds) (2,387) (Pounds)(165) (Pounds) (2,222)
=============== ============ ===============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Operations.
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(POUNDS STERLING IN THOUSANDS)
(a) Represents the necessary adjustment to reflect interest expense on
Assumed Indebtedness and indebtedness incurred in connection with the
Transactions less interest income as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
(Pounds)000
<S> <C>
Historical interest expense net.................................... 10,199
======
Revolving Facility ((Pounds)4.3 million at 9.5%)................... 408
Senior Notes ((Pounds)82.2 million at 10.0%)....................... 8,220
Discounting of receivables......................................... 284
Assumed Indebtedness ((Pounds)6.4 million at various interest
rates)............................................................ 937
Interest income.................................................... (215)
------
Pro forma interest expense, net.................................... 9,634
======
Adjustment needed.................................................. (565)
======
Assumed Indebtedness consists of certain bilateral credit facilities
and indebtedness including those in connection with the Company's
Foshan, China facility. See "Description of Credit Facilities--Other
Credit Facilities."
No tax benefit has been provided on the additional interest costs due
to tax losses for the period.
(b) Represents amortization of deferred financing costs incurred in
connection with the Senior Notes.
(c) U.K. GAAP differs in certain significant respects from U.S. GAAP. A
summary of the significant differences as they affect the Company are
set forth in Note 26 to the historical Consolidated Financial
Statements of the Company included elsewhere herein.
Calculation of unaudited pro forma consolidated net loss under U.S.
GAAP for the periods indicated below is as follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
(Pounds)000
<S> <C>
Pro forma net (loss) continuing operations in accordance with U.K.
GAAP.............................................................. (2,222)
Adjustments to conform to U.S. GAAP:
Goodwill amortization............................................ (4,057)
Pensions and other post retirement employee benefit.............. 162
Taxation......................................................... (16)
United Texon Limited acquisition costs........................... (500)
------
Pro forma
net loss from continuing operations in accordance with U.S. GAAP.. (6,633)
======
</TABLE>
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. All statements, trend analysis and other
information contained in this Prospectus relative to markets for the Company's
services and trends in the Company's operations or financial results, as well
as other statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," and "intend" and other similar expressions, constitute
forward-looking statements as defined in Section 21E(i)(1) of the Exchange Act
and are subject to business and economic risks, including but not limited to
those discussed in "Risk Factors," and actual results may differ materially
from those contemplated by the forward-looking statements.
The Company's Consolidated Financial Statements have been prepared in
accordance with U.K. GAAP, which differs in certain material respects from
U.S. GAAP and are summarized in Note 26 to the Notes to the Consolidated
Financial Statements of the Company included elsewhere herein. Except as noted
below, all information and discussion of the Company's financial condition and
results of operation have been prepared in accordance with U.K. GAAP. Under
U.K. GAAP, all of the goodwill associated with the Acquisition was written off
upon completion. Under U.S. GAAP, the goodwill would be amortized over the
ensuing life of the asset.
GENERAL
The Company is the world's largest manufacturer and marketer of structural
materials essential for the manufacture of footwear. The Company operates a
global business, with sales that are widely diversified by geographic region
and product line. Approximately 90% of 1997 sales were to the footwear
manufacturing industry with the balance sold to customers in the apparel,
medical, construction and other industries. In 1997, sales of insoles,
stiffeners, other footwear materials and industrial products accounted for
50%, 17%, 23%, and 10% of total sales, respectively. In the same period,
through the Company's extensive marketing and distribution network, 48% of
sales were made to Europe, 27% to Asia and the Pacific, 18% to the Americas
and 7% to the rest of the world.
The majority of the Company's operations are conducted in countries other
than the U.K. In addition to sales revenues in Pounds Sterling, the Company's
reporting currency, the Company's sales are primarily denominated in U.S.
dollars and European currencies which are members of the EMS. In 1997, 22% of
the Company's revenues were in Sterling, 29% in U.S. dollars, 43% in EMS
currencies and 6% in other currencies. By contrast, in 1997, 34% of its cost
of goods sold and operating expenses were denominated in Sterling, 35% in U.S.
dollars, 29% in EMS currencies and 2% in other currencies. As a result,
appreciation of Sterling versus the U.S. dollar and the EMS currencies may
have a negative impact on the Company's trading results, and depreciation of
Sterling against the U.S. dollar and EMS currencies may have a positive
impact. During 1997, Sterling has appreciated 5.1% against the U.S. dollar and
20.9% against the EMS currencies (based on average exchange rates for dollars
and Deutsche Marks, respectively, for 1997 versus 1996). The Sterling value of
sales, gross profit and operating profit in other currencies can vary
significantly with changes in exchange rates between these other currencies
and Sterling. The Company believes that the issuance of the Notes denominated
in Deutsche Marks serves as a natural hedge as, in 1997, 43% of the Company's
revenues, and only 29% of the Company's expenses were denominated in EMS
currencies. If the U.S. dollar and EMS exchange rates in effect during 1996
had remained in effect during 1997, the Company's revenues would have been
(Pounds)6.7 million higher than reported.
The Company operates seven major manufacturing facilities in the U.K., the
United States, Germany, Italy, Spain and China. The Company produces non-woven
products at Skelton in northern England, and further processes those products
and manufactures tacks, nails and other footwear products at a site adjacent
to its corporate headquarters in Leicester, England. In 1996, the Company
acquired a Spanish non-woven production facility that has approximately one-
quarter the
39
<PAGE>
rated capacity of its Skelton plant. Of the Company's total rated cellulose
production capacity of 44,800 metric tonnes per annum, approximately 35% is
produced at Mockmuhl, Germany, 34% in the United States at Russell,
Massachusetts, 18% at Foshan, China, and 13% at Ripatransone Italy.
The Company's costs and expenses include manufacturing (approximately 65.2%
of 1997 sales), selling and marketing expenses (approximately 15.9% of 1997
sales), general and administrative expenses (approximately 9.9% of 1997 sales)
and research and development costs (approximately 1.1% of 1997 sales).
During 1997, the Company's primary focus has been to increase the sales of
its higher margin non-woven products, especially to Asian manufacturers who
operate as subcontractors to major footwear companies in the United States and
Europe. These manufacturers select the Company on the basis of its quality
non-woven insoles and stiffeners particularly designed for athletic shoes.
These sales have increased over the period 1995 to 1997. To reduce its
transportation costs to ship these materials from the U.K. to Asia, the
Company plans to build a non-woven facility in China in the near future. The
Company believes it has developed significant experience in operating in China
since it opened its cellulose facility in association with a joint-venture
partner there in 1994.
During 1996, the Company appointed a new Chief Executive Officer and a Group
Finance Director. This new management team's primary focus during the year was
the increased sale of high margin products, and a recovery of the Company's
gross margins after their deterioration during 1995 as a result of high global
pulp prices. To reduce its dependence on primary pulp, the Company continued
the implementation of a process to utilize lower cost secondary pulp fibers
from recycled paper products at its Russell, Massachusetts facility, which it
has started to introduce at its cellulose facilities worldwide. The Company is
monitoring the development of three new futures markets for pulp which have
been established in the U.K. and Finland in 1997 to determine if they could be
used to reduce potential exposure to raw materials price volatility.
RESULTS OF CONTINUING OPERATIONS
The following table sets forth certain data from the Company's Consolidated
Financial Statements prepared under U.K. GAAP expressed as a percentage of
sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
---------------------------------
HISTORICAL ADJUSTED
---------------------------------
1993 1994 1995 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Sales:
Insoles.................................... 47.8% 47.5% 48.6% 50.6% 50.3%
Stiffeners................................. 14.3 14.7 14.4 15.4 16.8
Other footwear materials................... 27.5 27.5 25.5 24.3 22.8
Industrial products........................ 10.4 10.3 11.5 9.7 10.1
----- ----- ----- ----- -----
Total sales.............................. 100.0 100.0 100.0 100.0 100.0
Cost of goods sold........................... 65.3 66.6 69.8 65.6 65.2
----- ----- ----- ----- -----
Gross profit................................. 34.7 33.4 30.2 34.4 34.8
Marketing and administrative expenses........ 21.4 22.3 21.7 21.7 26.9
----- ----- ----- ----- -----
Operating income............................. 13.3 11.1 8.5 12.7 7.9
===== ===== ===== ===== =====
Net income (loss)............................ 3.5 2.6 (2.9) 2.8 (2.0)
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Sales turnover. Sales decreased (Pounds)6.3 million, or 4.9%, to
(Pounds)122.3 million in 1997 from (Pounds)128.6 million in 1996. On a
constant currency basis, however, sales increased by 4.5% during 1997 from the
comparable period in 1996. Sales of insoles decreased (Pounds)3.6 million, or
5.5%, to (Pounds)61.5 million in 1997
40
<PAGE>
from (Pounds)65.1 million in 1996. On a constant currency basis, however,
insole sales increased 5.4% due to an increase in the volume of cellulose
insoles sold in the Middle East and an increase in sales of non-woven insoles
in Asia. Sales of stiffeners increased (Pounds)0.7 million, or 3.7%, to
(Pounds)20.5 million in 1997 from (Pounds)19.8 million in 1996. On a constant
currency basis, however, sales of stiffeners increased 10.5%, mainly as a
result of additional sales volume in Asia following the Company's marketing
initiative to replace solvent stiffeners with the thermoplastic stiffeners in
which the Company specializes. Sales of other footwear materials decreased
(Pounds)3.3 million, or 10.6%, to (Pounds)27.9 million in 1997 from
(Pounds)31.2 million in 1996. On a constant currency basis, sales volume of
other footwear materials decreased by 2.0% primarily as a result of a decline
in sales of tacks. Sales of industrial products remained constant at
(Pounds)12.4 million in both periods.
Gross Profit. Gross profit decreased to (Pounds)42.5 million during 1997
compared with (Pounds)44.3 million in 1996. Gross profit increased to 34.8% of
sales for 1997 from 34.4% for 1996. The increase was primarily due to the
result of increased manufacturing efficiency in the production of cellulose
products and increased sales volumes of higher-margin, non-woven materials to
Asia for resale into western markets.
Marketing and administrative expenses. Marketing and administrative expenses
increased by (Pounds)4.9 million or 17.6% to (Pounds)32.9 million during 1997,
from (Pounds)28.0 million in 1996. However, marketing and administrative
expenses include exceptional expenses relating to fees of (Pounds)1.7 million
incurred in connection with a contemplated sale of the Materials business,
which sale was abandoned by the Company's shareholders in October 1997, and
(Pounds)1.1 million in refinancing costs. In addition, (Pounds)2.8 million,
representing the cost of the exercise of the management share options on
completion of the Offering is also included in marketing and administrative
expenses. Excluding these exceptional items marketing and administrative
expenses would have been (Pounds)27.3 million or 22.3% of sales. The increase
in marketing and administrative expenses in 1997 was primarily due to higher
costs associated with selling and marketing expenses for the distribution of
non-woven products in the Asian market.
Operating Profit. Operating profit before exceptional items decreased
(Pounds)6.7 million to (Pounds)9.6 million for the year ended December 31,
1997 compared to 1996. Excluding the exceptional expenses noted above,
operating profit would have been (Pounds)15.2 million or 12.4% of sales as
compared to (Pounds)16.3 million or 12.7% of sales in 1996. The variance was
primarily the result of the factors discussed above as well as the negative
impact on operating margins from the strength of Sterling against the major
European currencies.
Interest. Interest expense increased by (Pounds)0.2 million or 2.0% to
(Pounds)10.2 million for the year ended December 31, 1997 compared to 1996,
reflecting a similar amount of debt in each period.
Taxation. The tax charge decreased by (Pounds)0.9 million to (Pounds)1.5
million for the year ended December 31, 1997. The decrease is in part due to
lower overseas tax charges.
Net income/(loss). There was a net loss in the year to December 31, 1997 of
(Pounds)0.8 million as compared to net income in 1996 of (Pounds)3.6 million.
The variance was primarily the result of the factors discussed above.
Discontinued operations. Sales decreased (Pounds)11.2 million to
(Pounds)67.0 million for the year ended December 31, 1997 as compared to the
same period in 1996. The primary reasons for this fall in revenue was the sale
of the South African operation in June 1997, the run-down and factory closure
in Taiwan, and the continuing strength of Sterling.
Net loss in 1997 was (Pounds)1.9 million as against (Pounds)4.3 million in
1996. This improvement was mainly due to management's efforts to reduce
overheads throughout the Machinery business from (Pounds)28.4 million for the
year ended December 31, 1996 to (Pounds)24.6 million for the similar period in
1997 and the net profit on disposal of the Machinery business of (Pounds)1.6
million.
41
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
For the purposes of discussing the 1995 results the financial information
for the year ended December 31, 1995 represents the aggregation of the results
of USM (Holdings) Limited for the period from January 1, 1995 to April 24,
1995 and for United Texon Limited for the period from January 1, 1995 to
December 31, 1995, as though the 1995 Acquisition had occurred on January 1,
1995. See "The Transactions." On a pro forma basis, net interest expense would
have been increased by (Pounds)0.6 million, representing the additional
interest expense associated with the 1995 Acquisition.
Sales turnover. Sales increased (Pounds)12.9 million, or 11.1%, to
(Pounds)128.6 million in 1996 from (Pounds)115.7 million in 1995. On a
constant currency basis, sales increased by 10.5%, or essentially by the same
amount as on a nominal basis, reflecting the lack of overall foreign exchange
distortions during the period. Sales of insoles increased (Pounds)8.9 million,
or 15.8%, to (Pounds)65.1 million in 1996 from (Pounds)56.2 million in 1995.
The insole product line benefited from the acceptance and increased usage in
the Asian market of a new line of non-woven insoles especially designed for
athletic shoes. Sales of stiffeners increased (Pounds)3.1 million, or 18.6%,
to (Pounds)19.8 million in 1996 from (Pounds)16.7 million in 1995, primarily
as a result of the acquisition of a new extrusion line which increased
capacity significantly, and the acquisition of a new non-woven fabric plant in
Spain. Sales of other footwear materials increased (Pounds)1.7 million, or
5.8%, to (Pounds)31.2 million in 1996 from (Pounds)29.5 million in 1995,
primarily due to an increase in sales of shoe liners. Sales of industrial
products decreased (Pounds)0.8 million, or 6.0%, to (Pounds)12.5 million in
1996 from (Pounds)13.3 million in 1995.
Gross Profit. Gross profit increased (Pounds)9.3 million, or 26.6%, to
(Pounds)44.3 million in 1996 from (Pounds)35.0 million in 1995. Gross profit
margin increased to 34.4% in 1996 from 30.2% in 1995. The increase resulted
from the stabilization in global prices of pulp used in the cellulose
manufacturing process, the increased price of which in 1995 negatively
impacted gross margins for that year. In addition, the Chinese cellulose plant
concentrated on margin improvement after the success of its initial market
penetration in 1995.
Marketing and administrative expenses. Marketing and administrative expenses
increased (Pounds)2.9 million, or 11.6%, to (Pounds)28.0 million in 1996, from
(Pounds)25.1 million in 1995. Marketing and administrative expenses remained
constant at 21.7% of sales over the two periods. The increase in marketing and
administrative expenses was due to increased expenses of the Chinese plant and
higher distribution costs as a result of increased sales volume. In addition,
1995 expenses were reduced as a result of the refund to the Company of a U.K.
property tax payment.
Operating Profit. Operating profit increased (Pounds)6.4 million, or 64.6%,
to (Pounds)16.3 million in 1996, from (Pounds)9.9 million in 1995. Operating
profit increased to 12.7% of sales in 1996 from 8.5% in 1995, primarily for
the reasons discussed above.
Interest. Interest expense decreased by (Pounds)0.7 million or 6.5% to
(Pounds)10.0 million in 1996 from (Pounds)10.7 million in 1995. The decrease
in interest expense was mainly due to the decrease in debt during the period.
Taxation. The tax charge increased by (Pounds)1.4 million to (Pounds)2.4
million in 1996. The increase was due to higher taxable profits in overseas
subsidiaries.
Net income/(loss). There was net income in 1996 of (Pounds)3.6 million
compared to a net loss in 1995 of (Pounds)3.3 million. The increase was due to
a combination of increased sales with higher margins and the exceptional items
in 1995.
Discontinued operations. Sales decreased (Pounds)4.3 million from
(Pounds)82.6 million in 1995 to (Pounds)78.2 million in 1996 this reduction
was principally due to the continued weakness of demand in European and North
American markets where the business has a high market share.
42
<PAGE>
Net loss for 1996 was (Pounds)4.3 million as compared to (Pounds)10.8
million in 1995. Excluding the exceptional charge taken for restructuring the
business in 1995 the net loss was (Pounds)2.3 million. The deterioration in
profitability during 1996 was principally due to the reduction in turnover
offset by reduced expense levels.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs will arise primarily from debt service
obligations on the indebtedness incurred in connection with the Transactions,
working capital needs and the funding of capital expenditures. At December 31,
1997, on a pro forma basis after giving effect to the Transactions, the
Company's consolidated indebtedness would have been approximately (Pounds)92.0
million, consisting of (Pounds)4.3 million in borrowings under the Revolving
Facility, (Pounds)82.2 million under the Notes, and (Pounds)5.5 million
borrowings under certain bilateral facilities. The degree to which the Company
is leveraged could have a significant effect on its results of operations.
Principal and interest payments under the Revolving Facility and the Notes
will represent significant liquidity requirements for the Company. Loans under
the Revolving Facility will bear interest at floating rates. For a description
of the Revolving Facility, see "Description of Credit Facilities."
In addition to its debt service obligations, the Company's remaining
liquidity requirements relate to capital expenditures and working capital
needs. The Company incurred capital expenditures of (Pounds)1.7 million,
(Pounds)3.2 million, (Pounds)2.0 million and (Pounds)1.8 million in the years
ended December 31, 1997, 1996, 1995 and 1994, respectively. The Company
anticipates that maintenance capital expenditures over the years 1998 through
2000 will total approximately (Pounds)1.0 million per annum. In addition, over
the next three years, expenditures for manufacturing capacity expansion and
replacing and updating certain of its information technology systems in order
to improve operating efficiency are anticipated to total approximately
(Pounds)8.5 million.
The Company's primary sources of liquidity will be cash flows from
operations and borrowings under the Company's (Pounds)15.0 million Revolving
Facility which has a term of three years and is subject to a mandatory
commitment reduction at the end of each year by an amount based on excess cash
as set forth therein. The components of net cash flow from operating
activities are detailed in the Consolidated Financial Statements and the
related notes thereto included elsewhere in this Prospectus and include
operating profit/(loss) adjusted for (i) depreciation; (ii) changes in working
capital; (iii) the effect of other deferrals and accruals on operating
activity cash flow; (iv) profit on sale of tangible fixed assets; and (v) any
exceptional items. Net cash flow from operating activities for the year ended
December 31, 1997 was (Pounds)4.9 million, a decrease of (Pounds)22.4 million
from the comparable period of 1996. The principal reason for the decrease is a
working capital adjustment of (Pounds)11.8 million associated with the
disposal of the Machinery business.
The Company believes that cash flow generated from operations, together with
the amounts available under the Revolving Facility, should be more than
sufficient to fund its debt service requirements, working capital needs and
anticipated capital expenditures for the foreseeable future. See "Risk
Factors--Substantial Leverage; Ability to Service Debt."
INTERNATIONAL OPERATIONS
The Company conducts operations in countries around the world including
through manufacturing facilities in the U.K., the United States, Germany,
Italy, Spain and China. The Company's global operations may be subject to some
volatility because of currency fluctuations, inflation and changes in
political and economic conditions in these countries.
The financial position and results of operations of the Company's businesses
outside the U.K. are measured using the local currency as the functional
currency. Most of the revenues and expenses of the Company's operations are
denominated in local currencies whereas the majority of raw material purchases
are denominated in U.S. dollars. Assets and liabilities of the Company's
subsidiaries outside the U.K. are translated at the balance sheet exchange
rate and statement of operations accounts are translated at the average rate
prevailing during the relevant period.
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The Company's financial performance in future periods may be adversely
impacted as a result of changes in the above factors which are largely beyond
the control of the Company. See "Risk Factors--International Operations and
"--Risk of Foreign Exchange Rate Fluctuations; Introduction of the Euro."
INFLATION
The Company does not believe that inflation has had a material impact on its
financial position or results of operations during the periods covered by the
Consolidated Financial Statements and the related notes thereto included
elsewhere herein.
YEAR 2000 COMPLIANCE
The Company is in the process of formulating and implementing a program
designed to ensure that the software used in connection with the Company's
business and operations will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such dates. The Company currently
estimates that the additional costs to be incurred in connection with such a
program shall be approximately (Pounds)200,000 although there can be no
assurance that this will be the case or that the Company will not incur
additional costs in connection with such program.
The general expectation by those who have studied best practice in managing
the Year 2000 problem is that even the best run projects will face some Year
2000 compliance failures. There can be no assurance that Year 2000 projects
will be successful or that the date change from 1999 to 2000 will not
materially affect an organization's operations and financial results.
Businesses may also be affected by the inability of third parties to manage
the Year 2000 problem.
RECENT ACCOUNTING CHANGES
New U.K. accounting standards. In December 1997, the Accounting Standards
Board issued Financial Reporting Standard (FRS) 10. FRS 10 is effective for
all accounting periods ending on or after December 23, 1998 with earlier
adoption permitted. The new requirements must be applied prospectively from
the period of adoption but can be applied retrospectively. This FRS provides
accounting and reporting standards for goodwill and intangible assets and
requires that goodwill and intangible assets be capitalised and amortized over
their expected useful lives up to a maximum of 20 years, subject to the
following exception: for assets which are expected to last longer, including
those with indefinite lives, the asset is amortized over that longer period,
or not at all as the case may be, and is evaluated for impairment at least
annually. The Company has decided to apply the provisions of FRS 10
prospectively in 1998. FRS 10 could have a material effect on the Company's
financial position and results of operations as it pertains to any future
acquisitions.
New U.S. accounting standards. SFAS No. 130, "Reporting Comprehensive
Income," was issued in June 1997 and is effective for fiscal years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. It requires that all
items that are required to be recognised under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. It also
requires that an enterprise (a) classify items of other comprehensive income
by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. The Company is currently reviewing the likely impact on the
classification of items included in shareholders' equity.
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," was issued in June 1997 and is effective for fiscal years
beginning after December 15, 1997. In the initial year of application
comparative information for earlier years is to be restated. It requires that
companies disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance. It also
requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assets and reports
revenues, and its major customers. The Company is currently reviewing the
likely impact on the level of disclosure currently provided in its financial
statements.
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BUSINESS
OVERVIEW
The Company is the world's largest manufacturer and marketer of structural
materials that are essential in the manufacture of footwear. The Company,
founded in Leicester, England in 1899, operates a global business, which
generates sales that are widely diversified by geographic region and product
line. The Company's primary products include materials for insoles, which form
the structural foundation of shoes; stiffeners, which support and shape the
toe and heel of shoes; and other products used in the manufacture of footwear,
such as linings, tacks, nails, steel shanks and adhesives. The world's largest
manufacturer of insole materials, the Company also commands leading positions
in the markets for its other footwear products. While the products sold by the
Company represent a small percentage of the total cost of materials contained
in footwear, they are critical to the performance and manufacture of footwear
and are not fashion sensitive. In 1996, approximately 90% of sales were to the
footwear manufacturing industry. By leveraging its expertise in the
manufacture of these structural materials, the Company has developed several
related niche industrial products such as carpet gripper pins and cellulose
air freshener material. These industrial products are sold to a wide range of
industries.
The Company supplies most of the major footwear manufacturers in the world
and believes that its global presence gives it a unique competitive advantage
to exploit industry trends favoring suppliers who provide footwear companies
with a "global partner". The Company supplies over 6,000 customers worldwide,
servicing global athletic footwear companies such as Nike and Adidas,
designers and producers of casual shoes including Timberland and R. Griggs &
Co (Dr Martens) and manufacturers of men's and women's formal shoes such as
Church's and Bally. The Company has seven manufacturing sites strategically
located in Europe, the United States and China and sells its products in more
than 90 countries through an extensive marketing and distribution network. In
1997, sales of insoles, stiffeners, other footwear materials and industrial
products accounted for 50%, 17%, 23% and 10% of total sales, respectively. In
1997, 48% of the Company's sales were made to Europe, 27% to Asia and the
Pacific, 18% to the Americas and 7% to the rest of the world.
COMPETITIVE ADVANTAGES
The Company believes that it benefits from the following competitive
advantages which have enabled it to increase sales and operating profitability
and maintain its leadership position in the structural footwear materials
industry.
Leading Market Position Driven by Strong Brands and High Quality
Products. The Company is recognized in the footwear industry for high
standards of quality across its full range of products and for providing
innovative technical solutions and support to its customers worldwide. The
Company is the world's largest producer of insole material, stiffeners and
tacks and nails for footwear. The Company's products are marketed under brand
names which enjoy extremely wide recognition within the footwear industry,
such as "Texon," "Tufflex," "Formo," and "Unifast." The Company believes that
its leading market position is due to successful branding of its products,
reliability and high performance. As a U.K. based global enterprise, the
Company also benefits from the reputation of the U.K. footwear industry for
quality production and technological leadership.
Global Presence. The Company supplies most of the world's footwear
manufacturing industry across Europe, the Americas and Asia through its direct
presence in each of those markets. The Company has seven manufacturing plants
in six countries and 27 strategically located field warehouses. An extensive
marketing and distribution network enhances the Company's ability to provide
high quality, local service to its customers and to global branded footwear
companies' worldwide sourcing networks. The Company recently established a
bonded warehouse in India to
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service the needs of local manufacturers supplying primarily North American
and European footwear companies. The Company believes that it is uniquely
positioned to benefit from the continuing globalization within the footwear
industry.
Strong Relationships with a Diverse Customer Base. The Company benefits from
long-established relationships with many of the most important footwear
companies in the world. The Company has been supplying products for Nike since
its entry into the footwear market and for R. Griggs & Co (Dr Martens) and
Church's for nearly a century. The Company believes that its customer
relationships are strengthened by its high quality products, brand names,
leading market position, and the high level of technical support it provides
to its clients. The Company's customer base is geographically diverse and
covers a wide spectrum of footwear (athletic, traditional and safety; men's,
women's and children's), minimizing the Company's exposure to individual
markets. In 1997, no single customer accounted for more than 3% of sales, and
the top ten customers totaled less than 14% of sales.
Diverse and Customized Products. The Company offers a broad range of
products, many of which are customized to meet the needs of individual
footwear manufacturers. By satisfying its customers' preference for a "one-
stop shop", the Company's broad and comprehensive product range contributes to
its leading market position. The Company continually develops and evolves its
product lines to meet the precise and changing requirements of footwear
manufacturers. The Company believes that no competitor produces or provides as
broad a range of products.
Attractive Ancillary Businesses. The Company leverages its global
distribution channels to distribute products it does not produce itself and
utilizes its manufacturing capacity to manufacture related industrial
products. The Company manufactures and distributes products not related to the
footwear industry but which employ the Company's core manufacturing
techniques, such as air filters, materials for air fresheners and machine-
applied nails. The Company is the market leader in materials for automotive
air fresheners in the United States and carpet gripper pins in Europe.
Technological Leadership. The Company was the first to develop cellulose
insole material and non-woven insole material. These are now the two most
commonly used types of insole material in the world. The Company seeks to be
at the forefront of product development and to maintain a technological
advantage over its competitors through continued improvements in product
performance, manufacturing techniques and efficiency. For example, the Company
employs specialized technology to assist anti-counterfeiting programs that are
especially important to branded athletic shoe manufacturers.
Experienced and Incentivized Management Team. Many of the Company's senior
managers have more than a decade of experience with the Company. Individually,
the Company's managers have established track records in delivering revenue
and profit growth, developing new products, penetrating new markets, improving
production efficiency and streamlining supply chains. Senior management has a
significant equity stake in the Company.
BUSINESS STRATEGY
The Company's strategy is to expand sales, increase profitability and
strengthen its position as the industry leader and supplier of choice through
the following key initiatives:
Increase Global Market Share. Management plans to leverage its strong
customer relationships to expand the Company's market share. The Company's
customers and markets served have grown rapidly in recent years, contributing
to increased sales and improved operating results. Recognizing the movement of
manufacturing capacity to Asia, the Company established a facility in China in
1994 which manufactures and supplies cellulose insole material to local
footwear manufacturers producing
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principally for the export market. The Company intends to establish a non-
woven manufacturing facility in China to further enhance its market position.
Provide Preeminent Customer Service Worldwide. The Company intends to
improve further its responsiveness to the needs of its customers. To enhance
access to its products and address specific customers' needs, the Company
recently established a centralized customer care center and a comprehensive
catalog for part of its branded product line. The Company plans to build a new
production facility in China, which will produce new generation non-woven
products for global athletic footwear companies manufacturing there for the
world market. The new facility will shorten the supply chain between the
Company and manufacturers based in China thereby reducing delivery times and
increasing responsiveness.
Develop New Products. The Company has successfully developed many new
products for the footwear industry and intends to accelerate its new product
launch rate. The Company recently developed an innovative non-woven insole
material particularly suited to the process used in the manufacture of
athletic shoes. The Company will continue to adapt technologies developed for
the footwear industry for use in other applications such as "no-dig"
installed-pipe repair liners and high-temperature air filters.
Increase Operating Efficiencies. Management continuously reviews the
Company's operations for opportunities to further reduce costs and increase
manufacturing efficiencies through implementing world-class manufacturing
techniques, procurement and supply chain processes. The Company also plans to
replace and upgrade certain of its information technology systems. The
majority of the Company's manufacturing facilities are ISO certified.
Reduce Raw Materials Cost. The Company continues to improve its operating
results by reducing raw material costs and dependence on certain raw
materials. At its Russell, Massachusetts facility, the Company implemented a
process to use less expensive secondary fibers from recycled pulp products to
complement primary wood pulp, a basic component of cellulose production. The
Company plans to extend the use of this process to its other cellulose
manufacturing plants. The Company is also working with its suppliers to
develop ways of using less expensive raw materials in various production
processes while maintaining the quality and specifications of the finished
product.
Pursue Strategic Growth Opportunities. The Company believes that the
fragmented nature of the footwear materials industry provides opportunities
for organic growth and through potential joint ventures and strategic
acquisitions. The Company intends to pursue selective acquisitions that
complement its existing product offering and enable it to expand in selected
geographic areas. Attractive acquisition targets would have relatively small
sales compared to the Company, a fixed cost base that is easily eliminated,
and a complementary market position. The Company also will consider joint
ventures which would give it access to new products, markets or technologies.
THE INDUSTRY
The Shoe and Allied Trades Research Association, or SATRA, the leading trade
association in the footwear industry, projects that the industry will continue
to enjoy steady growth at a compound annual growth rate of approximately 3%
through 2000 due to favorable demographic trends, including continued
population and economic growth, which increase the demand for and consumption
of shoes. The Company believes that the growth rate for its products is
higher, as footwear manufacturers produce more footwear that utilizes
structural materials to improve the structural quality and durability of
shoes. In addition, the Company believes that manufacturers increasingly
utilize structural products such as the Company's, which allow for
environmentally conscious production processes.
As the worldwide footwear industry has grown, there has been a shift in
production capacity to Asia, primarily to capitalize on low labor costs.
Asia's share of global production increased from 61% in 1991 to 70% in 1995,
the last year for which data is available. The Company is well positioned with
its production and marketing presence in the region.
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The structural footwear materials industry is highly fragmented, with very
few companies operating beyond a national or regional level. While the
footwear manufacturing industry is also fragmented, there is a growing trend
towards globalization as shoe designers and branded footwear companies, which
outsource the manufacturing of their footwear, increasingly seek a global
solution to their supply and specification requirements. The Company has been
able, and believes it is well poised to continue, to take advantage of this
trend by providing its customers with high quality, state-of-the-art products
and servicing their requirements in each significant market through its
worldwide distribution network.
PRODUCTS AND MARKETS
The Company's products are designed to meet its customers' needs for
structural footwear material. The Company offers technical support, materials
design and customized production spanning the complete process from
specification of materials to the production of high volume products.
The Company's principal products are materials for the production of insoles
and stiffeners. The Company also produces or distributes linings, steel
shanks, tacks, nails, adhesives and other small footwear components, together
with certain niche industrial products unrelated to the footwear manufacturing
industry.
Insoles. Insoles are manufactured either from wood pulp ("cellulose
insoles") or synthetic fibers ("non-woven insoles") both of which are combined
with latex in a saturation process. The "Strobel" method is particularly
suited to the manufacture of athletic shoes where the sole itself provides
structural support and allows minimal wastage of costly upper material. As a
result, sales of non-woven insoles, which are particularly suited to the
Strobel method have grown significantly over the last few years and, are
expected to continue to increase at a higher rate than the cellulose insole
market. Nevertheless, sales of everyday footwear, which typically use
cellulose insoles, remain close to 60% of the overall market, driving demand
for one of the Company's core products. In 1997, total sales of insoles were
(Pounds)61.5 million, representing 50% of sales, with the substantial majority
of such sales representing cellulose insoles.
Stiffeners. Toe and heel stiffeners are designed to provide a range of
different stiffness, shape, support and feel characteristics for the toe and
heel area of a shoe, known as "toe puffs" or "box toes" and "counters".
Stiffeners are among the most technically complex components of a shoe, with
the products being made from a wide range of raw material and process
combinations, utilizing most of the Company's core manufacturing technologies.
The Company's more environmentally sound thermoplastic stiffeners are more
attractive to manufacturers than a chemical solvent based alternative. The
Company's stiffeners are also ideal for more complex athletic shoes, which
require sophisticated stiffeners given certain sports' needs for rigid
footwear. In 1997, total sales of stiffeners were (Pounds)20.5 million,
representing 17% of sales.
Other Footwear Materials. The Company also produces or distributes a wide
range of other shoe construction materials. These include shoe lining material
sold under the "Aquiline" brand name and products produced by the Unifast
division which sells steel shanks, tacks, nails, shoe consumables and
accessories, such as buckles and eyelets, and adhesives. The Company's recent
acquisition of the manufacturing equipment of a German competitor is expected
to increase the operating efficiency of the division. In 1997, total sales of
these footwear materials products were (Pounds)24.2 million, representing 20%
of sales.
Industrial Products. The Company manufactures products for applications
which are not associated with the footwear industry but which require similar
manufacturing processes to the Company's core technologies. These niche
products span the cellulose, non-woven and Unifast production areas.
Industrial products produced using cellulose technology include materials for
automotive air fresheners and stiffeners for baseball caps. The non-woven
production process has
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been adapted for use in high performance air filtration applications, in
specialty medical dressings and "no-dig" installed-pipe repair liners, which
permit the repair of installed pipes without excavation. The Unifast division
utilizes its tack and nail manufacturing capacity to produce machine-applied
carpet gripper pins and ballistic nails for industrial use. In 1997, total
sales of industrial products were (Pounds)12.4 million, representing 10% of
sales.
Shoe Machinery Products. In Australia, Mexico and New Zealand the Company
distributes shoe manufacturing machinery and associated products produced
primarily by the Company's former shoe Machinery business. See "The
Transactions". In 1997, this activity contributed sales of (Pounds)3.7
million, representing 3% of sales.
CUSTOMERS AND MARKETS SERVED
The Company has three primary customer types: branded footwear companies,
major manufacturers producing footwear under contract for other firms, and
smaller, independent producers. The Company also sells its products to
distributors and converters (companies that convert the Company's products to
the actual product specification and layout required by the end shoe
manufacturer) as well as customers for the Company's niche market industrial
products.
The materials manufactured by the Company can be found in footwear produced
by the world's leading branded footwear companies. Branded footwear companies
generally produce a detailed specification for their shoes including a list of
approved materials suppliers. Large footwear manufacturers, manufacturing
under contract for these branded footwear companies, select their preferred
footwear materials supplier from the specified list. As a global partner to
many branded footwear companies, the Company supplies its products as the
preferred supplier for that customer. In other cases, the Company's products
are supplied to subcontractors in circumstances where the branded shoe company
is unaware of the origin of the materials being used. When footwear is not
required to be produced according to a prescribed specification, manufacturers
will source independently from materials suppliers. The Company seeks to
develop close relationships with its customers and, in particular, to become
involved in assisting customers in the design of new end-products where this
is a feature of the customer's business.
The Company believes that it is included on its customers' specification
lists due to its reputation for a consistently high quality product. The
Company's local presence and support is essential to its developing strong
relationships with both major and smaller manufacturers, and to ensuring that
local factory manufacturers follow the specifications of their customers. The
Company believes that the strength of its customer relationships is a key
competitive advantage at all levels. The ability to push demand for its
products from branded shoe companies, while also pulling demand from
individual shoe factories, is another competitive advantage which the Company
believes would require considerable investment on the part of competitors to
replicate.
SALES AND DISTRIBUTION
The Company believes that it is uniquely placed in the highly fragmented
footwear materials industry in having a truly global presence with both
branded shoe companies and direct users of its products. The Company employs
over 340 marketing, distribution and technical support personnel and uses over
115 agents and over 50 distributors. This extensive distribution network
allows the Company to sell its products effectively throughout more than 90
countries, and to cover all of the world's major footwear manufacturing
regions. The Company supports its strong distribution capability through its
network of 27 field warehouses. Distributors and agents are supported by
regionally-based sales and technical specialists allowing the Company to
deliver high levels of customer service locally in its significant markets.
The Company's global presence enables it to provide price, quality and
delivery on a world-wide basis.
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MANUFACTURING
The Company has an expertise in tailoring a variety of distinct
manufacturing processes to produce innovative technical products for the
footwear industry. The Company's primary manufacturing process is the
treatment of cellulose and synthetic fibers with latex to produce insoles. The
Company further processes the synthetic products to produce stiffeners. The
Company also processes metal strip and wire to produce shanks, tacks and
nails.
The large majority of the Company's insole and stiffener material is
produced in sheet or roll form to facilitate transport and shipment. This
material then requires further conversion before use in footwear manufacture.
Such conversion consists of cutting or molding the product to specification.
The labor-intensive conversion process is typically carried out by third party
converters. The Company converts a small proportion of its material itself as
a service to its customers.
Cellulose Manufacturing Process. The cellulose manufacturing process is used
primarily for the production of insole material. In a process similar to the
manufacture of paper, pulp is combined with synthetic latex into a saturated
board which is then dried and cured so that the latex acts as a binder for the
board. Trace additives and coatings are used to develop the required
properties for different grades of product. Cellulose insole material may
require further treatment with coatings of polymeric film or laminating with
layers of foam to enhance waterproofing, comfort and other characteristics.
The Company does not perform these processes in-house, but rather outsources
them or sells its cellulose products on for further processing.
Synthetic Non-Woven Manufacturing Process. Stiffeners and a portion of the
Company's insoles and other products are produced using synthetic, non-woven
materials. The primary production begins with the processing of polyester and
other synthetic fibers to produce felt of various grades and thickness. As a
non-woven process, the synthetic fibers are intertwined rather than woven. In
some cases, this is followed by heat treatment. Further stages involve
impregnation with synthetic rubbers and may include coloring and finishing,
which includes printing, splitting and sueding. The reels of felt are
impregnated and rolled to the correct gauge and an adhesive coating is added
to one or both sides. The material is then cut into sheets or rolls.
Specific, non-woven processes are occasionally outsourced to supplement in-
house production, particularly in the area of fabric manufacturing. All
outsourcing takes place with established supplier links and is usually for
short periods only.
Manufacturing of Tacks, Nails and Shanks. The Unifast division manufactures
tacks, nails and steel shanks. Tacks and nails are made from rolls of wire
which are punched by a die and then cut to form the tacks and nails. A
sophisticated manufacturing process is required to make the tacks and nails
suitable for usage in high speed machines. Further processing may include
threading, heat treating or plating. Shanks are stamped and formed from rolls
of sheet steel in thousands of different shapes, heat treated, washed and
packed.
Manufacturing of Other Industrial Products. The Company has developed
expertise within its core technologies which has enabled it to make a number
of unique products for industrial applications outside of footwear
manufacturing. These products utilize the Company's manufacturing skills and
technical expertise to engineer innovative solutions for other industries.
Products include materials for vehicle air fresheners, imitation leather
goods, specialty medical dressings, filtration products and pipelining
systems.
FACILITIES
In addition to its executive offices in Leicester, U.K., the Company
operates seven major facilities in six countries with a total area of
approximately 84,694 square meters, of which the Company
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currently owns approximately 62,742 square meters and leases 21,952 square
meters. These facilities are as follows:
<TABLE>
<CAPTION>
SIZE DESCRIPTION OF
LOCATION (APPROX. SQ.MTRS) OWNED/LEASED PRODUCTS MANUFACTURED
- ------------------------ ----------------- ------------ ------------------------------------
<S> <C> <C> <C>
EUROPE
Leicester, U.K(/1/)..... 16,000 Owned/ to be Tack and nails; steel shanks;
Leased conversion of stiffeners; industrial
product components
Skelton, U.K............ 18,652 Leased Non-woven materials
Mockmuhl, Germany....... 19,150 Owned Cellulose products
Ripatransone, Italy..... 5,630 Owned Cellulose products
Ontinyente, Spain....... 3,300 Leased Non-woven materials
UNITED STATES
Russell, Massachusetts.. 14,220 Owned Cellulose products
ASIA
Foshan, China........... 7,742 Owned Cellulose products
</TABLE>
- --------
(/1/The)Leicester property is currently owned by the Company. The area shown
in the above table excludes part of the site which is occupied by the
Machinery business. The Company intends to sell the property to a third
party and to lease back the part it occupies.
The Company's manufacturing facilities currently are operating at close to
full capacity. The Company plans to expand its manufacturing capacity over the
next few years, principally in Asia.
The Company also has marketing and distribution operations across Europe (12
locations), the Americas (8 locations), and Asia and the Pacific (12
locations).
JOINT VENTURE
The Company has a 57.6% interest in a joint venture in Foshan, China (the
"Foshan Joint Venture") for the operation of a cellulose manufacturing
facility. Its partner is Foshan Arts and Crafts Industry Corporation, which is
controlled by the municipal government of the City of Foshan. The Company
established the Foshan Joint Venture in 1994, contributing the plant and
equipment, with its joint venture partner responsible for the improvements to
the infrastructure of the facility. In March 1998, the Company's board of
directors approved the acquisition of a further 30% of the Foshan Joint
Venture for an aggregate purchase price of $2,625,000, payable over a three
year period.
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company in the manufacture of its
products include wood pulp (which accounted for 27.6% of the Company's total
raw materials costs in 1997 and 17.9% of the Company's total cost of sales in
that year), polyester fiber, synthetic rubber and polymers. These raw
materials are purchased both domestically and internationally. The Company
believes that its supply sources are both well-established and reliable. The
Company has no long-term supply contracts and has experienced no significant
problems in supplying its operations. Although the Company has ongoing
relationships with certain suppliers of raw materials, the Company believes
that there are a number of reliable vendors available and it is able to obtain
competitive pricing for raw materials. Raw material prices fluctuate over time
depending on supply, demand and other factors and increases in raw material
prices may have an impact on the Company's financial performance (see "Risk
Factors--Price Fluctuations of Raw Materials"). The Company is seeking to
reduce certain raw materials costs by the substitution of lower cost
replacements.
COMPETITION
The footwear manufacturing business is a fragmented and highly competitive
industry. Competition is generally based on product quality, price, customer
service and timely delivery. The Company's main competitors vary by region and
by product. Cellulose insoles are the only product for which the
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Company has a global competitor, Bontex, a U.S. based producer of cellulose
insole materials with plants in the U.S. and Belgium. Nantex Industries Co. of
Taiwan is also a competitor for cellulose insole material. Competition in the
non-woven insoles market is mainly from national or regional suppliers such as
Industria Biagioli and Didi & Gori in Italy and Tronjen Industries in Taiwan.
Competition for sales of stiffeners is also fragmented with a limited number
of international competitors such as Rhenoflex, Foss Manufacturing Co and
Stanbee Co. The key competitors for the tacks and nails produced by the
Company's Unifast division are Metallurgica Lombarda and Mondial Punte in
Italy and Kongo Special Nail Company in Japan.
LEGAL PROCEEDINGS
From time to time, the Company is involved in routine litigation incidental
to its business. The Company is not a party to any pending or threatened legal
proceeding which the Company believes would have a material adverse effect on
the Company's results of operations or financial condition.
INTELLECTUAL PROPERTY
The Company utilizes trademarks on nearly all of its products, and believes
having such distinctive trademarks is an important factor in creating and
maintaining the strong market position for its goods and services. This
further serves to identify the Company and distinguish its goods from those of
its competitors. The Company considers the "Texon," "Aquiline," "Tufflex,"
"Formo," "IVI," "Unifast" and "Implus" trademarks to be among its most
valuable assets, and has registered trademarks in over 80 countries. The
Company's policy is to protect vigorously its trademarks against infringement.
The Company does not believe it is dependent to any significant extent upon
any single or related group of patents, licenses or concessions.
YEAR 2000 COMPLIANCE
The Company is in the process of formulating and implementing a program
designed to ensure that the software used in connection with the Company's
business and operations will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such dates. The Company currently
estimates that the additional costs to be incurred in connection with such a
program shall be approximately (Pounds)200,000 although there can be no
assurance that this will be the case or that the Company will not incur
additional costs in connection with such program. Furthermore, there can be no
assurance that Year 2000 projects will be successful or that the date change
from 1999 to 2000 will not materially affect an organization's operations and
financial results. Businesses may also be affected by the inability of third
parties to manage the Year 2000 problem.
ENVIRONMENTAL MATTERS
The Company's facilities, several of which have been operated as industrial
establishments for long periods of time, are subject to comprehensive
environmental laws and requirements, including those governing discharges to
the air and water, the handling of disposal of solid and hazardous substances
and wastes and remediation of contamination associated with the release of
hazardous substances at the Company's facilities and offsite disposal
locations. The Company has made, and will continue to make, expenditures to
comply with such laws and requirements. The Company believes, based upon
information currently available to management, that it is currently in
substantial compliance with all applicable environmental laws and requirements
and that the Company will not require material capital expenditures to
maintain such compliance during 1998 or in the foreseeable future. However,
future events, such as changes in existing laws and regulations or the
discovery of contamination at
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the Company's facilities, adjacent sites or offsite waste disposal locations,
may give rise to additional compliance or remediation costs which could have a
material adverse effect on the Company's results of operations or financial
condition. Moreover, the nature of the Company's business exposes it to some
risk of claims with respect to environmental matters, and there can be no
assurance that material costs or liabilities will not be incurred in
connection with any such claims.
Texon USA, Inc., the Company's U.S. subsidiary (the "U.S. Subsidiary"), was
organized as a new corporation in 1997 to acquire the assets of Texon
Footwear, Inc., including the manufacturing facility located in Russell,
Massachusetts. As part of the reorganization, the U.S. Subsidiary expressly
assumed all liabilities of Texon Footwear, Inc. that related to the acquired
assets, including liabilities under federal, state and local environmental
laws. The Company believes, however, that it is indemnified, by the entity
from which the assets were purchased in 1990, for all currently known
environmental claims. To date, the indemnifying entity has been addressing all
such claims. Thus, although the U.S. Subsidiary has assumed certain
obligations of Texon Footwear, Inc., which may include certain environmental
liabilities, the Company does not believe that the U.S. Subsidiary ultimately
will be required to satisfy claims that might be made against it, either
because other parties will satisfy those claims or because Texon Footwear,
Inc. otherwise will be found not to be responsible for them. The nature of
past operations, however, exposes the U.S. Subsidiary to a risk of new claims,
or the discovery of new information relating to existing claims, with respect
to environmental matters. There can be no assurance that material costs or
liabilities will not be incurred in connection with any such claims.
EMPLOYEES
As of December 31, 1997, the Company had approximately 1,071 employees (49%
in the United Kingdom, 22% in the rest of Europe, 13% in North America and 16%
in Asia and the Pacific). Approximately 460 employees, or about 43%, are
represented by various unions pursuant to collective bargaining agreements.
The Company has not experienced any labor problems resulting in a work
stoppage, and believes it maintains good relations with its employees.
BACKLOG
As of December 31, 1997, on a constant currency basis, the Company had a
backlog of approximately (Pounds)8.3 million, compared with (Pounds)10.4
million as of December 31, 1996. Most of this backlog was shipped during
January 1998 and the Company believes that substantially all of the remainder
will be shipped during the first quarter of 1998. Management believes that its
backlog order level reduced approximately 20% over the 12 month period as a
result of a reduction of non-woven backlog levels due to the reduction of
order lead times. The backlog in 1996 was extraordinarily high due to a
special order in the Middle East.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive directors and other executive officers hold office
on such terms as are approved by the remuneration committee of the Board of
Directors or by the Board of Directors. The Company's non-executive directors
hold office in accordance with the Shareholders Agreement entered into among
the Company's shareholders and the Company. See "Principal Shareholders--
Shareholders Agreement and Articles of Association."
The following sets forth the names and ages of each of the Company's
directors and executive officers and the positions they hold as of the date of
this Prospectus:
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Peter Selkirk.................. 42 Chief Executive and Director
Neil Fleming................... 42 Finance Director and Director
Kevin Cochrane................. 53 Director of Sales
Neil Eastwood.................. 61 Director of Cellulose Operations
Tony Freeman................... 49 Director of Marketing
Terry Pee...................... 54 Director of Non-Woven and Unifast Operations
David Gamble................... 51 Company Secretary
Timothy Wright................. 34 Non-executive Director
Shahan Soghikian............... 39 Non-executive Director
</TABLE>
Set forth below is a brief description of the business experience of each
director and executive officer:
Mr. Selkirk joined the Company as Managing Director in January 1996 after a
career in technical materials based companies in the packaging, automotive and
electronics sectors including Raychem Corporation and Courtaulds. He was
previously employed by Raychem Corporation as manager of one of its European
divisions, having been appointed in January 1993. Mr. Selkirk has an
international background, having worked in the United States and throughout
Europe. Mr Selkirk has managed operations in the United States and Europe and
has experience in sales, marketing, logistics and manufacturing. He has a
Masters degree in Natural Sciences and an MBA from the London Business School.
Mr. Fleming joined the Company as Finance Director in June 1996 after
holding various financial and general management positions at companies in the
capital goods, engineering and general industrial sectors, including APV plc
and the Norton Company. Between February 1991 and February 1994, Mr. Fleming
was group financial controller of APV plc and from February 1994 to June 1996,
he was managing director and then president of one of APV's divisions. He has
an international background, having worked in the United States, Germany,
France, Denmark, and Luxembourg. Mr. Fleming has a Bachelor of Science Degree
in Physics and is a Chartered Accountant with the Institute of Chartered
Accountants of Scotland.
Mr. Cochrane joined the Company in 1967 and has worked in various sales and
marketing and managerial positions before being appointed as Director of
Sales. Mr. Cochrane has a Bachelors degree in Economics and an MBA from the
Wharton Business School.
Mr. Eastwood joined the Company in 1980 and is responsible for the Company's
cellulose operations as General Manager. He has previously been employed in
operational and production control capacities in the textile industry. Mr.
Eastwood has a Bachelor of Sciences degree in Textile Technology.
Mr. Freeman has had 30 years of experience in the Company's business. Mr.
Freeman has in that time held various positions including General Manager of
the Unifast division and of non-woven products and is now the Company's
Director of Marketing. Mr. Freeman has a Technical Diploma in Mechanical
Engineering, a diploma from the Institute of Industrial Management and a
diploma in International Marketing from IMD in Lausanne.
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Mr. Pee joined the Company in September 1997, and has responsibility as
operations director of the Unifast division and of non-woven products. Prior
to joining the Company, Mr. Pee held positions both within the U.K. and
abroad, with various manufacturing and engineering companies, including GEC.
From 1988 to 1995, he was managing director of one of the product groups of
APV plc involved in global manufacturing before becoming business development
director for the Asia Pacific region. From September 1996 to September 1997,
he held the position of managing director of GEA in South Africa.
Mr. Gamble has been with the group since 1972. From 1976 to 1987, he was the
European Tax Manager and Director of International Taxes for Emhart
Corporation, the then U.S. parent of the Company. Since 1987 he has been
Deputy Finance Director, and, since 1989, Company Secretary of the group,
managing all tax, treasury and corporate finance matters of the group. Mr.
Gamble is a Chartered Accountant.
Mr. Wright has been a non-executive director of the Company since 1995. He
is a director of both Apax Partners & Co. Strategic Investors Limited and Apax
Partners & Co. Ventures Limited where he has been employed in private equity
investing for the last eight years. Mr. Wright is a non-executive director of
a number of private companies associated with certain funds advised by Apax.
Mr. Soghikian is the general partner of Chase Capital Partners responsible
for Europe and is based in London. He has been with Chase Capital Partners
since 1990 and has been a non-executive director of the Company since 1995.
Prior to joining Chase Capital Partners, Mr. Soghikian was a member of the
mergers and acquisitions groups of Bankers Trust and Prudential Securities,
Inc. Mr. Soghikian is a non-executive director of a number of private
companies associated with Chase Capital Partners, including Drilltec Patents &
Technologies Company, Inc. and American Floral Services. Mr. Soghikian is also
a member of the Advisory Board of Baring Communications Equity Ltd.
COMPENSATION OF DIRECTORS AND OFFICERS
For the year ended December 31, 1997, the aggregate compensation, including
bonuses, of all directors and executive officers of the Company named above
was (Pounds)824,465. For the year ended December 31, 1997, the aggregate
amount set aside by the Company to provide pension, retirement or similar
benefits to those directors and executive officers was approximately
(Pounds)119,005.
SENIOR MANAGEMENT OPTIONS
Following completion of the Transactions, Senior Management holds
approximately 8.5% of the outstanding Voting Ordinary Shares of the Company.
Senior Management have been granted options to acquire a further 4.3% of the
outstanding Voting Ordinary Shares from the Company's institutional investors.
Furthermore, certain employees of the Company, including Senior Management,
may be allotted (i) options to acquire up to 240,000 A Shares from
institutional investors and (ii) 80,000 Voting Ordinary Shares that are
authorized but are not currently outstanding.
EMPLOYMENT AGREEMENTS
Messrs. Selkirk, Fleming, Cochrane, Eastwood, Pee and Gamble are engaged
under employment agreements with the Company which are subject to twelve
months' termination notice from the Company or the executive. These agreements
provide for remuneration packages including base salary, bonus, insurance, and
pension benefits and also include non-competition and non-solicitation
provisions.
LIABILITY LIMITATION
Each director of the Company is indemnified out of the assets of the Company
against costs and liabilities incurred in the proper execution of his duties
or in the proper exercise of his powers, including liabilities incurred in
defending legal proceedings in which judgment is given in his favor, no
finding of material breach of duty is made or where relief from liability is
otherwise granted by the court. The Articles also permit the Company to
arrange directors' and officers' liability insurance for the benefit of
directors and the Company intends to obtain such insurance coverage.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table furnishes information, after giving effect to the
Transactions, as to the beneficial ownership of the outstanding Voting
Ordinary Shares by (i) each person known by the Company to beneficially own
more than 5% of the outstanding Voting Ordinary Shares and (ii) all directors
and officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP(/1/)
-------------------------
NUMBER OF PERCENTAGE
SHARES OWNED
--------- ----------
<S> <C> <C>
PRINCIPAL SHAREHOLDERS
Apax(/2/)........................................... 2,852,776 75.95
Phildrew Ventures Third Fund........................ 288,001 7.67
Timothy Wright(/3/)................................. 2,852,776(/2/) 75.95
All directors and officers as a group(/3/) (3
persons)........................................... 3,172,776(/2/) 84.47
</TABLE>
- --------
(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable within 60 days
are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but not deemed outstanding for the
purpose of calculating the percentage owned by each other person
listed. As of January 27, 1998, there were 320,000 Voting Ordinary
Shares and no Non Voting Ordinary Shares issued and outstanding.
(2) In relation to the holdings of interest in the Company, "Apax" includes
funds managed by Apax and, in respect of 70,224 Voting Ordinary Shares,
funds managed by Apax Partners & Cie Ventures S.A.
(3) Includes 2,852,776 Voting Ordinary Shares owned by funds advised by
Apax. Mr. Wright is a director of Apax Partners & Co. Strategic
Investors Limited and Apax Partners & Co. Ventures Limited. Mr. Wright
disclaims beneficial ownership of the shares held by funds advised by
Apax.
(4) This table does not reflect the Non Voting Ordinary Shares, all of
which are beneficially owned by Chase Equity Associates LP, an
affiliate of the Initial Purchasers, and The Chase Manhattan Bank.
Chase Equity Associates LP also beneficially owns 4.99% of the Voting
Ordinary Shares. The Voting Ordinary Shares and Non Voting Ordinary
Shares rank pari passu. The Non Voting Ordinary Shares comprise 4.18%
of the outstanding Ordinary Shares.
ARTICLES OF ASSOCIATION AND SHAREHOLDERS AGREEMENT
The Company's shareholders and the Company have entered into a shareholders
agreement dated December 23, 1997 (the "Shareholders Agreement"), regulating
certain aspects of the operation and management of the Company and the
shareholders' relationship inter se and with the Company. In addition, as a
matter of U.K. law, the Articles are binding on the Company's shareholders.
The following is a summary description of the principal terms of the Articles
and the Shareholders Agreement and is subject to and qualified in its entirety
by the Articles.
Articles of Association
Equity Structure. Following the Transactions, the Company's outstanding
equity structure consists of 3,436,277 Voting Ordinary A Shares (the "Voting A
Shares"), 163,723 Non Voting Ordinary A Shares (together with the Voting A
Shares, the "A Shares"), 320,000 Voting Ordinary B Shares (the "B Shares") and
52,000,000 preference shares. The holders of Non Voting Ordinary A Shares may
convert any or all of their Non Voting Ordinary A Shares into Voting A Shares
at any time by serving notice on the Company upon the occurrence of certain
events, including (i) a Listing, (ii) a Sale or (iii) the disposal of
substantially the whole business and assets of the Company. The Voting A
Shares and the B Shares comprise the Voting Ordinary Shares.
Preferred Shares. Under the Articles, the preference shares are redeemable
at the option of the Company. Holders of preference shares will be entitled to
receive a fixed cumulative dividend,
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<PAGE>
calculated as a percentage of the redemption value of (Pounds)52.0 million of
the preference shares, payable semi-annually at a rate which will be exclusive
of any associated tax credit. The ability of the Company to pay these
dividends in cash and to redeem the preference shares is subject to certain
restrictions contained in the Revolving Facility and the Indenture. See
"Description of Credit Facilities" and "Description of Notes--Limitation on
Restricted Payments". The dividend shall be 15% through September 30, 2002.
However, any preference dividend payments due on or prior to December 31,
2000, which are paid on or prior to the due date, shall be deemed to satisfy
three times the amount of the preference dividend so paid, provided that
arrears of accrued but unpaid preference dividends in respect of previous
periods have been paid.
The holders of the Company's preference shares will become eligible to vote
at the general meetings of the Company upon, among other things, non-payment
of the preferred dividend in full on the due date. In the Articles, Listing
means a listing of the Company's shares on a recognized stock exchange and
Sale means a transfer of Ordinary Shares which results in any person holding
at least 90% of the outstanding Ordinary Shares.
Board Representation. For so long as funds advised by Apax hold in aggregate
more than 50% of the Ordinary Shares, Apax is entitled to appoint and remove
up to two directors (the "Apax Directors") to the Board of Directors of the
Company. The holders of more than 50% of the A Shares are entitled to appoint
and remove one further non-executive director of the Company (the "Non-
Executive Director"). Additionally, pursuant to the Shareholders Agreement,
the holders of more than 50% of the A Shares are entitled to appoint a
director to act as Chairman of the Board of Directors. With the exception of
any Apax Director and the Non-Executive Director, directors may be appointed
and removed by the holders of either not less than 50% of the Voting Ordinary
Shares or not less than 55.6% of the A Shares. Enhanced voting rights are
provided to inhibit the removal of an Apax Director or the Non-Executive
Director by statutory shareholders' resolutions. The minimum number of
directors is one and there is no maximum number.
Transfer Restrictions/Provisions. Transfers of ordinary shares may not be
registered (i) other than in compliance with the Articles and (ii) unless the
transferee has agreed to be bound by the Shareholders Agreement. The Articles
also provide for "drag-along" rights, pre-emptive offerings, permitted
transfers and compulsory transfers for departing management shareholders in
certain circumstances.
Indemnity. Each director of the Company is indemnified out of the assets of
the Company against costs, charges, losses and liabilities incurred in the
proper execution of his duties or in the proper exercise of his powers,
including liabilities incurred in defending legal proceedings in which
judgment is given in his favor or in which he is acquitted or which are
otherwise disposed of without a finding or admission of material breach of
duty or where relief from liability is otherwise granted by the court. The
Articles also permit the Company to arrange directors' and officers' liability
insurance for the benefit of the directors and the Company intends to obtain
such insurance coverage.
Shareholders Agreement
Financial Information. The Company will supply to each institutional
investor certain financial information, including audited, consolidated annual
results, annual budgets (to have been approved by the Apax Directors) and
monthly management accounts. Apax and the other institutional investors are
entitled to disseminate this information among themselves and to their clients
and professional advisers, subject to certain restrictions.
The Apax Directors and the Non-Executive Director are entitled to pass
information received by them from the Company to Apax, the other institutional
investors and certain of their affiliates.
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<PAGE>
Matters Requiring Consent. Certain actions or transactions of the Company
require either the consent of an Apax Director, the consent of the holders of
more than 50% of the A Shares, or both. These matters include variations to
the Company's capital; alteration of constitutional documents; winding up or
dissolution of the Company; disposal of certain assets, undertakings or
subsidiaries; material changes to the business; entry into contracts with
investors and their affiliates; delegation of directors' powers; borrowing
money or incurring indebtedness other than as permitted by the Senior Credit
Agreement; entry into contracts or arrangements outside the ordinary course of
business; and the appointment and removal of executive directors.
Sale or Listing. The Company and the investors have declared in the
Shareholders Agreement their intention that a Sale or flotation of the
Company's shares be achieved within 3 years of the date of the Shareholders
Agreement. The minority institutional investors are entitled to sell their
holding to the majority institutional investors if, after 3 years, there has
been no Sale or flotation, provided that a valuation is obtained from an
investment bank and the majority institutional investors do not wish to
proceed with a realization at the value specified by the investment bank.
Duration/New Shareholders. The Shareholders Agreement ceases to have effect
on a Sale or a flotation. Individual investors cease to be parties to the
Shareholders Agreement upon ceasing to hold shares in the capital of the
Company (or, in the case of shareholders who are also employees, on the later
of their ceasing to hold shares or the cessation of their employment with the
Company). Shares may not be transferred or issued to persons who are not
parties to the Shareholders Agreement or agree to be bound by its terms.
Institutional Directors' Remuneration. If two Apax Directors are appointed,
each shall be entitled to an annual fee of (Pounds)15,000 plus VAT and if only
one director is appointed, he shall be entitled to an annual fee of
(Pounds)20,000 plus VAT. The Non-Executive Director is entitled to an annual
fee of (Pounds)20,000 plus VAT.
58
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into the
Exchange and Registration Rights Agreement with the Initial Purchasers,
pursuant to which the Company agreed to use its best efforts to file with the
Commission a registration statement with respect to the exchange of the Old
Notes for a series of registered debt securities with terms identical in all
material respects to the terms of the Old Notes, except that the Exchange
Notes are issued free from any covenant regarding transfer restrictions, and
except that if the Exchange Offer is not consummated by June 29, 1998, the
Company will be obligated to pay each holder of Old Notes an amount equal to
DM 0.192 per week per DM 1,000 of the Old Notes until the Exchange Offer is
consummated.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain no-action letters addressed to
other parties in other transactions. However, the Company has not sought its
own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Based upon these interpretations by the
staff of the Commission, the Company believes that the Exchange Notes issued
pursuant to this Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than (i) a
broker-dealer who acquired the Old Notes as a result of market making
activities or other trading activities, (ii) an Initial Purchaser who acquired
the Old Notes directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act, or (iii) a person that is an "affiliate" (as defined in Rule
405 of the Securities Act) of the Company) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes. Holders of Old Notes accepting the
Exchange Offer will represent to the Company in the Letter of Transmittal that
such conditions have been met. Any holder who participates in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
may not rely on the position of the staff of the Commission as set forth in
these no-action letters and would have to comply with the registration and
prospectus delivery requirements of the Securities Act in connection any
secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution." This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Letter of
Transmittal states that by acknowledging and delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. The Company has agreed that for a period of
180 days after the Expiration Date, it will make this Prospectus available to
broker-dealers for use in connection with any such resale. See "Plan of
Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to resell,
resale or other retransfer of Exchange Notes.
The Exchange Offer is not being made to, nor will the Company accept tenders
for exchange from, holders of Old Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
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<PAGE>
Holders of Old Notes not tendered will not have any further registration
rights and the Old Notes not exchanged will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the markets for the
Old Notes could be adversely affected.
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE
OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION, HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD
NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
AND CONSULTING THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Holders of Exchange Notes are not entitled to any registration rights with
respect to the Exchange Notes. Pursuant to the Exchange and Registration
Rights Agreement, holders of Old Notes are entitled to certain registration
rights. Under the Exchange and Registration Rights Agreement, the Company has
agreed, for the benefit of the Holders of the Old Notes, that it will, at its
cost, (i) within 60 days after the date of the original issue of the Old
Notes, file the Registration Statement with the Commission and (ii) within 120
days after the date of original issuance of the Old Notes, use its reasonable
best efforts to cause such Registration Statement to be declared effective
under the Securities Act. The Registration Statement of which this Prospectus
is a part constitutes the Registration Statement.
The Exchange and Registration Rights Agreement also provides that, if (i)
because of any change in law or applicable interpretations thereof by the
Commission's staff the Company is not permitted to effect the Exchange Offer,
or (ii) any Notes validly tendered pursuant to the Exchange Offer are not
exchanged for Exchange Notes within 150 days after the Issue Date, or (iii)
any Initial Purchaser so requests with respect to Notes not eligible to be
exchanged for Exchange Notes in the Exchange Offer and held by it following
the consummation of the Exchange Offer, or (iv) any applicable law or
interpretations do not permit any holder to participate in the Exchange Offer,
or (v) any holder that participates in the Exchange Offer does not receive
freely transferable Exchange Notes in exchange for tendered Notes or (vi) the
Company so elects, then the following provisions shall apply: The Company
shall use its reasonable best efforts to as promptly as practicable file with
the Commission and thereafter shall use its reasonable best efforts to cause
to be declared effective a shelf registration statement on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined below) by the holders from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement"); provided, however,
that no holder of Old Notes or Exchange Notes shall be entitled to have Old
Notes or Exchange Notes held by it covered by such Shelf Registration
Statement unless such holder agrees in writing to be bound by all the
provisions of the Exchange and Registration Rights Agreement applicable to
such holder. The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be usable by holders for a period of two
years from January 30, 1998, or such shorter period that will terminate when
all the Old Notes and Exchange Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement and the
date on which the Notes become eligible for resale without volume restrictions
pursuant to Rule 144 under the Securities Act (in any such case, such period
being called the "Shelf Registration Period"). The Company shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily takes any action that
would result in holders of Old Notes or Exchange Notes covered thereby not
being able to offer and sell such Old Notes or Exchange Notes
60
<PAGE>
during that period, unless such action is required by applicable law.
Notwithstanding any other provisions hereof, the Company will ensure that (i)
any Shelf Registration Statement and any amendment thereto and any prospectus
forming part thereof and any supplement thereto complies in all material
respects with the Securities Act and the rules and regulations thereunder,
(ii) any Shelf
Registration Statement and any amendment thereto (in either case, other than
with respect to information included therein in reliance upon or in conformity
with written information furnished to the Company by or on behalf of any
holder specifically for use therein (the "Holders' Information")) does not,
when it become effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any prospectus forming
part of any Shelf Registration Statement, and any supplement to such
prospectus (in either case, other than with respect to Holders' Information),
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
The Exchange and Registration Rights Agreement also provides that if (i) the
applicable Registration Statement is not filed with the Commission on or prior
to 60 days after the issue date of the Old Notes (the "Issue Date"), (ii) the
Registration Statement or the Shelf Registration Statement, as the case may
be, is not declared effective within 120 days after the Issue Date (or in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or the applicable interpretations of Commission's staff, if
later, within 45 days after publication of the change in law or
interpretation), (iii) the Exchange Offer is not consummated on or prior to
150 days after the Issue Date, or (iv) the Shelf Registration Statement is
filed and declared effective within 120 days after the Issue Date (or in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or the applicable interpretations of Commission's staff, if
later, within 45 days after publication of the change in law or
interpretation) but shall thereafter cease to be effective (at any time that
the Company is obligated to maintain the effectiveness thereof) without being
succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default," the Company will be obligated to pay Liquidated
Damages to each Holder of Transfer Restricted Securities, during the period of
one or more such Registration Defaults, in an amount equal to DM 0.192 per
week per DM 1,000 principal amount of Transfer Restricted Securities held by
such Holder until (i) the applicable Registration Statement is filed, (ii) the
Registration Statement is declared effective and the Exchange Offer is
consummated, (iii) the Shelf Registration Statement is declared effective or
(iv) the Shelf Registration Statement again becomes effective or an additional
Shelf Registration is filed and becomes effective, as the case may be.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. As used herein, the term "Transfer Restricted Securities"
means (i) each Note until the date on which such Note has been exchanged for a
freely transferable Exchange Note in the Exchange Offer, (ii) each Note or
Private Exchange Security until the date on which it has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (iii) each Note or Private Exchange Security
until the date on which it is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act. As used herein, the term "Private Exchange Security" means
debt securities of the Company that are identical in all material respects to
the Exchange Notes, except for the transfer restrictions equivalent to those
of the Old Notes.
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will, unless such Old Notes are withdrawn in accordance with the
withdrawal rights specified in "--Withdrawal of Tenders" below, accept any and
all Old Notes validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. The Company will issue, on or promptly after the Expiration
Date, an aggregate principal amount of up to DM 245 million of Exchange Notes
in exchange for a like principal amount of outstanding Old Notes tendered and
accepted in connection with the Exchange Offer. The Exchange
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Notes issued in connection with the Exchange Offer will be delivered on the
earliest practicable date on or following the Expiration Date. Holders may
tender some or all of their Old Notes in connection with the Exchange Offer.
The terms of the Exchange Notes are identical in all material respects to
the terms of the Old Notes, except that the Exchange Notes have been
registered under the Securities Act and are issued free from any covenant
regarding transfer restrictions, and except that if the Exchange Offer is not
consummated by June 29, 1998, the Company will be obligated to pay Liquidated
Damages to each holder of Old Notes. The Exchange Notes will evidence the same
debt as the Old Notes and will be issued under and be entitled to the same
benefits under the Indenture as the Old Notes. As of the date of this
Prospectus, DM 245 million aggregate principal amount of the Old Notes is
outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange
Offer will remain outstanding and be entitled to the benefits of the
Indenture, but will not be entitled to any registration rights under the
Exchange and Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Notes in connection with the Exchange Offer. The Company will
pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless extended by the Company in its sole discretion,
in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at the rate of 10% per annum. Interest
on the Exchange Notes shall accrue from the last Interest Payment Date on
which interest was paid on the Old Notes surrendered or, if no interest has
been paid on the Old Notes, from January 30, 1998.
Interest on the Exchange Notes will be payable semiannually on February 1 or
August 1 of each year, commencing on the first Interest Payment Date following
the issuance thereof.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes for any period subsequent to the last
interest payment date to occur prior to the issue date of the Exchange Notes,
and will be deemed to have waived the right to receive any interest payment on
the Old Notes accrued from and after such interest payment date.
EXCHANGE OFFER PROCEDURES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder
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and the Company upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal. Except as set forth
below, a holder who wishes to tender Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at one of the addresses set forth below
under "Exchange Agent" prior to 5:00 p.m. New York City time on the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Notes, if such procedure is available, into the Exchange Agent's account
at DTC pursuant to the procedure for book-entry transfer described below, must
be received by the Exchange Agent prior to 5:00 p.m. New York City time on the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
company having an office or correspondent in the United States (collectively,
"Eligible Institutions"). If Old Notes are registered in the name of a person
other than the signer of a Letter of Transmittal, the Old Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with
the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any holder who seeks to tender Old
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer as to any particular Old Notes either before or after
the Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, all defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall
any of them incur any liability for failure to give such notification. The
Exchange Agent intends to use reasonable efforts to give notification of such
defects or irregularities. Old Notes that are tendered but not accepted by the
Company for exchange, will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof
under the Securities Act and, upon consummation of the Exchange Offer, certain
registration rights under the Exchange and Registration Rights Agreement will
terminate.
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If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly
as the name of names of the registered holder or holders that appear on the
Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder and such person has
no arrangement with any person to participate in the distribution of the
Exchange Notes. If any holder or any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company, is engaged in or
intends to engage in or has an arrangement or understanding with any person to
participate in a distribution of such Exchange Notes to be acquired pursuant
to the Exchange Offer, or acquired the Old Notes as a result of market making
or other trading activities, such holder or any such other person (i) could
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives Exchange Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired as a result of market making
activities or other trading activities must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE; DELIVERY OF EXCHANGE SECURITIES
The Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the Exchange Notes promptly after acceptance
of the Old Notes. For purposes of the Exchange Offer, the Company shall be
deemed to have accepted properly tendered Old Notes for exchange when, as and
if the Company has given oral or written notice thereof to the Exchange Agent,
with written confirmation of any oral notice to be given promptly thereafter.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely
confirmation of such Old Notes into the Exchange Agent's account at DTC, (ii)
a properly completed and duly executed Letter of Transmittal and (iii) all
other required documents. If any tendered Old Notes are not accepted for any
reason set forth in the terms and conditions of the Exchange Offer, or if Old
Notes are submitted for a greater amount than the holder desires to exchange,
such unaccepted or unexchanged Old Notes will be returned without expense to
the tendering holder thereof (or, in the case of Old Notes tendered by book-
entry transfer into the Exchange Agent's account at DTC pursuant to the book-
entry procedures described below, such nonexchanged Old Notes will be credited
to an account maintained with DTC) designated by the tendering holder as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for purposes of the Exchange Offer within two business
days after the date of this Prospectus, and any financial institution that is
a participant in the DTC systems may make book-entry delivery of
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Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's
account at DTC in accordance with such DTC's procedures for transfer. However,
although delivery of Old Notes may be effected through book-entry transfer at
DTC, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under "--Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent has received from such Eligible Institution a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) and
Notice of Guaranteed Delivery, substantially in the form of the corresponding
exhibit to the Registration Statement of which this Prospectus constitutes a
part (by telegram, telex, facsimile transmission, mail or hand delivery),
setting forth the name and address of the holder of Old Notes and the amount
of Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent within three
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes
to be withdrawn (including the amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are registered, if different from that of the withdrawing
holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account with DTC specified by the Holder) as soon as
practicable after withdrawal, rejection of tender or
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termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Exchange
Offer Procedures" above at any time on or prior to the Expiration Date.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent in connection
with the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent, at its offices at 450 West 33rd Street, 15th
Floor, New York, New York 10001. The Exchange Agent's telephone number is
(212) 946-3014 and facsimile number is (212) 946-8177.
DELIVERY OF A LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will pay certain other expenses to be incurred in connection
with the Exchange Offer, including the fees and expenses of the Trustee,
accounting and certain legal fees.
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith. If, however, Exchange Notes are to
be delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if tendered Old Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes in connection with the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendered holder.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Company to register Exchange Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
APPRAISAL RIGHTS
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the consummation of the Exchange Offer. Any
expenses of the Exchange Offer that are paid by the Company will be amortized
by the Company over the term of the Exchange Notes under both U.K. and U.S.
generally accepted accounting principles.
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CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Except
under certain limited circumstances, the Company does not currently intend to
register the Old Notes under the Securities Act. In addition, upon the
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes
registered under the Securities Act or to any rights under the Exchange and
Registration Rights Agreement. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered, or
tendered but unaccepted, Old Notes could be adversely affected. See "The
Exchange Offer--Consequences of Not Exchanging Old Notes."
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties in other transactions substantially
similar to the Exchange Offer, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than
(i) a broker-dealer who acquired the Old Notes as a result of market making
activities or other trading activities, (ii) an Initial Purchaser who acquired
the Old Notes directly from the Company solely in order to resell pursuant to
Rule 144A of the Securities Act or any other available exemption under the
Securities Act, or (iii) a person that is an "affiliate" (as defined in Rule
405 of the Securities Act) of the Company without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes. Holders of Old Notes accepting the
Exchange Offer will represent to the Company in the Letter of Transmittal that
such conditions have been met. Any holder who participates in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
may not rely on the position of the staff of the Commission as set forth in
these no-action letters and would have to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Each broker-dealer who receives Exchange Notes
for its own account pursuant to the Exchange Offer must acknowledge that it
acquired the Old Notes as the result of market-making activities or other
trading activities and will deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. In addition, pursuant to Section 4(3) under the
Securities Act, until , 1998, all dealers effecting transactions in
the Exchange Notes, whether or not participating in the Exchange Offer, may be
required to deliver a Prospectus. See "The Exchange Offer--Purpose of the
Exchange Offer" and "Plan of Distribution."
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CERTAIN TRANSACTIONS
GROUP REORGANIZATION/MACHINERY BUSINESS DISPOSAL
During 1997, the group of companies owned by United Texon Limited underwent
a significant internal reorganization to facilitate the Machinery Disposal.
During the first phase, the group implemented a restructuring which created a
discrete sub-group (the "Machinery group") of companies held by USM Group
Limited, a wholly-owned subsidiary of United Texon Limited, carrying on the
Machinery business. This process was substantially completed on July 29, 1997.
In the second phase, the shares in USM Group Limited were transferred as of
December 31, 1997, to a new company principally owned by shareholders of the
Company, thereby completing the Machinery Disposal.
As a result of the Machinery Disposal and the Acquisition, there exist two
separate groups of companies ultimately owned by groups of shareholders who
are identical, other than in relation to management shareholdings and stock
options. Described below are (i) the agreements governing the first phase of
the Machinery Disposal, (ii) the agreements governing the second phase of the
Machinery Disposal and (iii) agreements between the Company and the Machinery
group relating to their ongoing relationships.
Share and Asset Transfer Agreements. The shares of companies operating the
Machinery business incorporated in Australia, Brazil, Canada, France, Germany,
Hong Kong, South Korea, the U.K. and the United States (including, indirectly,
shares in companies incorporated in Puerto Rico and Thailand) were transferred
into the Machinery group. The share transfer agreements contain minimal
warranties of the sellers. Additionally, asset purchase agreements were
entered into to transfer the Machinery business into the Machinery group in
Austria, France, Germany, Spain, the U.K. and the United States and to
transfer assets of the Materials business out of the Machinery group in
Germany, Hong Kong, Taiwan and the United States. The asset purchase
agreements sought to allocate certain identified liabilities between the
parties but did not contain extensive representations and warranties nor, in
general, indemnification provisions for unknown liabilities related to the
assets being transferred. The asset purchase agreements also contained
undertakings not to compete with the transferred business (and in some cases
agreements by the purchaser not to compete with the seller's retained
business). The Company may have unidentified contingent liabilities relating
to the Machinery business previously carried out by it. Accordingly,
liabilities relating to the past business activity could arise and affect the
ability of the Company to pay interest on the Notes and to satisfy its other
debt obligations.
Agreement for the Sale of USM Group Limited. Effective as of December 31,
1997, the entire issued share capital of USM Group Limited was sold by United
Texon Limited for a nominal consideration to a new company owned principally
by United Texon Limited's shareholders. The sale agreement contains warranties
by United Texon Limited regarding the shares being sold and provisions
regulating aspects of the ongoing relationship between the Company and the
Machinery group. These include (i) indemnification of the Machinery group from
any actual or contingent liabilities in respect of any indebtedness or other
obligations of the companies conducting the Materials business, (ii)
provisions dealing with the sharing of historic insurance coverage, (iii)
mutual undertakings not to compete for three years or solicit certain
employees for 12 months from 1997 and (iv) an undertaking by the parties to
determine an appropriate mechanism for either winding up or splitting the U.K.
pension scheme.
Ongoing Agreements with the Machinery group. The ongoing agreements between
the Company and the Machinery group consist of (i) distribution/agency
agreements, (ii) agreements for the sharing of premises or services and (iii)
group relief agreements for the surrender of tax losses for which payments
will be made to the surrendering company at a discount to the relevant rate of
corporation tax. Pursuant to distribution/agency agreements, a Machinery group
company is appointed
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as a distributor or agent for the sale of certain of the Company's products
from Austria, Brazil, Canada, France, Germany, Japan, Korea, Spain, Taiwan,
and Thailand. Members of the Machinery group have appointed the Company as
distributor/agent for certain shoe machinery products in Australia, Mexico and
New Zealand. These agreements are generally for an initial term (typically one
year) and are then automatically continued subject to six months' termination
notice. Agreements between the Company and Machinery group companies are in
place for the sharing of premises or services in Austria, China, France,
Germany, Indonesia, Spain, the U.K. and the United States. These agreements
provide for payments to be made on what the Company believes is a reasonable,
commercial basis. These agreements are generally for a short term although the
Company has entered into a sub-lease from a Machinery group company of office
premises at Wilmington, Massachusetts which will expire when the primary lease
expires on December 31, 2001.
CREDIT ARRANGEMENTS
In January 1998, Texon International plc entered into a credit agreement
(the "Credit Agreement") providing for the Revolving Facility with The Chase
Manhattan Bank, Chase Manhattan plc and Chase Manhattan International Limited,
which are affiliates of one of the Company's shareholders. Under the terms of
the Credit Agreement, an arrangement fee of 1.75% of the Revolving Facility
((Pounds)15.0 million) is payable to Chase Manhattan plc, and an annual agency
fee (initially (Pounds)50,000 per annum) is payable to Chase Manhattan
International Limited. See "Description of Credit Facilities."
Under the credit facilities that were repaid in part from the net proceeds
of the Old Note Offering, an arrangement fee of (Pounds)700,354 was paid in
July 1997 to Chase Manhattan International Limited, Lloyds Bank plc and BHF
Bank AG and an annual agency fee of (Pounds)50,000 is payable to Chase
Manhattan International Limited.
1995 ACQUISITION DEBT AND A NOTES
The 1995 Acquisition Debt was held by certain shareholders of the Company.
(Pounds)184,240 in principal amount of the A Notes were held by shareholders
in the Company and (Pounds)15,628 in principal amount were held by David
Gamble, a member of management. A portion of the net proceeds of the Old Note
Offering were used to repay the indebtedness represented by the 1995
Acquisition Debt and A Notes. See "The Transactions" and "Use of Proceeds."
ARTICLES OF ASSOCIATION AND SHAREHOLDERS AGREEMENT
The shareholders of the Company have entered into the Shareholders Agreement
and are subject to the provisions of the Articles. The Shareholders Agreement
provides, among other things, for certain board representation, provision of
financial information and consent for certain actions. The Articles contain,
among other things, certain provisions regarding transfer restrictions, the
appointment of directors and indemnification. See "Principal Shareholders--
Articles of Association and Shareholders Agreement."
SALE OF SOUTH AFRICAN SUBSIDIARY
On July 21, 1997 the Company completed the sale of its South African
subsidiary, BU Shoe Machinery (Pty) Limited, to two former directors of that
company. The initial consideration paid was (Pounds)466,000. The remainder is
to be paid on a deferred basis in quarterly instalments of (Pounds)33,750. The
first of these payments was made on September 26, 1997 and the last deferred
payment is due on December 31, 1999, making the total deferred consideration
payment due (Pounds)337,500 (subject to variation, depending on exchange rate
fluctuations between Sterling and the South African Rand). BU Shoe Machinery
(Pty) Limited carries on activities which, prior to its disposal, would have
fallen within those of the Machinery business. Accordingly any further
deferred sums to be paid on or after December 31, 1997, will be paid to USM
Group Limited.
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MANAGEMENT OPTIONS
Peter Selkirk, Neil Fleming, David Gamble, Neil Coutts and Keith Pacey held
options to subscribe for shares in United Texon Limited. Messrs. Selkirk,
Fleming and Gamble are executive officers of the Materials business. See
"Management--Directors and Executive Officers." Messrs. Coutts and Pacey are
executives of the Machinery business who have not continued with the Company.
The precise number of shares for which they were entitled to subscribe was
determined by reference to a formula and varied according to the amount of the
consideration payable in connection with the Acquisition. These options were
exercised on January 30, 1998, and the shares issued as a result were sold to
the Company in connection with the Acquisition for an aggregate consideration
of approximately (Pounds)2.81 million. See "Use of Proceeds."
Following completion of the Transactions, Senior Management holds
approximately 8.5% of the outstanding Voting Ordinary Shares of the Company.
Senior Management have been granted options to acquire a further 4.3% of the
outstanding Voting Ordinary Shares from the Company's institutional investors.
Furthermore, certain employees of the Company, including Senior Management,
may be allotted (i) options to acquire up to 240,000 A Shares from
institutional investors and (ii) 80,000 Voting Ordinary Shares that are
authorized but are not currently outstanding.
DIRECTORS' FEES
Certain directors' fees are payable to the Apax Directors and the Non-
Executive Director. See "Principal Shareholders--Shareholders Agreement."
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DESCRIPTION OF CREDIT FACILITIES
The description set forth below does not purport to be complete and is
qualified in its entirety by reference to certain agreements setting forth the
principal terms of the Revolving Facility, which will be available upon
request from the Company.
REVOLVING FACILITY
In January 1998, Texon International plc entered into the Credit Agreement
with Chase Manhattan plc as arranger, The Chase Manhattan Bank as issuing
bank, The Chase Manhattan Bank and other institutions as original lending
banks and Chase Manhattan International Limited as agent and security agent.
The Credit Agreement provides a multi-currency revolving facility in a maximum
amount not exceeding (Pounds)15.0 million. Letters of credit and bank
guarantees may be issued as part of the Revolving Facility. The Revolving
Facility will be used to refinance a portion of the senior bank facilities and
provide for the working capital and general corporate purposes of the Company.
The availability of the Revolving Facility will be subject to various
conditions precedent customary for facilities of this nature.
The Revolving Facility bears interest at a rate of 2% per annum plus LIBOR,
subject to certain reductions based on financial performance. The Revolving
Facility is a three year facility. A commitment fee of 0.75% per annum will be
paid by Texon International plc on the undrawn portion of the Revolving
Facility. Each lender which issues a letter of credit or bank guarantee under
the Revolving Facility will receive an issuing bank fee of 0.125% per annum in
respect of its contingent liability for such letter of credit or bank
guarantee. Each lender will receive a letter of credit fee calculated on a day
to day basis in respect of issued letters of credit or bank guarantees at a
rate equal to the margin payable in respect of the facilities and based on
each lender's contingent liability in respect of such letters of credit or
bank guarantees.
Texon International plc will be required to make mandatory prepayments of
all outstanding loans under the Revolving Facility upon the occurrence of a
flotation, debt refinancing or change of control of the Company.
The Credit Agreement contains customary covenants including restrictions on
disposal of assets, incurring additional indebtedness or contingent
liabilities, making acquisitions or investments, engaging in mergers or
consolidations, or amending other debt instruments.
In addition, the Company is required to comply with specified financial
ratios, including a total net interest cover ratio, a fixed charge ratio and a
total debt to EBITDA ratio, calculated on a rolling 12 month basis. The Credit
Agreement also contains customary events of default including payment default,
covenant default, cross-default and certain events of insolvency.
OTHER CREDIT FACILITIES
Two of the Company's German subsidiaries have working capital facilities,
both available in Deutsche Marks: (Pounds)250,000 is available pursuant to a
demand facility at an interest rate of 7.75% and (Pounds)340,000 is available
pursuant to a demand facility at an interest rate of 7.75%. The Company's
Italian subsidiary has four working capital facilities available in Italian
Lire: (Pounds)1.4 million is available pursuant to a demand facility at an
interest rate of 6.2%, (Pounds)1.0 million is available pursuant to a demand
facility at an interest rate of 6.6%, (Pounds)1.0 million is available
pursuant to a demand facility at an interest rate of 6.25% and a (Pounds)0.35
million facility with an interest rate of 7% repayable on March 1998. One of
the Company's U.K. subsidiaries has two finance lease facilities totaling
(Pounds)1.0 million, one with an interest rate of 8.57% repayable quarterly
until September 23, 2001 and one with an interest rate of 7.7% and repayable
quarterly until September 10, 2000. The Company's New Zealand subsidiary has a
working capital facility of (Pounds)74,000 available in New Zealand dollars at
an interest rate of 10% and repayable on July 31, 1998. In China, the Company
has three working capital facilities for an aggregate amount of (Pounds)2.7
million with interest rates varying from 8.8% to 15%, two of which are
repayable on demand and the remainder expiring at various times up until March
15, 1998. The Notes will be effectively subordinated to indebtedness under
these facilities. See "Description of Notes--Ranking."
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DESCRIPTION OF NOTES
For purposes of this section, the "Company" means Texon International plc
only, and does not include its subsidiaries.
GENERAL
The Old Notes were issued and the Exchange Notes are to be issued under an
Indenture, dated as of January 30, 1998 (the "Indenture"), between the Company
and The Bank of New York, as Trustee (the "Trustee"), a copy of which will be
available upon request to the Company. The terms of the Exchange Notes are
substantially identical to the terms of the Old Notes.
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by
the TIA and the Notes. Capitalized terms used herein and not otherwise defined
have the meanings set forth in the section "Certain Definitions". References
herein to specific amounts in one currency mean such amounts or their
equivalent in other currencies on the date of determination.
The Exchange Notes will be represented initially by a global note in bearer
form without coupons (the "Global Exchange Note") which will be issued in a
denomination equal to the outstanding principal amount of the Notes
represented thereby and held by The Bank of New York, as the book-entry
depositary (the "Book-Entry Depositary"). The Global Exchange Note will be
deposited with the Book-Entry Depositary pursuant to the Note Depositary
Agreement (the "Note Depositary Agreement") between the Company and the Book-
Entry Depositary. For a description of the Note Depositary Agreement, see
"Description of the Note Depositary Agreement."
The Book-Entry Depositary will issue a certificateless depositary interest
to DTC, which will then record beneficial interests in the Global Exchange
Note. Beneficial interests in the Exchange Notes will be shown on, and
transfers thereof will be effected only through, records maintained in book-
entry form by DTC (with respect to participant's interest) and its
participants, including, as applicable, the Euroclear Operator and Cedel. Such
beneficial interests in the Exchange Notes are referred to as "Book-Entry
Interests."
Holders of Book-Entry Interests will be entitled to receive definitive Notes
in registered form ("Definitive Notes") in exchange for their holdings of
Book-Entry Interests only in the limited circumstances set forth in
"Description of the Note Depositary Agreement--Issuance of Definitive Notes."
In no event will definitive Notes in bearer form be issued.
Application has been made to list the Exchange Notes on the Luxembourg Stock
Exchange.
The Exchange Notes will be payable as to principal, interest and Additional
Amounts, if any, either (i) to the Book-Entry Depositary (as Holder of the
Global Exchange Note) against presentation and surrender (or, in the case of
partial payment, endorsement) of the Global Exchange Note at the office of any
agent of the Company (the "Paying Agent") maintained for such purpose outside
the U.K. or (ii) in the event that Definitive Notes are issued as described
under "Description of The Note Depositary Agreement--Issuance of Definitive
Notes" at an office of the Paying Agent maintained for such purpose (which
will include an office within the City and State of New York); provided,
however, that with respect to any payment of principal or interest on
Definitive Notes with an aggregate principal amount in excess of DM 1 million
held by any Holder or group of Holders, such payment will be made, at the
written request of such Holder or Holders (which shall be a single request
with appropriate wire transfer instructions) received by the Paying Agent 15
days before the applicable payment date, by wire transfer of immediately
available funds to the Paying Agent, who in turn will wire such funds to
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such single account as such Holder or Holders may in writing to the Paying
Agent direct. The Paying Agent may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
with any payment transfer instructions received by the Paying Agent. Until
otherwise designated by the Company, the office of the Paying Agent in New
York will be the Corporate Trust Office of the Trustee maintained for such
purpose. The Company may change the Paying Agent without prior notice to
holders of Exchange Notes provided that the Company promptly notifies the
Trustee following any such change. The Exchange Notes will be issued in
minimum denominations of DM 1,000 principal amount and integral multiples
thereof, and Definitive Notes, if issued, will only be issued in registered
form. In all circumstances, the Company shall ensure that (i) at least one
Paying Agent is located outside the U.K., (ii) if and so long as the Exchange
Notes are listed on the Luxembourg Stock Exchange, at least one Paying Agent
is located in Luxembourg, as the rules of the Luxembourg Stock Exchange
require, or such other place as the Luxembourg Stock Exchange may approve and
(iii) if and so long as the Exchange Notes are listed on any other securities
exchange, any requirement of such securities exchange as to Paying Agents are
satisfied.
SUBSTITUTION OF CURRENCY
Under the Treaty on the European Economic and Monetary Union (the "Treaty"),
to which the Federal Republic of Germany is a signatory, on or before January
1, 1999, and subject to the fulfillment of certain conditions, the "Euro" may
replace all or some of the currencies of the member states of the European
Union, including the Deutsche Mark. If, pursuant to the Treaty, the Deutsche
Mark is replaced by the Euro, the payment of principal of, or interest on, the
Notes will be effected in Euro in conformity with legally applicable measures
taken pursuant to, or by virtue of, the Treaty. In addition, the regulations
of the European Commission relating to the Euro will then apply to the Notes
and the Indenture. The circumstances and consequences described in this
paragraph entitle neither the Company nor any holder of Notes to early
redemption, rescission, notice, repudiation, adjustment or renegotiation of
the terms and conditions of Notes or the Indenture or to raise other defenses
or to request any compensation claim, nor will they affect any of the other
obligations of the Company under the Notes and the Indenture.
TERMS OF THE NOTES
The Notes are and the Exchange Notes will be unsecured senior obligations of
the Company denominated in Deutsche Marks. The Notes will be limited to DM 245
million aggregate principal amount, and will mature on February 1, 2008. Each
Note will bear interest at a rate per annum shown on the front cover of this
Prospectus from January 30, 1998, or from the most recent date to which
interest has been paid or provided for, payable semiannually to Holders of
record at the close of business on January 15 or July 15 immediately preceding
the interest payment date on February 1 and August 1 of each year, commencing
August 1, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time on or after February 1, 2003, and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be the Wall
Street Journal) (and if and so long as the Notes are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or, in the case of Definitive Notes, mailed by first-
class mail to each Holder's registered address (and if and so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock
Exchange shall so require, published in a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort)), at
the following redemption prices (expressed as a percentage of principal
amount), plus accrued interest and Additional Amounts, if any, to the
redemption date (and in the case
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of Definitive Notes, subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof), if redeemed during the 12-
month period commencing on February 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2003................................................................. 105.000%
2004................................................................. 103.333%
2005................................................................. 101.667%
2006 and thereafter.................................................. 100.000%
</TABLE>
In addition, at any time and from time to time prior to February 1, 2001,
the Company may redeem in the aggregate up to 33 1/3% of the original
aggregate principal amount of the Notes with the proceeds of one or more
Public Equity Offerings by the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount
thereof) of 110% plus accrued interest and Additional Amounts, if any, to the
redemption date (and in the case of Definitive Notes, subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date and Additional Amounts, if any, in respect
thereof); provided, however, that at least 66 2/3% of the original aggregate
principal amount of the Notes must remain outstanding after each such
redemption; and provided, further, that such redemption shall occur within 90
days of the date of the closing of any such Equity Offering.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the
principal securities exchange, if any, on which Notes are listed or, if such
Notes are not so listed or such exchange prescribes no method of selection, on
a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note may be
redeemed except in integral multiples of DM 1,000 in original principal
amount. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof
to be redeemed. The Global Exchange Note redeemed in part will be surrendered
to the Trustee who will make a notation thereon to reduce the principal amount
of such Global Exchange Note to an amount equal to the unredeemed portion and,
in the case of Definitive Notes, a new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
REDEMPTION FOR TAXATION REASONS
The Notes may be redeemed, at the option of the Company, in whole but not in
part, at any time upon giving not less than 30 nor more than 60 days' notice
to the Holders (which notice shall be irrevocable), at a redemption price
equal to the principal amount thereof, together with accrued and unpaid
interest, if any, to the date fixed by the Company for redemption (a "Tax
Redemption Date") and all Additional Amounts (see "--Withholding Taxes"), if
any, then due and which will become due on the Tax Redemption Date as a result
of the redemption or otherwise, if the Company determines that, as a result of
(i) any change in, or amendment to, the laws or treaties (or any regulations,
protocols or rulings promulgated thereunder) of the U.K. (or any political
subdivision or taxing authority of the U.K.) affecting taxation which change
or amendment becomes effective on or after the Issue Date, (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the Issue Date or (iii) the
issuance of Definitive Notes due to (A) DTC being at any time unwilling or
unable to continue as or ceasing to be a clearing agency registered under the
Exchange Act, and a successor to DTC registered as a clearing agency under the
Exchange Act is not able to be appointed by the Company within 90 days or (B)
the Book-Entry Depositary being at any time unwilling or unable to
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continue as a Book-Entry Depositary and a successor Book-Entry Depositary is
not able to be appointed by the Company within 90 days, the Company is or will
be required to pay Additional Amounts, and the Company determines that such
payment obligation cannot be avoided by the Company taking reasonable
measures. Notwithstanding the foregoing, no such notice of redemption shall be
given earlier than 90 days prior to the earliest date on which the Company
would be obligated to make such payment or withholding if a payment in respect
of the Notes were then due. Prior to the publication or, where relevant,
mailing of any notice of redemption of the Notes pursuant to the foregoing,
the Company will deliver to the Trustee an opinion of a tax counsel reasonably
satisfactory to the Trustee to the effect that the circumstances referred to
above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event
it shall be conclusive and binding on the Holders.
RANKING
The Indebtedness evidenced by, and all obligations in respect of, the Notes
will be unsecured Senior Indebtedness of the Company, will rank pari passu in
right of payment with all existing and future Senior Indebtedness of the
Company and will be senior in right of payment to all existing and future
Subordinated Obligations of the Company. The Notes will be effectively
subordinated to any Secured Indebtedness of the Company to the extent of the
value of the assets securing such Indebtedness and to all liabilities of its
Subsidiaries.
The Company has agreed that, if the terms of any Subordinated Obligations of
the Company entered into after the Issue Date permit the holders of any Senior
Indebtedness of the Company to block payments to the holders of such
Subordinated Obligations in certain circumstances, then such Subordinated
Obligations must also permit the holders of the Notes to block such payments
in the same circumstances and to the same extent.
All of the operations of the Company are conducted through its Subsidiaries.
Claims of creditors of Subsidiaries of the Company including trade creditors,
and claims of preferred stockholders (if any) of such Subsidiaries generally
will have priority with respect to the assets and earnings of such
Subsidiaries over the claims of creditors of the Company, including holders of
the Notes. The Notes, therefore, will be effectively subordinated to creditors
(including trade creditors) and preferred stockholders (if any) of such
Subsidiaries.
At December 31, 1997, on a pro forma basis after giving effect to the
Transactions (including the Incurrence of the principal amount anticipated to
be outstanding under the Revolving Facility on the Issue Date) and the
application of the net proceeds therefrom as described herein under "Use of
Proceeds", the only outstanding Indebtedness of the Company other than the
Notes (excluding its consolidated subsidiaries) would have been secured Senior
Indebtedness of (Pounds)4.3 million arising under the Revolving Facility, and
the total liabilities of the Subsidiaries of the Company (including trade
payables and deferred taxes) would have been (Pounds)38.7 million. Although
the Indenture contains limitations on the amount of additional Indebtedness
which the Company may Incur and limits the incurrence of Indebtedness and the
issuance of Preferred Stock by the Company's Restricted Subsidiaries, such
limitations are subject to a number of significant qualifications. Under
certain circumstances the amount of such additional Indebtedness could be
substantial. See "--Certain Covenants--Limitation on Indebtedness" below.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to
repurchase all of such Holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof, plus accrued and unpaid interest and
Additional Amounts, if any, to the date of repurchase (and in the case of
Definitive Notes, subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof):
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(i) prior to the first public offering of Voting Stock of the Company, the
Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-
3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in
the aggregate of the total voting power of the Voting Stock of the Company,
whether as a result of issuance of securities of the Company, any merger,
consolidation, liquidation or dissolution of the Company, any direct or
indirect transfer of securities by any Permitted Holder or otherwise (for
purposes of this clause (i), the Permitted Holders shall be deemed to own
beneficially any Voting Stock of an entity (the "specified entity") held by
any other entity (the "parent entity") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate a
majority of the voting power of the Voting Stock of the parent entity);
(ii) (A) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above) of more than 35% of the
total voting power of the Voting Stock of the Company and (B) the Permitted
Holders do not "beneficially own" (as defined in clause (i) above), directly
or indirectly, in the aggregate a greater percentage of the total voting power
of the Voting Stock of the Company than such other person and do not have the
right or ability by voting power, contract or otherwise to elect or designate
for election a majority of the Board of Directors (for the purposes of this
clause (ii), such other person shall be deemed to own beneficially any Voting
Stock of a specified corporation held by a parent corporation, if such other
person "beneficially owns" (as defined in this clause (ii)), directly or
indirectly, more than 35% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders do not "beneficially own" (as
defined in clause (i) above), directly or indirectly, in the aggregate a
greater percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
(iii) the merger or consolidation of the Company with or into another Person
or the merger of another Person with or into the Company, or the sale of all
or substantially all the assets of the Company to another Person (in each
case, other than a Person that is controlled by the Permitted Holders), and,
in the case of any such merger or consolidation, the securities of the Company
that are outstanding immediately prior to such transaction and that represent
100% of the aggregate voting power of the Voting Stock of the Company are
changed into or exchanged for cash, securities or property, unless pursuant to
such transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving corporation
that represent immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving corporation; or
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved
by a vote of a majority of the directors of the Company then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to
this covenant, then prior to the publishing or mailing of the notice to
Holders provided for in the immediately following paragraph but in any event
within 30 days following any Change of Control, the Company shall (i) repay in
full all Bank Indebtedness or offer to repay in full all Bank Indebtedness and
repay the Bank Indebtedness of each lender who has accepted such offer or (ii)
obtain the requisite consent under the agreements governing the Bank
Indebtedness to permit the repurchase of the Notes as provided for in the
immediately following paragraph.
Within 30 days following any Change of Control, the Company shall deliver
written notice to the Trustee and publish a notice in a leading newspaper
having a general circulation in New York (which
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is expected to be the Wall Street Journal) (and, if and so long as Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, a newspaper having a general circulation in Luxembourg
(which is expected to be the Luxemburger Wort)) or, in the case of Definitive
Notes, mail a notice to each Holder (and if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, published in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)) in each case, with
a copy to the Trustee stating: (1) that a Change of Control has occurred and
that such Holder has the right to require the Company to purchase such
Holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and Additional Amounts, if
any, to the date of repurchase (and in the case of Definitive Notes, subject
to the right of Holders of record on a record date to receive interest on the
relevant interest payment date and Additional Amounts, if any, in respect
thereof); (2) the circumstances and relevant facts and financial information
regarding such Change of Control; (3) the repurchase date (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is first
published or, where relevant, mailed, except as may otherwise be required by
applicable law); and (4) the instructions determined by the Company,
consistent with this covenant, that a Holder must follow in order to have its
Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or
regulations, including any securities laws of the U.K. and Luxembourg and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Notes are listed, to the extent such laws or regulations are
applicable, in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Subject to the limitations discussed
below, the Company could, in the future, enter into certain transactions,
including acquisitions, refinancings or other recapitalizations, that would
not constitute a Change of Control under the Indenture, but that could
increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings.
The occurrence of certain of the events which would constitute a Change of
Control would require mandatory repayment of all outstanding indebtedness
under the Credit Agreement, which will effectively prevent the repurchase of
the Notes unless and until the indebtedness under the Credit Agreement is
repaid in full. Future Senior Indebtedness of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness,
even if the Change of Control itself does not, due to the financial effect of
such repurchase on the Company. Finally, the Company's ability to pay cash to
the Holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Subsidiaries to another person may be
uncertain.
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CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that
the Company or a Restricted Subsidiary may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio would be greater than 2.0:1.
Notwithstanding the foregoing, the Company will not permit any Restricted
Subsidiary to issue, to any party other than the Company or a Wholly Owned
Subsidiary of the Company, (i) any Preferred Stock or (ii) any Indebtedness
that by its terms is subordinated or junior in right of payment to any other
Indebtedness of such Restricted Subsidiary.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness (hereafter
"Permitted Indebtedness"):
(i) Indebtedness (x) of the Company under the Revolving Facility (as the
same may be amended from time to time without increasing the committed
amount available or outstanding, except as otherwise permitted by this
covenant) and (y) of the Company and Restricted Subsidiaries under other
credit agreements in an aggregate principal amount at any time outstanding
for both (x) and (y) not to exceed the greater of (A) (Pounds)15.0 million,
less any repayments and commitment reductions made pursuant to the
provisions of clause (a)(iii)(A) of "--Limitation on Sales of Assets and
Subsidiary Stock," and (B) the Borrowing Base at the time such Indebtedness
is Incurred;
(ii) Indebtedness of the Company owing to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by
the Company or any Wholly Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly Owned Subsidiary) will be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iii) Indebtedness represented by the Notes;
(iv) any Indebtedness (other than the Indebtedness described in clauses
(i) through (iii) above) outstanding on the Issue Date;
(v) any Refinancing Indebtedness Incurred in respect of any Indebtedness
described in clause (i), (iii), (iv) or paragraph (a) above;
(vi) (A) Indebtedness or Preferred Stock of a Restricted Subsidiary
Incurred and outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness or
Preferred Stock Incurred in contemplation of, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Subsidiary or was otherwise acquired by the
Company); provided, however, that at the time such Restricted Subsidiary is
acquired by the Company, the Company would have been able to Incur $1.00 of
additional Indebtedness pursuant to paragraph (a) after giving effect to
such acquisition (including the Incurrence of such Indebtedness or
Preferred Stock pursuant to this clause (vi)) and (B) Refinancing
Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness
Incurred by such Restricted Subsidiary pursuant to this clause (vi);
(vii) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by the
Company and its Restricted Subsidiaries in the
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ordinary course of their business and which do not secure other
Indebtedness, and (B) of the Company or any Restricted Subsidiary under
Currency Agreements and Interest Rate Agreements, in each case entered into
for bona fide hedging purposes of the Company or such Restricted Subsidiary
in the ordinary course of business and not for purposes of speculation;
provided, however, that, in the case of Currency Agreements and Interest
Rate Agreements, such Currency Agreements and Interest Rate Agreements do
not increase the Indebtedness of the Company or any Restricted Subsidiary
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities
and compensation payable thereunder;
(viii) Purchase Money Indebtedness and Capitalized Lease Obligations in
an aggregate principal amount on the date of Incurrence which, when added
to all other Purchase Money Indebtedness and Capitalized Lease Obligations
Incurred pursuant to this clause (viii) and then outstanding, not to exceed
(Pounds)5.0 million;
(ix) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to paragraph (a) or any other clause of this paragraph (b)) in an
aggregate principal amount on the date of Incurrence which, when added to
all other Indebtedness Incurred pursuant to this clause (ix) and then
outstanding, not to exceed (Pounds)12.0 million;
(x) Indebtedness represented by a grant or advance made available by a
federal, state or governmental agency or department or other like body
which is repayable only upon the Company or a Restricted Subsidiary (as the
case may be) failing to satisfy one or more conditions set out in the terms
of such grant or advance, provided there has been no such failure to
satisfy any of such conditions, not to exceed (Pounds)1.0 million
outstanding from time to time;
(xi) Indebtedness arising from indemnification agreements or purchase
price adjustments in the ordinary course of business; or
(xii) Indebtedness owed in respect of compensation claims or other
employee insurance arrangements in the ordinary course of business.
(c) Notwithstanding the foregoing, the Company may not Incur any
Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations unless such Indebtedness will be
subordinated to the Notes to at least the same extent as such Subordinated
Obligations.
(d) Notwithstanding any other provision of this covenant, the maximum amount
of Indebtedness that the Company or any Restricted Subsidiary may Incur
pursuant to this covenant shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this covenant, (i) Indebtedness Incurred pursuant to the
Credit Agreement prior to or on the date of the Indenture shall be treated as
Incurred pursuant to clause (i) of paragraph (b) above, (ii) Indebtedness
permitted by this covenant need not be permitted solely by reference to one
provision permitting such Indebtedness but may be permitted in part by one
such provision and in part by one or more other provisions of this Section
permitting such Indebtedness and (iii) in the event that Indebtedness or any
portion thereof meets the criteria of more than one of the types of
Indebtedness described in this covenant, the Company, in its sole discretion,
shall classify such Indebtedness and only be required to include the amount of
such Indebtedness in one of such clauses.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to:
(i) declare or pay any dividend or make any distribution on or in respect
of its Capital Stock (including any payment in connection with any merger
or consolidation involving the Company) except (A) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (B) dividends or distributions payable to the Company or another
Restricted Subsidiary
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(and, if such Restricted Subsidiary is not wholly owned and such dividend
or distribution is being paid on Voting Stock other than Preferred Stock,
to its other shareholders on a pro rata basis);
(ii) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of the Company held by any Person or any Capital Stock of a
Restricted Subsidiary held by any Affiliate of the Company (other than a
Restricted Subsidiary);
(iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition); or
(iv) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment described in
clauses (i) through (iv) hereof being herein referred to as a "Restricted
Payment") if at the time the Company or such Restricted Subsidiary makes
such Restricted Payment:
(1) a Default will have occurred and be continuing (or would result
therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "--
Limitation on Indebtedness;" or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to
be determined in good faith by the Board of Directors, whose
determination will be conclusive and evidenced by a resolution of the
Board of Directors) declared or made subsequent to the Issue Date would
exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from January 1, 1998, to the end
of the most recent fiscal quarter ending at least 45 days prior to
the date of such Restricted Payment, (or, in case such Consolidated
Net Income will be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from
the issue or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale
to a Subsidiary of the Company or an employee stock ownership plan
or other trust established by the Company or any of its
Subsidiaries;
(C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet
upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Indebtedness of the Company or
its Restricted Subsidiaries issued after the Issue Date that is
convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash or
other property distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); and
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans or advances or other transfers
of assets to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investment") not to exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments.
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(b) The provisions of the foregoing paragraph (a) will not prohibit:
(i) any purchase or redemption of Capital Stock of the Company or
Subordinated Obligations made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan or other trust established
by the Company or any of its Subsidiaries); provided, however, that (A)
such purchase or redemption will be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale
will be excluded from clause (3)(B) of paragraph (a) above;
(ii) any purchase or redemption of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred pursuant
to paragraph (b) of the covenant described under "--Limitation on
Indebtedness;" provided, however, that such purchase or redemption will be
excluded in the calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under "--
Limitation on Sales of Assets and Subsidiary Stock;" provided, however,
that such purchase or redemption will be excluded in the calculation of the
amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with this
covenant; provided, however, that such dividend will be included in the
calculation of the amount of Restricted Payments; or
(v) the repurchase of shares of, or options to purchase shares of, common
stock of the Company or any of its Subsidiaries from employees, former
employees, directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former employees,
directors or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto) approved
by the Board of Directors under which such individuals purchase or sell or
are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases shall not
exceed (Pounds)1.0 million in any calendar year; provided further, however,
that such repurchases shall be excluded in the calculation of the amount of
Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company or any Restricted
Subsidiary, (ii) make any loans or advances to the Company or any Restricted
Subsidiary or (iii) transfer any of its property or assets to the Company or
any Restricted Subsidiary, except:
(1) any encumbrance or restriction arising under applicable law;
(2) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the Issue Date;
(3) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred in
contemplation of, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was otherwise acquired by the Company) and
outstanding on such date;
(4) any encumbrance or restriction pursuant to an agreement constituting
Refinancing Indebtedness of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) or (2)
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of this covenant or this clause (3) or contained in any amendment to an
agreement referred to in clause (1) or (2) of this covenant or this clause
(3); provided, however, that the encumbrances and restrictions contained in
any such refinancing agreement or amendment are no less favorable to the
Noteholders than encumbrances and restrictions contained in such
agreements;
(5) in the case of clause (iii), any encumbrance or restriction (A) that
restricts in a customary manner the subletting, assignment or transfer of
any property or asset that is subject to a lease, license or similar
contract, (B) by virtue of any transfer of, agreement to transfer, option
or right with respect to, or Lien on, any property or assets of the Company
or any Restricted Subsidiary not otherwise prohibited by the Indenture or
(C) contained in security agreements or mortgages securing Indebtedness of
a Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security agreements
or mortgages;
(6) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(7) Purchase Money Indebtedness and Capital Lease Obligations permitted
by clause (viii) of the covenant described under "--Limitation on
Indebtedness."
Nothing contained in this covenant shall prevent the Company from entering
into any agreement or instrument providing for the incurrence of Permitted
Liens, nor shall this covenant be deemed to restrict the sale or other
disposition of property or assets of the Company or any of its Restricted
Subsidiaries in compliance with the other provisions of the Indenture.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value of the
shares and assets subject to such Asset Disposition;
(ii) at least 80% of the consideration thereof received by the Company or
such Restricted Subsidiary is in the form of cash or Cash Equivalents; and
(iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as
the case may be):
(A) first, to the extent the Company elects (or is required by the
terms of any Senior Indebtedness or Indebtedness (other than Preferred
Stock) of a Wholly Owned Subsidiary), to prepay, repay or purchase
Senior Indebtedness (other than the Notes) or Indebtedness (other than
Preferred Stock) of a Wholly Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within
365 days after the later of the date of such Asset Disposition or the
receipt of such Net Available Cash;
(B) second, to the extent of the balance of Net Available Cash after
application in accordance with clause (A), to the extent the Company or
such Restricted Subsidiary elects, to reinvest in Additional Assets
(including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by the Company
or another Restricted Subsidiary) within 365 days from the later of
such Asset Disposition or the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an
Offer (as defined below) to purchase Notes pursuant to and subject to
the conditions set forth in section (b) of this covenant, and
(D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C), to (x)
acquire Additional Assets (other than Indebtedness and Capital Stock)
or (y) prepay, repay or purchase Indebtedness of the
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Company (other than Indebtedness owed to an Affiliate of the Company and
other than Disqualified Stock of the Company) or Indebtedness of any
Restricted Subsidiary (other than Indebtedness owed to the Company or an
Affiliate of the Company), in each case described in this clause (D)
within one year from the receipt of such Net Available Cash or, if the
Company has made an Offer pursuant to clause (C), six months from the
date such Offer is consummated;
provided, however that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A), (C) or (D) above, the
Company or such Restricted Subsidiary will retire such Indebtedness and
will cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid or
purchased.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries will not be required to apply any Net Available
Cash in accordance with this covenant except to the extent that the aggregate
Net Available Cash from all Asset Dispositions that is not applied in
accordance with this covenant exceeds (Pounds)3.0 million.
For the purposes of this covenant, the following are deemed to be cash: (x)
the assumption of Indebtedness of the Company (other than Disqualified Stock of
the Company) or any Restricted Subsidiary and the release of the Company or
such Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition and (y) securities received by the
Company or any Restricted Subsidiary from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C) of this covenant, the Company will be required
to purchase Notes tendered pursuant to an offer by the Company for the Notes
(the "Offer") at a purchase price of 100% of their principal amount plus
accrued interest and Additional Amounts, if any, to the date of purchase (and,
in the case of Definitive Notes, subject to the right of Holders of record on a
record date to receive interest on the relevant interest payment date and
Additional Amounts, if any, in respect thereof) in accordance with the
procedures (including prorationing in the event of oversubscription) set forth
in the Indenture. If the aggregate purchase price of Notes tendered pursuant to
the Offer is less than the Net Available Cash allotted to the purchase of the
Notes, the Company will apply the remaining Net Available Cash in accordance
with clause (a)(iii)(D) of this covenant. The Company will not be required to
make an Offer for Notes pursuant to this covenant if the Net Available Cash
available therefor (after application of the proceeds as provided in clauses
(A) and (B) of this covenant section (a)(iii)) is less than (Pounds)3.0 million
for any particular Asset Disposition (which lesser amount will be carried
forward for purposes of determining whether an Offer is required with respect
to the Net Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations, including any securities laws of the U.K. and Luxembourg and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Notes are listed, to the extent such laws or regulations are
applicable, in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter
into or conduct any transaction (including, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
the Company (an "Affiliate Transaction") on terms (i) that are less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such
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transaction in arm's-length dealings with a Person who is not such an
Affiliate and (ii) that, in the event such Affiliate Transaction involves an
aggregate amount in excess of $1.0 million, are not in writing and have not
been approved by a majority of the members of the Board of Directors having no
personal stake in such Affiliate Transaction and who are not employed by or
otherwise associated with such Affiliate. In addition, if such Affiliate
Transaction involves an amount in excess of $5.0 million, a fairness opinion
must be provided by an independent internationally recognized appraisal or
investment banking firm.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described
under "--Limitation on Restricted Payments," (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) loans or advances to
employees in the ordinary course of business in accordance with past practices
of the Company or its Subsidiaries, but in any event not to exceed (Pounds)1.0
million in the aggregate outstanding at any one time, (iv) the payment of
reasonable fees and the provision of reasonable indemnities in the ordinary
course of business to directors of and consultants to the Company or its
Subsidiaries who are not employees of the Company or its Subsidiaries, (v) any
transaction between the Company and a Wholly Owned Subsidiary or between
Wholly Owned Subsidiaries, (vi) transactions pursuant to written agreements as
in effect on the Issue Date, (vii) any issuance of Capital Stock by the
Company, and (viii) employment agreements providing for reasonable
compensation and reasonable indemnities in the ordinary course of business.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company will not sell any Capital Stock of a Restricted
Subsidiary, and will not permit any Restricted Subsidiary, directly or
indirectly, to issue, sell or otherwise dispose of any of its Capital Stock
except: (i) to the Company or a Wholly Owned Subsidiary, or (ii) if,
immediately after giving effect to such issuance or sale, neither the Company
nor any of its Subsidiaries own any Capital Stock of such Restricted
Subsidiary. The proceeds of any sale of such Capital Stock permitted by
section (ii) above will be treated as Net Available Cash from an Asset
Disposition and must be applied in accordance with the terms of the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock."
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist
any Lien, other than Permitted Liens, on any of its property or assets
(including Capital Stock), whether owned on the Issue Date or thereafter
acquired, securing any obligation, unless contemporaneously therewith (or
prior thereto) effective provision is made to secure the Notes on an equal and
ratable basis with such obligation for so long as such obligation is so
secured; provided, however, that the Company will not permit any Lien securing
any Subordinated Obligation or Preferred Stock of the Company.
Limitation on Guarantees of Company Indebtedness. The Company will not
permit any Restricted Subsidiary to Guarantee any Indebtedness of the Company
or to secure any Indebtedness of the Company with a Lien on the assets of such
Restricted Subsidiary, unless contemporaneously therewith (or prior thereto)
effective provision is made to Guarantee or secure the Notes, as the case may
be, on an equal and ratable bases with such Guarantee or Lien for so long as
such Guarantee or Lien remains effective, and in an amount equal to the amount
of Company Indebtedness so Guaranteed or secured; provided, however, that any
Guarantee by a Restricted Subsidiary of a Subordinated Obligation of the
Company shall be subordinated and junior in right of payment to the
contemporaneous Guarantee of the Notes by such Restricted Subsidiary; and
provided, further, that the Company will not permit a Restricted Subsidiary to
secure any Subordinated Obligation of the Company or to Guarantee or secure
any Preferred Stock of the Company.
Reports to Holders. Whether or not required by the rules and regulations of
the Commission, the Company shall furnish to the holders of the Notes (i) all
annual and quarterly financial information that would be required to be
contained in a filing with the Commission on Forms 20-F and 10-Q (or any
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successor forms) if the Company were required to file such Forms (except that
quarterly financial information need not contain any reconciliation to U.S.
generally accepted accounting principles), including a "Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
and, with respect to the annual financial information, a report thereon by the
Company's certified independent accounts and (ii) all information that would
be required to be contained in current reports that would be required to be
filed with the Commission on Form 8-K if the Company were required to file
such reports; provided, however, that (x) such quarterly financial information
may be prepared in accordance with generally accepted accounting principles in
the U.K., shall be furnished within 60 days following the end of each fiscal
quarter of the Company and may be provided in a report on Form 6-K, (y) such
annual financial information shall be furnished within 120 days following the
end of the fiscal year of the Company and (z) such information that would be
required to be contained in a report on Form 8-K may be provided in a report
on Form 6-K. In addition, whether or not required by the rules and regulations
of the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission
will not accept such a filing). In addition, the Company shall furnish to the
Holders of the Notes and to prospective investors, upon the requests of such
Holders, any information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act so long as the Notes are not freely transferable
under the Act by Persons not "affiliates" under the Securities Act.
Limitation on Lines of Business. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business, other than a Related
Business.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (a) the Company or such
Subsidiary would be entitled to (i) Incur Indebtedness in an amount equal to
the Attributable Debt with respect to such Sale/Leaseback Transaction pursuant
to the covenant described under "--Limitation on Indebtedness" and (ii) create
a Lien on such property securing such Attributable Debt without equally and
ratably securing the Notes pursuant to the covenant described under "--
Limitation on Liens;" (b) the net cash proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are
at least equal to the fair value (as determined in good faith by the Board of
Directors) of such property and (c) the transfer of such property is permitted
by, and the Company applies the proceeds of such transaction in compliance
with, the covenant described under "--Limitation on Sales of Assets and
Subsidiary Stock."
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
will be a corporation organized and existing under the laws of the England and
Wales or the United States of America, any state thereof or the District of
Columbia and the Successor Company (if not the Company) will expressly assume,
by an indenture supplemental to the Indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Notes and the Indenture; (ii) immediately after giving
effect to such transaction (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Restricted Subsidiary as a result
of such transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction), no Default will have
occurred and be continuing; (iii) immediately after giving effect to such
transaction, the Successor Company would be able to Incur an additional $1.00
of Indebtedness under paragraph (a) of the covenant described under "--
Limitation on Indebtedness;" (iv) immediately after giving effect to such
transaction, the Successor Company will have Consolidated Net Worth in an
amount which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; (v) the Company will have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each
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stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture; and (vi) the Company will have
delivered to the Trustee opinions of tax counsel reasonably acceptable to the
Trustee stating that (A) any payment of principal, redemption price or
purchase price of, premium (if any), Additional Amounts (if any) and interest
on the Notes by the Successor Company to a Holder (or beneficial owner, if not
a Holder) after the consolidation, merger, conveyance, transfer or lease of
assets will be exempt from the Taxes described and defined under "--
Withholding Taxes" and (B) no other taxes on income (including taxable capital
gains) will be payable under the laws of the U.K. or any other jurisdiction
where the Successor Issuer is or becomes located by a Holder (or beneficial
owner, if not a Holder) who is not and is not deemed to be a resident of the
U.K. or other jurisdiction where the Successor Company is or becomes located
and does not carry on a trade in the U.K. through a branch, agency or
permanent establishment to which the Notes of that Holder are attributable
(or, as the case may be, does not carry on any business activities through a
branch, agency or permanent establishment in such other jurisdiction where the
Successor Company is or becomes located) in respect of the acquisition,
ownership or disposition of Notes, including the receipt of principal, premium
(if any), Additional Amounts (if any) or interest paid pursuant to such Notes.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets will not be released from the obligation to pay
the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), (A) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company and (B) the Company may merge with
a Wholly-Owned Subsidiary incorporated solely for the purpose of
reincorporating the Company in another jurisdiction to realize tax or other
benefits.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on or Additional Amounts, if any, with respect to any Note
when due, continued for 30 days, (ii) a default in the payment of principal of
any Note when due at its Stated Maturity, upon redemption, upon required
repurchase, upon declaration or otherwise, (iii) the failure by the Company to
comply with its obligations under the covenant described under "--Merger and
Consolidation" above, (iv) the failure by the Company to comply for 30 days
after notice with any of its obligations under the covenants described under
"--Change of Control" or "--Certain Covenants" above (in each case, other than
the failure to purchase Notes when required), (v) the failure by the Company
to comply for 60 days after notice with its other agreements contained in the
Notes or the Indenture, (vi) the failure by the Company or any Subsidiary to
pay any Indebtedness within any applicable grace period after final maturity
or the acceleration of any such Indebtedness by the holders thereof because of
a default if the total amount of such Indebtedness unpaid or accelerated
exceeds (Pounds)7.5 million or its foreign currency equivalent (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of the Company or any Subsidiary (the "bankruptcy provisions")
or (viii) the rendering of any judgment or decree for the payment of money in
excess of (Pounds)7.5 million or its foreign currency equivalent against the
Company or any Subsidiary if (A) an enforcement proceeding thereon is
commenced or (B) such judgment or decree remains outstanding for a period of
60 days following such judgment and is not discharged, waived or stayed (the
"judgment default provision").
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
However, a Default under clauses (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Company of the Default and the Company does not
cure such Default within the time specified in clauses (iv) and (v) hereof
after receipt of such notice.
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If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the outstanding Notes by notice to the Company may declare the principal of
and accrued but unpaid interest and Additional Amounts, if any, on all the
Notes to be due and payable. Upon such a declaration, such principal and
interest will be due and payable immediately. If an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company
occurs, the principal of and interest and Additional Amounts, if any, on all
the Notes will become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders. Under certain
circumstances referred to in the Indenture, the Holders of a majority in
principal amount of the outstanding Notes may rescind any such acceleration
with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such
Holders have offered to the Trustee reasonable indemnity or security against
any loss, liability or expense. Except to enforce the right to receive payment
of principal, premium (if any), interest or Additional Amounts, if any, when
due, no Holder may pursue any remedy with respect to the Indenture or the
Notes unless (i) such Holder has previously given the Trustee notice that an
Event of Default is continuing, (ii) Holders of at least 25% in principal
amount of the outstanding Notes have requested the Trustee to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Notes have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to
taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must give to each Holder notice of the
Default within the earlier of 90 days after it occurs or 30 days after it is
known to the Trustee or written notice of it is received by the Trustee.
Except in the case of a Default in the payment of principal of, premium (if
any), interest or Additional Amounts, if any, on any Note, the Trustee may
withhold notice if and so long as a committee of its Trust Officers in good
faith determines that withholding notice is in the interests of the
Noteholders. In addition, the Company is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Company also is required to deliver to the Trustee, within
30 days after the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action the Company is
taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived without
notice to any Holder but with the consent of the Holders of a majority in
principal amount of the Notes then outstanding (in each case, including
consents obtained in connection with a tender offer or exchange offer for the
Notes). However, without the consent of each Holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose Holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of
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any Note, (iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described under "--
Optional Redemption" above, (v) make any Note payable in money other than that
stated in the Note, (vi) impair the right of any Holder to receive payment of
principal of and interest and Additional Amounts, if any, on such Holder's
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes, (vii)
make any change in the amendment provisions which require each Holder's
consent or in the waiver provisions or (viii) make any change in the
provisions of the Indenture described under "--Withholding Taxes" that
adversely affects the rights of any Holder of the Notes or amend the terms of
the Notes in the Indenture in a way that would result in a loss of an
exemption from any of the Taxes described thereunder or an exemption from any
obligation to withhold or deduct Taxes so described thereunder unless the
Company agrees to pay Additional Amounts, if any, in respect thereof.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the
Company under the Indenture, to provide for uncertificated Notes in addition
to or in place of certificated Notes (provided that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the Code, or
in a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code), to secure the Notes, to add to the covenants of the
Company for the benefit of the Noteholders or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any Holder or to comply with any requirement of the Commission
in connection with the qualification of the Indenture under the TIA.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to provide notice of such amendment to Noteholders briefly describing
such amendment. However, the failure to give such notice to all Noteholders,
or any defect therein, will not impair or affect the validity of the
amendment.
NOTICES
Notice regarding the Notes will be (i) if Global Notes are outstanding,
published in a leading newspaper having a general circulation in New York
(which is expected to be the Wall Street Journal) (and, if and so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock
Exchange shall so require, a newspaper having general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)) or (ii) in the case
of Definitive Notes, mailed to Holders by first-class mail at their respective
addresses as they appear on the registration books of the Registrar (and if
and so long as the Notes are listed on the Luxembourg Stock Exchange and the
rules of such Stock Exchange shall so require, published in a newspaper having
a general circulation in Luxembourg (which is expected to be the Luxemburger
Wort)). If and so long as the Notes are listed on any other securities
exchange, notices will also be given in accordance with any applicable
requirements of such securities exchange. Notices given by publication will be
deemed given on the first date on which publication is made and notices given
by first-class mail, postage prepaid, will be deemed given five calendar days
after mailing.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations
specified in the Indenture. The Company at any time may terminate its
obligations under the covenants described under "--Change of Control,"
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"--Certain Covenants," the operation of the cross acceleration provision, the
bankruptcy provisions with respect to Subsidiaries and the judgment default
provision described under "--Defaults" above and the limitations contained in
clauses (iii) and (iv) under "--Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because
of an Event of Default with respect thereto and the Company will not be
required to repurchase the Notes upon a Change of Control. If the Company
exercises its covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in clause (iv), (vi),
(vii) (with respect only to Subsidiaries) or clause (viii) under "--Defaults"
above or because of the failure of the Company to comply with clause (iii) or
(iv) under "--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee cash in Deutsche
Marks or Federal Republic of Germany Obligations for the payment of principal,
premium (if any) and interest on the Notes to redemption or maturity, as the
case may be, and must comply with certain other conditions, including delivery
to the Trustee of Opinions of Counsel to the effect that (i) Holders of the
Notes will not recognize any income, gain or loss for U.S. Federal income tax
purposes or income tax purposes as a result of such deposit and defeasance and
will be subject to U.S. Federal income tax and U.K. income tax on the same
amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of
legal defeasance only, such Opinion of Counsel as to U.S. Federal income tax
must be based on a ruling of the Internal Revenue Service or other change in
applicable U.S. Federal income tax law), (ii) the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally under any applicable
English or U.S. Federal or state law, and that the Trustee has a perfected
security interest in such trust funds for the ratable benefit of the Holders
and (iii) payments from the defeasance trust will be free and exempt from any
and all withholding and other income taxes of whatever nature imposed or
levied by or on behalf of the U.K. or any political subdivision thereof or
therein having the power to tax.
WITHHOLDING TAXES
All payments made by the Company on the Notes (whether or not in the form of
Definitive Notes) will be made without withholding or deduction for, or on
account of, any present or future taxes, duties, assessments or governmental
charges of whatever nature (collectively, "Taxes") imposed or levied by or on
behalf of the U.K. or any political subdivision thereof or any authority
having power to tax therein (each a "U.K. Tax Authority"), unless the
withholding or deduction of such Taxes is then required by law. If any
deduction or withholding for, or on account of, any Taxes of any U.K. Tax
Authority shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest, liquidated damages or premium, the Company will pay such additional
amounts (the "Additional Amounts") as may be necessary in order that the net
amounts received in respect of such payments by the Holders of the Notes or
the Trustee, as the case may be, after such withholding or deduction, equal
the respective amounts which would have been received in respect of such
payments in the absence of such withholding or deduction; except that no such
Additional Amounts will be payable with respect to:
(i) in the case of Notes listed on a Recognized Stock Exchange at the time
such Additional Amounts would be payable, any payments on a Note held by or on
behalf of a Holder or a beneficial owner who is liable for such Taxes in
respect of such Note by reason of the Holder or beneficial owner having some
connection with the U.K. (including being a citizen or resident or national
of, or carrying on a business or maintaining a permanent establishment in, or
being physically present in, the U.K.)
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other than by the mere holding of such Note or enforcement of rights
thereunder or the receipt of payments in respect thereof;
(ii) in the case of Notes listed on a Recognized Stock Exchange at the time
such Additional Amounts would be payable, any Taxes that are imposed or
withheld as a result of a change in law (including regulations, administrative
practice or official interpretations thereof) after the Issue Date where such
withholding or imposition is by reason of the failure of the Holder or
beneficial owner of the Note to comply with any request by the Company to
provide information concerning the nationality, residence or identity of such
Holder or beneficial owner or to make any declaration or similar claim or
satisfy any information or reporting requirement, which is required or imposed
by a statute, treaty, regulation, protocol, or administrative practice of the
taxing jurisdiction as a precondition to exemption from all or part of such
Taxes;
(iii) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the U.K. (unless by
reason of the Company's actions presentment could not have been made
elsewhere); or
(iv) any Note presented for payment (where Notes are in the form of
Definitive Notes and presentation is required) more than 30 days after the
relevant payment is first made available for payment to the Holder (except to
the extent that the Holder would have been entitled to Additional Amounts had
the Note been presented on the last day of such 30 day period).
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, it would not have been entitled
to payment of Additional Amounts by reason of clauses (i) to (iv) inclusive
above.
Upon request, the Company will provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts.
Copies of such documentation will be made available to the Holders upon
request.
The Company will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
Notes or any other document or instrument referred to therein, or the receipt
of any payments with respect to the Notes, excluding any such taxes, charges
or similar levies imposed by any jurisdiction outside of the U.K., the United
States of America or any jurisdiction in which a Paying Agent is located,
other than those resulting from, or required to be paid in connection with,
the enforcement of the Notes or any other such document or instrument
following the occurrence of any Event of Default with respect to the Notes.
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar (in the case of Definitive Notes) and
Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CURRENCY INDEMNITY
Deutsche Marks is the sole currency of account and payment for all sums
payable by the Company under or in connection with the Notes, including
damages. Any amount received or recovered in a currency other than Deutsche
Marks (whether as a result of, or the enforcement of, a judgment or order of a
court of any jurisdiction, in the winding-up or dissolution of the Company or
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otherwise) by any holder of a Note in respect of any sum expressed to be due
to it from the Company shall only constitute a discharge to the Company to the
extent of the Deutsche Mark amount which the recipient is able to purchase
with the amount so received or recovered in that other currency on the date of
that receipt or recovery (or, if it is not practicable to make that purchase
on that date, on the first date on which it is practicable to do so). If that
Deutsche Mark amount is less than the Deutsche Mark amount expressed to be due
to the recipient under any Note, the Company shall indemnify the recipient
against any loss sustained by it as a result. In any event, the Company shall
indemnify the recipient against the cost of making any such purchase. For the
purposes of this paragraph, the holder of a Note shall certify in a
satisfactory manner to the Trustee (indicating the sources of information
used) that it would have suffered a loss had an actual purchase of Deutsche
Marks been made with the amount so received in that other currency on the date
of receipt or recovery (or, if a purchase of Deutsche Marks on such date had
not been practicable due to currency market conditions generally, on the first
date on which it would have been practicable, it being required that the need
for a change of date be certified in the manner mentioned above). These
indemnities constitute a separate and independent obligation from the
Company's other obligations, shall give rise to a separate and independent
cause of action, shall apply irrespective of any indulgence granted by any
holder of a Note and shall continue in full force and effect despite any other
judgement, order, claim or proof for a liquidated amount in respect of any sum
due under any Note. But see "--Substitution of Currency."
CERTAIN DEFINITIONS
"Additional Assets" means (i) any tangible property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; or (iv) any reimbursement to the Company or its
Restricted Subsidiaries for expenditures made, and costs incurred, to repair,
rebuild, replace or restore property subject to loss, damage or taking to the
extent that the Net Proceeds consist of insurance proceeds received on account
of such loss, damage or taking; provided, however, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under "--Certain
Covenants-- Limitation on Transactions with Affiliates" and "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock (on a fully diluted basis)
of the Company or of rights or warrants to purchase such Voting Stock (whether
or not currently exercisable) and any Person who would be an Affiliate of any
such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the
purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory in
the ordinary course of business, (iii) the disposition of all or substantially
all of the assets of the Issuer in the manner permitted pursuant to the
provisions described under the caption "--Merger and Consolidation," (iv) for
purposes of the provisions described under "--Certain Covenants--Limitation
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on Sales of Assets and Subsidiary Stock" only, a disposition subject to the
covenant described under "--Certain Covenants Limitation on Restricted
Payments," (v) grant of a non-exclusive license of intellectual property in
the ordinary course of business, (vi) the surrender or waiver of contract
rights or settlement, release of surrender of tort or other claims and (vii)
the sale or other disposition of the Leicester Plant, other than to an
Affiliate of the Company.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Credit Agreement, the other Senior Credit Documents and any Refinancing
Indebtedness with respect thereto, as amended from time to time, including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations, guarantees
and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means as of any date, an amount equal to the sum of (i) 60%
of the aggregate book value of inventory plus (ii) 85% of the aggregate book
value of all accounts receivable (net of bad debt reserves) of the Company and
its Restricted Subsidiaries on a Consolidated basis, as determined in
accordance with U.K. GAAP consistently applied less (iii) the outstanding
principal amount of all Indebtedness that is permitted to be outstanding by
virtue of clause (iv) of the covenant described under "--Limitation on
Indebtedness," including any Refinancing Indebtedness in respect thereof. To
the extent that information is not available as to the amount of inventory or
accounts receivable as of a specific date, the Company shall use the most
recent available information for purposes of calculating the Borrowing Base.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in Luxembourg, the State of New York, Frankfurt or
London or a place of payment are authorized or required by law to close.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with U.K. GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with U.K. GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the government of the United States or the U.K. or
any agency or instrumentality thereof, having maturities
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of not more than one year from the date of acquisition; (ii) marketable
general obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition thereof, having a credit rating of "A" or better from either
Standard & Poor's Ratings Service, a division of the McGraw-Hill Companies,
Inc., or Moody's Investors Service, Inc.; (iii) certificates of deposit, time
deposits, eurodollar time deposits, overnight bank deposits or bankers'
acceptances having maturities of not more than one year from the date of
acquisition thereof issued by any commercial bank the long-term debt of which
is rated at the time of acquisition thereof at least "A" or the equivalent
thereof by Standard & Poor's Ratings Service, a division of the McGraw-Hill
Companies, Inc., or "A" or the equivalent thereof by Moody's Investors
Service, Inc., and having capital and surplus in excess of $500 million; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i), (ii) and (iii) entered into
with any bank meeting the qualifications specified in clause (iii) above;
(v)commercial paper rated at the time of acquisition thereof at least "A-2" or
the equivalent thereof by Standard & Poor's Ratings Service, a division of the
McGraw-Hill Companies, Inc., or "P-2" or the equivalent thereof by Moody's
Investors Service, Inc., or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease
publishing ratings of investments, and in either case maturing within 270 days
after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses
(i) through (v) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Texon International plc, a public limited company
incorporated under the laws of England and Wales.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination in respect of the most recent such quarter to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided,
however, that (A) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (B) if since the beginning of such
period the Company or any Restricted Subsidiary shall have made any Asset
Disposition, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such
period and Consolidated Interest Expense for such period shall be reduced by
an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent
the Company and its continuing Restricted Subsidiaries are no longer liable
for such Indebtedness after such sale), (C) if since the beginning of such
period the Company or any Restricted Subsidiary (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary (or any Person that
becomes a Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all
of an operating unit of a business, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
(including the
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Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (D) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary or was merged
with or into the Company or any Restricted Subsidiary since the beginning of
such period) shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant to
clause (B) or (C) above if made by the Company or a Restricted Subsidiary
during such period, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the first day of
such period. For purposes of this definition, whenever pro forma effect is to
be given to an acquisition of assets, the amount of income or earnings related
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
Officer of the Company after consultation with the independent certified
public accountants of the Company. If any Indebtedness bears a floating rate
of interest and is being given pro forma effect, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination
in excess of 12 months).
"Consolidated Current Liabilities" means, as of any date of determination,
the aggregate amount of liabilities of the Company and its consolidated
Restricted Subsidiaries which may properly be classified as current
liabilities (including taxes accrued as estimated), on a consolidated basis,
after eliminating (a) all intercompany items between the Company and any
Restricted Subsidiary and (b) all current maturities of long-term
Indebtedness, all as determined in accordance with U.K. GAAP consistently
applied.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Restricted Subsidiaries, plus, to the extent
Incurred by the Company and its Restricted Subsidiaries in such period but not
included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations and Attributable Debt, (ii) amortization of debt
discount and debt issuance cost, (iii) capitalized interest, (iv) noncash
interest expense, (v) commissions, discounts and other fees and charges with
respect to letters of credit (other than with respect to trade letters of
credit in the ordinary course of business) and bankers' acceptance financing,
(vi) interest accruing on any Indebtedness of any other Person to the extent
such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary;
provided that payment of such amounts by the Company or any Restricted
Subsidiary is being made to, or is sought by, the holders of such Indebtedness
pursuant to such Guarantee, (vii) net costs associated with Hedging
Obligations (including amortization of fees), other than costs associated with
Currency Agreements made to hedge currency exposure in connection with trade
receivables or payables and purchases of supplies in the ordinary course of
business, (viii) payments in respect of Preferred Stock of Restricted
Subsidiaries of the Company or Disqualified Stock of the Company held by
Persons other than the Company or a Wholly Owned Subsidiary, and (ix) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust; provided, however, that there shall be
excluded therefrom any such interest expense of any Unrestricted Subsidiary to
the extent the related Indebtedness is not Guaranteed or paid by the Company
or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income
(loss) of any Person if such Person is not a Restricted Subsidiary, except
that (A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the
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Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person (other than an Unrestricted
Subsidiary) for such period shall be included in determining such Consolidated
Net Income; (ii) any net income (loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition; (iii) any net income (loss) of any Restricted
Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of other distributions
(whether of capital or by means of intercompany loans, advances or transfers)
by such Restricted Subsidiary, directly or indirectly, to the Company, except
that (A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash that could have been distributed by such Restricted Subsidiary
during such period to the Company or another Restricted Subsidiary as a
dividend or other distribution (whether of capital or by means of an
intercompany loan, advance or transfer) (subject, in the case of a dividend or
other distribution that could have been made to another Restricted Subsidiary,
to the limitation contained in this clause) and (B) the Company's equity in a
net loss of any such Restricted Subsidiary for such period shall be included
in determining such Consolidated Net Income; (iv) any gain or loss realized
upon the sale or other disposition of any asset of the Company or its
consolidated Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) that is not sold or otherwise disposed of in the ordinary course
of business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person; (v) any extraordinary gain or
loss; and (vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purpose of the covenant described under
"Certain Covenants--Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the sum of the amounts that would appear on a consolidated balance sheet of
the Company and its consolidated Restricted Subsidiaries as the total assets
(less accumulated depreciation and amortization, allowances for doubtful
receivables, other applicable reserves and other properly deductible items) of
the Company and its consolidated Restricted Subsidiaries, determined on a
consolidated basis in accordance with U.K. GAAP consistently applied, and
after deducting therefrom Consolidated Current Liabilities and, to the extent
otherwise included, the amounts of (without duplication): (a) the excess of
cost over fair market value of assets or businesses acquired; (b) any
revaluation or other write-up in book value of assets subsequent to the last
day of the fiscal quarter of the Company immediately preceding the Issue Date
as a result of a change in the method of valuation in accordance with U.K.
GAAP; (c) unamortized debt discount and expenses and other unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, licenses, organization or developmental expenses and other
intangible items; (d) minority interests in consolidated Subsidiaries held by
Persons other than the Company or a Restricted Subsidiary; (e) treasury stock;
(f) cash set aside and held in a sinking or other analogous fund established
for the purpose of redemption or other retirement of Capital Stock to the
extent such obligation is not reflected in Consolidated Current Liabilities;
and (g) Investments in and assets of Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated
value of all outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B)
any amounts attributable to Disqualified Stock.
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"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with U.K. GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in a Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Corporate Trust Office" means the office at which the Trustee's corporate
trust business is principally administered, which at the date hereof is
located at 101 Barclay Street, Floor 21 West, New York, NY 10286.
"Credit Agreement" means the Credit Agreement as amended, waived or
otherwise modified from time to time, to be executed by and among the Company,
Chase Manhattan plc, The Chase Manhattan Bank and Chase Manhattan
International Limited (except to the extent that any such amendment, waiver or
other modification thereto would be prohibited by the terms of the Indenture,
unless otherwise agreed to by the Holders of at least a majority in aggregate
principal amount of Notes at the time outstanding).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default, all as described under "Defaults" above.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense and (iv) amortization expense, in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Subsidiary
of the Company shall be added to Consolidated Net Income to compute EBITDA
only to the extent (and in the same proportion) that the net income of such
Subsidiary was included in calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Republic of Germany Obligations" means securities that are direct
and unconditional obligations of the Federal Republic of Germany or any of its
states (Bundeslander), as defined in Section 1807 No. 2 of the German Civil
Code (Burgerliches Gesetzbuch), as from time to time amended, and are not
callable or redeemable at the option of the issuer thereof.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of
any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or other obligation of such
other Person (whether arising by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for
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collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means (i) in the case of Global Notes, the bearer
thereof which will initially be the Book-Entry Depositary and (ii) in the case
of Definitive Notes, the Person in whose name a Note is registered on the
Registrar's books.
"Incur" means to issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Person at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto); (iv)
all obligations of such Person to pay the deferred and unpaid purchase price
of property or services (except Trade Payables), which purchase price is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services; (v) all
Capitalized Lease Obligations and all Attributable Debt of such Person; (vi)
the amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to
any Subsidiary of the Company, the maximum liquidation preference (or, if
greater, maximum mandatory redemption or repurchase price) with respect to any
Preferred Stock (but excluding, in each case, any accrued dividends except to
the extent such dividends increase such preference (or price)); (vii) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided, however,
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness of such other Persons; (viii) all Indebtedness of
other Persons to the extent Guaranteed by such Person; and (ix) to the extent
not otherwise included in this definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date.
"Initial Purchasers" means Chase Manhattan Bank AG, Chase Securities Inc.
and Chase Manhattan International Limited.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar
agreement or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person. For purposes of the
definition of "Unrestricted Subsidiary" and the covenant described under "--
Certain Covenants--Limitation on Restricted Payments," (i) "Investment" shall
include the portion (proportionate to the
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Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment"
in such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the
fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Leicester Plant" means the real property and related equipment owned by
Texon UK Limited located in Leicester, England.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise) but only as and
when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations
relating to the properties or assets that are the subject of such Asset
Disposition or received in any other noncash form) therefrom, in each case net
of (i) all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all Federal, state, provincial, foreign and local
taxes required to be paid or accrued as a liability under U.K. GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by
its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law be repaid out of the proceeds from such
Asset Disposition, (iii) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition, (iv) the deduction of appropriate amounts to
be provided by the seller as a reserve, in accordance with U.K. GAAP, against
any liabilities associated with the assets disposed of in such Asset
Disposition and retained by the Company or any Restricted Subsidiary after
such Asset Disposition and (v) any portion of the purchase price from an Asset
Disposition placed in escrow (whether as a reserve for adjustment of the
purchase price, for satisfaction of indemnities in respect of such Asset
Disposition or otherwise in connection with such Asset Disposition); provided,
however, that upon the termination of such escrow, Net Available Cash shall be
increased by any portion of funds therein released to the Company or any
Restricted Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the proceeds in cash or Cash Equivalents of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees or expenses
actually incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Officer" means the Chairman of the Board, the Chief Executive, the Finance
Director, any executive director or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. Unless otherwise required by the TIA, the counsel
may be an employee of or counsel to the Company or the Trustee.
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"Permitted Holders" means Apax Ventures IV, Apax Ventures IV International
Partners L.P., Apax European Buy-In Fund International Partners L.P., Apax
European Buy-In Fund, Apax CR III or Chase Equity Associates L.P., any of
their respective Affiliates, and any limited partnership, investment trust or
investment fund which in each case is managed or advised by any of Apax
Partners & Co. Strategic Investors Limited, Apax Partners & Co. Ventures
Limited and Chase Capital Partners or any of their respective Affiliates; and
any Person acting in the capacity of an underwriter in connection with a
public or private offering of the Company's Capital Stock.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary; provided, however,
that the primary business of such Restricted Subsidiary is a Related Business;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms; provided, however, that such trade terms may include such concessionary
trade terms as the Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary and not exceeding (Pounds)1.0 million in the aggregate
outstanding at any one time; (vii) stock, obligations or securities received
in settlement of debts created in the ordinary course of business and owing to
the Company or any Restricted Subsidiary or in satisfaction of judgments;
(viii) a joint venture or other entity principally engaged in a Related
Business, provided, however, that the aggregate amount of all such Investments
under this clause (viii) shall not exceed (Pounds)2.0 million; and (ix) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under "--Certain Covenants--Limitation on Sales of Assets
and Subsidiary Stock."
"Permitted Liens" means, with respect to any Person, (a) pledges or deposits
by such Person under workmen's compensation laws, unemployment insurance laws
or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government
bonds to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes, assessments, governmental charges or
claims or import duties or for the payment of rent, government contracts,
performance and return of money bonds and other obligations of a like nature,
in each case Incurred in the ordinary course of business; (b) Liens imposed by
law, such as carriers', warehousemen's, landlord's, suppliers', materialmen's,
repairmen's and mechanics' Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings or other Liens arising out
of judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review; (c)
Liens for property taxes not yet due or payable or subject to penalties for
non-payment and which are being contested in good faith and by appropriate
proceedings; provided that any reserve or other appropriate provision required
in accordance with U.K. GAAP shall have been made therefor; (d) Liens in favor
of issuers of surety bonds or letters of credit issued pursuant to the request
of and for the account of such Person in the ordinary course of its business;
(e) minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which were not Incurred in connection with Indebtedness and which do not in
the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the
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business of such Person; (f) Liens securing Indebtedness Incurred to finance
the construction, purchase or lease of, or repairs, improvements or additions
to, property; provided, however, that the Lien may not extend to any other
property owned by the Company or any Restricted Subsidiary at the time the
Lien is Incurred, and the Indebtedness secured by the Lien may not be Incurred
more than 365 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation
of the property subject to the Lien; (g) Liens existing on the Issue Date; (h)
Liens on property or shares of stock of a Person at the time such Person
becomes a Subsidiary; provided, however, such Liens are not created, Incurred
or assumed in connection with, or in contemplation of, such other Person
becoming such a Subsidiary; provided further, however, that such Liens may not
extend to any other property owned by the Company or any Restricted
Subsidiary; (i) Liens on property at the time the Company or a Restricted
Subsidiary acquired the property, including any acquisition by means of a
merger or consolidation with or into the Company or any Restricted Subsidiary;
provided, however, that such Liens are not created or Incurred in connection
with, or in contemplation of, such acquisition; provided further, however,
that the Liens may not extend to any other property owned by the Company or
any Restricted Subsidiary; (j) Liens securing Indebtedness or other
obligations of a Restricted Subsidiary owing to the Company or a Wholly Owned
Subsidiary; (k) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the Indenture, secured by a Lien
on the same property securing such Hedging Obligations; (l) Liens to secure
any refinancing, refunding, extension, renewal or replacement (or successive
refinancings, refundings, extensions, renewals or replacements) as a whole, or
in part, of any Indebtedness secured by any Lien referred to in the foregoing
clauses (f), (g), (h) and (i); provided, however, that (x) such new Lien shall
be limited to all or part of the same property that secured the original Lien
(plus improvements on such property) and (y) the Indebtedness secured by such
Lien at such time is not increased to any amount greater than the sum of (A)
the outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (f), (g), (h) or (i) at the time the
original Lien became a Permitted Lien under the Indenture and (B) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement; (m) Liens in favor
of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (n)
judgment and attachment Liens not giving rise to an Event of Default; (o)
leases or subleases granted to others in the ordinary course of business; (p)
Liens arising out of consignment or similar arrangements for the sale of goods
entered into by the Company or its Restricted Subsidiaries in the ordinary
course of business; (q) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (r) Liens granted by the Company on the
stock of United Texon Limited securing Indebtedness of the Company under the
Revolving Facility; (s) Liens granted by the Company securing Indebtedness of
the Company permitted under clauses (b) (iii) or (viii) of "Certain
Covenants--Limitations on Indebtedness," or securing Refinancing Indebtedness
in respect thereof; (t) Liens securing Indebtedness (other than Preferred
Stock) of a Restricted Subsidiary permitted under clause (a) or clauses
(b)(i), (iv), (v), (vi), (vii), (viii) or (ix) of "Certain Covenants--
Limitations on Indebtedness" and (u) Liens securing aggregate Indebtedness
outstanding from time to time not in excess of 10.0% of Consolidated Net
Tangible Assets.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
ordinary shares of the Company pursuant (i) to an effective registration
statement under the Securities Act or (ii) a placement
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outside the United States involving the distribution of an offering circular
to at least 100 bona fide prospective purchasers and listing of such ordinary
shares on the Luxembourg Stock Exchange or other Recognized Stock Exchange (a
"Qualified Placement").
"Public Market" means any time after (i) a Public Equity Offering has been
consummated and (ii)at least 15% of the total issued and outstanding ordinary
shares of the Company has been distributed by means of an effective
registration statement under the Securities Act or a Qualified Placement.
"Purchase Agreement" means the agreement for the purchase of DM 245 million
principal amount of Senior Notes between the Company and the Initial
Purchasers dated January 27, 1998.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations with
respect to the acquisition of an asset in the ordinary course of business, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such
asset, including additions and improvements; provided, however, that any Lien
arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset is
attached; and provided further, that such Indebtedness is Incurred within 180
days after such acquisition by the Company or Restricted Subsidiary of such
asset and does not exceed the lesser of the fair market value or the purchase
price of such asset.
"Recognized Stock Exchange" means a recognized stock exchange within the
meaning of Section 841 of the U.K. Income and Corporation Taxes Act of 1988.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and
"refinanced" shall have a correlative meaning) any Indebtedness existing on
the date of the Indenture or Incurred in compliance with the Indenture
(including Indebtedness of the Company that refinances Indebtedness of any
Restricted Subsidiary (to the extent permitted in the Indenture) and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is
equal to or greater than the Average Life of the Indebtedness being refinanced
and (iii) such Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if issued
with original issue discount, the aggregate accreted value) then outstanding
of the Indebtedness being refinanced; provided further, however, that
Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted
Subsidiary that refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary to
the businesses of the Company and the Restricted Subsidiaries as conducted on
the Issue Date.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Revolving Facility" means the Revolving Facility under the Credit Agreement
(as defined therein).
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"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person, other than leases between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Credit Documents" means the collective reference to the Credit
Agreement and the Security Documents (as defined in the Credit Agreement).
"Senior Indebtedness" means all Indebtedness of the Company including
principal of, premium (if any), accrued interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to the Company whether or not a claim for post-filing interest is
allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees and other amounts owing with respect to such
Indebtedness, whether outstanding on the Issue Date or thereafter Incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that the obligations constituting such
Indebtedness are not superior in right of payment to the Notes; provided,
however, that Senior Indebtedness shall not include (i) any obligation of the
Company to any Subsidiary of the Company, (ii) any liability for taxes owed or
owing by the Company, (iii) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (iv) any Indebtedness or
obligation of the Company which is subordinate or junior in any respect to any
other Indebtedness or obligation of the Company, including any Subordinated
Obligations, (v) any obligations with respect to any Capital Stock, or (vi)
any Indebtedness Incurred in violation of the Indenture.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) that is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of
such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the U.K. or the United States of America or any
agency thereof or obligations Guaranteed by the United States of America or
the U.K. or any agency thereof, (ii) investments in time deposit accounts,
certificates of deposit and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust Company which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $250,000,000 (or the
foreign currency equivalent thereof) and whose long-term debt is rated "A" (or
such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act), (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in clause (ii)
above, (iv) Investments in commercial paper, maturing not more than 90 days
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after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or
"A-1" (or higher) according to Standard and Poor's Ratings Service, a division
of The McGraw-Hill Companies, Inc. ("S&P"), and (v) investments in securities
with maturities of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing authority thereof, and
rated at least "A" by S&P or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)77aaa -77bbbb)
as in effect on the date of the Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Transactions" means the establishment of and initial drawings under the
Revolving Facility, the Offering and the Acquisition (including the use of the
proceeds of such financings and the payment of related fees and expenses).
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means any Vice President or any other officer or assistant
officer of the Trustee assigned by the Trustee to the Corporate Trust Office
to administer its corporate trust matters.
"U.K. GAAP" means accounting principles and practices generally accepted in
the U.K. and approved by the Institute of Chartered Accountants of England and
Wales or other applicable authority, as in effect on the Issue Date. All
ratios and comparisons contained in the Indenture shall be computed in
conformity with U.K. GAAP.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of (Pounds)10,000 or less or (B) if
such Subsidiary has consolidated assets greater than (Pounds)10,000, then such
designation would be permitted under the covenant entitled "Limitation on
Restricted Payments". The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"--Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the resolution of
the Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
of America (including any agency or instrumentality
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thereof) for the payment of which the full faith and credit of the United
States of America is pledged and which are not callable or redeemable at the
issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned
by the Company or another Wholly Owned Subsidiary.
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DESCRIPTION OF THE NOTE DEPOSITARY AGREEMENT
GENERAL
The Exchange Notes will be represented initially by the Global Exchange
Note, which will be issued in bearer form without coupons and which will
represent the aggregate principal amount of the outstanding Exchange Notes.
The Global Exchange Note will be deposited with The Bank of New York, as Book-
Entry Depositary pursuant to the terms of the Note Depositary Agreement. The
Book-Entry Depositary will issue a certificateless depositary interest
(representing a 100% interest in the underlying Global Exchange Note) to DTC
or its nominee. The summary of certain provisions of the Note Depositary
Agreement contained in this section does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Note Depositary Agreement, a copy of the form of which will
be available from the Company upon request.
Upon confirmation by DTC that the Book-Entry Depositary has custody of the
Global Exchange Note and upon acceptance by DTC of the certificateless
depositary interest pursuant to the Letter of Representations, DTC will record
beneficial interests in the Global Exchange Note. Book-Entry Interests will be
recorded in denominations of DM 1,000 and integral multiples thereof.
Ownership of Book-Entry Interests will be limited to Persons that have
accounts with DTC ("Participants") or Persons that hold interests in the Book-
Entry Interests through Participants ("Indirect Participants"), including, as
applicable, the Euroclear Operator, Cedel, banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with DTC,
either directly or indirectly. Indirect Participants shall also include
Persons that hold through such Indirect Participants. The Book-Entry Interests
will not be held in definitive form. Instead, DTC will credit, on its book-
entry registration and transfer system, the Participants' accounts with the
respective interests beneficially owned by such Participants. Ownership of
Book-Entry Interests will be shown on, and the transfer of these Book-Entry
Interests or the interests therein will be effected only through, records
maintained by DTC (with respect to interests of its Participants) and on the
records of Participants or Indirect Participants (with respect to interests of
Indirect Participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. The foregoing limitations may impair the ability to own,
transfer or pledge Book-Entry Interests.
So long as the Book-Entry Depositary, or its nominee, is the Holder of the
Global Exchange Note underlying Book-Entry Interests, the Book-Entry
Depositary or such nominee, as the case may be, will be considered the sole
Holder of the Global Exchange Note for all purposes under the Indenture.
Except as set forth below under "--Issuance of Definitive Notes," Participants
or Indirect Participants will not be entitled to have Exchange Notes or Book-
Entry Interests registered in their names, will not receive or be entitled to
receive physical delivery of Exchange Notes in definitive bearer or registered
form and will not be considered the owners or Holders thereof under the
Indenture. Accordingly, each Person holding a Book-Entry Interest must rely on
the procedures of the Book-Entry Depositary and DTC and, Indirect Participants
must rely on the procedure of the Participants or Indirect Participants
through which such Person owns its interest in the Book-Entry Interests,
including, as applicable, the Euroclear Operator and Cedel, to exercise any
rights and obligations of a Holder under the Indenture. See "--Action in
Respect of the Global Exchange Note and the Book-Entry Interests." If any
Definitive Notes are issued, they will only be issued in registered form.
Unless and until Book-Entry Interests are exchanged for Definitive Notes,
the certificateless depositary interest held by DTC may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor of DTC or
a nominee of such successor.
Purchasers of beneficial interests in the Exchange Notes will hold their
beneficial interests in the Global Exchange Note. Investors may hold their
beneficial interest in the Global Exchange Note directly through DTC, if they
are participants in such system, or indirectly through organizations which
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are participants in such system. All interests in the Global Exchange Note,
including those held through Euroclear Operator or Cedel, may be subject to
the procedures and requirements of DTC. Those interests held through the
Euroclear Operator or Cedel may also be subject to the procedures and
requirements of such system.
Although DTC, the Euroclear Operator and Cedel have agreed to certain
procedures to facilitate transfers of beneficial interests in the Global
Exchange Note among participants of DTC and account holders of the Euroclear
Operator and Cedel, they are under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Company, the Trustee or any of their respective agents will have
any responsibility for the performance by DTC, the Euroclear Operator or Cedel
or their respective participants or account holders of their respective
obligations under the rules and procedures governing their operations.
PAYMENTS ON THE GLOBAL EXCHANGE NOTE
Payment of principal of and interest on, and any other amount due in respect
of, the Global Exchange Note will be made to the Book-Entry Depositary, as the
Holder thereof. All such amounts will be payable, by a Paying Agent located
outside of the United Kingdom, in Deutsche Marks or U.S. dollars or in such
other coin or currency of the United States of America as at the time of
payment is legal tender for the payment therein of public and private debts.
Upon receipt of any payment of principal of or premium (if any) or interest on
the Global Note, the Book-Entry Depositary will distribute all such payments
to Cede & Co., as nominee of DTC. All such payments will be distributed
without deduction or withholding for any taxes, duties, assessments or other
governmental charges of whatever nature except as may be required by law. If
any such deduction or withholding is required to be made, then except as
provided in "Description of Notes--Withholding Taxes," such Additional Amounts
will be paid by the Company to the Book-Entry Depositary as may be necessary
in order that the net amounts received by the Holder of the Global Exchange
Note or owners of Book-Entry Interests after such deduction or withholding
shall be not less than the amounts specified in such Exchange Note to which
such Holder or owner is entitled. DTC, upon receipt of any payment from the
Book-Entry Depositary, will promptly credit Participants' accounts with
payments in amounts proportionate to their respective ownership of Book-Entry
Interests, as shown on the records of DTC. The Company expects that payments
by Participants to owners of interests in Book-Entry Interests held through
such Participants or Indirect Participants will be governed by standing
customer instructions and customary practices, as is now the case with the
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participants or Indirect
Participants. None of the Company, the Trustee, the Book-Entry Depositary or
any other agent of the Company, the Trustee or the Book-Entry Depositary will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of a Participants's ownership of Book-Entry
Interests or for maintaining, supervising or reviewing any records relating to
a Participants's ownership of Book-Entry Interests.
To the extent that any holder of Book-Entry Interests has not made an
election to receive payments in Deutsche Marks in respect of any payment of
principal or interest, the aggregate amount designated for all such holders of
Book-Entry Interests in respect of such payment (the "DM Conversion Amount")
will be converted by the Paying Agent into U.S. dollars and paid to or as
directed by the Book-Entry Depositary for payment through DTC's settlement
system to its relevant Participants. All costs of any such conversion and any
wire transfers will be deducted from such payments. Any such conversion shall
be based on The Bank of New York's bid quotation, at or prior to 11:00 a.m.
New York time, on the second New York Business Day preceding the relevant
payment date, for the purchase by the Paying Agent of the DM Conversion Amount
of U.S. dollars for settlement on such payment date. If such bid quotation is
not available for any reason, the Paying Agent will endeavor to obtain a bid
quotation from a leading foreign exchange bank in New York City selected by
the Paying Agent for such purpose. If no bid quotation from a leading foreign
exchange bank is
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available, payment of the DM Conversion Amount will be made in Deutsche Marks
to or as directed by the Book-Entry Depositary for distribution to the account
or accounts specified by DTC to the Book-Entry Depositary.
INFORMATION REGARDING DTC, THE EUROCLEAR OPERATOR AND CEDEL
DTC, the Euroclear Operator and Cedel have advised the Company as follows:
DTC. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities of its Participants and to facilitate
the clearance and settlement of transactions among its Participants in such
securities through electronic book-entry changes in accounts of the
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers
(including the Initial Purchaser), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC.
The Euroclear Operator and Cedel. The Euroclear Operator and Cedel each hold
securities for their account holders and facilitate the clearance and
settlement of securities transactions by electronic book-entry transfer
between their respective account holders, thereby eliminating the need for
physical movements of certificates and any risk from lack of simultaneous
transfers of securities.
The Euroclear Operator and Cedel provide various services including
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. The Euroclear Operator
and Cedel also deal with domestic securities lending and borrowing. The
Euroclear Operator and Cedel also deal with domestic securities markets in
several countries through established depository and custodial relationships.
The Euroclear Operator and Cedel have established an electronic bridge between
their two systems across which their respective account holders may settle
trades with each other.
Account holders in the Euroclear Operator and Cedel are world-wide financial
institutions including underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the Euroclear
Operator and Cedel is available to other institutions that clear through or
maintain a custodial relationship with an account holder of either system.
Account holders' overall contractual relations with the Euroclear Operator
and Cedel are governed by the respective rules and operating procedures of the
Euroclear Operator and Cedel and any applicable laws. The Euroclear Operator
and Cedel act under such rules and operating procedures only on behalf of
their respective account holders, and have no record of or relationship with
persons holding through their respective account holders.
The Company understands that under existing industry practices, if either
the Company or Trustee requests any action of owners of Book-Entry Interests
or if an owner of a Book-Entry Interest desires to give or take any action
that a Holder is entitled to give or take under the Indenture, DTC would
authorize the Participants owning the relevant Book-Entry Interests to give or
take such action, and such Participants would authorize Indirect Participants
to give or take such action or would otherwise act upon the instructions of
such Indirect Participants.
REDEMPTION
In the event the Global Exchange Note (or a portion thereof) is redeemed,
the Book-Entry Depositary will deliver all amounts received by it in respect
of the redemption of the Global Exchange Note to DTC and surrender such Global
Exchange Note to the Trustee for cancellation or, in the case
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of a partial redemption, endorsement to reflect the reduction in the principal
amount of the Global Exchange Note equal to the principal amount redeemed. The
redemption price payable in connection with the redemption of Book-Entry
Interests will be equal to the amount received by the Book-Entry Depositary in
connection with the redemption of the Global Exchange Note (or portion
thereof). For any redemptions of the Global Exchange Note in part, selection
of Book-Entry Interests to be redeemed will be made by DTC on a pro rata basis
(or on such other basis as DTC deems fair and appropriate) provided that no
Book-Entry Interest of DM 1,000 principal amount or less shall be redeemed in
part. Once redeemed in part, a new Global Exchange Note in the principal
amount equal to the unredeemed portion thereof will be issued and delivered to
the Book-Entry Depositary.
TRANSFERS AND TRANSFER RESTRICTIONS
All transfers of Book-Entry Interests will be recorded in accordance with
the book-entry system maintained by DTC, pursuant to customary procedures
established by DTC and its Participants. See""--General." Pursuant to the Note
Depositary Agreement, the Global Exchange Note may be transferred only to a
successor Book-Entry Depositary.
ISSUANCE OF DEFINITIVE NOTES
Holders of Book-Entry Interests will be entitled to receive Definitive Notes
in registered form in exchange for their holdings of Book-Entry Interests (i)
if DTC is at any time unwilling or unable to continue as, or ceases to be, a
clearing agency registered under the Exchange Act, and a successor to DTC
registered as a clearing agency under the Exchange Act is not able to be
appointed by the Company with 90 days of such notification or (ii) if the
Book-Entry Depositary is at any time unwilling or unable to continue as Book-
Entry Depositary and a successor Book-Entry Depositary is not able to be
appointed by the Company within 90 days. Any Definitive Notes issued in
exchange for Book-Entry Interests will be registered in such name or names as
the Book-Entry Depositary shall instruct the Trustee based on the instruction
of DTC. It is expected that such instructions will be based upon directions
received by DTC from Participants with respect to ownership of Book-Entry
Interests.
In addition to the foregoing, on or after the occurrence of an Event of
Default, holders of Book-Entry Interests will be entitled to request and
receive Definitive Notes. Such Definitive Notes will be issued to and
registered in the name of, or as directed by, such Person only upon the
request in writing by the Book-Entry Depositary (based upon the instructions
of DTC).
To the extent permitted by law, the Company, the Trustee and any Paying
Agent shall be entitled to treat the Person in whose name any Definitive Note
is registered as the absolute owner thereof. The Indenture contains provisions
relating to the maintenance by a registrar of a register reflecting ownership
of Definitive Notes, if any, and any other provisions customary for a
registered debt security. Any payments in respect of a Definitive Note will be
made to the Holder appearing on the register at the close of business on the
record date at his address shown on the Register.
HOLDERS SHOULD BE AWARE THAT, UNDER CURRENT U.K. TAX LAW, UPON THE ISSUANCE
TO A HOLDER OF DEFINITIVE NOTES, SUCH HOLDER WILL BECOME SUBJECT TO U.K.
INCOME TAX (CURRENTLY 20%) TO BE WITHHELD ON ANY PAYMENTS OF INTEREST ON THE
NOTES AS SET FORTH UNDER "CERTAIN INCOME TAX CONSIDERATIONS--MATERIAL U.K. TAX
CONSEQUENCES."
However, U.S. Holders of Definitive Notes may be entitled to receive a
refund of withheld amounts from the U.K. Inland Revenue in certain
circumstances. See "Certain Income Tax Considerations--Material U.K. Tax
Consequences." In addition, if a Holder receives Definitive Notes, such Holder
will be entitled to receive Additional Amounts with respect to such Notes. See
"Description of Exchange Notes--Withholding Taxes."
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TRANSFER AND EXCHANGE OF DEFINITIVE NOTES
In the event that Definitive Notes are in issue, a Holder may transfer or
exchange the Definitive Notes in accordance with the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Exchange
Notes selected for redemption or for a period of 15 days before a selection of
Exchange Notes to be redeemed. If Definitives Notes are issued, the Company
will appoint a Person located in London and reasonably acceptable to the
Trustee, as an additional paying and transfer agent. Upon the issuance of
Definitive Notes, Holders will be able to transfer and exchange Definitive
Notes at the London office of such paying and transfer agent provided that all
transfers and exchanges must be effected in accordance with the terms of the
Indenture and, among other things, be recorded in the register maintained by
the registrar.
ACTION IN RESPECT OF THE GLOBAL EXCHANGE NOTE AND THE BOOK-ENTRY INTERESTS
Not later than 10 days after receipt by the Book-Entry Depositary of notice
of any solicitation of consents or requests for a waiver or other action by
the Holder of the Global Exchange Note or holders of the Book-Entry Interests,
the Book-Entry Depositary will mail to DTC a notice containing (a) such
information as is contained in such notice, (b) a statement that at the close
of business on a specified record date DTC will be entitled to instruct the
Book-Entry Depositary as to the consent, waiver or other action, if any,
pertaining to the Book-Entry Interests or the Global Exchange Note and (c) a
statement as to the manner in which such instructions may be given. Upon the
written request of DTC, the Book-Entry Depositary shall endeavor insofar as
practicable to take such action regarding the requested consent, waiver or
other action in respect of the Book-Entry Interests or the Global Exchange
Note in accordance with any instructions set forth in such request. DTC is
expected to follow the procedures described under "--General" above with
respect to soliciting instructions from its Participants. The Book-Entry
Depositary will not exercise any discretion in the granting of consents or
waivers or the taking of any other action in respect of the Book-Entry
Interests or the Global Exchange Note.
REPORTS
The Book-Entry Depositary will immediately, and in no event later than ten
days from receipt, send to DTC a copy of any notices, reports and other
communications received relating to the Company, the Global Exchange Note or
the Book-Entry Interests. Copies of all such notices, reports and
communications will be available for inspection at the offices of the listing
agent for the Exchange Notes. All notices regarding the Exchange Notes will be
(i) in the case of the Global Exchange Note, published in a leading newspaper
having a general circulation in New York (which is expected to be the Wall
Street Journal) (and if and so long as the Exchange Notes are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so
require, a newspaper having a general circulation in Luxembourg (which is
expected to be The Luxemburger Wort)) or (ii) in the case of Definitive Notes,
mailed to Holders by first-class mail at their respective addresses as they
appear on the registration books of the Registrar (and if and so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock
Exchange shall to require, published in a newspaper having a general
circulation in Luxembourg (which is expected to be The Luxemburger Wort)).
ACTION BY BOOK-ENTRY DEPOSITARY
Subject to certain limitations, upon the occurrence of a default with
respect to the Exchange Notes, or in connection with any other right of the
Holder of the Global Exchange Note under the Indenture or the Note Depositary
Agreement, if requested in writing by DTC, the Book-Entry Depositary will take
any such action as shall be requested in such notice.
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CHARGES OF BOOK-ENTRY DEPOSITARY
The Company has agreed to pay all charges of the Book-Entry Depositary under
the Note Depositary Agreement. The Company has also agreed to indemnify the
Book-Entry Depositary against certain liabilities incurred by it under the
Note Depositary Agreement.
AMENDMENT AND TERMINATION
The Note Depositary Agreement may be amended by agreement among the Company
and the Book-Entry Depositary. The consent of DTC shall not be required in
connection with any amendment to the Note Depositary Agreement: (i) to cure
any inconsistency, omission, defect or ambiguity in such Agreement; (ii) to
add to the covenants and agreements of the Book-Entry Depositary or the
Company; (iii) to effectuate the assignment of the Book-Entry Depositary's
rights and duties to a qualified successor; (iv) to comply with the Securities
Act, the Exchange Act, the U.S. Investment Company Act of 1940, as amended, or
the TIA; or (v) to modify, alter, amend or supplement the Note Depositary
Agreement in any other manner that is not adverse to DTC or the holders of
Book-Entry Interests. Except as set forth above, no amendment that adversely
affects DTC or the holders of Book-Entry Interests may be made to the Note
Depositary Agreement or the Book-Entry Interests without the consent of DTC.
Upon the exchange of the Global Exchange Note in whole for Definitive Notes
and the issuance of Definitive Notes, the Note Depositary Agreement will
terminate. The Note Depositary Agreement may be terminated upon the
resignation of the Book-Entry Depositary if no successor has been appointed
within 90 days as set forth under "--Resignation or Removal of Book-Entry
Depositary" below.
RESIGNATION OR REMOVAL OF BOOK-ENTRY DEPOSITARY
The Book-Entry Depositary may at any time resign as Book-Entry Depositary
upon 60 days' written notice delivered to each of the Company and the Trustee.
The Company may remove the Book-Entry Depositary at any time upon 90 days'
written notice. No resignation or removal of the Book-Entry Depositary and no
appointment of a successor Book-Entry Depositary shall become effective until
(i) the acceptance of appointment by the successor Book-Entry Depositary or
(ii) the issuance of Definitive Notes.
OBLIGATION OF BOOK-ENTRY DEPOSITARY
The Book-Entry Depositary will assume no obligation or liability under the
Note Depositary Agreement other than to use good faith and reasonable care in
the performance of its duties under such Agreement.
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TAX CONSIDERATIONS
MATERIAL U.K. TAX CONSEQUENCES
The following summary describes the material U.K. tax consequences of the
ownership of the Notes. Except where noted, it relates only to the position of
persons who are the absolute beneficial owners of their Notes and may not
apply to special situations, such as those of dealers in securities.
Furthermore, the discussion below is generally based upon the provisions of
the U.K. tax laws and U.K. Inland Revenue practice as at February 24, 1998,
and such provisions may be repealed, revoked or modified so as to result in
U.K. tax consequences different from those discussed below. Persons
considering the purchase, ownership, exchange or disposition of Notes or the
Exchange Offer should consult their own tax advisers concerning U.K. tax
consequences in light of their particular situations as well as any
consequences arising under the law of any other relevant tax jurisdiction
(including the application of any relevant double taxation treaty). No
representations with respect to the tax consequences to any particular holder
of Book-Entry Interests are made hereby.
The statements made below are based on current law and practice in the U.K.
The comments are general in nature and only apply to persons who are the
beneficial owners of the Notes and may not apply to certain classes of persons
(such as dealers). Persons who are in any doubt as to their tax position or
who may be subject to tax in other jurisdictions should consult their
professional advisers in light of their particular circumstances and as to the
application of any relevant double taxation treaty. No representations are
made with regard to the tax consequences of any particular holder of Book-
Entry Interests. It should be noted that the U.K. Inland Revenue announced on
November 18, 1997 that the arrangements under which quoted Eurobond interest
is received from U.K. collecting agents without income tax being deducted will
be reviewed after December 9, 1998.
Taxation of Interest. While the Notes continue to be in bearer form and are
listed on a recognized stock exchange (as defined by section 841 Taxes Act
1988) interest on the Notes may be paid without withholding for income tax
provided:
(a) the person by or through whom the payment is made is not in the U.K.;
(b) the payment is made by or through a person who is in the U.K. and
either of the following requirements is met
(i) the person receiving the interest is beneficially entitled to the
interest, beneficially owns the Notes and is not resident in the U.K.
for tax purposes; or
(ii) the Notes are held within a recognized clearing system within
the meaning of section 841A Taxes Act 1988 (The Euroclear Operator and
Cedel have each been designated as a recognized clearance system for
this purpose)
and the person by or through the payment is made has received a declaration
to that effect in the form required by law and the Inland Revenue has not
issued a notice to the person by or through the payment is made stating
that they consider that the above conditions have not been satisfied.
If the above requirements are not satisfied, interest will be paid under
deduction of income tax at the lower rate (currently 20%) subject to any
direction to the contrary by the Inland Revenue in respect of any relief which
may be available pursuant to the provisions of any applicable double taxation
treaty.
If the Notes cease to be represented by the Global Exchange Note and
Definitive Notes are issued interest on the Definitive Notes will be paid
under deduction of income tax.
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<PAGE>
Where a U.K. collecting agent (except by means of clearing of a cheque or
arranging for the clearing of the cheque):
(a) acts as custodian of the Notes and receives interest on the Notes or
directs that interest on the Notes be paid to another person or consents to
such payment; or
(b) collects or secures payment of or receives interest on the Notes for
a Noteholder; or
(c) otherwise acts for another person in arranging the collection of
securing payment of interest on the Notes
then the collecting agent will be liable to account for U.K. income tax at the
lower rate (currently 20%) unless:
(i) the relevant Notes are held in a recognized clearing system and the
collecting agent pays or accounts for the interest directly or indirectly
to the clearing system and the declaration in the form required by law is
obtained; or
(ii) the relevant Notes are held in a recognized clearing system for
which the collecting agent is a depository; or
(iii) the person beneficially entitled to the interest is not resident in
the U.K. and beneficially owns the relevant Notes or is specified by
regulation; or
(iv) the interest arises to trustees not resident in the U.K. of certain
discretionary or accumulation trusts where none of the beneficiaries of the
trust is resident in the U.K.; or
(v) the person beneficially entitled to the interest is eligible for
certain relief's from tax in respect of the interest; or
(vi) the interest falls to be treated as income of, or of the government
of, a sovereign power or of certain international organizations.
A declaration in the form required by law needs to be provided in the cases
of clauses (iii) to (vi) in order for the interest to be paid with
withholding.
The interest on a Note is derived from the U.K. and accordingly will be
chargeable to U.K. tax by direct assessment even if the interest is paid
without deduction. Interest on the Notes received without deduction or
withholding will not be chargeable to U.K. income tax in the hands of a holder
of a Note who is not resident in the U.K. unless the holder of the Note
carries on a trade, profession or vocation within the U.K. through a UK branch
or agency in connection with which the interest is received or to which the
Notes are attributable.
There are certain exemptions for interest received by certain categories or
agencies (such as some brokers and investment managers).
Where interest on the Notes has been paid under deduction of lower rate
income tax (currently 20%) Noteholders which are not resident in the U.K. may
be able to recover all or part of the tax deducted if there is an appropriate
provision under an applicable double taxation treaty between the country in
which they are resident for tax purposes and the U.K. A United States holder
who is entitled to the benefit of the U.S./U.K. double taxation treaty would
normally be able to recover in full for any tax withheld by making the
appropriate claim. A claim may be made by a United States holder prior to the
interest being paid and if accepted the Inland Revenue will authorize
subsequent payments to be made without withholding. In the case of an advance
claim such a claim should be made well in advance of the interest payment date
and in the case of a claim for repayment well before the end of the
appropriate limitation period (being six years after the end of the U.K. year
of assessment to which the interest relates).
Taxation of Accrued Income. A transfer or exchange of a Note by a non
corporate Noteholder resident or ordinarily resident in the U.K. or carrying
on a trade in the U.K. through a branch or agency with which the ownership of
the Notes is connected or attributable may give rise to a charge to income tax
in respect of an amount representing interest on the Note which has accrued
since the last interest payment date.
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<PAGE>
Corporate Noteholders who are within the U.K. charge to corporation tax will
not be taxed in this way. Corporate Noteholders who are within the U.K. charge
to corporation tax are generally charged to tax in each accounting period by
reference to the interest accrued in that period in accordance with an
authorized accruals or mark to market basis of accounting.
Capital Gains. A disposal or exchange of a Note by a non corporate
Noteholder who is resident or ordinarily resident for tax purposes in the U.K.
or carries on the trade profession or vocation in the U.K. through a branch or
agency to which the Note is attributable or connected may give rise to a
chargeable gain or allowable loss for the purposes of taxation of chargeable
gains. In the event that the Noteholder receives a premium on redemption the
premium should be treated as a capital receipt. As the Notes are issued in a
currency other than sterling, in order to calculate any chargeable gain it
will be necessary for a person liable to U.K. tax and chargeable gains to
prepare the pound sterling value of the Notes at acquisition and disposal. Any
difference may give rise to a gain or a loss for tax purposes.
Corporate Noteholders who are within the charge to a corporation tax will be
taxed and relieved on their Notes in accordance with an authorized accruals or
mark to market basis of accounting. Foreign exchange gains and losses in
respect of the Notes held by such a company will be taxed and relieved as
income for U.K. corporation tax purposes in accordance with the company's
accounts.
Stamp Duty And Stamp Duty Reserve Tax. No U.K. stamp duty or stamp duty
reserve tax is payable on the issue or transfer of the Global Exchange Note or
on the issue or transfer of a Definitive Note.
UNITED STATES TAX CONSIDERATIONS
The following discussion is a summary of certain U.S. federal income tax
consequences of the ownership of Notes by U.S. Holders (as defined below). The
summary is not a complete analysis or description of all potential tax
consequences to such holders and does not address all tax considerations that
may be relevant to all categories of potential purchasers (such as dealers in
securities or commodities, tax-exempt investors, investors whose functional
currency is not the U.S. dollar and other investors subject to special rules,
including investors holding Notes as part of a currency hedge, a straddle, a
"synthetic security" or other integrated investment (including a "conversion
transaction") comprised of a Note and one or more other investments).
Prospective purchasers of Notes are urged to consult their own tax advisors
concerning the U.S. federal, state and local tax consequences of the purchase,
ownership and disposition of Notes.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), judicial decisions, administrative pronouncements, and existing and
proposed Treasury regulations, changes to any of which after the date of this
Prospectus could apply on a retroactive basis and affect the tax consequences
described herein.
The term "U.S. Holder" means a beneficial owner of a Global Exchange Note
that (a) purchases the Note in the Exchange Offer at the issue price stated on
the front cover, (b) holds the Note as a capital asset and (c) is, for U.S.
federal income tax purposes, (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof or
(iii) otherwise subject to U.S. federal income taxation on a net income basis
in respect of the Notes.
Payments of Interest. The gross amount of interest paid on a Note will be
includible in the gross income of a U.S. Holder at the time it is received or
accrued, depending on the Holder's method of accounting for U.S. federal
income tax purposes, under the rules described below. The Notes are not
anticipated to be issued at a discount that is not treated as de minimis for
U.S. federal income tax
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<PAGE>
purposes, and therefore the Notes are not anticipated to be issued with any
original issue discount. This treatment is based upon the assumption that no
liquidated damages will be paid on account of a Registration Default. The
United States Internal Revenue Service could, however, assert a different
position, which could result in the Notes being treated as issued with
original issue discount, and thereby affecting the timing and character of
interest income of U.S. Holders.
In the case of a cash method U.S. Holder, the amount of interest income in
respect of any interest payment will be determined by translating such payment
into U.S. dollars at the spot exchange rate in effect on the date such
interest payment is received. No exchange gain or loss will be realized with
respect to the receipt of such interest payment, other than exchange gain or
loss that is attributable to any difference between the exchange rate utilized
to translate the Deutsche Mark payment into U.S. dollars by the Paying Agent
(as described above under "Description of the Note Depositary Agreement--
Payments on the Global Exchange Note") and the spot exchange rate in effect on
the date such interest payment is received or, in the case of a U.S. Holder
that elects to receive payments on the Notes in Deutsche Marks, that is
attributable to the actual disposition of the Deutsche Marks received. Any
such exchange gain or loss will generally be treated as ordinary income or
loss. In the case of an accrual method U.S. Holder, the amount of any interest
income accrued during any accrual period will generally be determined by
translating such accruals into U.S. dollars at the average exchange rate
applicable to the accrual period (or, with respect to an accrual period that
spans two taxable years, at the average exchange rate for the partial period
within the taxable year). Such a U.S. Holder will additionally realize
exchange gain or loss with respect to any interest income accrued on the date
such interest income is received (or on the date the Note is disposed of) in
an amount equal to the difference between (x) the U.S. dollars received in
respect of such interest payment or, in the case of a U.S. Holder that elects
to receive payments on the Notes in Deutsche Marks, the amount determined by
converting the amount of the payment received into U.S. dollars at the spot
exchange rate in effect on the date such payment is received and (y) the
amount of interest income accrued in respect of such payment according to the
rule set forth in the prior sentence. Notwithstanding the rules described
above, an accrual method U.S. Holder may alternatively make an election to
apply a "spot accrual convention" that effectively allows such U.S. Holder to
translate accrued interest into U.S. dollars at a single spot exchange rate,
as set forth in Treasury regulations (S) 1.988-2(b)(2)(iii)(B). The amount of
interest income received by a U.S. Holder as set forth in this paragraph will
generally be treated as "passive income" or, in the case of certain U.S.
Holders, "financial services income," from sources outside the United States,
and any foreign currency exchange gain or loss as set forth in this paragraph
will generally be treated as realized from sources within the United States.
Sale, Retirement and Other Disposition of the Notes. Upon the sale, exchange
or retirement of a Note, a U.S. Holder will generally recognize taxable gain
or loss equal to the difference between the amount realized (not including any
amounts received that are attributable to accrued and unpaid interest, which
will be taxable as interest income, and exchange gain or loss as set forth
above and in this paragraph) and the U.S. Holder's tax basis in the Note. A
U.S. Holder's tax basis in a Note generally will be its cost, which generally
will be calculated by reference to the spot exchange rate for Deutsche Marks
in effect on the date of purchase. The value of any amount received by a U.S.
Holder on retirement of the Note generally will be determined by reference to
the spot exchange rate for Deutsche Marks in effect on the date the Note is
retired. Gain or loss recognized on the sale or retirement of a Note
(determined as described above) will be capital gain or loss and will be long-
term gain or loss if the Note was held for more than one year at the time of
the disposition. U.S. Holders that are individuals may be eligible for
preferential treatment for net capital gains, particularly with respect to
capital assets that are held for more than 18 months at the time of
disposition. Gain recognized by a U.S. Holder generally will be treated as
U.S. source income. U.S. Holders should consult their tax advisors regarding
the source of loss recognized on the sale, exchange or retirement of a Note.
Notwithstanding the foregoing, gain or loss recognized by a U.S. Holder on the
sale, exchange or retirement of a Note generally will be treated as ordinary
income or loss to the extent that the gain or loss is attributable to changes
in Deutsche Mark exchange rates during the period in which
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<PAGE>
the U.S. Holder held the Note or, in the case of a U.S. Holder that does not
elect to receive payments on the Notes in Deutsche Marks, to the extent of any
difference between the amount realized on retirement of the Note calculated by
reference to the spot exchange rate for Deutsche Marks in effect on the date
of retirement and the actual amount of U.S. dollars received. In general, such
foreign currency gain or loss will be treated by a U.S. Holder as realized
from sources within the United States.
Exchange Offer. A U.S. Holder of a Note will not recognize taxable gain or
loss on receipt of an Exchange Note in exchange for an Old Note pursuant to
this Exchange Offer.
Information Reporting and Backup Withholding. In general, information
reporting requirements will apply to certain payments of principal and
interest paid in respect of the Notes and to the sales proceeds of Notes paid
to U.S. Holders, other than certain exempt U.S. Holders (such as
corporations). A 31% backup withholding tax will apply to such payments if the
U.S. Holder fails to provide a taxpayer identification number or certification
of foreign or other exempt status or to comply with applicable requirements of
the backup withholding rules. Any amounts withheld under the backup
withholding rules will be eligible for credit against such U.S. Holder's U.S.
federal income tax liability, provided the required information is furnished
to the Internal Revenue Service.
115
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1998, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the
Letter of Transmittal. The Company has agreed to pay all expenses incident to
the Exchange Offer (including the expenses of one counsel for the holders of
the Notes) other than commissions or concessions of any broker-dealers and
will indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Mayer, Brown & Platt, special U.S. counsel for the Company. Certain aspects of
the validity of the Exchange Notes will be passed upon for the Company by
Dickson Minto W.S., U.K. counsel to the Company.
EXPERTS
The consolidated financial statements of USM (Holdings) Limited as of April
24, 1995 and for the period from January 1, 1995 to April 24, 1995 and the
consolidated financial statements of United Texon Limited as of December 31,
1996 and 1997 and for the periods from April 25, 1995 to December 31, 1995 and
the years ended December 31, 1996 and 1997 and the consolidated financial
statements of Texon International plc as of December 31, 1997 being both the
date it acquired United Texon Limited and the end of its financial reporting
period, included in the Registration Statement have been audited and reported
upon by KPMG, independent chartered accountants. Such consolidated financial
statements have been included herein in reliance upon the reports of KPMG and
upon the authority of said firm as experts in accounting and auditing.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form F-4 under the Securities Act of
1933 (the "Securities Act"), with respect to the Exchange Notes offered hereby
(the "Registration Statement"). This Prospectus, which constitutes a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain parts of which have been omitted from the
Prospectus in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Exchange Notes offered
hereby, reference is made to the Registration Statement, including the
exhibits and schedules filed therewith, and the financial statements and notes
filed as a part thereof. Statements made in the Prospectus concerning the
contents of any document referred to herein are not necessarily complete. With
respect to each such document filed with the Commission as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirely by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file reports with the Commission. All reports and
other information filed by the Company, and the Registration Statement,
including the exhibits and schedules thereto, may be inspected and copied at
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at Seven World Trade Center, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in
New York, New York, and Chicago, Illinois, at the prescribed rates.
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, the Company shall furnish to the holders of the
Notes and file with the Trustee and the Commission (i) all annual and
quarterly financial information that would be required to be contained in a
filing with the Commission on Forms 20-F and 10-Q (or any successor forms) if
the Company were required to file such Forms (except that quarterly financial
information need not contain any reconciliation to U.S. generally accepted
accounting principles) and (ii) all information that would be required to be
contained in current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports;
provided, however, that (x) such quarterly financial information may be
prepared in accordance with U.K. generally accepted accounting principles,
shall be furnished within 60 days following the end of each fiscal quarter of
the Company and may be provided in a report on Form 6-K, (y) such annual
financial information shall be furnished within 120 days following the end of
the fiscal year of the Company and (z) such information that would be required
to be contained in a report on Form 8-K may be provided in a report on Form 6-
K.
As a foreign private issuer, the Company is exempt from certain provisions
of the Exchange Act prescribing the furnishing and content of proxy
statements.
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TEXON INTERNATIONAL PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TEXON INTERNATIONAL PLC
CONSOLIDATED FINANCIAL STATEMENTS OF TEXON INTERNATIONAL PLC AND ITS
PREDECESSOR COMPANIES, UNITED TEXON LIMITED AND USM (HOLDINGS) LIMITED
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- ----
<S> <C>
Independent auditors' report............................................... F-2
Consolidated profit and loss accounts...................................... F-3
Consolidated balance sheets................................................ F-4
Consolidated cash flow statements.......................................... F-5
Reconciliation of net cash flow to movement in net debt.................... F-6
Consolidated statements of total recognised gains and losses............... F-7
Reconciliation of movements in total shareholders' deficit................. F-8
Notes to the consolidated financial statements............................. F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Texon International plc:
We have audited the accompanying consolidated balance sheets of United Texon
Limited and subsidiaries as of December 31, 1996 and 1997, and of Texon
International plc and subsidiaries as of December 31, 1997, and the related
consolidated profit and loss accounts, cash flow statements, statements of
total recognised gains and losses and reconciliation of movements in
shareholders' funds of USM (Holdings) Limited for the period from January 1,
1995 to April 24, 1995, and of United Texon Limited for the period from April
25, 1995 to December 31, 1995, and the years ended December 31, 1996 and 1997,
and of Texon International plc for December 31, 1997 being both the date it
acquired United Texon Limited and the end of its financial reporting period.
These consolidated financial statements are the responsibility of the
management of Texon International plc. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom which standards are substantially equivalent
to auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the consolidated financial position
of United Texon Limited and subsidiaries as of December 31, 1996 and 1997, and
of Texon International plc and subsidiaries as of December 31, 1997, and the
consolidated results of operations and cash flows of USM (Holdings) Limited
for the period from January 1, 1995 to April 24, 1995, of United Texon Limited
for the period from April 25, 1995 to December 31, 1995, and the years ended
December 31, 1996 and 1997, and of Texon International plc for December 31,
1997 being both the date it acquired United Texon Limited and the end of its
financial reporting period, in conformity with generally accepted accounting
principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected the results of operations for the years,
ended December 31, 1996 and 1997 and shareholders' equity as of December 31,
1996 and 1997, to the extent summarised in Note 26 to the consolidated
financial statements.
/s/ KPMG
Chartered Accountants
Registered Auditors
London, England
March 31, 1998
F-2
<PAGE>
TEXON INTERNATIONAL PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- --------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25,
1995 TO 1995 TO YEAR ENDED YEAR ENDED
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31,
NOTES 1995 1995 1996 1997
----- ----------- ------------ ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Sales turnover
Continuing
operations........... 3 38,172 76,905 127,887 121,556
Discontinued
operations........... 27,652 54,008 77,074 66,255
------- ------- -------- --------
65,824 130,913 204,961 187,811
Cost of sales
Continuing
operations........... (25,835) (55,689) (83,606) (79,015)
Discontinued
operations........... (17,286) (39,784) (52,446) (44,322)
------- ------- -------- --------
(43,121) (95,473) (136,052) (123,337)
Gross profit
Continuing
operations........... 12,337 21,216 44,281 42,541
Discontinued
operations........... 10,366 14,224 24,628 21,933
------- ------- -------- --------
22,703 35,440 68,909 64,474
Marketing and
administrative expenses 4,5
Continuing
operations........... (8,409) (16,917) (28,001) (32,932)
Discontinued
operations........... (9,378) (25,060) (28,401) (24,552)
------- ------- -------- --------
(17,787) (41,977) (56,402) (57,484)
Operating profit/(loss) 4,5
Continuing
operations........... 3,928 4,299 16,280 9,609
Discontinued
operations........... 988 (10,836) (3,773) (2,619)
------- ------- -------- --------
4,916 (6,537) 12,507 6,990
Profit on sale of
discontinued
activities............. 5b -- -- -- 1,602
Profit/(loss) before
interest and taxation 6
Continuing
operations........... 3,928 4,299 16,280 9,609
Discontinued
operations........... 988 (10,836) (3,773) (1,017)
------- ------- -------- --------
4,916 (6,537) 12,507 8,592
Interest receivable..... 140 237 229 298
Interest payable and
similar charges........ 7 (3,510) (7,873) (11,267) (10,915)
------- ------- -------- --------
Profit/(loss) on
ordinary activities
before taxation...... 1,546 (14,173) 1,469 (2,025)
Taxation on profit on
ordinary activities.... 9 (650) (988) (1,905) (1,988)
------- ------- -------- --------
Profit/(loss) on
ordinary activities
after taxation....... 896 (15,161) (436) (4,013)
Minority equity
interests.............. 17 68 109 (293) (305)
------- ------- -------- --------
Net profit/(loss) for
the financial year..... 16 964 (15,052) (729) (4,318)
------- ------- -------- --------
Additional finance
(cost)/credit of non-
equity preference
shares............... 15 -- (1,450) (3,767) 5,217
------- ------- -------- --------
Retained profit/(loss)
for the period for
equity shareholders.. 964 (16,502) (4,496) 899
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TEXON INTERNATIONAL PLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
NOTES 1996 1997 1997
----- ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets................ 10 26,554 15,841 17,098
CURRENT ASSETS
Stocks......................... 11 36,047 16,716 16,716
Debtors........................ 12 34,994 19,345 19,345
Cash at bank and in hand....... 1,791 1,143 1,156
-------- -------- --------
72,832 37,204 37,217
CREDITORS (amounts falling due
within one year)................ 13 (99,873) (113,734) (114,393)
NET CURRENT ASSETS/(LIABILITIES)
Due within one year............ (29,793) (77,392) (78,038)
Debtors due after one year..... 2,752 862 862
TOTAL NET CURRENT LIABILITIES.... (27,041) (76,530) (77,176)
-------- -------- --------
TOTAL ASSETS LESS CURRENT
LIABILITIES..................... (487) (60,689) (60,078)
======== ======== ========
CREDITORS
Amounts falling due after more
than one year................. 13 33,897 698 698
Provisions for liabilities and
charges....................... 14 30,461 6,422 6,422
CAPITAL AND RESERVES--EQUITY
Called up share capital........ 15 29,050 29,050 13
Share premium account.......... 16 4,950 4,950 --
Share capital to be issued
(including share premium)..... 16 -- -- 55,600
Goodwill write-off reserve..... 16 (81,809) (79,462) (124,242)
Profit and loss account........ 16 (18,257) (23,778) --
-------- -------- --------
Shareholders' deficit
Equity interest................ (100,283) (98,240) (68,629)
Non--equity interests.......... 15 34,217 29,000 --
(66,066) (69,240) (68,629)
Minority equity interests........ 17 1,221 1,431 1,431
-------- -------- --------
(64,845) (67,809) (67,198)
-------- -------- --------
(487) (60,689) (60,078)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TEXON INTERNATIONAL PLC
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- ----------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
NOTES 1995 1995 1996 1997 1997
----- ----------- ------------ ------------ ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Cash flow from operating
activities............. 21a 2,723 4,311 27,329 4,976 --
Return on investments
and servicing of
finance................ 21b (3,274) (5,214) (6,459) (5,665) --
Taxation................ (347) (1,894) (564) (2,678) --
Capital expenditure and
financial investment... 21b 2,685 (3,847) (3,298) 5,990 --
Acquisitions and
disposals.............. 21b -- (29,356) -- -- (64,175)
------ ------- ------- ------ -------
Cash inflow/(outflow)
before use of liquid
resources.............. 1,787 (36,000) 17,008 2,623 (64,175)
Financing
Increase/(decrease) in
debt................... 21b (3,317) 1,393 (17,499) (4,029) 64,175
Value of shares......... 867 34,000 -- -- 13
------ ------- ------- ------ -------
Increase/(decrease) in
cash in the period..... (663) (607) (491) (1,406) 13
====== ======= ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TEXON INTERNATIONAL PLC
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
NOTES 1995 1995 1996 1997 1997
----- ----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Increase/(decrease) in
cash in the period..... 21c (663) (607) (491) (1,406) 13
Cash inflow/(outflow)
from debt and lease
financing.............. 2,450 (1,393) 17,499 4,029 --
------- -------- -------- ------- -------
Change in net debt
resulting from cash
flows.................. 1,787 (2,000) 17,008 2,623 13
Non cash movements in
debt................... 867 (5,535) -- (3,434) --
New finance leases...... -- -- (3,925) -- --
Translation
differences............ (1,591) (1,868) 2,899 (106) --
Loans and finance leases
acquired with
subsidiary............. -- (93,101) -- -- (64,175)
------- -------- -------- ------- -------
Movement in net debt in
the period............. 1,063 (102,504) 15,982 (917) (64,162)
Net debt brought
forward................ (93,035) -- (102,504) (86,522) --
------- -------- -------- ------- -------
Net debt carried
forward................ (91,972) (102,504) (86,522) (87,439) (64,162)
======= ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
TEXON INTERNATIONAL PLC
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Net profit/(loss) for
the financial year..... 964 (15,052) (729) (4,318) --
Exercised share
options................ -- -- -- 2,803 --
Currency translation
differences on foreign
currency working
capital/net tangible
assets and goodwill.... 887 518 (5,652) (4,187) --
Currency translation
differences on foreign
currency borrowings.... (750) (377) 3,035 181 --
Elimination of currency
translation differences
on goodwill included in
other reserves......... (1,856) (1,384) 7,868 2,347 --
------ ------- ------ ------ ---
Total recognised gains
/(losses) in the
period................. (755) (16,295) 4,522 (3,174) --
====== ======= ====== ====== ===
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
TEXON INTERNATIONAL PLC
RECONCILIATION OF MOVEMENTS IN TOTAL SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Retained profit/(loss)
for the year for equity
shareholders........... 964 (16,502) (4,496) 899 --
Appropriation from
equity to non-equity
included therein (in
respect of the
preference shares)..... -- 1,450 3,767 (5,217) --
------- ------- ------- ------- --------
964 (15,052) (729) (4,318) --
New share capital
issued................. 867 34,000 -- -- 13
New share capital to be
issued................. -- -- -- -- 55,600
Exercised share
options................ -- -- -- 2,803 --
Goodwill written off
during period.......... -- (88,293) -- -- (124,242)
Foreign exchange
adjustments............ (1,719) (1,243) 5,251 (1,659) --
------- ------- ------- ------- --------
Net (decrease)/increase
to shareholders'
deficit................ 112 (70,588) 4,522 (3,174) (68,629)
Opening shareholders'
deficit................ (51,724) -- (70,588) (66,066) --
------- ------- ------- ------- --------
Closing shareholders'
deficit................ (51,612) (70,588) (66,066) (69,240) (68,629)
======= ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 BUSINESS ACTIVITY AND BASIS OF PRESENTATION
The Group formed by Texon International plc and its subsidiaries ("the
Group") is engaged in manufacturing and supplying shoe materials and machinery
to the footwear industry world-wide.
Texon International acquisition
On December 23, 1997, Texon International plc and the shareholders of United
Texon Limited entered into an acquisition agreement (the "Acquisition
Agreement") under which Texon International plc agreed to acquire the entire
issued share capital of United Texon Limited (the "Acquisition"). The
Acquisition was conditional upon (i) consummation of the offering by Texon
International plc of Senior Notes due 2008 (the "Offering") and (ii) a
Revolving Facility being made available unconditionally. These conditions were
duly fulfilled on January 30, 1998.
Under the terms of the Acquisition Agreement, Texon International plc had
control of the financial and operational management of United Texon Limited
effective from December 31, 1997 and Texon International plc has therefore
prepared consolidated accounts at December 31, 1997, see Note 25. Texon
International plc did not trade previously and Texon International plc has no
consolidated profit or loss for the period from its incorporation on December
17, 1997 to December 31, 1997, consequently no consolidated profit and loss
account has been included for Texon International plc.
United Texon Limited acquisition
United Texon Limited was incorporated on January 5, 1995. On April 24, 1995,
United Texon Limited acquired USM (Holdings) Limited in a transaction (the
"1995 Acquisition") accounted for using the purchase method. The consolidated
financial information presented herein for the periods ended December 31,
1995, December 31, 1996 and December 31, 1997 relate to United Texon Limited
and its subsidiaries. The consolidated financial information presented herein
for the period ended April 24, 1995 relates to USM (Holdings) Limited.
Machinery disposal
On December 31, 1997, United Texon Limited disposed of the group of
companies operating the shoe machinery business through a sale to a new
company formed by the shareholders of United Texon Limited ("the Machinery
Disposal"). The Machinery Disposal is treated as a disposal in the 1997
financial statements of United Texon Limited and the comparative figures have
been reanalysed to show the Machinery business as a discontinued operation.
Consolidated financial information
The consolidated financial information presented herein for the periods
prior to Texon International plc's acquisition of United Texon Limited relates
to United Texon Limited and USM (Holdings) Limited. United Texon Limited and
USM (Holdings) Limited are also referred to collectively as ("the Group") in
these consolidated financial statements where appropriate.
2 ACCOUNTING POLICIES
The following paragraphs describe the significant accounting policies used
in preparing the consolidated financial statements.
A) BASIS OF PREPARATION
The consolidated financial statements have been prepared in pounds sterling
and in accordance with generally accepted accounting principles in the UK ("UK
GAAP"). These accounting principles differ in certain significant respects
from accounting principles generally accepted in the United States ("US
GAAP"). Note 26 sets out a description and the related effect on net
income/(loss) and shareholders' deficit of the significant differences.
F-9
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
B) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements
of USM (Holdings) Limited and its subsidiary undertakings for the period ended
April 24, 1995, and of United Texon Limited and its subsidiary undertakings
for the period ended December 31, 1995, the years ended December 31, 1996 and
1997, and Texon International plc and its subsidiary undertakings as at
December 31, 1997. As the Acquisition was only effective from 18:00 hours on
December 31, 1997, a consolidated balance sheet for United Texon Limited as of
that date has been included for reference purposes only.
The consolidated financial statements incorporate the results and assets and
liabilities of each company and its subsidiaries after eliminating
intercompany balances and transactions.
Any excess of the cost of investment including acquisition costs, over the
fair value of net assets acquired is written off to other reserves.
C) SALES TURNOVER
Sales turnover comprises the invoiced value (excluding value added tax) for
the sale of products from stock, the provision of machine servicing and the
leasing of machines.
D) FOREIGN EXCHANGE
The closing assets and liabilities of subsidiaries denominated in overseas
currencies have been translated at the exchange rates ruling at the balance
sheet date. The results for the period of overseas companies have been
translated at the average exchange rate relevant for the period. Differences
arising on the translation of assets and liabilities and the results for the
year denominated in overseas currencies are taken to reserves along with the
effect of foreign exchange contracts and foreign currency borrowings entered
into for the purpose of hedging those exposures. The currency translation on
goodwill passes through other reserves in accordance with the accounting
policy for goodwill. All other profits or losses on exchange are dealt with in
the consolidated profit and loss accounts.
To reduce the effect of fluctuating currency exchange rates, foreign
currency forward contracts are entered into to hedge firm commitments. The
Group does not enter into speculative foreign exchange contracts. Differences
arising on the translation of foreign currency forward contracts to hedge
these commitments are deferred and recognised when the commitment matures.
Results of Central and South American subsidiaries operating in hyper-
inflationary economies are reported using a stable functional currency to
eliminate any distorting effect.
E) STOCK
Stock is stated at the lower of cost, including factory overheads where
applicable, and net realisable value on a first in first out basis. Provision
is made for slow-moving and obsolete items.
F) RESEARCH AND DEVELOPMENT
Research, development and patent expenditure is written off in the year in
which it is incurred.
F-10
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
G) DEPRECIATION OF TANGIBLE FIXED ASSETS
Depreciation of tangible fixed assets is provided on the cost of the assets
so as to write off the cost less the estimated residual value of the assets
over their estimated useful lives by equal annual instalments over the
following periods:
<TABLE>
<CAPTION>
YEARS
-------------------------------
<S> <C>
Freehold buildings............................. 20 to 45
Leasehold improvements......................... Over the shorter of useful life
or term of the lease
Leased machinery............................... 5 to 10
Plant and equipment............................ 5 to 13
Office equipment............................... 3 to 10
Motor vehicles................................. 3 to 5
</TABLE>
H) LEASE COMMITMENTS
Where leases are entered into which entails taking substantially all the
risks and rewards of ownership of an asset, the lease is treated as a "finance
lease'. Other leases are treated as operating leases.
An asset subject to a finance lease is recorded in the consolidated balance
sheet as a tangible fixed asset and is depreciated over its estimated useful
life or the term of the lease, whichever is shorter. Future instalments under
such leases, net of finance charges, are included within creditors. Rentals
payable are apportioned between the finance element, which is charged to the
consolidated profit and loss accounts, and the capital element which reduces
the outstanding obligation for future instalments.
Operating lease payments and receipts are charged to the consolidated profit
and loss accounts on a straight line basis over the life of the lease.
I) MACHINERY LEASED TO CUSTOMERS
Leased machinery retained by the Group, is included in tangible fixed assets
at cost to the Group less accumulated depreciation. Cost includes factory
overheads and, where applicable, costs of importation. Leases are treated as
operating leases and income from them is recognised over the lease period.
Where the Group have transferred machinery on lease to its customers, but
retained the ability or obligation to re-acquire the machinery at the end of
the primary lease period, the asset has been included in tangible fixed assets
as above, and the proceeds received credited to the consolidated profit and
loss accounts over the primary lease period.
In the event of the Group re-acquiring machinery, the Group's exposure is
limited to the realisable market value of the machines.
J) TAXATION
The charge for taxation is based on the profit/(loss) for the year and takes
into account taxation deferred because of timing differences between the
treatment of certain items for taxation and accounting purposes. Provision is
made for deferred tax only to the extent that it is probable that an actual
liability will crystallise.
F-11
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
K) PENSIONS AND OTHER POST RETIREMENT BENEFITS
Pension schemes are operated in the UK and in overseas countries. The
expected cost of defined benefit pension schemes is charged to the
consolidated profit and loss accounts so as to spread the cost of pensions
over the remaining service lives of employees in the scheme. Variations from
the regular cost are spread over the expected remaining service lives of
current employees in the scheme. The pension cost is assessed in accordance
with the advice of qualified actuaries.
Provision is also made for post retirement medical and life assurance
benefits of retired employees and certain current employees in the US.
L) NET EARNINGS/(LOSS) PER ORDINARY SHARE
Historical net earnings/(loss) per share is not shown as the historical
arrangement is not indicative of the continuing capital structure.
M) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expense during the
reporting period. Actual results could differ from those estimates.
N) DISCONTINUED OPERATIONS
United Texon Limited carried out its activities through two divisions: the
Machinery division and the Materials division. On December 31, 1997, the group
of companies comprising the Machinery division was disposed of and accordingly
the results of this division have been separately disclosed. Until January 1,
1997 subsidiaries of United Texon Limited which carried out both Machinery and
Materials activities did not historically analyse their results on a
divisional basis, other than for sales and gross profit, or report divisional
balance sheet information. From January 1, 1997, however, each subsidiary was
required to submit divisional information.
In order to provide financial information for the Machinery division for the
periods prior to January 1, 1997 management have made estimates and judgements
based on their knowledge of the business. The information has been compiled as
follows:
Gross profit
Gross profit has historically been analysed by product line and accordingly
can be analysed by division. Segmental information included in the Group's
audited consolidated statutory accounts has historically disclosed the
divisional split of revenues and gross profit.
Operating income/(loss)
Research and development and distribution and marketing costs can
predominately be directly associated with a specific division and have been
allocated accordingly. Common costs, including
F-12
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
administration costs, have been allocated by local management based on their
assessment of the costs associated with each division, at that time. Other
operating income and expense including head office costs have been allocated
by management on a category by category basis dependent on the type of income
or cost or an appropriate basis. Pension costs have been analysed between
divisions based on the divisional employee numbers on a demerged basis.
Interest and tax
Interest on substantially all of the borrowings has been allocated to the
Materials division in accordance with the Materials division assuming the debt
following the sale of the Machinery division. Taxation charges have been
allocated between divisions based on the post sale Group structure.
3 ANALYSIS OF TURNOVER, GROSS PROFIT AND CAPITAL EMPLOYED
Operations were divided into two segments: Materials and related products
and Machinery and related products. As discussed in Note 1, the Materials and
Machinery business have been separated and the Machinery business sold with
effect from December 31, 1997. Consequently, the following analyses show the
activities of each of the companies split between "continuing" and
"discontinued" operations.
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- --------------------------------------
PERIOD FROM
JANUARY 1, PERIOD FROM
1995 APRIL 25,
TO APRIL 1995 TO YEAR ENDED YEAR ENDED
24, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
----------- ------------ ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
TURNOVER ANALYSED BY MAJOR
BUSINESS ACTIVITY:
Continuing operations...... 38,401 77,295 128,602 122,343
Discontinued operations.... 27,967 54,595 78,227 67,048
------ ------- ------- -------
66,368 131,890 206,829 189,391
Sales between operations... (544) (977) (1,868) (1,580)
------ ------- ------- -------
External turnover.......... 65,824 130,913 204,961 187,811
====== ======= ======= =======
OPERATING PROFIT/(LOSS)
ANALYSED BY MAJOR BUSINESS
ACTIVITY:
Continuing operations...... 3,928 4,299 16,280 9,609
Discontinued operations.... 988 (10,836) (3,773) (2,619)
------ ------- ------- -------
4,916 (6,537) 12,507 6,990
====== ======= ======= =======
CAPITAL EXPENDITURES:
Continuing operations...... 496 1,455 3,188 1,722
Discontinued operations.... 1,329 3,026 2,959 1,538
------ ------- ------- -------
1,825 4,481 6,147 3,260
====== ======= ======= =======
DEPRECIATION:
Continuing operations...... 805 1,424 2,161 2,355
Discontinued operations.... 1,365 2,600 3,671 2,583
------ ------- ------- -------
2,170 4,024 5,832 4,938
====== ======= ======= =======
</TABLE>
F-13
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3 ANALYSIS OF TURNOVER, GROSS PROFIT AND CAPITAL EMPLOYED (CONTINUED)
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
OPERATING ASSETS/(LIABILITIES)
EMPLOYED BY MAJOR BUSINESS ACTIVITY:
Continuing operations................. 28,652 23,800 25,057
Discontinued operations............... 7,663 -- --
-------- ------- -------
36,315 23,800 25,057
RECONCILIATION TO NET LIABILITIES:
Cash.................................. 1,791 1,143 1,156
Borrowings............................ (87,221) (87,660) (64,396)
Taxes................................. (2,230) (975) (975)
Accrued bank interest................. (3,663) (4,117) (4,117)
Future rental income.................. (4,697) -- --
Non-operating accruals................ -- -- (23,923)
Reorganisation reserve................ (5,140) -- --
-------- ------- -------
(101,160) (91,609) (92,255)
-------- ------- -------
NET LIABILITIES....................... (64,845) (67,809) (67,198)
======== ======= =======
</TABLE>
F-14
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3 ANALYSIS OF TURNOVER, GROSS PROFIT AND CAPITAL EMPLOYED (CONTINUED)
GEOGRAPHICAL ANALYSIS OF CONTINUING OPERATIONS IS AS FOLLOWS:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- ----------------------------------------
PERIOD FROM PERIOD
JANUARY 1, FROM APRIL 25,
1995 TO 1995 TO YEAR ENDED YEAR ENDED
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
----------- -------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
TURNOVER ANALYSIS BY
COMPANY LOCATION:
Europe................... 25,647 49,292 83,725 80,413
America.................. 7,440 14,898 24,473 23,652
Asia..................... 2,609 7,115 11,567 11,167
Other.................... 2,705 5,990 8,837 7,111
------ ------ ------- -------
38,401 77,295 128,602 122,343
====== ====== ======= =======
Export sales from the
UK...................... 7,148 19,975 19,954 16,825
====== ====== ======= =======
TURNOVER ANALYSIS BY
DESTINATION:
Europe................... 22,768 42,882 65,029 59,178
America.................. 6,310 12,333 21,564 21,658
Asia..................... 5,687 14,317 24,752 26,398
Other.................... 3,636 7,763 17,257 15,109
------ ------ ------- -------
38,401 77,295 128,602 122,343
====== ====== ======= =======
OPERATING PROFIT ANALYSIS
BY
COMPANY LOCATION:
Europe................... 3,306 2,746 12,782 6,449
America.................. 329 635 1,918 1,665
Asia..................... 40 438 940 1,135
Other.................... 253 480 640 360
------ ------ ------- -------
3,928 4,299 16,280 9,609
====== ====== ======= =======
</TABLE>
GEOGRAPHICAL OPERATING ASSETS EMPLOYED ANALYSED BY COMPANY LOCATION FOR
CONTINUING OPERATIONS IS AS FOLLOWS:
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Europe............................. 13,760 10,591 11,848
America............................ 5,064 2,943 2,943
Asia............................... 6,938 7,950 7,950
Other.............................. 2,890 2,316 2,316
------ ------ ------
28,652 23,800 25,057
====== ====== ======
</TABLE>
Operating assets have been analysed above, rather than net assets, as it
more appropriately reflects the divisions by excluding cash balances and
amounts falling due for bank loans and
F-15
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3 ANALYSIS OF TURNOVER, GROSS PROFIT AND CAPITAL EMPLOYED (CONTINUED)
overdrafts, obligations under finance leases, accrued interest and the accrued
consideration for the Acquisition.
The customer base is diverse both in its geographical spread, types of
footwear companies (athletic and traditional, men's and women's) and across
the spectrum of branded shoe companies, manufacturers, converters and
distributors. No single customer accounted for more than 3% of sales in 1995,
1996 or 1997.
The Group purchases most of the raw materials for its products on the open
market, and sales may be affected by changes in the market price of such raw
materials.
The Group does not engage in commodity hedging transactions for raw
materials. Although the Group has generally been able to pass on increases in
the price of raw materials to its customers, there can be no assurance that it
will be able to do so in the future, on a timely basis or at all. The results
of operations have in the past been affected by fluctuations in the price of
the primary raw material, wood pulp, for its cellulose products. Additionally,
significant increases in the price of the Group's products due to increases in
the cost of raw materials, could have a negative effect on demand for its
products and a material adverse effect on the Group's business, financial
condition and results of operation.
4 OPERATING PROFIT
Operating profit/(loss) is stated after charging:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- ----------------------------------------
PERIOD FROM PERIOD
JANUARY 1, FROM APRIL 25,
1995 TO 1995 TO YEAR ENDED YEAR ENDED
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
----------- -------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Marketing and
distribution costs...... 11,633 25,205 36,328 33,235
Research and development
costs................... 1,418 3,545 4,037 3,810
Administration expenses:
Operating expenses..... 4,099 9,394 11,397 9,838
Other expenses......... 637 3,833 4,640 10,601
------ ------ ------ ------
17,787 41,977 56,402 57,484
====== ====== ====== ======
</TABLE>
F-16
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4 OPERATING PROFIT (CONTINUED)
Operating profit relating to continuing operations is stated after charging:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- -----------------------------------------
PERIOD FROM
JANUARY 1, PERIOD FROM
1995 TO APRIL 25, 1995 YEAR ENDED YEAR ENDED
APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
----------- --------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Marketing and
distribution costs..... 5,520 10,862 18,923 19,428
Research and
development............ 423 892 1,312 1,351
Administration expenses:
Operating expenses.... 1,897 3,647 5,725 5,285
Other expenses........ 569 1,516 2,041 6,868
----- ------ ------ ------
8,409 16,917 28,001 32,932
===== ====== ====== ======
</TABLE>
5EXCEPTIONAL ITEMS
A) EXCEPTIONAL ITEMS INCLUDED WITHIN OPERATING PROFIT:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- -----------------------------------------
PERIOD FROM
JANUARY 1, PERIOD FROM
1995 TO APRIL 25, 1995 YEAR ENDED YEAR ENDED
APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
----------- --------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
OPERATING PROFIT BEFORE
EXCEPTIONAL ITEMS...... 4,916 3,573 12,507 12,649
EXCEPTIONAL ITEMS
Restructuring
provision......... i) -- (10,110) -- --
Cost of abortive
sale............. ii) -- -- -- (1,712)
Refinancing costs.....
iii) -- -- -- (1,144)
Share options..... iv) -- -- -- (2,803)
----- ------- ------ ------
OPERATING PROFIT/(LOSS)
FOR THE PERIOD......... 4,916 (6,537) 12,507 6,990
===== ======= ====== ======
</TABLE>
I)Restructuring provision
In 1995, the decision was taken to significantly restructure the Group. The
costs of these projects totalling (Pounds)10,110,000 was provided in the 1995
accounts as an exceptional item ((Pounds)5,760,000 in cost of sales and
(Pounds)4,350,000 in marketing and administrative costs). Of the charge
(Pounds)1,634,000 related to the continuing operations ((Pounds)1,434,000 in
costs of sales and (Pounds)200,000 in marketing and administrative costs).
The balance sheet accrual relating to the restructuring provision amounted
to (Pounds)nil as of December 31, 1997 and (Pounds)5,140,000 and
(Pounds)9,374,000 as of December 31, 1996 and 1995 respectively.
F-17
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5EXCEPTIONAL ITEMS (CONTINUED)
II)Cost of abortive sale
In October 1997, the shareholders of United Texon Limited aborted a proposed
sale of its shares. The costs of this abortive sale, amounting to
(Pounds)1,712,000 have been treated as an exceptional item in continuing
operations.
III)Refinancing costs
In July 1997, United Texon Limited refinanced its Senior Loan facilities
with a syndicate of banks led by Chase Manhattan Bank plc. The cost of this
refinancing, amounting to (Pounds)1,144,000 has been treated as an exceptional
item in continuing operations.
IV)Share options
On October 22, 1997 United Texon Limited issued share options to five senior
employees. The excess of market value over the exercise price of the options,
estimated at (Pounds)2,803,000 has been treated as an exceptional item in
continuing operations.
B)PROFIT ON SALE OF DISCONTINUED OPERATION
Effective December 31, 1997, the entire Machinery division ("Machinery
Group") was sold by United Texon Limited for a nominal consideration to a new
company owned principally by United Texon Limited's shareholders. The net gain
on the sale of the Machinery Group amounted to (Pounds)1,602,000. The total
profit on disposal being (Pounds)3,250,000 with (Pounds)1,648,000 of costs
associated with the demerger. The net gain has been treated as an exceptional
item.
The exceptional items relating to the discontinued operations had no effect
on United Texon Limited's tax charge or minority interest.
F-18
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE INTEREST
Profit/(loss) on ordinary activities before interest is stated after
charging/(crediting):
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
------------ -----------------------------------------
PERIOD FROM
JANUARY 1, PERIOD FROM
1995 APRIL 25, 1995 YEAR ENDED YEAR ENDED
TO APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
------------ --------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
COMBINED GROUP
Depreciation of tangible
fixed assets
Owned................. 2,137 3,926 5,702 4,768
Leased................ 33 98 130 170
Operating lease charges
Hire of plant and
machinery............ 546 1,091 1,376 1,360
Other lease charges... 627 1,253 1,745 1,657
Finance lease charges
Plant and machinery... 14 30 59 77
Leased machinery...... 265 412 488 322
Pension costs........... 1,028 2,160 3,145 2,959
Profit on sale of
properties............. (897) -- -- (386)
Loss/(profit) on sale of
other assets........... 6 (73) (51) (251)
Net foreign exchange
losses................. 148 371 66 51
Provision for doubtful
debtors................ 272 517 672 558
CONTINUING OPERATIONS
Depreciation of tangible
fixed assets
Owned................. 772 1,326 2,031 2,213
Leased................ 33 98 130 142
Operating lease charges
Hire of plant and
machinery............ 333 666 840 546
Other lease charges... 420 840 1,170 742
Finance lease charges
Plant and machinery... 14 30 59 68
Leased machinery...... -- -- -- --
Pension costs........... 290 928 1,246 1,144
Profit on sale of
properties............. -- -- -- (386)
Profit on sale of other
assets................. -- (20) (3) (266)
Net foreign exchange
losses/(profits)....... 149 72 45 (53)
Provision for doubtful
debtors................ 176 227 467 378
</TABLE>
F-19
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
--------------- -----------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, 1995 APRIL 25, 1995 YEAR ENDED YEAR ENDED
TO APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
--------------- --------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
INTEREST PAYABLE AND
SIMILAR CHARGES ON:
Borrowings totally
repayable within
5 years.............. (934) (6,288) (3,086) (7,874)
Debenture interest
repayable within
5 years.............. -- -- -- (3,041)
Borrowings repayable
after 5 years........ (2,576) -- (5,543) --
Debenture interest
repayable after
5 years.............. -- (1,585) (2,638) --
------ ------ ------- -------
(3,510) (7,873) (11,267) (10,915)
====== ====== ======= =======
</TABLE>
8DIRECTORS AND EMPLOYEES
The average number of employees (including directors) was made up as
follows:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- --------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25,
1995 TO 1995 TO YEAR ENDED YEAR ENDED
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Manufacturing.............. 1,221 1,194 1,142 1,021
Selling, distribution and
administration............ 1,250 1,252 1,174 1,058
----- ----- ----- -----
2,471 2,446 2,316 2,079
===== ===== ===== =====
Total number of employees
at end of period.......... 2,481 2,400 2,259 1,071
===== ===== ===== =====
</TABLE>
As of December 31, 1997 Texon International plc had 1,071 employees, of
which 603 were in manufacturing and 468 in selling, distribution and
administration.
F-20
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8DIRECTORS AND EMPLOYEES (CONTINUED)
Payments in respect of these employees were as follows:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
------------ -----------------------------------------
PERIOD FROM
JANUARY 1, PERIOD FROM
1995 APRIL 25, 1995 YEAR ENDED YEAR ENDED
TO APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
------------ --------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Wages................... 15,669 31,212 45,672 43,980
Social security costs... 1,870 3,549 5,768 5,342
Other pension costs..... 1,028 2,160 3,145 2,959
Health and other payroll
costs.................. 868 1,088 2,130 2,033
------ ------ ------ ------
19,435 38,009 56,715 54,314
====== ====== ====== ======
</TABLE>
Directors' emoluments including pension contributions comprise:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
------------ -----------------------------------------
PERIOD FROM
JANUARY 1, PERIOD FROM
1995 APRIL 25, 1995 YEAR ENDED YEAR ENDED
TO APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
------------ --------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Fees................. 7 40 60 60
Other emoluments..... 311 198 1,090 1,146
Pensions............. 14 5 37 117
--- --- ----- -----
332 243 1,187 1,323
=== === ===== =====
</TABLE>
Included within other emoluments for the years ended December 31, 1996 and
1997, is (Pounds)306,000 and (Pounds)375,000, respectively, paid as
compensation to Directors and past Directors for loss of office. Directors of
United Texon Limited who were compensated during 1996 for loss of office were,
Mr Bates (resigned May 31, 1996), Mr Burton (resigned June 28, 1996) and Mr
Price (resigned August 6, 1996). The directors compensated for loss of office
during 1997 were Dr Coutts who resigned from United Texon Limited on December
31, 1997 and Mr Fleming, who following the sale of the Machinery business,
resigned from the Machinery division on December 31, 1997 and was compensated
by British United Shoe Machinery Co Limited, a subsidiary within the Machinery
division.
Pensions for the year ended December 31, 1996 includes a contribution of
(Pounds)26,361 paid on behalf of two Directors as compensation for loss of
office.
F-21
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8DIRECTORS AND EMPLOYEES (CONTINUED)
Directors' emoluments:
The emoluments of the Chairman were (Pounds)54,000, (Pounds)133,000,
(Pounds)201,000 and (Pounds)545,000 for the period from January 1, 1995 to
April 24, 1995, period from April 25, 1995 to December 31, 1995 and the years
ended December 31, 1996 and 1997 respectively.
Emoluments of the highest paid Director were (Pounds)68,000,
(Pounds)133,000, (Pounds)224,000 and (Pounds)545,000 for the period from
January 1, 1995 to April 24, 1995, period from April 25, 1995 to December 31,
1995 and the years ended December 31, 1996 and 1997 respectively.
Three Directors have benefits accruing under money purchase pension schemes.
The remuneration of the executive Directors is authorised by the
Remuneration Committee of the Board which consists of non-executive Directors
only.
While the consolidated profit and loss accounts include the total emoluments
of the employees of United Texon Limited for the year, the Directors'
emoluments shown above are only for the period in which they were a director
of United Texon Limited.
Additional information relating to Directors share options is located in
Note 15.
F-22
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9 TAXATION
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
----------- --------------------------------------
PERIOD FROM PERIOD
JANUARY 1, FROM APRIL
1995 TO 25, 1995 TO YEAR ENDED YEAR ENDED
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
----------- ------------ ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
TAXABLE INCOME/(LOSS):
UK......................... (1,589) (8,417) (1,949) (11,590)
Overseas................... 3,135 (5,756) 3,418 9,565
------ ------- ------ -------
1,546 (14,173) 1,469 (2,025)
====== ======= ====== =======
THE TAX CHARGE IS MADE UP
AS FOLLOWS:
UK
Corporation tax at 31.5%,
(1996 and 1995: 33%).... -- -- -- --
Deferred tax............. -- -- -- (247)
OVERSEAS TAXATION
Corporation tax.......... (641) (830) (2,324) (1,796)
Withholding tax.......... (11) (83) (195) (3)
Deferred tax............. 2 (107) (69) 36
------ ------- ------ -------
(650) (1,020) (2,588) (2,010)
CURRENT YEAR ADJUSTMENTS IN
RESPECT OF PRIOR YEARS
Corporation tax.......... -- 112 (13) 22
Deferred tax............. -- (80) 696 --
------ ------- ------ -------
(650) (988) (1,905) (1,988)
====== ======= ====== =======
Continuing operations...... (367) (682) (2,387) (1,492)
Discontinued operations.... (283) (306) 482 (496)
------ ------- ------ -------
(650) (988) (1,905) (1,988)
====== ======= ====== =======
</TABLE>
The December 31, 1997 charge for UK Corporation Tax at 31.5% (1996 and 1995:
33%) is stated after double tax relief of (Pounds)512,000 (December 31, 1996:
(Pounds)177,000; period April 25, 1995 to December 31, 1995: (Pounds)988,000;
period from January 1, 1995 to April 24, 1995: (Pounds)Nil).
At December 31, 1997, Texon International plc and its subsidiaries had
carried forward tax losses available for continuing operations of
(Pounds)11,971,000, with (Pounds)4,020,000 expiring between December 31, 1997
and December 31, 2012 and (Pounds)7,951,000 being unlimited.
The taxable profits generated by the Foshan Texon Cellulose Board
Manufacturing Co Limited are subject to a tax holiday until December 31, 1997,
and at half the standard rate for the following three years (the current
standard rate is 33%).
F-23
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9 TAXATION (CONTINUED)
The table below reconciles the expected UK statutory charge to the actual
taxes:
<TABLE>
<CAPTION>
USM
(HOLDINGS)
LIMITED UNITED TEXON LIMITED
--------------- -----------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, 1995 APRIL 25, 1995 YEAR ENDED YEAR ENDED
TO APRIL 24, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
--------------- --------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
EXPECTED TAXATION
CHARGE/(BENEFIT) AT UK
CORPORATION TAX RATES
(1997: 31.5%; 1996 and
1995: 33%)............. 510 (4,677) 485 (638)
Current year tax losses
not relieved........... 758 5,801 1,743 4,043
Benefit of prior year
losses................. (736) (406) (441) (2,922)
Withholding tax......... 11 83 195 3
Overseas tax rates...... 107 219 606 1,240
Prior year tax
adjustment............. -- (32) (683) (22)
Non-deductible
expenses............... -- -- -- 1,308
Non-taxable gain on
disposal of
discontinued
operations............. -- -- -- (1,024)
---- ------ ----- ------
Actual taxes on income.. 650 988 1,905 1,988
==== ====== ===== ======
</TABLE>
To the extent that dividends remitted from overseas subsidiaries and
associated undertakings are expected to result in additional taxes,
appropriate amounts have been provided. No taxes have been provided for
unremitted earnings of subsidiaries and associated undertakings when such
amounts are considered permanently re-invested.
F-24
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10 CONSOLIDATED TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
MACHINERY
LAND AND PLANT AND OFFICE MOTOR LEASED TO
BUILDINGS MACHINERY EQUIPMENT VEHICLES CUSTOMERS TOTAL
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
UNITED TEXON LIMITED
<S> <C> <C> <C> <C> <C> <C>
COST
At January 1, 1997...... 11,105 35,358 3,367 652 13,041 63,523
Exchange adjustment..... (270) (749) (80) (12) (293) (1,404)
Additions............... 9 1,813 111 173 1,154 3,260
Disposals............... (1,450) (1,646) (526) (235) (4,808) (8,665)
Discontinued
operations............. (1,309) (12,142) (1,877) (218) (8,777) (24,323)
------ ------- ------ ---- ------ -------
At December 31, 1997.... 8,085 22,634 995 360 317 32,391
====== ======= ====== ==== ====== =======
ACCUMULATED DEPRECIATION
At January 1, 1997...... 2,734 22,577 2,757 334 8,567 36,969
Exchange adjustment..... (122) (371) (149) (53) (287) (982)
Provided during the
year................... 340 2,571 182 154 1,691 4,938
Disposals............... (743) (1,521) (483) (113) (3,430) (6,290)
Discontinued
operations............. (480) (9,629) (1,561) (138) (6,277) (18,085)
------ ------- ------ ---- ------ -------
At December 31, 1997.... 1,729 13,627 746 184 264 16,550
====== ======= ====== ==== ====== =======
NET BOOK VALUE AT
DECEMBER 31, 1997...... 6,356 9,007 249 176 53 15,841
------ ------- ------ ---- ------ -------
NET BOOK VALUE AT
DECEMBER 31, 1996...... 8,371 12,781 610 318 4,474 26,554
====== ======= ====== ==== ====== =======
TEXON INTERNATIONAL PLC
COST
Assets acquired......... 6,356 9,007 249 176 53 15,841
Fair value adjustments.. 1,257 -- -- -- -- 1,257
------ ------- ------ ---- ------ -------
At December 31, 1997.... 7,613 9,007 249 176 53 17,098
====== ======= ====== ==== ====== =======
ACCUMULATED DEPRECIATION
Depreciation on assets
acquired............... -- -- -- -- -- --
------ ------- ------ ---- ------ -------
Net book value at
December 31, 1997...... 7,613 9,007 249 176 53 17,098
====== ======= ====== ==== ====== =======
</TABLE>
Included in the total net book value of plant and machinery at December 31,
1997 is (Pounds)1,005,000 (December 31, 1996: (Pounds)1,244,000) in respect of
assets held under finance leases and hire purchase contracts. Depreciation
charged during the year ended December 31, 1997 related to such plant and
machinery is (Pounds)142,000 (December 31, 1996: (Pounds)128,000).
Included in the net book value of machinery leased to customers as of
December 31, 1997 is (Pounds)24,000 (December 31, 1996: (Pounds)2,201,000) in
respect of assets sold to finance companies on terms whereby the assets may be
re-acquired at the end of the primary lease period under a re-marketing
agreement with such finance companies.
F-25
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10 CONSOLIDATED TANGIBLE FIXED ASSETS (CONTINUED)
Land and Buildings comprise:
<TABLE>
<CAPTION>
SHORT
FREEHOLD LEASEHOLD TOTAL
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
UNITED TEXON LIMITED
COST
At January 1, 1997........................ 10,782 323 11,105
Exchange adjustment....................... (255) (15) (270)
Reclassification.......................... -- 5 5
Capital expenditure....................... -- 4 4
Disposals................................. (1,441) (9) (1,450)
Discontinued operations................... (1,014) (295) (1,309)
------ ---- ------
Cost at December 31, 1997................. 8,072 13 8,085
====== ==== ======
ACCUMULATED DEPRECIATION
At January 1, 1997........................ 2,555 179 2,734
Exchange adjustment....................... (120) (2) (122)
Provided in the year...................... 322 18 340
Disposals................................. (734) (9) (743)
Discontinued operations................... (299) (181) (480)
------ ---- ------
Accumulated depreciation at December 31,
1997..................................... 1,724 5 1,729
====== ==== ======
NET BOOK VALUE
At December 31, 1997...................... 6,348 8 6,356
====== ==== ======
At December 31, 1996...................... 8,227 144 8,371
====== ==== ======
TEXON INTERNATIONAL PLC
COST
Assets acquired........................... 6,348 8 6,356
Fair value adjustments.................... 1,257 -- 1,257
------ ---- ------
At December 31, 1997...................... 7,605 8 7,613
====== ==== ======
ACCUMULATED DEPRECIATION
Depreciation on assets acquired........... -- -- --
====== ==== ======
NET BOOK VALUE
At December 31, 1997...................... 7,605 8 7,613
====== ==== ======
</TABLE>
F-26
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11STOCKS
Stocks comprise the following:
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Raw materials.......................... 2,747 2,283 2,283
Work in progress....................... 10,146 1,148 1,148
Finished goods and goods for resale.... 23,154 13,285 13,285
------ ------ ------
36,047 16,716 16,716
====== ====== ======
</TABLE>
12DEBTORS
Debtors comprise the following:
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade debtors, net of (Pounds)1,529,000
(1996: (Pounds)1,626,000) allowance
for doubtful debtors.................. 28,920 16,868 16,868
Other debtors.......................... 2,152 1,288 1,288
Prepayments and accrued income......... 1,170 327 327
------ ------ ------
32,242 18,483 18,483
====== ====== ======
AMOUNTS FALLING DUE AFTER MORE THAN ONE
YEAR
Trade debtors.......................... 670 -- --
Other debtors.......................... 2,082 862 862
------ ------ ------
2,752 862 862
------ ------ ------
Total debtors.......................... 34,994 19,345 19,345
====== ====== ======
</TABLE>
F-27
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12DEBTORS (CONTINUED)
Other debtors falling due after more than one year relate to deposits on
leased assets, bonds and cash surrender insurance. The movement on the
allowance for doubtful debts may be analysed as follows:
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period................. 2,196 2,341 2,343 1,626 --
Charge for the period... 272 517 662 558 --
Utilised during the pe-
riod................... (175) (557) (1,274) (576) --
Allowance acquired...... -- -- -- -- 1,529
Exchange adjustment..... 48 42 (105) (79) --
----- ----- ------ ----- -----
Balance at end of peri-
od..................... 2,341 2,343 1,626 1,529 1,529
===== ===== ====== ===== =====
</TABLE>
13CREDITORS
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Amounts falling due within one year
Borrowings, bank loans and
overdrafts.......................... 56,587 60,446 60,446
Obligations under finance leases..... 147 224 224
Payments received on account......... 519 81 81
Trade creditors...................... 13,036 9,460 9,460
Taxation and social security......... 4,965 2,333 2,333
Other creditors...................... 3,900 871 871
Accruals............................. 20,719 13,105 37,028
Debentures........................... -- 27,214 3,950
------ ------- -------
99,873 113,734 114,393
====== ======= =======
Amounts falling due after more than one
year
Obligations under finance leases
(falling due in 2-5 years).......... 945 698 698
Future lease income.................. 2,318 -- --
Debentures, falling due in 2-5
years............................... 3,950 -- --
Borrowings, bank loans
Repayable after more than 1 year... 6,461 -- --
Debentures
Falling due after more than 5
years............................. 20,223 -- --
------ ------- -------
33,897 698 698
====== ======= =======
</TABLE>
F-28
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13 CREDITORS (CONTINUED)
Texon International plc and United Texon Limited had no trade balances
bearing imputed interest at December 31, 1997. The weighted average interest
rate on short-term and total borrowings at December 31, 1997 was 9.33% (1996:
8.79%).
BORROWINGS, BANK LOANS AND OVERDRAFTS COMPRISE:
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Amounts falling due within one year
Senior Secured Loans................. 51,128 48,122 48,122
Mezzanine Debt....................... -- 6,854 6,854
Other loans and bilateral facili-
ties................................ 5,459 5,470 5,470
------ ------ ------
56,587 60,446 60,446
====== ====== ======
Amounts falling due after more than
one year
Mezzanine Debt........................ 6,461 -- --
------ ------ ------
6,461 -- --
====== ====== ======
</TABLE>
Following the acquisition of United Texon Limited by Texon International plc
on December 31, 1997 the Senior Secured loans, Mezzanine Debt and Loan notes
became repayable on demand and were repaid on completion of the transaction on
January 30, 1998. As a part of the same transaction Texon International plc
acquired the deep discounted bonds from the shareholders of United Texon
Limited and as described in more detail in Note 25a entered into a new Credit
Agreement. Details pertaining to the borrowings, bank loans and overdrafts as
of December 31,1997 are given below.
The Senior Secured Loans are from a syndicate of banks and are secured by
fixed and floating charges on the worldwide assets of the Group's
subsidiaries. The final maturity of the Senior Secured Loans is March 31,
2002. As at December 31, 1996, the Group was in breach of financial covenants
regarding the Senior Secured Loans making them technically repayable on
demand. On July 29, 1997 the Group successfully negotiated a new agreement
resulting in the debt no longer being repayable on demand. The relevant
interest rate effective on the loans in 1997 was 2.25% per annum over LIBOR
(1996: 2.25%).
The Group has unused available bank facilities as of December 31, 1997, of
(Pounds)3,539,000. The facilities are available as part of and under the same
terms as the existing debt.
The Group is subject to various financial ratio covenants under the Senior
credit agreement of July 29, 1997. Under the terms of the Senior credit
agreement in place at December 31, 1997, the Group was prevented from paying a
dividend on the ordinary shares.
The date for repayment of the Mezzanine Debt is September 30, 2002. United
Texon Limited's relevant interest rate for 1997 was 3.5% over the relevant
cost of funds payable in cash, with a further 6% per annum payable on
redemption. The third party lender has a second charge on the assets of
F-29
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13CREDITORS (CONTINUED)
United Texon Limited. No interest was paid during 1997 and interest accrues
thereon at 10.5% over the relevant cost of funds.
Others loans and bilateral facilities represent credit facilities of
subsidiaries with third parties.
DEBENTURES COMPRISE:
Details concerning the Bonds and Loan notes as of December 31, 1997 are given
below:
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Amounts falling due within one year
Deep Discounted Bonds................ -- 23,264 --
Loan notes........................... -- 3,950 3,950
------ ------ -----
-- 27,214 3,950
====== ====== =====
Amounts falling due after more than
one year
Deep discounted bonds................ 20,223 -- --
Loan notes........................... 3,950 -- --
------ ------ -----
24,173 -- --
====== ====== =====
</TABLE>
The Deep Discounted Bonds were purchased from the shareholders by Texon
International plc in connection with its acquisition of United Texon Limited
and are included within accruals in Texon International plc's balance sheet as
of December 31, 1997.
The Deep Discounted Bonds which accrue at a discount rate of 15% per annum
are redeemable at par on September 30, 2002 for (Pounds)45,184,000.
Loan notes comprise a Loan note of (Pounds)450,000 redeemable on June 30,
1999, upon which no interest is payable. Options on Loan notes of
(Pounds)158,476 are not exercised at December 31, 1997, against which no
interest is payable until exercised and (Pounds)3,341,816 of Loan notes upon
which interest is payable at a rate of 5% per annum. If interest is not paid
at each six month period from January 1, 1996, then interest of 8% per annum
is charged on this outstanding interest. The Loan notes are redeemable at
United Texon Limited's option but in any event not later than the earlier of
the date of sale or flotation of the Company or June 30, 1999.
F-30
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14PROVISIONS FOR LIABILITIES AND CHARGES
UNITED TEXON LIMITED
<TABLE>
<CAPTION>
OTHER
PENSIONS DEFERRED TAX PROVISIONS TOTAL
----------- ------------ ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Balance at January 1, 1997... 16,957 (526) 14,030 30,461
Exchange adjustment.......... (2,043) (3) 438 (1,608)
Provided..................... 1,679 211 2,848 4,738
Utilised..................... (830) -- (2,811) (3,641)
Disposal of Machinery
division.................... (12,069) 102 (11,561) (23,528)
------- ---- ------- -------
At December 31, 1997......... 3,694 (216) 2,944 6,422
======= ==== ======= =======
At December 31, 1996......... 16,957 (526) 14,030 30,461
======= ==== ======= =======
</TABLE>
TEXON INTERNATIONAL PLC
<TABLE>
<CAPTION>
OTHER
PENSIONS DEFERRED TAX PROVISIONS TOTAL
----------- ------------ ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Provisions acquired............ 3,694 (216) 2,944 6,422
----- ---- ----- -----
At December 31, 1997........... 3,694 (216) 2,944 6,422
===== ==== ===== =====
</TABLE>
PENSIONS:
Pensions are discussed in Note 22.
DEFERRED TAXATION:
<TABLE>
<CAPTION>
TEXON
INTERNATIONAL
UNITED TEXON LIMITED PLC
------------------------- -------------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
DEFERRED TAXATION IS REPRESENTED BY
Excess of capital allowances over
accumulated depreciation............. 64 (51) (51)
Intercompany profit contained in
stock................................ (725) (262) (262)
Other provisions and timing
differences.......................... 135 97 97
---- ---- ----
(526) (216) (216)
==== ==== ====
</TABLE>
Properties valued in the accounts at more than their historical cost in the
local books of Texon International plc and United Texon Limited could give
rise to a tax liability of approximately (Pounds)1.7 million and (Pounds)1.3
million respectively if sold at net book value. Provision for this liability
has not been made in the accounts in cases where there is no intention of
selling the properties and in others any tax liability would be extinguished
by available tax losses. There are no other potential liabilities for deferred
tax, not provided in the financial statements.
OTHER PROVISIONS:
Other provisions at December 31, 1997 includes (Pounds)606,000 (1996:
(Pounds)8,622,000) for post retirement medical and life insurance benefits of
retired employees and certain current employees in the United States. (See
Note 23).
F-31
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15SHARE CAPITAL
TEXON INTERNATIONAL PLC
<TABLE>
<CAPTION>
TEXON INTERNATIONAL PLC
-------------------------------------
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1997 1997
---------------- --------------------
NUMBER OF SHARES PAR VALUE ((Pounds))
<S> <C> <C>
AUTHORISED SHARE CAPITAL
Ordinary A voting shares of (Pounds)1
each.................................. 3,436,277 3,436,277
Ordinary A non-voting shares of
(Pounds)1 each........................ 163,723 163,723
Ordinary B voting shares of (Pounds)1
each.................................. 400,000 400,000
Redeemable cumulative preference shares
of 10p each........................... 52,000,000 5,200,000
---------
9,200,000
=========
</TABLE>
<TABLE>
<CAPTION>
TEXON INTERNATIONAL PLC
----------------------------------
NUMBER OF CONSIDERATION
SHARES PAR VALUE PAID
--------- ---------- -------------
((Pounds)) ((Pounds))
<S> <C> <C> <C>
ISSUED SHARE CAPITAL
Ordinary B voting shares of (Pounds)1 each
Issued fully paid........................... 1 1 1
Issued partly paid.......................... 49,999 12,501 12,501
------ ------ ------
50,000 12,502 12,502
====== ====== ======
</TABLE>
On December 31, 1997 Texon International plc acquired the entire share
capital including preference shares of United Texon Limited. The consideration
includes the shares described as "share capital to be issued" as discussed in
Note 25.
Under the terms of the revolving credit facility and the 10% Series A Notes
due 2008, Texon International plc are prevented from paying a dividend on
preference shares and ordinary shares until certain financial ratios have been
met.
The redeemable cumulative preference shares carry a fixed cumulative
dividend, calculated as a percentage of the redemption value of (Pounds)52.0
million, payable semi-annually at a rate exclusive of any associated tax
credit. The dividend is 15% through September 30, 2002. However, any
preference dividend payments due on or prior to December 31, 2000, which are
paid on or prior to the due date, shall be deemed to satisfy three times the
amount of the preference dividend so paid, provided that arrears of accrued
but unpaid dividends in respect of previous periods have been paid until
December 31, 2000, in the event that the dividend is not paid on the due date,
it shall accumulate at a rate of 15%.
F-32
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15SHARE CAPITAL (CONTINUED)
UNITED TEXON LIMITED
Details of the issued share capital including the mandatorily redeemable
cumulative preference shares acquired by Texon International plc at December
31, 1997 are given below:
<TABLE>
<CAPTION>
UNITED TEXON LIMITED
-------------------------------------
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1997 1997
---------------- --------------------
NUMBER OF SHARES PAR VALUE ((Pounds))
<S> <C> <C>
AUTHORISED SHARE CAPITAL
Ordinary voting shares of 1p each...... 4,999,568 49,996
Ordinary non-voting shares of 1p each.. 250,327 2,503
Mandatorily redeemable cumulative
preference shares of (Pounds)1 each... 29,000,000 29,000,000
----------
29,052,499
==========
</TABLE>
<TABLE>
<CAPTION>
UNITED TEXON LIMITED
-----------------------------------
NUMBER OF CONSIDERATION
SHARES PAR VALUE PAID
---------- ---------- -------------
((Pounds)) ((Pounds))
<S> <C> <C> <C>
ISSUED SHARE CAPITAL
Ordinary voting shares of 1p each........ 4,749,673 47,497 4,749,673
Ordinary non-voting shares of 1p each.... 250,327 2,503 250,327
Mandatorily redeemable cumulative
preference shares of (Pounds)1 each..... 29,000,000 29,000,000 29,000,000
---------- ----------
29,050,000 34,000,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
UNITED TEXON LIMITED
-------------------------------------
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1996 1996
---------------- --------------------
NUMBER OF SHARES PAR VALUE ((Pounds))
<S> <C> <C>
AUTHORISED SHARE CAPITAL
Ordinary voting shares of 1p each....... 5,092,000 50,920
Ordinary non-voting shares of 1p each... 157,895 1,579
Mandatorily redeemable cumulative
preference shares of (Pounds)1 each.... 29,000,000 29,000,000
----------
29,052,499
==========
</TABLE>
<TABLE>
<CAPTION>
UNITED TEXON LIMITED
-----------------------------------
AS OF DECEMBER 31, 1996
-----------------------------------
NUMBER OF CONSIDERATION
SHARES PAR VALUE PAID
---------- ---------- -------------
((Pounds)) ((Pounds))
<S> <C> <C> <C>
ISSUED SHARE CAPITAL
Ordinary voting shares of 1p each......... 4,842,105 48,421 4,842,105
Ordinary non-voting shares of 1p each..... 157,895 1,579 157,895
Mandatorily redeemable cumulative
preference shares of (Pounds)1 each...... 29,000,000 29,000,000 29,000,000
---------- ----------
29,050,000 34,000,000
========== ==========
</TABLE>
F-33
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15SHARE CAPITAL (CONTINUED)
MANDATORILY REDEEMABLE CUMULATIVE PREFERENCE SHARES:
The mandatorily redeemable cumulative preference shares are redeemable at
United Texon Limited's option but in any event not later than the earlier of
the date of sale or flotation of the company or September 30, 2002, at par
together with premium of 7 1/2% per annum from date of allotment to date of
redemption.
In addition, the mandatorily redeemable cumulative preference shares carry
the right to a preference dividend that accrues at the rate of 5% per annum
from January 1, 1996, to date of redemption.
On October 6, 1997, United Texon Limited's shareholders waived their
entitlement to the premium on redemption in respect of the period from January
1, 1996, to December 31, 1997, together with additional amounts representing
interest on the preference dividend for the same period. The premium payable
on the redemption of the preference shares from the date of issue to December
31, 1997, was also waived. From January 1, 1998, the original rights and
entitlements are restored.
As a result the redemption premium, preference dividend and interest charges
transferred from equity to non-equity interests in prior periods has been
reversed in 1997.
Non-equity interests are comprised of the following:
<TABLE>
<CAPTION>
((Pounds))
<S> <C>
NON-EQUITY INTERESTS
Preference shares of (Pounds)1 each (at issue).................... 29,000,000
Acretion of redemption premium for the period..................... 1,450,000
----------
Non-equity interest at December 31, 1995.......................... 30,450,000
Acretion of redemption premium for the period..................... 2,284,000
Accrued preference dividend and interest on accrued preference
dividend......................................................... 1,483,000
----------
Non-equity interest at December 31, 1996.......................... 34,217,000
Reversal of redemption premium ................................... (3,734,000)
Waiver of accrued preference dividend and interest on accrued
preference dividend.............................................. (1,483,000)
----------
Non-equity interest at December 31, 1997.......................... 29,000,000
==========
</TABLE>
SHARE OPTIONS-UNITED TEXON LIMITED
Shares options over 212,500 ordinary shares previously granted to Directors
in 1995 and 1996 were forfeited during 1997 in connection with the
establishment of a new share option scheme. The exercise price approximated
the fair value of the shares on the date of grant of such share options.
Under the 1997 share option scheme 925,273 share options were granted to
directors and officers at a weighted average exercise price per share of 1p.
In 1997 671,123 were exercised with the remaining 254,150 being forfeited.
The options were granted in October 1997, and were only exercisable on the
occurrence of a capital event (ie. a sale or listing). The number of shares to
which individuals were entitled was determined in relation to the capital
value of the Company. The acquisition of United Texon Limited by Texon
International plc triggered the exercise of the options. The shares were
issued on January 30, 1998, effective as at December 31, 1997.
The total compensation cost included in the results of United Texon Limited
in the year ended December 31, 1997 in respect of the 1997 share option scheme
was (Pounds)2.8 million. The weighted average grant date fair value of options
granted during the year was (Pounds)4.18.
F-34
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16 RESERVES
<TABLE>
<CAPTION>
SHARE GOODWILL
PREMIUM WRITE-OFF PROFIT AND
ACCOUNT RESERVE LOSS ACCOUNT TOTAL
----------- ----------- ------------ -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
USM (HOLDINGS) LIMITED
Balance at January 1, 1995... 17,484 (73,932) (1,406) (57,854)
Retained profit for the
year........................ -- -- 964 964
Exchange adjustments......... -- (1,856) 137 (1,719)
------ -------- ------- --------
Balance at April 24, 1995.... 17,484 (75,788) (305) (58,609)
====== ======== ======= ========
UNITED TEXON LIMITED
Balance at April 25, 1995.... -- -- -- --
Share premium on issue of or-
dinary shares............... 4,950 -- -- 4,950
Goodwill written-off during
the period.................. -- (88,293) -- (88,293)
Retained profit/(loss) for
the year.................... -- -- (15,052) (15,052)
Exchange adjustments......... -- (1,384) 141 (1,243)
------ -------- ------- --------
Balance at December 31,
1995........................ 4,950 (89,677) (14,911) (99,638)
====== ======== ======= ========
Balance at January 1 1996.... 4,950 (89,677) (14,911) (99,638)
Retained profit/(loss) for
the year.................... -- -- (729) (729)
Exchange adjustments......... -- 7,868 (2,617) 5,251
------ -------- ------- --------
Balance at December 31,
1996........................ 4,950 (81,809) (18,257) (95,116)
====== ======== ======= ========
Balance at January 1, 1997... 4,950 (81,809) (18,257) (95,116)
Retained profit/(loss) for
the year.................... -- -- (4,318) (4,318)
Exercised share options...... -- -- 2,803 2,803
Exchange adjustments......... -- 2,347 (4,006) (1,659)
------ -------- ------- --------
Balance at December 31,
1997........................ 4,950 (79,462) (23,778) (98,290)
====== ======== ======= ========
TEXON INTERNATIONAL PLC
Balance at incorporation..... -- -- -- --
Goodwill written-off during
the period.................. -- (124,242) -- (124,242)
------ -------- ------- --------
Balance at December 31,
1997........................ -- (124,242) -- (124,242)
====== ======== ======= ========
</TABLE>
The Texon International plc and United Texon Limited accumulated translation
gains at December 31, 1997, were (Pounds)nil and (Pounds)2,349,000 respectively
(United Texon Limited 1996: (Pounds)4,008,000).
F-35
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17MINORITY EQUITY INTERESTS
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
------------ -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 1995 TO YEAR ENDED YEAR ENDED 1997 TO
TO APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
------------ ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period................. 1,053 -- 890 1,221 --
Acquisition of USM
(Holdings) Limited..... -- 960 -- -- --
Acquisition of United
Texon Limited.......... -- -- -- -- 1,431
Minority interest in the
profit/(loss) on
ordinary activities
after tax.............. (68) (109) 293 305 --
Exchange adjustments.... (25) 39 38 (95) --
----- ---- ----- ----- -----
Balance at end of
period................. 960 890 1,221 1,431 1,431
===== ==== ===== ===== =====
</TABLE>
The minority interests relate to Texon International plc and United Texon
Limited's joint-venture operation in China. The Company owns 96% of USM (China
Holdings) Limited which in turn holds 60% of Foshan Texon Cellulose Board
Manufacturing Co Limited.
18CONTINGENT LIABILITIES
Subsidiary undertakings have contingent liabilities amounting to
approximately (Pounds)681,000 in respect of guarantees given for commitments
in the normal course of trade.
From time to time, the Company is involved in routine ligitation incidental
to its business. The Company is not a party to any pending or threatened legal
proceeding which the Company believes would have a material adverse effect on
the Company's results of operations or financial condition.
19FINANCIAL COMMITMENTS
Operating lease commitments of Texon International plc and United Texon
Limited for future minimum lease payments as at December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
PROPERTY OTHER
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Leases expiring within 1 year...................... 164 244
Leases expiring in the second to fifth years
inclusive......................................... 161 237
Leases expiring over 5 years....................... 126 6
--- ---
451 487
=== ===
</TABLE>
20RELATED PARTY TRANSACTIONS
The Chairman of United Texon Limited holds a Directorship in SATRA (Shoe and
Allied Trades Research Association). During the year ended December 31, 1997,
a subsidiary of United Texon Limited, British United Shoe Machinery Limited,
made payments to SATRA of (Pounds)28,078 (1996: (Pounds)61,884; period from
April 25, 1995 to December 31, 1995: (Pounds)61,639; period from January 1,
1995 to April 24, 1995: (Pounds)30,012).
Certain Texon International plc and United Texon Limited shareholders have
had commercial relations with the companies. As a consequence, fees have been
paid to the shareholders for providing the services of directors, banking
services and strategic advice.
F-36
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20 RELATED PARTY TRANSACTIONS (CONTINUED)
Transactions with related parties during the period (excluding interest paid
in the normal course of business) including fees is as follows:
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Fees for directors'
services............... -- 66 45 45 --
Banking and strategic
advice................. 100 2,520 80 155 500
Debt issuance........... -- -- -- 700 --
--- ----- --- --- ---
100 2,586 125 900 500
=== ===== === === ===
</TABLE>
Amounts included within creditors in respect of related parties at December
31, 1997 totalled (Pounds)519,000. Included within prepayments in respect of
related parties at December 31, 1997 was an amount of (Pounds)14,000.
In a post balance sheet event described in Note 25 Texon International plc
paid a related party (Pounds)4 million in respect of debt issuance costs.
Peter Selkirk and Neil Fleming have an agreement with the holders of the A
ordinary shares in Texon International plc whereby they each may acquire from
those shareholders 80,000 A ordinary shares at a price of (Pounds)8.75 per
share. In addition, a further 240,000 A ordinary shares are available for
allocation, on a basis to be determined by the Remuneration Committee, to
Officers of the Company on the same terms as those described above.
SALE OF MACHINERY BUSINESS
The sale agreement contains warranties by United Texon Limited regarding the
shares being sold and provisions regulating aspects of the ongoing
relationship between United Texon Limited and the Machinery Group. These
include (i) provisions dealing with the sharing of historic insurance
coverage, (ii) mutual undertakings not to compete for three years or solicit
certain employees for 12 months, (iii) provisions for United Texon Limited to
make funds of up to (Pounds)2,000,000 available to the Machinery Group for
working capital purposes (to be repaid upon the completion of the Acquisition)
and (iv) an undertaking by the parties to determine an appropriate mechanism
for either winding up or splitting the UK pension scheme.
F-37
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21 NOTES TO THE CASH FLOW STATEMENT
A) RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS:
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Operating
profit/(loss).......... 4,916 (6,537) 12,507 8,592 --
Depreciation charges.... 2,170 4,024 5,832 4,938 --
Cash flow relating to
restructuring charge... -- 9,374 (4,234) (3,693) --
(Increase)/decrease in
stocks................. (3,521) 3,656 2,228 18,362 --
(Increase)/decrease in
debtors................ (2,924) 4,032 2,208 14,233 --
Increase/(decrease) in
creditors and
accruals............... 2,973 (10,165) 8,839 (39,622) --
Profit on sale of tangi-
ble fixed assets....... (891) (73) (51) (637) --
Management share option
expense................ -- -- -- 2,803 --
------ ------- ------ ------- ---
Net cash
inflow/(outflow) from
operating activities... 2,723 4,311 27,329 4,976 --
====== ======= ====== ======= ===
</TABLE>
F-38
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21 NOTES TO THE CASH FLOW STATEMENT (CONTINUED)
B)ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
RETURNS ON INVESTMENTS
AND SERVICING OF
FINANCE
Interest received..... 140 237 229 298 --
Interest paid......... (3,135) (5,009) (6,141) (5,564) --
Interest element of
finance leased
payments............. (14) (30) (59) (77) --
Interest element of
finance leased
machinery............ (265) (412) (488) (322) --
------ ------- ------- ------ -------
Net cash
inflow/(outflow) for
returns on investments
and servicing of
finance................ (3,274) (5,214) (6,459) (5,665) --
====== ======= ======= ====== =======
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Purchase of tangible
fixed assets........... (1,825) (4,481) (5,321) (3,260) --
Sale of tangible fixed
assets................. 4,510 634 2,023 9,250 --
------ ------- ------- ------ -------
Net cash
inflow/(outflow) for
capital expenditure and
financial investment... 2,685 (3,847) (3,298) 5,990 --
====== ======= ======= ====== =======
ACQUISITIONS AND
DISPOSALS
Purchase/Sale of
subsidiary
undertaking............ -- (29,356) -- -- (64,175)
------ ------- ------- ------ -------
Net cash
inflow/(outflow) for
acquisitions........... -- (29,356) -- -- (64,175)
====== ======= ======= ====== =======
FINANCING
Issue of ordinary share
capital................ -- 5,000 -- -- 13
Issue of preference
share capital.......... 867 29,000 -- -- --
Issue of debentures..... -- 16,000 -- -- --
Debt due within a year.. (3,288) (20,529) (17,256) (3,859) 64,175
Debt due beyond a year.. -- 6,000 -- -- --
New finance leases...... -- -- -- -- --
Capital element of
finance lease rental
payments............... (29) (78) (243) (170) --
------ ------- ------- ------ -------
Net cash
inflow/(outflow) for
financing.............. (2,450) 35,393 (17,499) (4,029) 64,188
====== ======= ======= ====== =======
</TABLE>
F-39
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21 NOTES TO THE CASH FLOW STATEMENT (CONTINUED)
C)ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
DEBT DUE DEBT DUE
OVER WITHIN AFTER FINANCE
CASH DRAFTS ONE YEAR ONE YEAR LEASES TOTAL
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
USM (HOLDINGS) LIMITED
As at January 1, 1995... 3,388 (1,591) (12,455) (81,761) (616) (93,035)
Cash flow............... (755) 92 402 2,019 29 1,787
Other non-cash charges.. -- -- -- 867 -- 867
Exchange movements...... 71 (76) (55) (1,531) -- (1,591)
------ ------ ------- ------- ------ --------
As at April 24, 1995.... 2,704 (1,575) (12,108) (80,406) (587) (91,972)
UNITED TEXON LIMITED
As at April 25, 1995.... -- -- -- -- -- --
Cash flow............... 1,997 (2,604) (1,471) -- 78 (2,000)
Acquisition (excluding
cash and overdrafts)... -- -- (70,514) (22,000) (587) (93,101)
Other non-cash charges.. -- -- -- (5,535) -- (5,535)
Exchange movements...... 67 (137) (1,798) -- -- (1,868)
------ ------ ------- ------- ------ --------
As at December 31,
1995................... 2,064 (2,741) (73,783) (27,535) (509) (102,504)
As at January 1, 1996... 2,064 (2,741) (73,783) (27,535) (509) (102,504)
Cash flow............... 32 (523) 17,256 -- 243 17,008
Other non-cash charges.. -- -- -- (3,099) (826) (3,925)
Exchange movements...... (305) 350 2,854 -- -- 2,899
------ ------ ------- ------- ------ --------
As at December 31,
1996................... 1,791 (2,914) (53,673) (30,634) (1,092) (86,522)
As at January 1, 1997... 1,791 (2,914) (53,673) (30,634) (1,092) (86,522)
Cash flow............... 987 (1,227) 3,859 -- 170 3,789
Other non-cash charges.. -- -- (34,068) 30,634 -- (3,434)
Cash sold in disposal... (1,577) 411 -- -- -- (1,166)
Exchange movements...... (58) 366 (414) -- -- (106)
------ ------ ------- ------- ------ --------
As at December 31,
1997................... 1,143 (3,364) (84,296) -- (922) (87,439)
TEXON INTERNATIONAL PLC
Debt acquired December
31, 1997............... 1,143 (3,364) (61,032) -- (922) (64,175)
Proceeds from share
issue.................. 13 -- -- -- -- 13
------ ------ ------- ------- ------ --------
As at December 31,
1997................... 1,156 (3,364) (61,032) -- (922) (64,162)
====== ====== ======= ======= ====== ========
</TABLE>
D)CASH FLOW RELATING TO EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Provision at beginning
of period.............. -- 10,110 9,374 5,140 --
Spend................... -- (736) (4,234) (3,693) --
Discontinued
operations............. -- -- -- (1,447) --
--- ------ ------ ------ ---
Provision at end of
period................. -- 9,374 5,140 -- --
=== ====== ====== ====== ===
</TABLE>
F-40
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21 NOTES TO THE CASH FLOW STATEMENT (CONTINUED)
E)CASH FLOW RELATING TO SALE OF BUSINESS
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Net assets disposed
Fixed Assets.......... -- -- -- 6,238 --
Stock................. -- -- -- 16,034 --
Debtors............... -- -- -- 13,462 --
Creditors............. -- -- -- (40,150) --
Overdraft............. -- -- -- (411) --
Cash.................. -- -- -- 1,577 --
--- --- --- ------- ---
-- -- -- (3,250) --
Profit on disposal...... -- -- -- 3,250 --
=== === === ======= ===
</TABLE>
F)MAJOR NON-CASH TRANSACTIONS
(i) During the period to December 31, 1995 part of the consideration for
the purchase of subsidiary undertakings comprised loan notes of
(Pounds)3,525,000 and (Pounds)425,000 of other loan notes issued in the
year. Interest expense on the debentures of (Pounds)1,585,000 which was
not paid has been added to the debt during the period.
(ii) During the period to December 31, 1996 United Texon Limited entered
into finance lease arrangements in respect of assets with a total
capital value of (Pounds)826,000. Interest on the debentures of
(Pounds)2,638,000 and interest on the mezzanine debt of
(Pounds)461,000, which was not paid, has been added to the debt during
the year.
(iii) During the period to December 31, 1997, (Pounds)30,634,000 of debt
classified as due after one year has been reclassified as due within
one year. Interest on the debentures of (Pounds)3,071,000 and
interest on the mezzanine debt of (Pounds)363,000, which was not
paid, has been added to the debt during the period.
F-41
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
21 NOTES TO THE CASH FLOW STATEMENT (CONTINUED)
G)PURCHASE OF SUBSIDIARY UNDERTAKING
<TABLE>
<CAPTION>
USM TEXON
(HOLDINGS) INTERNATIONAL
LIMITED UNITED TEXON LIMITED PLC
----------- -------------------------------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 1, APRIL 25, DECEMBER 31,
1995 TO 1995 TO YEAR ENDED YEAR ENDED 1997 TO
APRIL 24, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997 1997
----------- ------------ ------------ ------------ -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Net assets acquired:
Tangible fixed assets... -- 29,738 -- -- 17,098
Stock................... -- 43,923 -- -- 16,716
Debtors................. -- 43,952 -- -- 19,345
Cash at bank and in
hand................... -- 2,704 -- -- 1,143
Creditors............... -- (78,964) -- -- (32,272)
Overdrafts acquired..... -- (1,575) -- -- (3,364)
Loans and finance
leases................. -- (93,101) -- -- (61,954)
Minority shareholders'
interests.............. -- (960) -- -- (1,431)
--- ------- --- --- -------
-- (54,283) -- -- (44,719)
Goodwill................ -- 80,284 -- -- 123,742
--- ------- --- --- -------
-- 26,001 -- -- 79,023
=== ======= === === =======
Satisfied by:
Cash payable in January
1998................... -- -- -- -- 23,423
Cash.................... -- 22,476 -- -- --
Loan notes issued....... -- 3,525 -- -- --
Shares to be issued in
January 1998........... -- -- -- -- 55,600
--- ------- --- --- -------
-- 26,001 -- -- 79,023
=== ======= === === =======
Analysis of net outflow
of cash in respect of
the purchase of the
subsidiary undertaking
Cash consideration...... -- (22,476) -- -- --
Net cash and overdrafts
acquired............... -- 1,129 -- -- --
--- ------- --- --- -------
-- (21,347) -- -- --
Acquisition costs....... -- (8,009) -- -- (500)
--- ------- --- --- -------
Total costs of
acquisition............ -- (29,356) -- -- (500)
=== ======= === === =======
</TABLE>
22 PENSION COSTS
The majority of the Group's employees participate in pension schemes of the
defined benefit type that determine retirement pensions based on an employee's
years of service and a final pay definition. Some of these schemes are
externally funded within trusts, others are financed via internal book
reserves. For all these schemes contributions are paid or pension costs
charged based on advice received from qualified actuaries.
F-42
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
22 PENSION COSTS (CONTINUED)
The major funded pension schemes are in the UK and the US. One of the plans
in the US that covers employees in the materials and machinery businesses is
in the process of being split. The existing plan's assets will be shared
between the plans for each business in proportion to the liabilities under
each plan. It is expected that future contributions paid into the plans and
related pension costs will not be materially different from those allocated to
the separate businesses in the recent past.
The UK pensions scheme will be split following the demerger. The precise
basis of the split has yet to be finalised and the pension liabilities and
costs have been calculated in accordance with the current intentions, which
will require the agreement of the Pension Schemes Office (a branch of the
Inland Revenue). While the precise basis for sharing assets has yet to be
finalised, it is not expected that future contributions paid into the plans
and related pension costs will be materially different from those applicable
to separate businesses in the recent past.
In Germany, Austria and Spain there are defined benefit pension arrangements
which are not separately funded, in accordance with local practice, and
provision for the pension liability is made in the Group's consolidated
balance sheet.
The Group has other defined contribution pension arrangements in the various
countries in which it operates, in accordance with local conditions and
regulations.
The under-funding of the US and UK pension scheme is being made good by
increased contributions over 20 years and 15 years respectively in accordance
with the actuaries' recommendation.
Details of the actuarial valuations for the two most significant funded
schemes are as follows:
<TABLE>
<CAPTION>
UNITED KINGDOM UNITED STATES
-------------- -------------
<S> <C> <C>
Date of last actuarial valua-
tion............................ September 30, 1996 January 1, 1997
Actuarial method................. Projected Unit Projected Unit
Assumed excess of investment
return over salary increases.... 3% 2.5%
Assumed rate of pension increas-
es.............................. 2.25% Nil
Value of assets at date of latest
valuation....................... (Pounds)35.7 million (Pounds)12.3 million
Level of funding................. 96% 94%
Actuaries........................ Watson Wyatt Partners Buck Consultants
</TABLE>
F-43
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
22 PENSION COSTS (CONTINUED)
For the purposes of the disclosure in accordance with US GAAP (SFAS 87), the
funded status and pension cost of the major plans in Austria, Germany, Spain,
Italy, UK and the US as at December 31, 1996 and 1997 have been described in
the following tables. The 1997 disclosure relates to the continuing operations
only.
<TABLE>
<CAPTION>
UNITED TEXON LIMITED TEXON INTERNATIONAL PLC
-------------------------- --------------------------
AS OF DECEMBER 31, 1996 AS OF DECEMBER 31, 1997
-------------------------- --------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED COSTS BENEFITS EXCEED COSTS
------------- ------------ ------------- ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF:
Vested benefit obligations............. 41,675 15,521 24,831 3,299
Accumulated benefit obligations........ 42,188 15,627 25,195 3,489
------ ------- ------ ------
Projected benefit obligations.......... 49,257 16,658 29,443 3,815
Plan assets at fair value.............. 47,692 418 26,064 --
------ ------- ------ ------
Projected benefit obligations (in
excess of) or less than plan assets... (1,565) (16,240) (3,379) (3,815)
Unrecognised net (gain) or loss........ (2,854) 497 1,573 (298)
Prior service cost not yet recognised.. (55) 119 (19) --
Unrecognised net obligation on
implementation........................ 772 (516) 440 (18)
Adjustment to recognise minimum
liability............................. -- (382) -- (3)
Fourth quarter contribution............ -- -- 159 0
------ ------- ------ ------
Prepaid pension costs (pension
liability)............................ (3,702) (16,522) (1,226) (4,134)
------ ------- ------ ------
Intangible assets...................... -- 205 -- --
------ ------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1997
------------
%
<S> <C>
ASSUMPTIONS
Discount rate...................................................... 5-7.5
Long term rate of increases in remuneration........................ 2-5.5
</TABLE>
<TABLE>
<CAPTION>
UNITED TEXON LIMITED
-------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(Pounds)000 (Pounds)000
<S> <C> <C>
THE NET PERIODIC PENSION COSTS FOR THE MAJOR
RETIREMENT PLANS UNDER SFAS NO. 87 COMPRISES
Service cost--present value of benefits earned
during the year.................................... 1,401 687
Interest cost on projected benefit obligations...... 4,812 2,178
Actual (return) on assets........................... (6,616) (3,534)
Net amortisation and deferral....................... 2,836 1,493
------ ------
Net periodic pension costs.......................... 2,433 824
====== ======
</TABLE>
F-44
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
22 PENSION COSTS (CONTINUED)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1996
-----------------
%
<S> <C>
ASSUMPTIONS
Discount rate................................................. 5-8.75
Long term rate of increase in remuneration.................... 2-6
Expected long term rate of return on assets................... 8-9.5
</TABLE>
23POST RETIREMENT MEDICAL BENEFIT PLAN
The US subsidiary of Texon International plc and United Texon Limited
sponsors a defined benefit post-retirement plan that covers 199 employees and
1,590 retirees including their dependants. The plan provides post-retirement
medical benefits in the form of a contribution to the retiree's health
insurance premium as well as managed care programs. There are post-retirement
death benefits for current retirees only. The following table sets forth the
plan's funded status at December 31, 1997. The 1997 disclosures relate to the
continuing operations only.
<TABLE>
<CAPTION>
TEXON
UNITED TEXON INTERNATIONAL
LIMITED PLC
-------------------- --------------------
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1996 1997
-------------------- --------------------
(Pounds)000 (Pounds)000
<S> <C> <C>
ACCUMULATED POST-RETIREMENT BENEFIT
OBLIGATION
Retirement eligible, retirees and
beneficiaries....................... 5,713 194
Active employees not fully eligible.. 357 351
------ ----
Total.............................. 6,070 545
Fair value of assets................. -- --
------ ----
Accumulated post-retirement benefit
obligation in excess of plan
assets............................ (6,070) (545)
Unrecognised net (gain)/loss from
past experience different from that
assumed and from changes in
assumptions......................... (1,364) (43)
Unrecognised transition
obligation/(asset).................. (1,480) 14
------ ----
Accrued post-retirement benefit
cost.............................. (8,914) (574)
====== ====
NET PERIODIC POST-RETIREMENT BENEFIT COST INCLUDED THE FOLLOWING COMPONENTS:
<CAPTION>
UNITED TEXON LIMITED UNITED TEXON LIMITED
-------------------- --------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------------- --------------------
(Pounds)000 (Pounds)000
<S> <C> <C>
Service cost......................... 25 18
Interest cost on accumulated post-
retirement benefit obligation....... 586 41
Amortisation of transitional
obligation/(asset).................. (166) 1
------ ----
Net periodic post-retirement benefit
cost................................ 445 60
====== ====
</TABLE>
For measurement purposes, an 11% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1998, reducing to 5% in
2006. The health care cost trend assumption has an effect on the amounts
reported.
F-45
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
23 POST RETIREMENT MEDICAL BENEFIT PLAN (CONTINUED)
To illustrate, increasing the assumed health care cost trend rates by 1
percentage point each year would increase the accumulated post-retirement
benefit obligation as of December 31, 1997, by 8% ((Pounds)44,000) and the
aggregate of service and interest cost components of net periodic post-
retirement benefit cost for the year then ended by 10% ((Pounds)6,000).
<TABLE>
<S> <C>
Medical trend rates (initial rate)........................... 11.0% per annum
Assumed discount............................................. 7.5% per annum
</TABLE>
24NEW UK ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Board issued Financial Reporting
Standard (FRS) 10. FRS 10 is effective for all accounting periods ending on or
after December 23, 1998 with earlier adoption permitted. The new requirements
must be applied prospectively from the period of adoption but can be applied
retrospectively. This FRS provides accounting and reporting standards for
goodwill and intangible assets and requires that goodwill and intangible
assets be capitalised and amortised over their expected useful lives up to a
maximum of 20 years, subject to the following exception: for assets which are
expected to last longer, including those with indefinite lives, the assets are
amortised over that longer period, or not at all as the case may be, and are
evaluated for impairment at least annually. Texon International plc has
decided to apply the provisions of FRS 10 prospectively in 1998. FRS 10 could
have a material effect on Texon International plc's financial position and
results of operations as it pertains to any future acquisitions.
25POST BALANCE SHEET EVENTS
A)CREDIT FACILITY
As part of the Acquisition referred to in Note 1, on January 30, 1998 Texon
International plc entered into the Credit Agreement with Chase Manhattan and
other institutions. The Credit Agreement provides a multi-currency revolving
facility (the "Revolving Facility") in a maximum amount not exceeding
(Pounds)15.0 million. Letters of credit and bank guarantees may be issued as
part of the Revolving Facility. The Revolving Facility will be used to
refinance a portion of the senior bank facilities and provide for the working
capital and general corporate purposes of the Company. The availability of the
Revolving Facility will be subject to various conditions precedent customary
for facilities of this nature.
The Revolving Facility bears interest at a rate of 2% per annum plus LIBOR,
subject to certain reductions based on financial performance. The Revolving
Facility is a three year facility expiring on January 30, 2001. A commitment
fee of 0.75% per annum will be paid by Texon International plc on the undrawn
portion of the Revolving Facility. Each lender which issues a letter of credit
or bank guarantee under the Revolving Facility will receive an issuing bank
fee of 0.125% per annum in respect of its contingent liability for such letter
of credit or bank guarantee. Each lender will receive a letter of credit fee
calculated on a day to day basis in respect of issued letters of credit or
bank guarantees at a rate equal to the margin payable in respect of the
facilities and based on each lender's contingent liability in respect of such
letters of credit or bank guarantees.
Texon International plc will be required to make mandatory prepayments of
all outstanding loans under the Revolving Facility upon the occurrence of a
flotation, debt refinancing or change of control of the Company.
F-46
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
25 POST BALANCE SHEET EVENTS (CONTINUED)
The Credit Agreement contains customary covenants including restrictions on
disposal of assets, incurring additional indebtedness or contingent
liabilities, making acquisitions or investments, engaging in mergers or
consolidations, or amending other debt instruments.
In addition, the Company is required to comply with specified financial
ratios, including a total net interest cover ratio, a fixed charge ratio and a
total debt to EBITDA ratio, calculated on a rolling 12 month basis. The Credit
Agreement also contains customary events of default including payment default,
covenant default, cross-default and certain events of insolvency.
On January 30, 1998 the Company issued DM 245,000,000 (approximately
(Pounds)82.2 million) of 10% Series A Senior Notes due February 1, 2008.
Interest is payable on February 1 and August 1 of each year, commencing on
August 1, 1998.
The notes are subjected to restrictive covenants similar to those in the
Credit Agreement. The Company may be required to redeem the Notes at 101% of
the principal amount, together with accrued and unpaid interest upon a change
of control.
B)ISSUANCE OF SHARE CAPITAL
On January 30, 1998, Texon International plc issued the following shares of
share capital to be issued in connection with the acquisition of United Texon
Limited on December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF NOMINAL CONSIDERATION
SHARES VALUE PAID
--------- ---------- -------------
<S> <C> <C> <C>
NUMBER OF SHARES ((Pounds)) ((Pounds))
</TABLE>
<TABLE>
<S> <C> <C> <C>
Voting A ordinary shares of (Pounds)1 each....... 3,436,277 3,436,277 --
Non-voting A ordinary shares of (Pounds)1 each... 163,723 163,723 --
Voting B ordinary shares of (Pounds)1 each....... 270,000 270,000 270,000
Mandatorily redeemable cumulative preference
shares of 10p each.............................. 52,000,000 5,200,000 --
--------- -------
9,070,000 270,000
========= =======
</TABLE>
In addition on January 30, 1998, the balance of 75p per share on 49,999
partly paid B ordinary shares was paid in cash.
The above shares were issued to effect the acquisition of United Texon
Limited as follows:
i) 2,855,298 Redeemable preference shares of 10p each issued at a premium
of 90p in part consideration for the acquisition of 100% of the Deep
Discounted Bond issued by United Texon Limited.
ii) 29,000,000 Redeemable preference shares of 10p each issued at a premium
of 90p included in share capital to be issued to purchase 100% of the
mandatorily Redeemable Preference shares of United Texon Limited.
iii) 20,144,702 Redeemable preference shares of 10p each issued at a
premium of 90p, 3,436,277 voting A ordinary shares of (Pounds)1 each
issued at par and 163,723 non-voting ordinary shares of (Pounds)1 each
issued at par all included in share capital to be issued to purchase
of 87.62% of the voting and 100% of the non-voting ordinary shares of
United Texon Limited.
F-47
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
25 POST BALANCE SHEET EVENTS (CONTINUED)
Cash consideration of (Pounds)2,810,000 was paid to members of management in
satisfaction of the liability for the purchase of 12.38% of the voting
ordinary shares of United Texon Limited issued upon exercise of the share
options and (Pounds)20,600,000 was paid as part consideration for the
acquisition of 100% of the Deep Discounted Bond.
C)MINORITY INTEREST
In February 1998, an outline agreement was entered into to acquire a further
30% of the Foshan Texon Cellulose Board Manufacturing Co Limited joint
venture. The price of US$ 2,625,000, is to be paid in three annual
instalments. Completion is expected by the end of April, 1998.
26 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The consolidated financial statements are prepared in conformity with
accounting principles accepted in the UK ("UK GAAP") which differ in certain
respects from those generally accepted in the United States ("US GAAP"). The
significant areas of difference affecting the consolidated financial
statements of the Company are described below.
A)UNITED TEXON LIMITED ACQUISITION
Under UK GAAP, the acquisition of United Texon Limited by Texon
International plc on December 31, 1997 has been accounted for as an
acquisition and the assets and liabilities of United Texon Limited have been
recorded at their fair values as of that date with the excess consideration
paid charged directly to reserves as goodwill. Under US GAAP, purchase
accounting does not apply with respect to this transaction because there has
been no change in control. Accordingly, for US GAAP purposes, all assets and
liabilities are recorded at their historical United Texon Limited cost basis.
In addition, any excess consideration paid is treated as a capital transaction
and any costs incurred in connection with the acquisition are expensed.
B)MACHINERY GROUP DISPOSAL
Under UK GAAP, the sale of the Machinery Group to shareholders on December
31, 1997 resulted in a gain on disposal being recognised in the consolidated
profit and loss accounts. Since the sale was to existing shareholders of the
Group, this transaction would be accounted for as a spin-off under US GAAP
with the difference between the net book value of assets sold and
consideration received treated as a capital transaction. In addition, any
costs incurred in connection with the sale would be expensed under US GAAP.
C)GOODWILL
Under UK GAAP, the Group writes off goodwill arising on consolidation
directly to the goodwill write-off reserve in the year of acquisition. Under
US GAAP, goodwill arising on consolidation is capitalised on the consolidated
balance sheet and then amortised over its useful life, which Texon
International plc has estimated to be 20 years.
The gross cost under US GAAP at December 31, 1996 and December 31, 1997 of
goodwill is approximately (Pounds)81,809,000 and (Pounds)79,775,000,
respectively. Accumulated amortisation under US GAAP at December 31, 1996 and
December 31, 1997 of goodwill is (Pounds)7,430,000 and (Pounds)11,487,000
respectively.
F-48
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
D) RESTRUCTURING AND INTEGRATION COSTS
Under UK GAAP, when a decision has been taken to restructure part of the
Group's business, provisions are made for the impairment of asset values
together with severance and other costs. US GAAP requires a number of specific
criteria to be met before such costs can be recognised as an expense. Among
these is the requirement that all the significant actions arising from a
restructuring and integration plan and their expected completion dates must be
identified by the consolidated balance sheet date.
Certain restructuring charges recognised in the period to December 31, 1995
under UK GAAP were not recognisable as restructuring charges under US GAAP
until the year ended December 31, 1996.
E)PENSIONS AND OTHER POST-RETIREMENT BENEFITS
The Group accounts for the costs of pensions and other post-retirement
benefits under the rules set out in UK accounting standards. US GAAP is more
prescriptive in respect of actuarial assumptions and the allocation of costs
to accounting periods. (See Notes 22 and 23).
F)REDEEMABLE PREFERENCE SHARES
Under UK GAAP, preference shares with mandatory redemption features or
redeemable at the option of the security holder are classified as non-equity
interests as a component of total shareholders' deficit. Under US GAAP such
redeemable preference share are classified outside of shareholders' deficit.
G)DEFERRED TAXATION
Under UK GAAP, Texon International plc provides for deferred taxation using
the partial liability method on all material timing differences to the extent
that it is considered probable that the liabilities will crystallise in the
foreseeable future. Under US GAAP, deferred taxation is provided for all
temporary differences on a full liability basis. Deferred tax assets are also
recognised to the extent that it is more likely than not that the benefit will
be realised.
F-49
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
The UK deferred tax asset as at December 31, 1996 and 1997 can be reconciled
as follows to the US GAAP net deferred tax asset:
<TABLE>
<CAPTION>
UK GAAP UNPROVIDED US GAAP
1997 ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Property plant and equipment.............. 97 -- 97
Other temporary differences............... -- 560 560
Liabilities not provided under UK GAAP.... -- 1,700 1,700
---- ------- -------
97 2,260 2,357
==== ======= =======
DEFERRED TAX ASSETS:
Intercompany profit....................... (262) -- (262)
Deferred interest......................... -- (3,974) (3,974)
Trading losses............................ -- (4,216) (4,216)
Property plant and equipment.............. (51) (745) (796)
Pensions and long-term retirement
benefits................................. -- (1,208) (1,208)
Intangible assets......................... -- (1,418) (1,418)
Other (including receivables provision)... -- (209) (209)
---- ------- -------
(313) (11,770) (12,083)
Less valuation allowance.................. -- 9,726 9,726
---- ------- -------
(313) (2,044) (2,357)
Net deferred tax (asset)/liability........ (216) 216 --
==== ======= =======
<CAPTION>
UK GAAP UNPROVIDED US GAAP
1996 ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Property plant & equipment................ 64 -- 64
Other temporary differences............... 135 -- 135
Liabilities not provided under UK GAAP.... -- 1,800 1,800
---- ------- -------
199 1,800 1,999
---- ------- -------
DEFERRED TAX ASSETS:
Intercompany profit....................... (725) -- (725)
Deferred interest......................... -- (2,803) (2,803)
Trading losses............................ -- (11,742) (11,742)
Capital losses............................ -- (149) (149)
Property plant & equipment................ -- (1,553) (1,553)
Pensions and long-term retirement
benefits................................. -- (6,127) (6,127)
Intangible assets......................... -- (1,895) (1,895)
Other (including receivables provision)... -- (1,355) (1,355)
---- ------- -------
(725) (25,624) (26,349)
Less valuation allowance.................. -- 24,350 24,350
---- ------- -------
(725) (1,274) (1,999)
---- ------- -------
Net deferred tax (asset)/liability........ (526) 526 --
==== ======= =======
</TABLE>
F-50
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
Management believes that the available objective evidence creates sufficient
uncertainty regarding the realisation of deferred tax assets except to the
extent of deferred tax liabilities such that a full valuation allowance has
been recorded. The valuation allowance at December 31, 1995 was
(Pounds)24,728,000.
H) NET INCOME/(LOSS) PER ORDINARY SHARE
Historical net earnings/(loss) per share is not shown as the historical
arrangement is not indicative of the continuing capital structure.
I)IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Group, for US GAAP purposes, adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of long-lived assets and for long-lived assets
to be disposed Of", on January 1, 1996. This statement requires that long-
lived assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognised is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this statement did not
have a material impact on the Group's financial position, results of
operations, or liquidity.
J)FINANCIAL INSTRUMENTS
The fair values of cash, accounts receivable and accounts payable
approximate to book value due to the short term nature of these assets and
liabilities.
The Group's financial instruments are generally short-term in nature and in
the case of debt (except for the deep discounted bonds) bear variable interest
rates. Accordingly, the carrying value of such financial instruments
approximates their fair value. In the opinion of the directors the fair value
of the deep discounted bonds approximate book value. The fair value of foreign
exchange contracts is estimated by published market quotes and amounted to
(Pounds)16,482,000 and (Pounds)23,133,000 at December 31, 1997 and 1996,
respectively. The deferred gain/(loss) on the foreign exchange contracts was
(Pounds)14,000 and (Pounds)439,000 at December 31, 1997 and 1996 respectively.
All gains or losses on foreign exchange contracts have been expensed rather
than deferred.
K)SHARE OPTION SCHEMES
The Group adopted SFAS No. 123, "Accounting for Stock-Based Compensation",
on January 1, 1996 which permits entities to recognise as an expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro-forma net income/(loss) and
pro-forma earnings/(loss) per share disclosures for share option grants made
in 1995 and future years as if the fair-value based method defined in SFAS No.
123 had been applied. Management has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro-forma disclosure
provisions of SFAS No. 123. Accordingly, compensation expense is recorded on
the date of grant only
F-51
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
if the current market price of the underlying stock exceeded the exercise
price. It was determined that on the date of grant, the current market price
exceeded the exercised price by (Pounds)2.8 million. Compensation cost was
recognised in the year ended December 31, 1997.
The fair value of share options granted by the Group during 1997 was
estimated at (Pounds)2.8 million using the minimum value method with the
following weighted average assumptions: expected dividend yield of 0%, risk-
free rate of 6.2%, expected volatility of 0% and average expected lives of 3
months. Accordingly, there would be no difference in compensation cost for the
share options, determined under the method prescribed by SFAS No. 123.
L)STATEMENT OF CASH FLOWS
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, capital investment
and financial investment, acquisitions and disposals and financing activities.
Under US GAAP, cash flow activities are reported as operating activities,
investing activities and financing activities. Cash flows from taxation and
returns on investments and servicing of finance would, with the exception of
dividends paid, be included as operating activities. The payment of dividends
and debt issue costs would be included under financing activities.
Set out below, is a summary combined statement of cash flows for the Group
under US GAAP.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(Pounds)000 (Pounds)000
<S> <C> <C>
Net cash provided by/(used in) operating
activities......................................... 20,306 (2,325)
Net cash (used in)/provided by investing
activities......................................... (3,298) 6,092
Net cash provided by financing activities........... (17,499) (5,173)
------- ------
Net increase/(decrease) in cash and cash equivalent
under US GAAP...................................... (491) (1,406)
======= ======
</TABLE>
F-52
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
M)RECONCILIATIONS
The following is a summary of the material adjustments to net income and
shareholders' equity which would have been required if US GAAP had been applied
instead of UK GAAP.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
1996 1997
------------ ------------
(Pounds)000 (Pounds)000
<S> <C> <C>
Net loss in accordance with UK GAAP.................. (729) (4,318)
Adjustments to conform to US GAAP
United Texon Limited acquisition costs............. -- (500)
Gain on disposal of Machinery business............. -- (3,250)
Amortisation of goodwill........................... (4,486) (4,057)
Restructuring costs................................ (5,924) --
Pensions and other post-retirement benefits........ 333 1,210
Effect of differences on policy for recognition of
deferred tax costs and liabilities................ (626) 211
------- -------
Total net loss in accordance with US GAAP............ (11,432) (10,704)
======= =======
Net loss from continuing operations in accordance
with US GAAP........................................ (1,031) (6,798)
Net loss of discontinued operations in accordance
with US GAAP........................................ (10,401) (3,906)
------- -------
(11,432) (10,704)
Finance costs of non-equity preference shares........ (3,767) 5,217
------- -------
Retained loss for the period for equity shareholders
in accordance with US GAAP.......................... (15,199) (5,487)
======= =======
<CAPTION>
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(Pounds)000 (Pounds)000
<S> <C> <C>
Shareholders deficit in accordance with UK GAAP...... (66,066) (68,629)
Adjustments to conform to US GAAP:
United Texon Limited acquisition................... -- (1,257)
Goodwill........................................... 74,379 68,288
Pension and other post-retirement benefits......... (534) 22
Mandatorily redeemable preference shares........... (34,217) --
Taxation........................................... (526) (216)
------- -------
Shareholders' deficit in accordance with US GAAP..... (26,964) (1,792)
======= =======
</TABLE>
F-53
<PAGE>
TEXON INTERNATIONAL PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
26 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
N)NEW US ACCOUNTING STANDARDS
SFAS No. 130 "Reporting Comprehensive Income" was issued in June 1997 and is
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods provided for comparative purposes
is required. It requires that all items that are required to be recognised
under accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. It also requires that an enterprise (a) classify items
of other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. Texon International plc is currently
reviewing the likely impact on the classification of items included in
shareholders' deficit.
SFAS No. 131 "Disclosure about Segments of an Enterprise and Related
Information" was issued in June 1997 and is effective for fiscal years
beginning after December 15, 1997. In the initial year of application
comparative information for earlier years is to be restated. It requires that
companies disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance. It also
requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assets and reports
revenues, and its major customers. Texon International plc is currently
reviewing the likely impact on the level of disclosure currently provided in
its consolidated financial statements.
F-54
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given
or made, such information or representations must not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any offer or sale made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Presentation of Financial Information and Certain Definitions............ ii
Enforceability of Civil Liabilities...................................... iii
Summary.................................................................. 1
Risk Factors............................................................. 17
Use of Proceeds.......................................................... 25
Exchange Rate Information................................................ 25
Capitalization........................................................... 26
The Transactions......................................................... 27
Selected Historical and Unaudited Pro Forma Consolidated Financial
Information and Other Data.............................................. 29
Unaudited Pro Forma Consolidated Financial Information................... 34
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
Business................................................................. 45
Management............................................................... 54
Principal Shareholders................................................... 56
The Exchange Offer....................................................... 59
Certain Transactions..................................................... 68
Description of Credit Facilities......................................... 71
Description of Notes..................................................... 72
Description of The Note Depositary Agreement............................. 105
Tax Considerations....................................................... 111
Plan of Distribution..................................................... 116
Legal Matters............................................................ 116
Experts.................................................................. 116
Available Information.................................................... 117
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
Until , 1998, all dealers effecting transactions in the Exchange Notes
offered hereby, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
Prospectus
DM 245,000,000
Texon International plc
Offer to Exchange its 10% Series A Senior Notes due 2008 for any and all of
its Outstanding 10% Senior Notes due 2008
[LOGO] TEXON
-------------
INTERNATIONAL
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Reference is made to Article 13.11 of the Articles of Association of the
Company, filed herewith as Exhibit 3.1 which, among other things, and subject
to certain conditions, authorize the Company to indemnify the directors and
officers of the Company out of the assets of the Company against all costs,
charges, losses, damages and liabilities incurred by him in the actual or
purported execution or discharge of his duties or exercise of his powers.
ITEM 21. EXHIBITS
(a) The following exhibits are filed as part of the Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement between the Company and the Initial Purchasers
dated January 27, 1998.
3.1 Memorandum and Articles of Association of Texon International plc.
4.1 Indenture, dated as of January 30, 1998, among Texon International plc
and The Chase Manhattan Bank as Trustee.
4.2 Form of 10% Senior Notes due 2008 (included in Exhibit 4.1 hereto).
4.3 Form of 10% Series A Senior Notes due 2008 (included in Exhibit 4.1
hereto).
4.4 Exchange and Registration Rights Agreement between the Company and the
Initial Purchasers dated January 27, 1998.
4.5 Note Depositary Agreement dated January 30, 1998 between Texon
International plc and The Bank of New York, as Book-Entry Depositary.
5.1 Opinion of Mayer, Brown & Platt as to the legality of the securities
being registered hereby.+
5.2 Opinion of Dickson Minto W.S as to certain matters of English law.+
8.1 Opinion of Mayer, Brown & Platt as to material U.S. federal income tax
matters (included in Exhibit 5.1).+
8.2 Opinion of Dickson Minto W.S as to material U.K. tax matters (included
in Exhibit 5.2)+
10.1 Shareholders Agreement dated December 23, 1997, between the Company
and the shareholders of the Company.P
10.2 Agreement for Sale of USM Group Limited, dated December 23, 1997.P
10.3 Agreement for Sale of United Texon Limited, dated December 23, 1997.P
10.4 Credit Agreement, dated January 29, 1998, among the Company, Chase
Manhattan plc, The Chase Manhattan Bank and the other Lenders party
thereto.P
10.5 Employment Agreement, dated January 30, 1998, between the Company and
Peter Selkirk.P
10.6 Employment Agreement, dated January 30, 1998, between the Company and
Neil Fleming.P
10.7 Employment Agreement, dated July 29, 1997, between the Company and
Kevin Cochrane.P
10.8 Employment Agreement, dated July 29, 1997, between the Company and
Neil Eastwood.P
10.9 Employment Agreement, dated as of September 2, 1997, between the
Company and Terry Pee.P
10.10 Employment Agreement, dated [ ] between the Company and David
Gamble.+
10.11 Option Agreement of Peter Selkirk relating to the A Shares dated
December 23, 1997.P
10.12 Option Agreement of Peter Selkirk and Neil Fleming relating to the B
Shares dated December 23, 1997.P
10.13 Business Acquisition Agreement between British United Shoe Machinery
Limited and DMWSL 189 Limited and related agreements dated July 29,
1997.P
10.14 Business Sale Agreement between Deutsche Vereinigte Schumaschinen GmbH
& Co. and DVSG Engineering und Patentverwaltungs GmbH dated July 29,
1997.P
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
10.15 Business Sale Agreement between DVSG Engineering und Patentverwaltungs
GmbH and DVSG Service GmbH dated July 29, 1997.P
10.16 Business Sale Agreement between USM Espana S.L. and Maquinaria USM
S.L. dated July 29, 1997.P
10.17 Business Acquisition Agreement between USM Taiwan Limited and Texon
Taiwan Limited dated December 1997.P
10.18 Bill of Sale, Assignment and Assumption Agreement between USM Texon
Materials Inc. and United Shoe Machinery Corporation and related
agreements dated July 29, 1997.P
10.19 Assets Sale Agreement between USM Asia Limited and Texon (H.K.)
Limited dated July 29, 1997.P
10.20 Share Purchase Agreement between DVSG Holding GmbH and DVSG
Beteiligungs und Verwaltungs GmbH dated July 29, 1997.P
10.21 Share Sale Agreement between USM Holding GmbH and Texon Verwaltungs
GmbH Gr. dated July 29, 1997.P
10.22 Share Sale Agreement between USM Texon Limited and Texon Verwaltungs
GmbH Gr. dated July 29, 1997.P
10.23 Share Sale Agreement between USM International Limited and DVSG
Administration GmbH relating to the entire issued share capital of
DVSG Service GmbH.P
10.24 Share Sale Agreement between USM International Limited and DVSG
Administration GmbH relating to the entire issued share capital of
DVSG Beteiligungs und Verwaltungs GmbH.P
10.25 Share Sale Agreement between USM Benelux B.V. and USM Texon Limited
relating to the entire issued share capital of USM Holding GmbH dated
December 23, 1997.P
10.26 Share Transfer Agreement between Texon France S.A. and USM
International Limited dated December 24, 1997 and related agreement.P
10.27 Share Purchase Agreement between USM Benelux B.V. and USM
International Limited relating to the entire issued share capital of
USM Asia Limited dated July 29, 1997.P
10.28 Share Transfer Agreement between USM Benelux B.V. and USM
International Limited relating to the entire issued share capital of
USM Taiwan Limited dated July 29, 1997.P
10.29 Share Transfer Agreement between USM Benelux B.V. and USM Texon
Limited dated December 23, 1997.P
10.30 Share Transfer Agreement between USM International Limited and Texon
Materiales S.L.P
10.31 Share Transfer Agreement between USM Texon Limited and El Manto de
Elias S.L.P
10.32 Share Transfer Agreement between Texon Overseas and USM International
Limited relating to the entire holding of Texon Overseas in USM Far
East Australia Pty Limited dated July 29, 1997.P
10.33 Share Transfer Agreement between United Texon plc and USM
International Limited relating to the entire issued share capital of
3138933 Canada Inc. dated July 29, 1997.P
10.34 Share Transfer Agreement between USM Texon Limited and USM
International Limited relating to the entire issued share capital of
Samco Strong Limited dated July 29, 1997.P
10.35 Share Transfer Agreement between United Texon plc and USM
International Limited relating to the entire issued share capital of
USM Corporation and related agreements dated July 29, 1997.P
10.36 Share Transfer Agreement between USM Benelux B.V. and United Texon plc
relating to the entire issued share capital of USM Corporation and
related agreements dated July 29, 1997.P
10.37 Share Transfer Agreement between Texon Overseas and USM International
Limited relating to the entire issued share capital of USM Korea
Limited dated July 29, 1997.P
10.38 Share Transfer Agreement between USM Benelux B.V. and USM
International Limited relating to the entire issued share capital of
USM Asia Limited dated July 29, 1997.P
10.39 Share Transfer Agreement between USM Benelux B.V. and USM
International Limited relating to the entire issued share capital of
USM do Brasil Industria e Comercio SA dated July 29, 1997.P
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
10.40 Exclusive Distributor Agreement between British United Shoe Machinery
Co. Limited and United Shoe Machinery of Australia Pty. Ltd dated
July 29, 1997.P
10.41 Exclusive Distributor Agreement between British United Shoe Machinery
Limited and USM Korea Limited dated July 29, 1997.P
10.42 Exclusive Distributor Agreement between Texon (H.K.) Limited and USM
Korea Limited.P
10.43 Exclusive Distributor Agreement between British United Shoe Machinery
Limited and United Shoe Machinery (Thailand) Co. Ltd. dated July 29,
1997.P
10.44 Non-Exclusive Distributor Agreement between USM Texon Materials Inc.
and USM Canada Ltd. dated August 8, 1997.P
10.45 Non-Exclusive Distributor Agreement between Texon France S.A. and USM
France S.A. dated July 29, 1977.P
10.46 Non-Exclusive Distributor Agreement between DVSG Engineering und
Patentverwaltungs GmbH and Deutsche Vereinigte Schumaschinen GmbH &
Co. dated July 29, 1997.P
10.47 Non-Exclusive Distributor Agreement between United Shoe Machinery
Corporation and USM Texon Mexico S.A.P
10.48 Non-Exclusive Distributor Agreement between Texon Materiales S.L. and
Maquinaria USM, S.L. dated July 29, 1997.P
10.49 Non-Exclusive Distributor Agreement between Samco Strong Limited and
United Shoe Machinery of Australia Pty. Ltd. dated July 29, 1997.P
10.50 Non-Exclusive Distributor Agreement between Texon Taiwan Limited and
USM Taiwan Limited.P
10.51 Sole Agency Agreement between Texon (H.K.) Limited and USM Far East
Australia (PTY) Limited dated July 29, 1997.P
10.52 Cost Sharing Agreement between Texon France S.A. and USM France S.A.P
10.53 Cost Sharing Agreement between USM Taiwan Limited and Texon Taiwan
Limited dated December 10, 1997.P
10.54 Services Agreement between USM Texon Oesterreich Gesellschaft M.b.H.
and USM Oesterreich Maschinenhandelsgesellschaft dated December 1,
1997.P
10.55 Service Agreement between DMWSL 189 and British United Shoe Machinery
Limited dated July 29, 1997.P
10.56 Services Agreement between DVSG Engineering und Patentverwaltungs GmbH
and Deutsche Vereinigte Schumaschinen GmbH & Co. relating to the
provision of services/premises at Pirmasens dated July 29, 1997.P
10.57 Services Agreement between Deutsche Vereinigte Schumaschinen GmbH &
Co. and DVSG Engineering und Patentverwaltungs GmbH relating to the
provision of services/premises at Frankfurt am Main dated July 29,
1997.P
10.58 Services Agreement between Texon Materiales S.L. and Maquinaria USM,
S.L. dated July 29, 1997.P
10.59 Services Agreement between USM Texon Materials Inc. and United Shoe
Machinery Corporation dated June 30, 1997.P
10.60 Computing Services Agreement between USM Texon Materials Inc. and
United Shoe Machinery Corporation dated June 30, 1997.P
10.61 Services Agreement between USM Asia Limited and Texon (H.K.) Limited.P
10.62 Services Agreement between USM Far East Australia Pty Ltd. and Texon
(H.K.) Limited.P
10.63 Sub-Lease Agreement between USM Texon Materials Inc. and USM
Corporation dated May 1, 1997.P
10.64 Contribution and Assumption Agreement between USM Corporation and USM
Texon Materials Inc. dated June 27, 1997.P
10.65 Joint Venture Contract between Foshan Arts & Crafts Industry
Corporation and USM (China Holdings) Ltd.P
10.66 Agreement between USM Texon Limited and British United Shoe Machinery
Co. Limited relating to the surrender of group relief, dated December
23, 1997.P
10.67 Agreement between USM Texon Limited and Samco Strong Limited relating
to the surrender of group relief dated December 23, 1997.P
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
21.1 List of Subsidiaries of the Registrant.
23.1 Consents of counsel (included in Exhibits 5.1, 5.2, 8.1 and 8.2).+
23.2 Consent of KPMG.
24.1 Power of Attorney (see page II-6).
25.1 Statement of Eligibility of Trustee.+
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients.
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
</TABLE>
- --------
+To be filed by amendment.
PFiled in paper format under cover of Form SE with the Commission.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(i) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(ii) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus of any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 242(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offer.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than
II-4
<PAGE>
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM F-4 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF LONDON, ENGLAND ON APRIL 7, 1998.
Texon International plc
/s/ Neil Fleming
By___________________________________
Name: Neil Fleming
Title: Finance Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter Selkirk, Neil Fleming or David Gamble,
his true and lawful attorney-in-fact and agent, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendment (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully for all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON APRIL 7,
1998 IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Neil Fleming Director and Chief Executive Officer
____________________________________
BY NEIL FLEMING AS ATTORNEY-IN-FACT
FOR PETER SELKIRK
/s/ Neil Fleming Finance Director and Director
____________________________________
BY NEIL FLEMING
/s/ Neil Fleming Company Secretary
____________________________________
BY NEIL FLEMING AS ATTORNEY-IN-FACT
FOR DAVID GAMBLE
/s/ Neil Fleming Director
____________________________________
BY NEIL FLEMING AS ATTORNEY-IN-FACT
FOR TIMOTHY WRIGHT
/s/ Neil Fleming Director
____________________________________
BY NEIL FLEMING AS ATTORNEY-IN-FACT
FOR SHAHAN SOGHIKIAN
</TABLE>
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned has duly signed this Registration Statement solely in its capacity
as agent for service of process in the United States, on April 7, 1998.
Agent for Service of Process in the
United States
/s/ CT Corporation Systems
By___________________________________
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 Purchase Agreement between the Company and the Initial
purchasers dated
January 27, 1998.
3.1 Memorandum and Articles of Association of Texon
International plc.
4.1 Indenture, dated as of January 30, 1998, among Texon
International plc and The Chase Manhattan Bank as
Trustee.
4.2 Form of 10% Senior Notes due 2008 (included in Exhibit
4.1 hereto).
4.3 Form of 10% Series A Senior Notes due 2008 (included in
Exhibit 4.1 hereto).
4.4 Exchange and Registration Rights Agreement between the
Company and the Initial Purchasers dated January 27,
1998.
4.5 Note Depositary Agreement dated January 30, 1998
between Texon International plc and The Bank of New
York, as Book-Entry Depositary.
5.1 Opinion of Mayer, Brown & Platt as to the legality of
the securities being registered hereby.+
5.2 Opinion of Dickson Minto W.S as to certain matters of
English law.+
8.1 Opinion of Mayer, Brown & Platt as to material U.S.
federal income tax matters (included in Exhibit 5.1).+
8.2 Opinion of Dickson Minto W.S as to material U.K. tax
matters (included in Exhibit 5.2)+
10.1 Shareholders Agreement dated December 23, 1997, between
the Company and the shareholders of the Company.P
10.2 Agreement for Sale of USM Group Limited, dated December
23, 1997.P
10.3 Agreement for Sale of United Texon Limited, dated
December 23, 1997.P
10.4 Credit Agreement, dated January 29, 1998, among the
Company, Chase Manhattan plc, The Chase Manhattan Bank
and the other Lenders party thereto.P
10.5 Employment Agreement, dated January 30, 1998, between
the Company and Peter Selkirk.P
10.6 Employment Agreement, dated January 30, 1998, between
the Company and Neil Fleming.P
10.7 Employment Agreement, dated July 29, 1997, between the
Company and Kevin Cochrane.P
10.8 Employment Agreement, dated July 29, 1997, between the
Company and Neil Eastwood.P
10.9 Employment Agreement, dated as of September 2, 1997,
between the Company and Terry Pee.P
10.10 Employment Agreement, dated [ ] between the Company
and David Gamble.+
10.11 Option Agreement of Peter Selkirk relating to the A
Shares dated December 23, 1997.P
10.12 Option Agreement of Peter Selkirk and Neil Fleming
relating to the B Shares dated December 23, 1997.P
10.13 Business Acquisition Agreement between British United
Shoe Machinery Limited and DMWSL 189 Limited and
related agreements dated July 29, 1997.P
10.14 Business Sale Agreement between Deutsche Vereinigte
Schumaschinen GmbH & Co. and DVSG Engineering und
Patentverwaltungs GmbH dated July 29, 1997.P
10.15 Business Sale Agreement between DVSG Engineering und
Patentverwaltungs GmbH and DVSG Service GmbH dated
July 29, 1997.P
10.16 Business Sale Agreement between USM Espana S.L. and
Maquinaria USM S.L. dated July 29, 1997.P
10.17 Business Acquisition Agreement between USM Taiwan
Limited and Texon Taiwan Limited dated December 1997.P
10.18 Bill of Sale, Assignment and Assumption Agreement
between USM Texon Materials Inc. and United Shoe
Machinery Corporation and related agreements dated
July 29, 1997.P
10.19 Assets Sale Agreement between USM Asia Limited and
Texon (H.K.) Limited dated July 29, 1997.P
10.20 Share Purchase Agreement between DVSG Holding GmbH and
DVSG Beteiligungs und Verwaltungs GmbH dated July 29,
1997.P
10.21 Share Sale Agreement between USM Holding GmbH and Texon
Verwaltungs GmbH Gr. dated July 29, 1997.P
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.22 Share Sale Agreement between USM Texon Limited and
Texon Verwaltungs GmbH Gr. dated July 29, 1997.P
10.23 Share Sale Agreement between USM International Limited
and DVSG Administration GmbH relating to the entire
issued share capital of DVSG Service GmbH.P
10.24 Share Sale Agreement between USM International Limited
and DVSG Administration GmbH relating to the entire
issued share capital of DVSG Beteiligungs und
Verwaltungs GmbH.P
10.25 Share Sale Agreement between USM Benelux B.V. and USM
Texon Limited relating to the entire issued share
capital of USM Holding GmbH dated December 23, 1997.P
10.26 Share Transfer Agreement between Texon France S.A. and
USM International Limited dated December 24, 1997 and
related agreement.P
10.27 Share Purchase Agreement between USM Benelux B.V. and
USM International Limited relating to the entire
issued share capital of USM Asia Limited dated July
29, 1997.P
10.28 Share Transfer Agreement between USM Benelux B.V. and
USM International Limited relating to the entire
issued share capital of USM Taiwan Limited dated July
29, 1997.P
10.29 Share Transfer Agreement between USM Benelux B.V. and
USM Texon Limited dated December 23, 1997.P
10.30 Share Transfer Agreement between USM International
Limited and Texon Materiales S.L.P
10.31 Share Transfer Agreement between USM Texon Limited and
El Manto de Elias S.L.P
10.32 Share Transfer Agreement between Texon Overseas and USM
International Limited relating to the entire holding
of Texon Overseas in USM Far East Australia Pty
Limited dated July 29, 1997.P
10.33 Share Transfer Agreement between United Texon plc and
USM International Limited relating to the entire
issued share capital of 3138933 Canada Inc. dated July
29, 1997.P
10.34 Share Transfer Agreement between USM Texon Limited and
USM International Limited relating to the entire
issued share capital of Samco Strong Limited dated
July 29, 1997.P
10.35 Share Transfer Agreement between United Texon plc and
USM International Limited relating to the entire
issued share capital of USM Corporation and related
agreements dated July 29, 1997.P
10.36 Share Transfer Agreement between USM Benelux B.V. and
United Texon plc relating to the entire issued share
capital of USM Corporation and related agreements
dated July 29, 1997.P
10.37 Share Transfer Agreement between Texon Overseas and USM
International Limited relating to the entire issued
share capital of USM Korea Limited dated July 29,
1997.P
10.38 Share Transfer Agreement between USM Benelux B.V. and
USM International Limited relating to the entire
issued share capital of USM Asia Limited dated July
29, 1997.P
10.39 Share Transfer Agreement between USM Benelux B.V. and
USM International Limited relating to the entire
issued share capital of USM do Brasil Industria e
Comercio SA dated July 29, 1997.P
10.40 Exclusive Distributor Agreement between British United
Shoe Machinery Co. Limited and United Shoe Machinery
of Australia Pty. Ltd dated July 29, 1997.P
10.41 Exclusive Distributor Agreement between British United
Shoe Machinery Limited and USM Korea Limited dated
July 29, 1997.P
10.42 Exclusive Distributor Agreement between Texon (H.K.)
Limited and USM Korea Limited.P
10.43 Exclusive Distributor Agreement between British United
Shoe Machinery Limited and United Shoe Machinery
(Thailand) Co. Ltd. dated July 29, 1997.P
10.44 Non-Exclusive Distributor Agreement between USM Texon
Materials Inc. and USM Canada Ltd. dated August 8,
1997.P
10.45 Non-Exclusive Distributor Agreement between Texon
France S.A. and USM France S.A. dated July 29, 1977.P
10.46 Non-Exclusive Distributor Agreement between DVSG
Engineering und Patentverwaltungs GmbH and Deutsche
Vereinigte Schumaschinen GmbH & Co. dated July 29,
1997.P
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.47 Non-Exclusive Distributor Agreement between United Shoe
Machinery Corporation and USM Texon Mexico S.A.P
10.48 Non-Exclusive Distributor Agreement between Texon
Materiales S.L. and Maquinaria USM, S.L. dated July
29, 1997.P
10.49 Non-Exclusive Distributor Agreement between Samco
Strong Limited and United Shoe Machinery of Australia
Pty. Ltd. dated July 29, 1997.P
10.50 Non-Exclusive Distributor Agreement between Texon
Taiwan Limited and USM Taiwan Limited.P
10.51 Sole Agency Agreement between Texon (H.K.) Limited and
USM Far East Australia (PTY) Limited dated July 29,
1997.P
10.52 Cost Sharing Agreement between Texon France S.A. and
USM France S.A.P
10.53 Cost Sharing Agreement between USM Taiwan Limited and
Texon Taiwan Limited dated December 10, 1997.P
10.54 Services Agreement between USM Texon Oesterreich
Gesellschaft M.b.H. and USM Oesterreich Maschinenhand
elsgesellschaft dated December 1, 1997.P
10.55 Service Agreement between DMWSL 189 and British United
Shoe Machinery Limited dated July 29, 1997.P
10.56 Services Agreement between DVSG Engineering und
Patentverwaltungs GmbH and Deutsche Vereinigte
Schumaschinen GmbH & Co. relating to the provision of
services/premises at Pirmasens dated July 29, 1997.P
10.57 Services Agreement between Deutsche Vereinigte
Schumaschinen GmbH & Co. and DVSG Engineering und
Patentverwaltungs GmbH relating to the provision of
services/premises at Frankfurt am Main dated July 29,
1997.P
10.58 Services Agreement between Texon Materiales S.L. and
Maquinaria USM, S.L. dated July 29, 1997.*
10.59 Services Agreement between USM Texon Materials Inc. and
United Shoe Machinery Corporation dated June 30,
1997.P
10.60 Computing Services Agreement between USM Texon
Materials Inc. and United Shoe Machinery Corporation
dated June 30, 1997.P
10.61 Services Agreement between USM Asia Limited and Texon
(H.K.) Limited.P
10.62 Services Agreement between USM Far East Australia Pty
Ltd. and Texon (H.K.) Limited.P
10.63 Sub-Lease Agreement between USM Texon Materials Inc.
and USM Corporation dated May 1, 1997.P
10.64 Contribution and Assumption Agreement between USM
Corporation and USM Texon Materials Inc. dated June
27, 1997.P
10.65 Joint Venture Contract between Foshan Arts & Crafts
Industry Corporation and USM (China Holdings) Ltd.P
10.66 Agreement between USM Texon Limited and British United
Shoe Machinery Co. Limited relating to the surrender
of group relief, dated December 23, 1997.P
10.67 Agreement between USM Texon Limited and Samco Strong
Limited relating to the surrender of group relief
dated December 23, 1997.P
21.1 List of subsidiaries of the Registrant.*
23.1 Consents of counsel (included in Exhibits 5.1, 5.2, 8.1
and 8.2).+
23.2 Consent of KPMG.
24.1 Power of Attorney (see page II-6).
25.1 Statement of Eligibility of Trustee.+
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients.
99.4 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
</TABLE>
- -------
+To be filed by amendment.
PFiled in paper format under cover of Form SE with the Commission.
<PAGE>
EXHIBIT 1.1
TEXON INTERNATIONAL PLC
DM 245 million
10% Senior Notes due 2008
PURCHASE AGREEMENT
------------------
January 27, 1998
CHASE MANHATTAN INTERNATIONAL LIMITED
125 London Wall, 9th Floor
London, EC2Y 5AJ
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
CHASE MANHATTAN BANK AG
Ulmenstrasse 30
60325 Frankfurt am Main
Germany
Ladies and Gentlemen:
Texon International plc, a company incorporated under the laws of
England and Wales (the "Company"), proposes to issue and sell DM 245 million
-------
aggregate principal amount of its 10% Senior Notes due 2008 (the "Securities").
----------
The Securities will be issued pursuant to an Indenture to be dated as of January
30, 1998 (the "Indenture") between the Company and The Bank of New York, as
---------
trustee (in such capacity, the "Trustee"). The Company hereby confirms its
-------
agreement with Chase Manhattan International Limited ("CMIL"), Chase Securities
Inc. ("CSI") and Chase Manhattan Bank AG (together with CMIL and CSI, the
"Initial Purchasers") concerning the purchase of the Securities from the Company
- -------------------
by the Initial Purchasers.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. The Company has
--------------
prepared a preliminary offering memorandum dated January 5, 1998 and
supplemented January 26, 1998 (the "Preliminary Offering Memorandum") and will
-------------------------------
prepare an offering memorandum dated the date hereof (the "Offering Memorandum")
-------------------
setting forth information concerning the Company and the Securities. Copies of
the Preliminary Offering Memorandum
<PAGE>
2
have been, and copies of the Offering Memorandum will be, delivered by the
Company to the Initial Purchasers pursuant to the terms of this Agreement. Any
references herein to the Preliminary Offering Memorandum and the Offering
Memorandum shall be deemed to include all amendments and supplements thereto,
unless otherwise noted. The Company confirms that it has authorized the use of
the Preliminary Offering Memorandum and the Offering Memorandum in connection
with the offering and resale of the Securities by the several Initial Purchasers
in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of an Exchange
and Registration Rights Agreement, substantially in the form attached hereto as
Annex A (the "Registration Rights Agreement"), pursuant to which the Company
-----------------------------
will agree to file with the U.S. Securities and Exchange Commission (the
"Commission") (i) a registration statement under the Securities Act (the
- -----------
"Exchange Offer Registration Statement") registering an issue of senior notes of
- --------------------------------------
the Company (the "Exchange Securities") which are identical in all material
-------------------
respects to the Securities (except that the Exchange Securities will not contain
terms with respect to transfer restrictions) and (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement").
----------------------------
Immediately prior to or concurrent with the consummation of the sale
of the Securities to the Initial Purchasers, the Acquisition (as defined below)
will be completed. Additionally, the Machinery Disposal (as defined below) has
been consummated as of December 31, 1997. The "Acquisition" refers to the
-----------
Company's acquisition of all the issued capital stock of United Texon Limited
(such entity, together with its subsidiaries, is referred to herein as "United
------
Texon") pursuant to the Acquisition Agreement (the "Acquisition Agreement"),
- ----- ---------------------
dated December 23, 1997 between the Company and the shareholders of United Texon
(the "United Texon Shareholders") and the related financing thereof. The
-------------------------
"Machinery Disposal" refers to the transfer to certain of the United Texon
- -------------------
Shareholders of USM Group Limited, together with the former subsidiaries of
United Texon engaged in the business of selling and servicing machines used to
manufacture shoes, pursuant to the Stock Purchase Agreement, dated December 23,
1997 between United Texon and USM Group Holdings Limited (the "Stock Purchase
--------------
Agreement"). The Stock Purchase Agreement and the Inter-Company Funding
- ---------
Agreement, dated December 23, 1997 between USM Group Limited and United Texon,
are referred to
<PAGE>
3
collectively as the "Machinery Disposal Agreements". The Acquisition and the
-----------------------------
Machinery Disposal are referred to collectively as the "Transactions". In
------------
connection with the Transactions, the Company will enter into a Facility
Agreement, to be dated on or about January 29, 1998 (together with the other
financing documents to be entered into pursuant thereto, the "Senior Finance
--------------
Documents"), among the Company, Chase Manhattan plc, as Arranger, The Chase
- ---------
Manhattan Bank and certain other financial institutions named therein as
Original Lenders, The Chase Manhattan Bank, as Issuing Bank, and CMIL, as Agent
and Security Agent, providing for senior credit facilities in an aggregate
principal amount of up to (Pounds)15.0 million (the "Senior Credit Facility").
----------------------
The Offering is contingent upon the concurrent consummation of the Acquisition
and the initial borrowings under the Senior Credit Facility.
This Agreement, the Indenture, the Registration Rights Agreement, the
Note Depositary Agreement to be dated as of January 30, 1998 (the "Depositary
----------
Agreement"), between the Company and The Bank of New York, as book-entry
- ---------
depositary (in such capacity, the "Book-Entry Depositary"), the Securities, the
---------------------
Acquisition Agreement, the Machinery Disposal Agreements and the Senior Finance
Documents are referred to herein collectively as the "Transaction Documents".
---------------------
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Memorandum. References to the subsidiaries
of the Company herein refer to each direct and indirect subsidiary of the
Company after giving effect to the Transactions.
1. Representations, Warranties and Agreements of the Company. The
---------------------------------------------------------
Company represents and warrants to, and agrees with, the several Initial
Purchasers on and as of the date hereof and the Closing Date (as defined in
Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date the
Offering Memorandum will not, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
--------
Company makes no representation or warranty as to information contained in
or omitted from the Preliminary Offering Memorandum or the Offering
<PAGE>
4
Memorandum in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Initial Purchaser
specifically for use therein (as set forth in Section 15 of this Agreement,
the "Initial Purchasers' Information").
-------------------------------
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all of the information
that, if requested by a prospective purchaser of the Securities, would be
required to be provided to such prospective purchaser pursuant to Section
(d)(4) of Rule 144A under the Securities Act ("Rule 144A").
---------
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 2 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchasers and the
offer, resale and delivery of the Securities by the Initial Purchasers in
the manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or to qualify the
Indenture under the U.S. Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
--------------------
(d) The Company and each of its Material Subsidiaries (as defined
below) have been duly incorporated and are validly existing as corporations
in good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good standing
as foreign corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged, except where the failure to so
qualify or have such power or authority would not, singularly or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), results of operations, business or prospects of the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect"). "Material
----------------------- --------
Subsidiaries" refers to the companies listed in Schedule I hereto.
------------
(e) The Company, upon consummation of the Acquisition, will have an
authorized capitalization as
<PAGE>
5
set forth in the Offering Memorandum under the heading "Capitalization";
--------------
all of the outstanding shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and non-
assessable; and the capital stock of the Company conforms in all material
respects to the description thereof contained in the Offering Memorandum.
All of the outstanding shares of capital stock of each Material Subsidiary
of the Company have been duly and validly authorized and issued, are fully
paid and non-assessable. The Company owns directly or indirectly at least
99% of the outstanding shares of capital stock of each Material Subsidiary,
except for the capital stock of Foshan Texon Cellulose Board Manufacturing
Company Limited ("Foshan"), of which the Company owns 57.6% of the
outstanding shares. Such shares are owned free and clear of any lien,
charge, encumbrance, security interest, restriction upon third party voting
or transfer or any other claim of any third party (except pursuant to (i)
the stockholders agreement of Foshan and (ii) the Senior Finance Documents
or any of the Security Documents (as defined in the Senior Finance
Documents)).
(f) Each of the Company and each of its Material Subsidiaries party
to any Transaction Document has full right, power and authority to execute
and deliver each of the Transaction Documents to which it is a party and to
perform its obligations thereunder; and all corporate action required to be
taken for the due and proper authorization, execution and delivery of each
of the Transaction Documents and the consummation of the transactions
contemplated thereby has been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered
by the Company and this Agreement constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered in
a proceeding in equity or at law).
(h) The Registration Rights Agreement has been duly authorized by the
Company and, when duly executed and delivered in accordance with its terms
by each of
<PAGE>
6
the parties thereto, will constitute a valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally
and by general equitable principles (whether considered in a proceeding in
equity or at law).
(i) The Depositary Agreement has been duly authorized by the Company
and, when duly executed and delivered in accordance with its terms by each
of the parties thereto, will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered in
a proceeding in equity or at law).
(j) The Indenture has been duly authorized by the Company and, when
duly executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at
law). On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act and the rules and
regulations of the Commission applicable to an indenture which is qualified
thereunder, other than the Trustee being qualified in accordance with the
Trust Indenture Act.
(k) The Securities and the Exchange Securities have been duly
authorized by the Company and, when duly executed, authenticated, issued
and delivered as provided in the Indenture and paid for as provided herein
or, in the case of Exchange Securities, exchanged for Securities as
contemplated in the Registration Rights Agreement, will be duly and validly
issued and outstanding and will constitute valid and
<PAGE>
7
legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally
and by general equitable principles (whether considered in a proceeding in
equity or at law).
(l) The Acquisition Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered in
a proceeding in equity or at law).
(m) Each of the Machinery Disposal Agreements has been duly
authorized, executed and delivered by United Texon and constitutes a valid
and legally binding agreement of United Texon, enforceable against United
Texon in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(n) Each of the Senior Finance Documents has been duly authorized by
the Company and, when duly executed and delivered in accordance with their
terms by each of the parties thereto, the Senior Finance Documents will
constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms, except to
the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at
law).
<PAGE>
8
(o) Each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum.
(p) (i) The execution, delivery and performance by the Company and
each of its subsidiaries of each of the Transaction Documents (each to the
extent a party thereto), (ii) the issuance, authentication, sale and
delivery of the Securities and compliance by the Company with the terms
thereof and (iii) the consummation of the transactions contemplated by the
Transaction Documents will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than those contemplated by the Senior Finance Documents)
upon any property or assets of the Company or any of its subsidiaries
pursuant to, any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, except where any such
conflict, breach, violation, default or creation (singularly or in the
aggregate) would not have a Material Adverse Effect or a material adverse
effect on the ability of the Company or any of its subsidiaries a party to
any Transaction Document to perform its obligations under the Transaction
Documents, nor will such actions result in any violation of the provisions
of the charter or by-laws or memorandum or articles of association (or
other constitutive documents) of the Company or any of its subsidiaries or
any statute or law or any judgment, order, decree, rule or regulation of
any court or arbitrator or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets, except where any such violation (singularly or in the aggregate)
would not have a Material Adverse Effect or a material adverse effect on
the ability of the Company or any of its subsidiaries a party to any
Transaction Document to perform its obligations under the Transaction
Documents; and no consent, approval, authorization or order of, or filing
or registration with, any such court or arbitrator or governmental agency
or body under any such statute, judgment, order, decree, rule or regulation
is required for (i) the execution, delivery and performance by the Company
and
<PAGE>
9
each of its subsidiaries of each of the Transaction Documents (each to the
extent a party thereto), (ii) the issuance, authentication, sale and
delivery of the Securities and compliance by the Company with the terms
thereof and (iii) the consummation of the transactions contemplated by the
Transaction Documents, except for such consents, approvals, authorizations,
filings, registrations or qualifications (A) which shall have been obtained
or made prior to the Closing Date or which are to be made following the
Closing Date with the Luxembourg Stock Exchange (the "Luxembourg Stock
Exchange") or required to be made following the Closing Date pursuant to
the provisions of the Restrictive Trade Practices Act 1976 (B) as may be
required to be obtained or made under the Securities Act as provided in the
Registration Rights Agreement and applicable state securities laws.
(q) Except as disclosed in the Offering Memorandum, under current
practice of the Inland Revenue of the United Kingdom and under current laws
and regulations (and interpretations thereof) of the United Kingdom and any
political subdivision thereof, all interest, principal, premium, if any,
and other payments due or made on the Securities and the Exchange
Securities may be paid by the Company to the Holder thereof in German
Deutsche Marks and all such payments made to Holders thereof who are non-
residents of the United Kingdom and do not have a branch, agency or
permanent establishment nor carry on a trade in the United Kingdom to which
the holding of Securities or Exchange Securities is attributable, will not
be subject to income, withholding or other taxes under laws and regulations
of the United Kingdom or any political subdivision or taxing authority
thereof or therein and will otherwise be free and clear of any other tax,
duty, withholding or deduction in the United Kingdom or any political
subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental authorization in the United Kingdom
or any political subdivision or taxing authority thereof or therein.
(r) To the best of the Company's knowledge after reasonable
investigation, KPMG are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of Rule 101
of the Code of Professional Conduct of the American Institute of Certified
Public Accountants ("AICPA") and its interpretations and rulings
-----
thereunder. The
<PAGE>
10
historical financial statements (including the related notes) contained in
the Offering Memorandum comply in all material respects with the
requirements applicable to a registration statement on Form F-1 under the
Securities Act (except that certain supporting schedules are omitted and
except for financial information required by such requirements for the
fiscal year ended December 31, 1997); such financial statements have been
prepared in accordance with U.K. generally accepted accounting principles
consistently applied throughout the periods covered thereby and fairly
present, in all material respects, the financial position of the entities
purported to be covered thereby at the respective dates indicated and the
results of their operations and their cash flows for the respective periods
indicated except as otherwise stated in the Offering Memorandum; and the
financial information contained in the Offering Memorandum under the
headings "Summary-Summary Historical and Unaudited Pro Forma Consolidated
Financial Information and Other Data", "Capitalization", "Selected
Historical and Unaudited Pro Forma Consolidated Financial Information and
Other Data", "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Management-Compensation of Directors and
Officers" are derived from the accounting records of the Company (except
for the adjustments and assumptions stated therein) and its subsidiaries
and fairly present, in all material respects, the information purported to
be shown thereby. The pro forma and adjusted historical financial
information contained in the Offering Memorandum has been prepared on a
basis consistent with the historical financial statements contained in the
Offering Memorandum (except for the pro forma adjust ments specified
therein, including the adjustments therein for currency conversion and the
presentation of "Other Data"), includes all material adjustments to the
historical financial information to reflect the transactions described in
the Offering Memorandum, gives effect to assumptions made on a reasonable
basis and fairly presents, in all material respects, the historical and
proposed transactions contemplated by the Offering Memorandum and the
Transaction Documents.
(s) There are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any property
or assets of the Company or any of its subsidiaries is the subject which,
singularly or in the aggregate, if determined adversely to the Company or
any of its
<PAGE>
11
subsidiaries, could reasonably be expected to have a Material Adverse
Effect; and to the best knowledge of the Company, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
(t) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Securities or suspends the sale of
the Securities in any jurisdiction; no injunction, restraining order or
order of any nature by any U.K. or any U.S. Federal or state court of
competent jurisdiction has been issued with respect to the Company or any
of its subsidiaries which would prevent or suspend the issuance or sale of
the Securities or the use of the Preliminary Offering Memorandum or the
Offering Memorandum in any jurisdiction; no action, suit or proceeding is
pending against or, to the best knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries before any
court or arbitrator or any governmental agency, body or official, domestic
or foreign, which could reasonably be expected to (i) interfere with or
adversely affect the issuance of the Securities or (ii) in any manner draw
into question the validity or enforceability of any of the Transaction
Documents or any action taken or to be taken pursuant thereto; and the
Company has complied with any and all requests by the Luxembourg Exchange
for additional information to be included in the Listing Application (as
defined below) and has received no request from the Luxembourg Exchange or
any securities authority in any jurisdiction for additional information to
be included in the Preliminary Memorandum or the Offering Memorandum which
has not been complied with.
(u) Neither the Company nor any of its Material Subsidiaries is (i)
in violation of its charter or by-laws or memorandum or articles of
association (or other constitutive documents), (ii) in default in any
material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject or (iii) in violation in
any material respect of any law, ordinance,
<PAGE>
12
governmental rule, regulation or court decree to which it or its property
or assets may be subject.
(v) The Company and each of its subsidiaries possess all material
licenses, certificates, authorizations and permits issued by, and have made
all declarations and filings with, the appropriate regulatory agencies or
bodies which are necessary or desirable for the ownership of their
respective properties or the conduct of their respective businesses as
described in the Offering Memorandum, except where the failure to possess
or make the same would not, singularly or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any of its Material
Subsidiaries has received notification of any revocation or modification of
any such license, certificate, authorization or permit or has any reason to
believe that any such license, certificate, authorization or permit will
not be renewed in the ordinary course.
(w) The Company has delivered to the Initial Purchasers true and
correct copies of the Acquisition Agreement in the form as originally
executed (together with all exhibits and schedules thereto); the
Acquisition Agreement (together with such exhibits and schedules) and the
agreements specified therein to be entered into on or prior to the Closing
Date represent the entire agreement between the Company and the United
Texon Shareholders and their affiliates with respect to the Acquisition;
and there have been no amendments, supplements or waivers thereto
(including such exhibits, schedules or other agreements) other than those
as to which the Initial Purchasers shall have been advised in writing.
(x) The Company has delivered to the Initial Purchasers true and
correct copies of the Machinery Disposal Agreements in the form as
originally executed (together with all exhibits and schedules thereto); the
Machinery Disposal Agreements (together with such exhibits and schedules)
represent the entire agreement between United Texon and the United Texon
Shareholders, their affiliates and USM Group Limited with respect to the
Machinery Disposal; and there have been no amendments, supplements or
waivers thereto (including such exhibits, schedules or other agreements)
other than those as to which the Initial Purchasers shall have been advised
in writing.
<PAGE>
13
(y) As of the Closing Date, the Company shall have delivered to the
Initial Purchasers true and correct copies of the Senior Financing
Documents in the form as originally executed (together with all exhibits
and schedules thereto); the Senior Financing Documents (together with such
exhibits and schedules) represent the entire agreement between the Company
and the other parties thereto with respect to the Senior Credit Facility;
and there have been no amendments, supplements or waivers thereto
(including such exhibits and schedules) other than those as to which the
Initial Purchasers shall have been advised in writing.
(z) The Company and each of its Material Subsidiaries have filed, or
have requested extensions for, all income and franchise tax returns
required to be filed through the date hereof and have paid all taxes due
thereon, other than (i) those being contested in good faith and for which
adequate reserves have been provided or (ii) those currently payable
without penalty or interest; and no tax deficiency has been determined
adversely to the Company or any of its subsidiaries which has had, nor does
the Company or any of its subsidiaries have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse
Effect.
(aa) Neither the Company nor any of its Material Subsidiaries is, or
after consummation of the transactions contemplated in the Transaction
Documents will be, (i) an "investment company" or a company "controlled
by" an investment company within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and the rules and
----------------------
regulations of the Commission thereunder or (ii) a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" thereof within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(bb) The Company and each of its Material Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets
<PAGE>
14
is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(cc) The businesses, undertakings, properties and other assets of the
Company and each of its Material Subsidiaries are and, following the
Acquisition will be, insured in respect of such risks and for such amounts
as are normally insured against by persons carrying on similar businesses
as those carried on by the Company or its Material Subsidiaries and against
all material risks against which the Company or its Material Subsidiaries
would reasonably be expected to be insured in the circumstances of the
businesses and undertakings carried on by them.
(dd) The Company and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) necessary for the conduct of their
respective businesses, except where the failure to own or possess such
rights would not have a Material Adverse Effect, and has no reason to
believe that, to the best knowledge of the Company, the conduct of their
respective businesses will conflict in any material respect with, and the
Company and its subsidiaries have not received any notice of any claim of
conflict with, any such rights of others, except where such conflict would
not have a Material Adverse Effect.
(ee) The Company and each of its subsidiaries have good and
marketable title in fee simple to, or have valid rights to lease or
otherwise use, all items of real and personal property which are material
to the business of the Company and its subsidiaries, in each case free and
clear of all liens, encumbrances, claims and defects and imperfections of
title except such as (i) are contemplated by the Senior Credit Documents,
(ii) do not materially interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries or (iii) could not
reasonably be expected to have a Material Adverse Effect.
<PAGE>
15
(ff) No material labor disturbance by or dispute with the employees
of the Company or any of its subsidiaries exists or, to the best knowledge
of the Company, is contemplated or threatened which would have a Material
Adverse Effect.
(gg) No "prohibited transaction" (as defined in Section 406 of the
U.S. Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"), or
-----
Section 4975 of the U.S. Internal Revenue Code of 1986, as amended from
time to time (the "Code")) or "accumulated funding deficiency" (as defined
----
in Section 302 of ERISA) or any of the events set forth in Section 4043(b)
of ERISA (other than events with respect to which the 30-day notice
requirement under Section 4043 of ERISA has been waived) has occurred with
respect to any employee benefit plan of the Company or any of its
subsidiaries which could reasonably be expected to have, singularly or in
the aggregate, a Material Adverse Effect; each such employee benefit plan
is in compliance in all material respects with applicable law, including
ERISA and the Code; the Company and each of its Material Subsidiaries have
not incurred and do not expect to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from, any pension plan
for which the Company or any of its Material Subsidiaries would have any
liability; and each such pension plan that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects
and nothing has occurred, whether by action or by failure to act, which
could reasonably be expected to cause the loss of such qualification.
(hh) Except as disclosed in the Offering Memorandum under "Business--
Environmental Matters", There has been no storage, generation,
transportation, handling, treatment, disposal, discharge, emission or other
release of any kind of toxic or other wastes or other hazardous substances
by, due to or caused by the Company or any of its subsidiaries (or, to the
best knowledge of the Company, any other entity (including any predecessor)
for whose acts or omissions the Company or any of its subsidiaries is or
would be liable) upon any of the property now or previously owned or leased
by the Company or any of its subsidiaries, or upon any other property, in
violation of any statute or any ordinance, rule, regulation, order,
judgment, decree or permit or which would, under
<PAGE>
16
any statute or any ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any liability,
except for any violation or liability which could not reasonably be
expected to have, singularly or in the aggregate with all such violations
and liabilities, a Material Adverse Effect; and there has been no disposal,
discharge, emission or other release of any kind onto such property or into
the environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which the Company has knowledge,
except for any such disposal, discharge, emission or other release of any
kind which could not reasonably be expected to have, singularly or in the
aggregate with all such discharges and other releases, a Material Adverse
Effect.
(ii) Neither the Company nor, to the best knowledge of the Company,
any director, officer, agent, employee or other person associated with or
acting on behalf of the Company has at any time within the last five years
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(jj) On and immediately after the Closing Date, the Company (after
giving effect to the issuance of the Securities and to the other
transactions related thereto as described in the Offering Memorandum) will
be Solvent. As used in this paragraph, the term "Solvent" means, with
respect to a particular date, that on such date (i) no order has been made
and no resolution has been passed for the winding up of the Company or for
a provisional liquidator to be appointed in respect of the Company and no
meeting has been convened for the purpose of winding up the Company; (ii)
no administration order has been made in respect of the Company; (iii) no
receiver (which expression shall include an administrative receiver) has
been appointed in respect of the Company or all or any of its assets; (iv)
the company is not insolvent, or unable to pay its debts within the meaning
of section 123(1)(e) of the U.K. Insolvency Act 1986; and (v) no voluntary
arrangement has been proposed under section 1
<PAGE>
17
of the U.K. Insolvency Act 1986 in respect of the Company.
(kk) Except as disclosed in the Offering Memorandum there are no
outstanding subscriptions, rights, warrants, calls or options to acquire,
or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of
capital stock of or other equity or other ownership interest in the Company
or any of its Material Subsidiaries except as set forth in Section 1(e).
(ll) None of the proceeds of the sale of the Securities will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin security" (as that term is defined in Regulations G and U of the
Board of Governors of the U.S. Federal Reserve System (the "Federal Reserve
---------------
Board")), for the purpose of reducing or retiring any indebtedness which
-----
was originally incurred to purchase or carry any margin security or for any
other purpose which might cause any of the Securities to be considered a
"purpose credit" within the meanings of Regulation G, T, U or X of the
Federal Reserve Board.
(mm) Neither the Company nor any of its subsidiaries is a party to
any contract, agreement or understanding with any person that would give
rise to a valid claim against the Company or the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with the
offering and sale of the Securities.
(nn) The Securities satisfy the eligibility requirements of Rule
144A(d)(3).
(oo) None of the Company, any of its affiliates or any person acting
on its or their behalf has engaged or will engage in any directed selling
efforts (as such term is defined in Regulation S under the Securities Act
("Regulation S")) with respect to the Securities, and all such persons have
------------
complied and will comply with the offering restrictions requirements of
Regulation S to the extent applicable; provided, however, that the Company
-------- -------
makes no representations or warranties as to the activities of the Initial
Purchasers. The Company has not entered and will not enter into any
contractual arrangement with respect to the distribution of the Securities
except for this Agreement.
<PAGE>
18
(pp) Neither the Company nor any of its affiliates has, directly or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as such term is defined
in the Securities Act), which is or will be integrated with the sale of the
Securities in a manner that would require registration of the Securities
under the Securities Act; provided, however, that the Company makes no
-------- -------
representations or warranties as to the activities of the Initial
Purchasers.
(qq) None of the Company, or any of its affiliates, or any person
acting on its or their behalf has engaged, in connection with the offering
of the Securities, in any form of general solicitation or general
advertising in the United States within the meaning of Rule 502(c) under
the Securities Act; provided, however, that the Company makes no
-------- -------
representations or warranties as to the activities of the Initial
Purchasers.
(rr) There are no securities of the Company registered under the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act") or listed
on a national securities exchange or quoted in a U.S. automated inter-
dealer quotation system.
(ss) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act in
connection with the offering of the Securities.
(tt) There is no "substantial U.S. market interest" as defined in
Rule 902(n) of Regulation S in the Company's debt securities.
(uu) Since the date as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (i) there has been no
material adverse change or, to the best knowledge of the Company, any
development involving a prospective material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs,
management or business prospects of the Company and its subsidiaries taken
as a whole, whether or not arising in the ordinary course of business, (ii)
neither the Company nor any of its Material Subsidiaries has incurred any
material liability or obligation, direct or contingent, other than in the
ordinary course of business, (iii) neither the Company nor any of its
Material Subsidiaries has
<PAGE>
19
entered into any material transaction other than in the ordinary course of
business and (iv) there has not been any change in the capital stock or
long-term debt of the Company or the long-term debt of any of its Material
Subsidiaries, or any dividend or distribution of any kind declared, paid or
made by the Company on any class of its capital stock.
(vv) Application has been made to list the Securities on the
Luxembourg Exchange and, in connection therewith, the Company has prepared
and submitted to the Luxembourg Exchange a listing application with respect
to the Securities (the "Listing Application"). The Listing Application (i)
-------------------
complies in all material respects with the requirements of the Luxembourg
Exchange and (ii) has been submitted to the Luxembourg Exchange. There is
no requirement to deliver the finalized Listing Application to prospective
purchasers or purchasers of Securities from the Initial Purchasers in
connection with the offer and sale by the Initial Purchasers of the
Securities.
(ww) No forward-looking statement (within the meaning of Section 27A
of the Securities Act or Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis and been disclosed other than in good
faith.
(xx) The Company has the power to submit, and pursuant to this
Agreement and the Indenture, has legally, validly, effectively and
irrevocably submitted to the jurisdiction of any U.S. Federal or state
court in the Borough of Manhattan in The City of New York, New York, and
has the power to designate, appoint and empower and, pursuant to this
Agreement and the Indenture has, or in the case of the Indenture will have,
legally, validly, effectively and irrevocably designated, appointed and
empowered, an agent for service of process in any suit or proceeding based
on or arising under this Agreement, the Indenture, the Registration Rights
Agreement and the Note Depositary Agreement in any U.S. Federal or state
court in the Borough of Manhattan in The City of New York, as provided in
Section 17 hereof, Section 10.10 of the Indenture, Section 10(h) of the
Registration Rights Agreement and Section 4.08 of the Note Depositary
Agreement.
<PAGE>
20
(yy) The Company is not aware of any material liabilities of the
Machinery Business remaining with the Company following the Machinery
Disposal.
2. Purchase and Resale of the Securities. (a) On the basis of the
-------------------------------------
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
the Initial Purchasers, severally and not jointly, and each of the Initial
Purchasers, severally and not jointly, agrees to purchase from the Company, the
principal amount of Securities set forth opposite the name of such Initial
Purchaser on Schedule II hereto at a purchase price equal to 97% of the
principal amount thereof. The Company shall not be obligated to deliver any of
the Securities except upon payment for all of the Securities to be purchased as
provided herein.
(b) The Initial Purchasers have advised the Company that they
propose to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, represents and warrants to, and agrees
with, the Company that (i) it is purchasing the Securities pursuant to a private
sale exempt from registration under the Securities Act and understands that the
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from, or in transactions not
subject to, the registration requirements of the Securities Act, (ii) it has not
solicited offers for, or offered or sold, and will not solicit offers for, or
offer or sell, the Securities by means of any form of general solicitation or
general advertising in the United States within the meaning of Rule 502(c) of
Regulation D under the Securities Act ("Regulation D") and (iii) it has
------------
solicited and will solicit offers for the Securities only from, and has offered
or sold and will offer, sell or deliver the Securities, as part of its initial
offering and otherwise until 40 days after the later of commencement of the
offering of the Securities and the Closing Date, only (A) to persons whom it
reasonably believes to be qualified institutional buyers ("Qualified
---------
Institutional Buyers") as defined in Rule 144A, or if any such person is buying
- --------------------
for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such
<PAGE>
21
sale or delivery is being made in reliance on Rule 144A or (B) in reliance on
Regulation S.
(c) In connection with the offer and sale of Securities in reliance
on Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:
(i) None of such Initial Purchaser or any of its affiliates or any
other person acting on its or their behalf has engaged or will engage in
any directed selling efforts with respect to the Securities, and all such
persons have complied and will comply with the offering restrictions
requirement of Regulation S.
(ii) At or prior to the confirmation of sale of any Securities sold in
reliance on Regulation S, it will have sent to each distributor, dealer or
other person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the date of
original issuance of the Securities, except in accordance with
Regulation S or Rule 144A under the Securities Act. Terms used above
have the meanings given to them by Regulation S."
(iii) It has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the Securities,
except with its affiliates or with the prior written consent of the
Company.
Terms used in this Section 2(c) have the meanings given to them by
Regulation S.
(d) Each Initial Purchaser represents and warrants that it is a
Qualified Institutional Buyer, with such knowledge and experience in financial
and business matters as is necessary to evaluate the merits and risks of
<PAGE>
22
an investment in the Securities, and is acquiring the Securities not with a view
to the distribution or resale thereof, except distributions or resales in
compliance with the registration requirements or exemption provisions of the
Securities Act, including Rule 144A, and that neither it, nor anyone acting on
its behalf, will offer the Securities so as to bring the issuance and sale of
the Securities within the provisions of Section 5 of the Securities Act.
(e) Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that (i) it has not offered or sold and, prior to the date
six months after the date of issue of the Securities, will not offer or sell any
Securities to persons in the United Kingdom, except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted in and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (ii) it has complied with and will comply
with all applicable provisions of the Financial Services Act 1986 of the United
Kingdom with respect to anything done by it in relation to the Securities in,
from or otherwise involving the United Kingdom and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended), or to a person
to whom such document may otherwise lawfully be issued or passed on.
(f) In addition to the foregoing, each Initial Purchaser acknowledges
and agrees that the Company and, for purposes of the opinions to be delivered to
the Initial Purchasers pursuant to Sections 5(d), (e) and (f) counsel for the
Company and the Initial Purchasers, respectively, may rely upon the accuracy of
the representations and warranties of the Initial Purchasers and their
compliance with their agreements contained in this Section 2, and each Initial
Purchaser hereby consents to such reliance.
(g) The Company acknowledges and agrees that the Initial Purchasers
may sell Securities to any affiliate of an Initial Purchaser and that any such
affiliate may sell Securities purchased by it to an Initial Purchaser; provided,
--------
in each case, that such sales are made in accordance with the provisions of this
Section 2.
<PAGE>
23
3. Delivery of and Payment for the Securities. (a) Delivery of and
------------------------------------------
payment for the Securities shall be made at the offices of Dickson Minto W.S.,
London, or at such other place as shall be agreed upon by the Initial Purchasers
and the Company, at 2.30 p.m. London time, on January 30, 1998, or at such other
time or date, not later than three full business days thereafter, as shall be
agreed upon by the Initial Purchasers and the Company (such date and time of
payment and delivery being referred to herein as the "Closing Date").
------------
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Company by wire or book-entry transfer of same-
day funds to such account or accounts as the Company shall specify prior to the
Closing Date or by such other means as the parties hereto shall agree prior to
the Closing Date against delivery to the Initial Purchasers of the Securities.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligations of the
Initial Purchasers hereunder. Upon delivery, the Securities shall be in the form
of one or more permanent global Securities in bearer form (the "Global
------
Securities") representing all the Securities and to be deposited with the Book-
- ----------
Entry Depositary pursuant to the Depositary Agreement. The Book-Entry
Depositary will issue two certificateless depositary interests to The Depository
Trust Company ("DTC"). Beneficial interests in the Offered Securities will be
shown on, and transfers thereof will be effected only through, records
maintained in book-entry form by DTC and its participants, including, as
applicable, Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System ("Euroclear") and Cedel Bank, societe anonyme
("Cedel"). The Company agrees to make the global certificates evidencing the
Securities available for inspection by CMIL on behalf of the Initial Purchasers
in London at least 24 hours prior to the Closing Date.
4. Further Agreements of the Company. The Company agrees with each
---------------------------------
of the Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes
any statement of a material fact made in the Offering Memorandum untrue or
which requires the making of any additions to or changes in the Offering
Memorandum (as amended or supplemented from time to time) in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; to advise
<PAGE>
24
the Initial Purchasers promptly of any order preventing or suspending the
use of the Preliminary Offering Memorandum or the Offering Memorandum, of
any suspension of the qualification of the Securities for offering or sale
in any jurisdiction and of the initiation or threatening of any proceeding
for any such purpose; and to use its reasonable best efforts to prevent the
issuance of any such order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum or suspending
any such qualification and, if any such suspension is issued, to obtain the
lifting thereof at the earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and counsel
for the Initial Purchasers, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and any
amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to each of the Initial Purchasers and
counsel for the Initial Purchasers and not to effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by
notice to the Company after a reasonable period to review, which shall not
in any case be longer than ten business days after receipt of such copy;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for
the Initial Purchasers or counsel for the Company, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
<PAGE>
25
(e) for so long as the Securities are outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act,
to furnish to holders of the Securities and beneficial owners and
prospective purchasers of the Securities designated by such holders, upon
request of such holders or such beneficial owners or prospective
purchasers, the information required to be delivered pursuant to Rule
144A(d)(4), unless the Company is then subject to and in compliance with
Section 13 or 15(d) of the Exchange Act or exempt from reporting pursuant
to Rule 12g3-2(b) under the Exchange Act (the foregoing agreement being for
the benefit of the holders from time to time of the Securities and
beneficial owners and prospective purchasers of the Securities designated
by such holders);
(f) for a period of five years following the Closing Date, to furnish
to the Initial Purchasers copies of any reports filed by the Company with
the Commission on Forms 20-F, 10-K, 10-Q, 6-K and 8-K, or such other
similar forms as may be designated by the Commission (and any information
furnished to the Commission pursuant to Rule 12g3-2(b) under the Exchange
Act), and such other documents, reports and information as shall be
furnished by the Company to the Trustee or to the holders of the Securities
pursuant to the Indenture or the Exchange Act or any rule or regulation of
the Commission thereunder;
(g) to use its reasonable best efforts to qualify the Securities for
sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may reasonably designate and to continue such
qualifications in effect for so long as required for the resale of the
Securities; and to arrange for the determination of the eligibility for
investment of the Securities under the laws of such jurisdictions as the
Initial Purchasers may reasonably request; provided that the Company and
--------
its subsidiaries shall not be obligated to register or qualify as foreign
corporations or as securities dealers in any jurisdiction in which they are
not so registered or qualified or to file a general consent to service of
process in any jurisdiction or to subject themselves to taxation in any
jurisdiction if they are not otherwise so subject;
(h) to arrange, with the cooperation of the Initial Purchasers, for
the Securities to be (i)
<PAGE>
26
designated Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market securities in accordance with the rules and
------
regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market (ii) listed on the
----
Luxembourg Exchange and (iii) for the Securities to be eligible for
clearance and settlement through DTC and Euroclear and Cedel; and to
arrange for the Exchange Securities to be listed on the Luxembourg
Exchange;
(i) not to, and to cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as such term is defined in the Securities Act) which could be integrated
with the sale of the Securities in a manner which would require
registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may
be, not to, and to cause its affiliates not to, and not to authorize or
knowingly permit any person acting on their behalf to, (i) solicit any
offer to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising in the United States within the
meaning of Regulation D or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act or (ii) engage in any
"directed selling efforts" (as defined in Regulation S) with respect to the
Securities; and not to offer, sell, contract to sell or otherwise dispose
of, directly or indirectly, any securities under circumstances where such
offer, sale, contract or disposition would cause the exemptions afforded by
Section 4(2) of the Securities Act and Rule 144A or the safe harbor of
Regulation S under the Securities Act to cease to be applicable to the
offering and sale of the Securities as contemplated by this Agreement and
the Offering Memorandum;
(k) except as required by the Registration Rights Agreement, for a
period of 180 days from the date of the Offering Memorandum, not to, and to
cause its affiliates not to, offer for sale, sell, contract to sell or
otherwise dispose of, directly or indirectly, or file a registration
statement for, or announce any offer, sale, contract for sale of or other
disposition of any debt securities issued or guaranteed by the
<PAGE>
27
Company or any of its subsidiaries (other than the Securities) without the
prior written consent of the Initial Purchasers;
(l) without the prior written consent of the Initial Purchasers, not
to, and not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Securities that have been reacquired
by them, except for Securities purchased by the Company or any of its
affiliates and resold in a transaction registered under the Securities Act;
(m) not to, for a period of two years following the Closing Date, be
or become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act, and to not
be or become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder;
(n) in connection with the offering of the Securities, until CSI on
behalf of the Initial Purchasers shall have notified the Company of the
completion of the resale of the Securities, not to, and to cause its
affiliated purchasers (as defined in Regulation M under the Exchange Act)
not to, either alone or with one or more other person, bid for or purchase,
for any account in which it or any of its affiliated purchasers has a
beneficial interest, any Securities, or attempt to induce any person to
purchase any Securities, except as contemplated by the Exchange Offer; and
not to, and to cause its affiliated purchasers not to, make bids or
purchase for the purpose of creating actual, or apparent, active trading in
or of raising the price of the Securities;
(o) in connection with the offering of the Securities, to make its
officers, key employees, independent accountants and legal counsel
reasonably available upon request by the Initial Purchasers;
(p) to furnish to each of the Initial Purchasers on the date hereof a
copy of the independent accountants' reports included in the Offering
Memorandum signed by the accountants rendering such reports;
<PAGE>
28
(q) to do and perform all things required to be done and performed by
it under this Agreement that are within its control prior to or after the
Closing Date, and to use its reasonable best efforts to satisfy all
conditions precedent on its part to the delivery of the Securities;
(r) not to take any action prior to the execution and delivery of the
Indenture which, if taken after such execution and delivery, would have
violated any of the covenants contained in the Indenture;
(s) not to take any action prior to the Closing Date which would
require the Offering Memorandum to be amended or supplemented pursuant to
Section 4(d);
(t) prior to the Closing Date, not to issue any press release or other
communication directly or indirectly or hold any press conference with
respect to the Company, its condition, financial or otherwise, or earnings,
business affairs or business prospects (except for routine oral marketing
communications in the ordinary course of business and consistent with the
past practices of the Company and of which the Initial Purchasers are
notified), without the prior written consent of the Initial Purchasers,
which consent shall not be unreasonably withheld, unless in the judgment of
the Company and its counsel, and after notification to the Initial
Purchasers, such press release or communication is required by law;
(u) to apply the net proceeds from the sale of the Securities as set
forth in the Offering Memorandum under the heading "Use of Proceeds"; and
(v) not to amend, supplement or waive any part of the Acquisition
Agreement, the Machinery Disposal Agreements or the Senior Finance
Documents without the prior consent in writing of the Initial Purchasers,
which consent shall not be unreasonably withheld.
5. Conditions of Initial Purchasers' Obligations. The respective
---------------------------------------------
obligations of the several Initial Purchasers hereunder are subject to the
accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Company contained herein, to the accuracy
of the statements of the Company and its officers made in any certificates
delivered pursuant hereto, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
<PAGE>
29
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial Purchasers
may agree; and no stop order suspending the sale of the Securities in any
jurisdiction shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or, to the best of the
Company's knowledge, threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact which, in the reasonable opinion of counsel for the
Initial Purchasers, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of the Transaction Documents and
the Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby, shall be
reasonably satisfactory in all material respects to the Initial Purchasers,
and the Company shall have furnished to the Initial Purchasers all
documents and information that they or their counsel may reasonably request
to enable them to pass upon such matters.
(d) Mayer, Brown & Platt shall have furnished to the Initial
Purchasers their written opinion, as U.S. counsel to the Company, addressed
to the Initial Purchasers and dated the Closing Date, in form and
<PAGE>
30
substance reasonably satisfactory to the Initial Purchasers, substantially
to the effect set forth in Annex B hereto, and the Company shall have
furnished to such counsel such documents and information as they reasonably
request for the purpose of enabling them to pass upon such matters.
(e) Dickson Minto W.S. shall have furnished to the Initial Purchasers
their written opinion, as U.K. counsel to the Company, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers, substantially to the
effect set forth in Annex C hereto, and the Company shall have furnished to
such counsel such documents and information as they reasonably request for
the purpose of enabling them to pass upon such matters.
(f) The Initial Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Initial Purchasers, such opinion, dated the Closing
Date, with respect to such matters as the Initial Purchasers may reasonably
require, and the Company shall have furnished to such counsel such
documents and information as they reasonably request for the purpose of
enabling them to pass upon such matters.
(g) The Company shall have furnished to the Initial Purchasers a
letter (the "Initial Letter") of KPMG, addressed to the Initial Purchasers
--------------
and dated the date hereof, in form and substance satisfactory to the
Initial Purchasers, substantially to the effect set forth in Annex D
hereto.
(h) The Company shall have furnished to the Initial Purchasers a
letter (the "Bring-Down Letter") of KPMG, addressed to the Initial
-----------------
Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants with respect to the Company and its
subsidiaries within the meaning of Rule 101 of the Code of Professional
Conduct of the AICPA and its interpretations and rulings thereunder, (ii)
stating, as of the date of the Bring-Down Letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Offering Memorandum,
as of a date not more than three business days prior to the date of the
Bring-Down Letter), that the conclusions and findings of such accountants
with respect to the financial information and other matters covered by its
Initial Letter are accurate and (iii) confirming in all material respects
the conclusions and findings set forth in its Initial Letter. In addition,
the Company shall have received a letter from KPMG consenting to the use,
in connection with the offering of the Securities, of the audited financial
statements of the Company prepared by such accountants and included in the
Offering Memorandum.
(i) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing
<PAGE>
31
Date, of its chief executive officer and its chief financial officer
stating that (A) such officers have carefully examined the Offering
Memorandum, (B) in their opinion, the Offering Memorandum, as of its date,
did not include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and since the date of the Offering
Memorandum, no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any untrue
statement of a material fact and would not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading and (C) to the best of their knowledge after reasonable
investigation, as of the Closing Date, the representations and warranties
of the Company in this Agreement are true and correct in all material
respects, the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder on or prior
to the Closing Date, and subsequent to the date of the most recent
financial statements contained in the Offering Memorandum, there has been
(i) no material adverse change in the financial position or results of
operation of the Company or any of its Material Subsidiaries, or (ii) any
change, or any development including a prospective change, in or affecting
the condition (financial or otherwise), results of operations, business or
prospects of the Company and its subsidiaries taken as a whole, except as
set forth in the Offering Memorandum.
(j) The Initial Purchasers shall have received a counterpart of the
Registration Rights Agreement which shall have been executed and delivered
by a duly authorized officer of the Company.
(k) The Indenture shall have been duly executed and delivered by the
Company and the Trustee; and the Securities shall have been duly executed
and delivered by the Company and duly authenticated by the Trustee.
(l) The Depositary Agreement shall have been duly executed and
delivered by the Company and the Book-Entry Depositary.
<PAGE>
32
(m) The Securities shall have been approved by the NASD for trading
in the PORTAL Market.
(n) If any event shall have occurred that requires the Company under
Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof shall have been delivered to the
Initial Purchasers reasonably in advance of the Closing Date.
(o) There shall not have occurred any invalidation of Rule 144A or
Regulation S by any court or any withdrawal or proposed withdrawal of any
rule or regulation under the Securities Act or the Exchange Act by the
Commission or any amendment or proposed amendment thereof by the Commission
which in the judgment of the Initial Purchasers would materially impair the
ability of the Initial Purchasers to purchase, hold or effect resales of
the Securities as contemplated hereby.
(p) Subsequent to the execution and delivery of this Agreement or, if
earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall
not have been any change in the capital stock or long-term debt or any
change, or any development involving a prospective change, in or affecting
the condition (financial or otherwise), results of operations, business or
prospects of the Company and its subsidiaries taken as a whole, the effect
of which, in any such case described above, is, in the reasonable judgment
of the Initial Purchasers, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated by this Agreement
and the Offering Memorandum (exclusive of any amendment or supplement
thereto).
(q) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date, prevent
the issuance or sale of the Securities; and no injunction, restraining
order or order of any other nature by any U.K. or any U.S. Federal or state
court of competent jurisdiction shall have been issued as of the Closing
<PAGE>
33
Date which would prevent the issuance or sale of the Securities.
(r) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Securities or
any of the Company's other debt securities or preferred stock by any
"nationally recognized statistical rating organization", as such term is
defined by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance
or review (other than an announcement with positive implications of a
possible upgrading), its rating of the Securities or any of the Company's
other debt securities or preferred stock.
(s) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the Luxembourg Exchange, the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market shall have been
suspended or limited, or minimum prices shall have been established on any
such exchange or market by the Commission, by any such exchange or by any
other regulatory body or governmental authority having jurisdiction, or
trading in any securities of the Company on any exchange or in the over-
the-counter market shall have been suspended or (ii) any general moratorium
on commercial banking activities shall have been declared by Luxembourg,
United Kingdom or U.S. Federal or New York state authorities or (iii) an
outbreak or escalation of hostilities or a declaration by the United States
or any member state of the European Union of a national emergency or war or
(iv) a material adverse change in general economic, political or financial
conditions (or the effect of international conditions on financial markets
shall be such) the effect of which, in the case of this clause (iv), is, in
the reasonable judgment of the Initial Purchasers, so material and adverse
as to make it impracticable or inadvisable to proceed with the sale or the
delivery of the Securities on the terms and in the manner contemplated by
this Agreement and in the Offering Memorandum (exclusive of any amendment
or supplement thereto).
(t) Concurrently with or prior to the issue and sale of the
Securities by the Company, the Acquisition
<PAGE>
34
shall have been consummated on terms that conform in all material respects
to the description thereof in the Offering Memorandum and the Initial
Purchasers shall receive evidence reasonably satisfactory to them of the
consummation thereof. The Initial Purchasers shall receive true and correct
copies of the Acquisition Agreement (together with all exhibits and
schedules thereto), including all amendments or supplements thereto, and
all certificates or other closing documents delivered in connection with
the consummation of the Acquisition as soon as practicable after the
Closing Date. There shall have been no amendment, supplement or waiver of
any part of the Acquisition Agreement (including the exhibits and schedules
thereto) not disclosed in writing to the Initial Purchasers prior to the
date hereof, or any such amendment, supplement or waiver after the date
hereof not consented to in writing by the Initial Purchasers. All
conditions precedent to the Acquisition other than the payment of the
consideration contained in such Agreement shall have been satisfied or
waived, with the prior written consent of the Initial Purchasers,
concurrently or prior to the consummation of the Acquisition.
(u) The Initial Purchasers shall have received such further opinions,
certificates, letters and documents as the Initial Purchasers may
reasonably request.
The Company will furnish the Initial Purchasers with conformed copies
of such opinions, certificates, letters and documents mentioned above as the
Initial Purchasers reasonably request. The Initial Purchasers may in their sole
discretion waive compliance with any conditions to their obligations hereunder,
whether in respect of the Closing Date or otherwise.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers hereunder
-----------
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Securities if, prior to that time, any of the events
<PAGE>
35
described in Section 5(o), (p), (q), (r) and (s) shall have occurred and be
continuing.
7. Reimbursement of Initial Purchasers' Expenses. If (a) this
---------------------------------------------
Agreement shall have been terminated pursuant to Section 6, (b) the Company
shall fail to tender the Securities for delivery to the Initial Purchasers for
any reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Company shall reimburse the Initial Purchasers for such out-of-
pocket expenses (including reasonable fees and disbursements of counsel) as
shall have been reasonably incurred by the Initial Purchasers in connection with
this Agreement and the proposed purchase and resale of the Securities.
8. Indemnification. (a) The Company shall indemnify and hold
---------------
harmless each Initial Purchaser, its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 8(a),
Section 9 and Section 17(c) as an Initial Purchaser), from and against any and
all losses, claims, damages or liabilities and reasonable expenses, joint or
several, or any action in respect thereof (including, without limitation, any
loss, claim, damage, liability or action relating to purchases and sales of the
Securities), to which that Initial Purchaser may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
statutory law or regulation, at common law or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum, the Offering Memorandum or in any amendment or
supplement thereto or in any information provided by the Company pursuant to
Section 4(e) or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and shall reimburse each Initial Purchaser promptly upon
demand for any legal or other expenses reasonably incurred by that Initial
Purchaser in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
--------
however, the Company shall not be liable in any such case to the extent that any
- -------
such loss, claim,
<PAGE>
36
damage, liability or action arises out of, or is based upon, an untrue statement
or alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Initial Purchasers'
Information; and provided, further, that with respect to any such untrue
-------- -------
statement in or omission from the Preliminary Offering Memorandum, the indemnity
agreement contained in this Section 8(a) shall not inure to the benefit of any
such Initial Purchaser to the extent that the sale to the person asserting any
such loss, claim, damage, liability or action was an initial resale by such
Initial Purchaser and any such loss, claim, damage, liability or action of or
with respect to such Initial Purchaser results from the fact that both (i) to
the extent required by applicable law, a copy of the Offering Memorandum was not
sent or given to such person at or prior to the written confirmation of the sale
of such Securities to such person and (ii) the untrue statement in or omission
from the Preliminary Offering Memorandum was corrected in the Offering
Memorandum unless, in either case, such failure to deliver the Offering
Memorandum was a result of non-compliance by the Company with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 8(b) and
Section 9 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other U.S. Federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with the Initial Purchasers' Information, and shall
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending or preparing to defend
against or
<PAGE>
37
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 8(a) or 8(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
--------
however, that the failure to notify the indemnifying party shall not relieve it
- -------
from any liability which it may have under this Section 8 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
-------- -------
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
-------- -------
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the
<PAGE>
38
indemnified party to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 8(a) and 8(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement (i) includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding and (ii) does not include a statement as to an
admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
The obligations of the Company and the Initial Purchasers in this
Section 8 and in Section 9 are in addition to any other liability that the
Company or the Initial Purchasers, as the case may be, may otherwise have,
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
9. Contribution. If the indemnification provided for in Section 8 is
------------
unavailable or insufficient to hold harmless an indemnified party under Section
8(a) or 8(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect
<PAGE>
39
the relative benefits received by the Company on the one hand and the Initial
Purchasers on the other from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities purchased under this Agreement (before deducting expenses)
received by or on behalf of the Company, on the one hand, and the total
discounts and commissions received by the Initial Purchasers with respect to the
Securities purchased under this Agreement, on the other, bear to the total gross
proceeds from the sale of the Securities under this Agreement, in each case as
set forth in the table on the cover page of the Offering Memorandum. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to the Company or information
supplied by the Company on the one hand or to any Initial Purchasers'
Information on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Initial Purchasers agree that
it would not be just and equitable if contributions pursuant to this Section 9
were to be determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purposes) or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 9 shall be deemed to include, for purposes of this Section
9, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 9, no Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total discounts and commissions received by such Initial Purchaser
with respect to the Securities purchased by it under this Agreement exceeds the
amount of
<PAGE>
40
any damages which such Initial Purchaser has otherwise paid or become liable to
pay by reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute as provided in this Section 9 are several
in proportion to their respective purchase obligations and not joint.
10. Persons Entitled to Benefit of Agreement. This Agreement shall
----------------------------------------
inure to the benefit of and be binding upon the Initial Purchasers, the Company
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Sections 8 and 9 with respect to affiliates, officers, directors, employees,
representatives, agents and controlling persons of the Company and the Initial
Purchasers and in Section 4(e) with respect to holders and beneficial owners and
prospective purchasers of the Securities. Nothing in this Agreement is intended
or shall be construed to give any person, other than the persons referred to in
this Section 10, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
11. Expenses. (a) The Company agrees with the Initial Purchasers to
--------
pay (together with VAT where applicable) (i) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Securities and
any taxes payable in that connection; (ii) the costs incident to the
preparation, printing and distribution of the Preliminary Offering Memorandum,
the Offering Memorandum, the Listing Application and any amendments or
supplements thereto; (iii) the costs of reproducing and distributing each of the
Transaction Documents; (iv) the costs incident to the preparation, printing and
delivery of the certificates evidencing the Securities, including stamp duties
and transfer taxes, if any, payable upon issuance of the Securities; (v) the
fees and expenses of the Company's counsel and independent accountants; (vi) the
fees and expenses of qualifying the Securities under the securities laws of the
several jurisdictions as provided in Section 4(g) and of preparing, printing and
distributing Blue Sky Memoranda (including related reasonable fees and expenses
of counsel for the Initial Purchasers); (vii) any fees charged by rating
agencies for rating the Securities; (viii) the fees and expenses of the Trustee,
the Book-Entry Depositary, any paying agent and any listing agent
<PAGE>
41
(including any affiliate of any Initial Purchaser acting in such capacity) in
respect of listing the Securities on the Luxembourg Exchange or any other
securities exchange (including related fees and expenses of any counsel to such
parties); (ix) all expenses and application fees incurred in connection with (A)
the listing and qualifying of the Securities on the PORTAL Market and on the
Luxembourg Exchange or any other securities exchange and (B) the approval of the
Securities for book-entry transfer by DTC; (x) the expenses incurred by the
Company and the Initial Purchasers in connection with attending or hosting "road
show" meetings with prospective purchasers of the Securities from the Initial
Purchasers; and (xi) all other costs and expenses incident to the performance of
the obligations of the Company under the Transaction Documents which are not
otherwise specifically provided for in this Section 11; provided, however, that
-------- -------
except as provided in this Section 11 and Section 7, the Initial Purchasers
shall pay their own costs and expenses, including the costs and expenses of
their counsel.
(b) In addition, the Company agrees that it will indemnify and hold
harmless the Initial Purchasers against any documentary, stamp or similar
issuance tax, including any interest and penalties, on the creation, issuance
and sale of the Securities and on the execution and delivery of this Agreement.
(c) All amounts payable by the Company hereunder shall be exclusive
of Value Added Tax or any similar taxes ("V.A.T"). All amounts charged by the
-----
Initial Purchasers or for which the Initial Purchasers are to be reimbursed will
be invoiced together with V.A.T, where appropriate (and the Initial Purchasers
shall remit to the Company such V.A.T chargeable to the Initial Purchasers and
reimbursed by the Company which is recovered by the Initial Purchasers from
Customs and Excise). In addition, all such amounts shall be paid free and clear
of, and without any deduction or withholding for or on account of, any current
or future taxes, levies, imports, duties, charges or other deductions or
withholdings levied in any jurisdiction from or through which payment is made or
where the payor is located unless such deduction or withholding is required by
applicable law, in which event the Company shall pay additional amounts so that
the persons entitled to such payments receive the amount that such persons would
otherwise have received but for such deduction or withholding.
<PAGE>
42
12. Survival. The respective indemnities, rights of contribution,
--------
representations, warranties and agreements of the Company and the Initial
Purchasers contained in this Agreement or made by or on behalf of the Company or
the Initial Purchasers pursuant to this Agreement or any certificate delivered
pursuant hereto shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
of them or any of their respective affiliates, officers, directors, employees,
representatives, agents or controlling persons. Specifically, the
representations contained in Sections 1 and 2 and the agreements contained in
Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17 and 19 shall survive the
termination of this Agreement.
13. Notices, etc.. All statements, requests, notices and agreements
-------------
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail
or telecopy transmission to (i) Chase Manhattan International Limited, 125
London Wall, 9th Floor, London, EC2Y 5AJ; Attention: Jeffrey Bronheim
(telecopier no: (44) 171-777-3141), (ii) Chase Manhattan Bank AG,
Ulmenstrasse 30, 60325 Frankfurt am Main, Germany; Attention: Wolfgang
Boehm (telecopier no.: (49) 69-7158-4367) and (iii) Chase Securities Inc.,
270 Park Avenue, New York, New York, 10017. Attention: Stephen Grant
(telecopier no.: (212) 270-0994); or
(b) if to the Company, shall be delivered or sent by mail or telecopy
transmission to the address of the Company set forth in the Offering
Memorandum, Attention: Finance Director (telecopier no.: (44) 116 261
0423);
provided that any notice to the Initial Purchasers pursuant to Section 8(c)
- --------
shall also be delivered or sent by mail to the Initial Purchasers at the address
set forth on the signature page hereof. Any such statements, requests, notices
or agreements shall take effect at the time of receipt thereof.
The Company shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Initial Purchasers
by CSI.
<PAGE>
43
14. Definition of Terms. For purposes of this Agreement, (a) the
-------------------
term "business day" means a day other than a Saturday, Sunday or other day on
------------
which banking institutions in Luxembourg, the State of New York, Frankfurt or
London are authorized or required by law to close, (b) the term "subsidiary" has
----------
the meaning set forth in Rule 405 under the Securities Act and (c) except where
otherwise expressly provided, the term "affiliate" has the meaning set forth in
---------
Rule 405 under the Securities Act.
15. Initial Purchasers' Information. The parties hereto acknowledge
-------------------------------
and agree that the Initial Purchasers' Information consists solely of the
following information in the Preliminary Offering Memorandum and the Offering
Memorandum: (a) the last paragraph on the front cover page concerning the terms
of the offering by the Initial Purchasers; (b) the legend on the inside front
cover page concerning over-allotment and trading activities by the Initial
Purchasers; and (c) the statements concerning the Initial Purchasers contained
in (i) the first two sentences of the third paragraph, (ii) the second and third
sentences of the tenth paragraph, (iii) the thirteenth paragraph and (iv) the
fourteenth paragraph under the heading "Plan of Distribution".
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
17. Consent to Jurisdiction; Appointment of Agent for Service of
------------------------------------------------------------
Process; Judgement Currency. (a) The Company agrees that any suit, action or
- ----------------------------
proceeding against the Company arising out of or relating to this Agreement may
be instituted in any state or U.S. Federal court in the Borough of Manhattan,
The City of New York, New York, and any appellate court from any thereof, and it
irrevocably submits to the non-exclusive jurisdiction of such courts in any
suit, action or proceeding. The Company irrevocably waives, to the fullest
extent permitted by law, any objection to any suit, action, or proceeding that
may be brought in connection with this Agreement, including such actions, suits
or proceedings relating to securities laws of the United States of America or
any state thereof, in such courts whether on the grounds of venue, residence or
domicile or on the ground that any such suit, action or proceeding has been
brought in an inconvenient forum. The Company agrees that final judgment in any
such suit, action or proceeding brought in such court shall be conclusive and
<PAGE>
44
binding upon the Company and may be enforced in any court to the jurisdiction of
which the Company is subject by a suit upon such judgment; provided that service
--------
of process is effected upon the Company in the manner provided by this Section
17.
(b) The Company irrevocably appoints CT Corporation System, with
offices on the date hereof at 1633 Broadway, New York, New York, 10019, as its
authorized agent (the "Authorized Agent"), upon whom process may be served in
----------------
any suit, action or proceeding arising out of or relating to this Agreement or
the transactions contemplated herein which may be instituted in any state or
U.S. Federal court in the Borough of Manhattan, The City of New York, New York,
and expressly accepts the non-exclusive jurisdiction of any such court in
respect of any such suit, action or proceeding. The Company hereby represents
and warrants that the Authorized Agent has accepted such appointment and has
agreed to act as said agent for service of process, and the Company agrees to
take any and all action, including the filing of any and all documents that may
be necessary to continue such respective appointment in full force and effect
for a period of ten years from the date of this Agreement. Service of process
upon the Authorized Agent shall be deemed, in every respect, effective service
of process upon the Company. Notwithstanding the foregoing, any action
involving the Company arising out of or relating to this Agreement may be
instituted in any court of competent jurisdiction in any other jurisdiction.
(c) Any action, suit or proceeding brought by the Company against any
Initial Purchaser entitled to indemnification or contribution under Section 8 or
9, arising out of or based upon this Agreement and the transactions contemplated
herein shall be brought solely in a U.S. Federal or state court in the Borough
of Manhattan, The City of New York, New York, and the Company shall not initiate
nor seek to initiate, in the United Kingdom or in any other jurisdiction other
than in such New York courts, any action, suit or proceeding against any Initial
Purchaser entitled to indemnification or contribution under Section 8 or 9,
arising out of or based upon this Agreement and the transactions contemplated
hereby. The foregoing shall apply, without limitation, to any action seeking to
obtain any injunction or declaratory judgment against the enforcement of, or a
declaratory judgment concerning, any claim by any Initial Purchaser in respect
of this Agreement and any transaction contemplated hereby, and any action
challenging the enforceability of or seeking to invalidate in any respect the
submission by the Company hereunder to
<PAGE>
45
the jurisdiction of such New York courts or the designation, pursuant to this
Section 17, of the laws of the State of New York as the law applicable to this
Agreement.
(d) If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder into any currency other than United
States dollars (or Deutsche Marks in the case of payments pursuant to Section
3), the parties hereto agree, to the fullest extent that they may effectively do
so, that the rate of exchange used shall be the rate at which in accordance with
normal banking procedures the Initial Purchasers could purchase United States
dollars (or Deutsche Marks in the case of payments pursuant to Section 3) with
the other currency in New York City on the business day preceding that on which
final judgment is given. The obligation of the Company in respect of any sum
due to an Initial Purchaser shall, notwithstanding any judgment in a currency
other than United States dollars (or Deutsche Marks in the case of payments
pursuant to Section 3), not be discharged until the first business day,
following receipt by such Initial Purchaser of any sum adjudged to be so due in
such other currency, on which (and only to the extent that) such Initial
Purchaser may in accordance with normal banking procedures purchase United
States dollars (or Deutsche Marks in the case of payments pursuant to Section 3)
with such other currency; if the United States dollars (or German Deutsche Marks
in the case of payments pursuant to Section 3) so purchased are less than the
sum originally due to an Initial Purchaser hereunder, the Company agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Initial Purchaser against such loss. If the United States dollars (or Deutsche
Marks in the case of payments pursuant to Section 3) so purchased are greater
than the sum originally due to an Initial Purchaser hereunder, such Initial
Purchaser agrees to pay to the Company an amount equal to the excess of the
dollars (or Deutsche Marks in the case of payments pursuant to Section 3) so
purchased over the sum originally due to such Initial Purchaser hereunder.
(e) The provisions of this Section 17 shall survive any termination
or cancellation of this Agreement.
18. Counterparts. This Agreement may be executed in one or more
------------
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
<PAGE>
46
19. Amendments. No amendment or waiver of any provision of this
----------
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. Headings. The headings herein are inserted for convenience of
--------
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
47
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement the Company and the Initial
Purchasers in accordance with its terms.
Very truly yours,
TEXON INTERNATIONAL PLC
By
---------------------------
Name:
Title:
Accepted:
On behalf of Chase Manhattan Bank AG,
Chase Securities Inc. and
Chase Manhattan International Limited
CHASE MANHATTAN INTERNATIONAL LIMITED
By ____________________
Authorized Signatory
Address for notices pursuant to Section 8(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
<PAGE>
EXHIBIT 3.1
THE COMPANIES ACT 1985
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM
AND
ARTICLES OF ASSOCIATION
OF
TEXON INTERNATIONAL PLC
(REGISTERED NO. 3447210)
INCORPORATED IN ENGLAND AND WALES THE 9TH DAY OF OCTOBER 1997
Dickson Minto W.S.
Royal London House
22/25 Finsbury Square
London
EC2A lDS
<PAGE>
THE COMPANIES ACT 1985
__________________________________________
PUBLIC COMPANY LIMITED BY SHARES
__________________________________________
MEMORANDUM OF ASSOCIATION
OF
TEXON INTERNATIONAL PLC
I. The name of the Company is "Texon International PLC".
II. The Company is to be a Public Company.
III.The Registered Office of the Company will be situate in England and
Wales.
IV. The objects for which the Company is established are:
(1) (a) To promote, establish, develop and carry on any business,
activity or trade whatsoever and to do anything of any nature which in the
opinion of the Company or its Directors is or may be capable of being
conveniently carried on or done in connection with the business of the
Company or which might directly or indirectly enhance the value of or
render more profitable all or any part of the Company's undertaking,
property, rights or assets or which might otherwise advance the interests
of the Company or of its members.
(b) To carry on business as a general commercial company and to do
anything of a nature which in the opinion of the Company or its Directors
is or may be capable of being conveniently carried on or done in connection
with the business of the Company or which might directly or indirectly
enhance the value of or render more profitable all or any part of the
Company's undertaking, property, rights or assets or which might otherwise
advance the interests of the Company or of its members.
(2) To purchase, take on lease or in exchange, hire or otherwise acquire
and hold real or personal, moveable or immoveable, property of every
description and wherever situate and any option, interest, licence,
servitude, easement, right or privilege in or over such property which
the Company or its Directors may think necessary or convenient for the
purposes of its business or for investment or for the furtherance of
its objects, and in particular but not limited to any land, buildings,
apparatus,
<PAGE>
2
machinery, plant and stock-in-trade; and also to sell, feu, lease,
let, exchange, surrender, mortgage, charge or otherwise dispose of or
deal with or to occupy, factor, maintain, manage, control, work,
alter, extend, equip, improve, exploit, develop, replace or turn to
account in any manner or way any such property or to grant any option,
interest, licence, servitude, easement, right or privilege in or over
any such property.
(3) To promote, establish, develop and carry on any other business or
activity whatsoever and to do anything of any nature which in the
opinion of the Company or its Directors is or may be capable of being
conveniently carried on or done in connection with any business of the
Company hereinbefore or hereinafter authorised, whether ejusdem
generis therewith or not, or calculated as likely directly or
indirectly to enhance the value of or render more profitable all or
any part of the Company's undertaking, property, rights or assets or
utilising its know-how or expertise or otherwise advancing the
interests of the Company or of its members.
(4) To purchase or acquire by exchange, subscription, application,
promotion or otherwise and to hold and deal with in any manner or way
any of the property following:
(a) all or any part of the undertaking, property, business or
assets of any person, firm or company carrying on or
proposing to carry on any business which the Company is
authorised to carry on or possessed of property which in the
opinion of the Company or its Directors is suitable for any
of the purposes of the Company; or any interest in any
partnership or joint venture or joint-purse arrangement or
other arrangement regarding the sharing of profits or any
union of interests with any such person, firm or company,
and, as part of the consideration for any such acquisition,
to undertake all or any of the transactions or liabilities
of any person, firm or company, and to give or accept by way
of consideration, for any of such acts or things or for any
such undertaking, property, business, assets or interests
acquired, any shares, stock, debentures, debenture stock or
other securities which the Company has power to issue or
partly in more than one of or in all of such modes and to
acquire, hold, retain, sell, dispose of, charge, mortgage
and deal with any shares, stock, debentures, debenture stock
or other securities received;
(b) the whole or any part of the shares, stock, debentures,
debenture stock and other securities, units, participations
or interests in or of any
<PAGE>
3
corporations, companies, associations, undertakings, or
firms for the time being engaged, concerned or interested in
any industry, trade or business of a type similar to any or
all of those which the Company is empowered by this
Memorandum of Association to carry on or which can
conveniently be carried on in connection with any such
business, trade or industry as aforesaid or the acquisition
of which may seem to the Company or its Directors calculated
directly or indirectly to benefit the Company or the
interests of its members and to promote the beneficial co-
operation of any such companies, associations or firms as
well with one another as with the Company and to exercise in
respect of such investments and holdings all the rights,
powers and privileges of ownership including the right to
vote thereon;
(c) plant, machinery, and personal, moveable, real and heritable
property of all kinds; and
(d) patents, patent rights or inventions, know-how, copyrights,
designs, trade marks or secret processes, including without
prejudice to the generality of the foregoing to register,
promote and advertise the same.
(5) To perform or do all or any of the following operations, acts or
things:
(a) to enter into any arrangement with any government or
authority, supreme, municipal, local or otherwise which may
seem to the Company or its Directors conducive to the
attainment of the Company's objects or any of them and to
apply for, promote and obtain any legislation, order,
charter, privilege, concession, licence, right, franchise or
authorisation from any such government or authority for
enabling the Company to carry any of its objects into effect
or for extending any of the powers of the Company or for
effecting any modification of the constitution of the
Company or for any other purpose which the Company or its
Directors consider may be likely directly or indirectly to
further the objects of the Company or the interests of its
members, and to carry out, exercise and comply with the same
and to oppose any proceedings or applications or the like
which the Company or its Directors consider may be directly
or indirectly prejudicial to the interests of the Company or
its members;
(b) to apply for, take out, obtain, purchase and otherwise
acquire any grants, licences, concessions and the like
conferring any exclusive or absolute or non-exclusive or
limited right to use, or any secret processes
<PAGE>
4
or other information regarding, any invention or discovery
which may seem to the Company or its Directors capable of
being used for any of the purposes of the Company or the
acquisition of which may seem likely to the Company or its
Directors directly or indirectly to benefit the Company or
its members and to carry on research and to acquire, use,
maintain, exercise, develop, manufacture under, sell or
otherwise dispose of, deal with or turn to account any such
licences, concessions and the like and other information
aforesaid;
(c) to lend and advance money, to place money on current account
or deposit and to grant or provide credit and financial
accommodation to any person, firm or company, including,
without limitation, any clients of or other persons having
dealings with the Company, or to agents acting for or
representing the Company on such terms as may be thought fit
and with or without security and to buy and sell foreign
currency and to carry on the business of a banking, finance
or insurance company;
(d) to receive from any person, firm or company, including
shareholders and Directors of the Company, money or
securities, on deposit or loan, at interest or for safe
custody or otherwise;
(e) to borrow and raise money with or without security and, for
the purposes of or in connection with the borrowing or
raising of money by the Company, to become a member of any
building society and to accept money on deposit and to
secure or discharge any debt or obligation of or binding on
the Company in such manner as may be thought fit by the
Company or its Directors and, in particular, by the granting
or creating or the permitting to subsist of any mortgages,
charges (whether fixed or floating), security rights, liens
or encumbrances upon the undertaking of the Company and all
or any of its real and personal, moveable and immoveable
property, (present and future) or by the granting or
creating or the permitting to subsist of any mortgage,
pledge or charge over all or any of the uncalled capital for
the time being of the Company or by the creation and issue,
at par or at a premium or discount and for such
consideration and with and subject to such rights, powers,
privileges and conditions as may be thought fit, of bonds,
debentures, debenture stock, perpetual, redeemable or
repayable or otherwise or of other obligations or securities
of the Company of any description;
<PAGE>
5
(f) to enter into any guarantee, contract of indemnity or
suretyship and in particular, (without prejudice to the
generality of the foregoing) whether with or without the
Company receiving any consideration, to guarantee or to
grant any indemnity in respect of or to secure (with or
without a personal covenant and with or without a mortgage,
charge (whether fixed or floating), security right, lien or
encumbrance upon all or any part of the undertaking and
assets, present and future, and the uncalled capital of the
Company, the performance of any obligation, contract or
liability or loss or cost or expense or the payment of any
debt or sum including the principal amount thereof or any
dividend, interest or premium on any stock, debenture,
debenture stock, bond, share or other security of any
person, firm or company including (without prejudice to the
generality of the foregoing) any company which is for the
time being a subsidiary or a holding company of the Company
or another subsidiary of a holding company of the Company or
otherwise associated with the Company in business;
(g) to accept, draw, issue, make, create, execute, discount,
endorse, negotiate, and to buy, sell and deal in bank
drafts, bills of exchange, promissory notes, debentures,
bills of lading and other instruments and securities,
whether negotiable, transferable or otherwise;
(h) to enter into any partnership or any joint venture or any
joint-purse arrangement or any profit-sharing arrangement
and to co-operate or participate in any way with, and to
assist or subsidise, any company, firm or person;
(i) to establish, promote, organise, incorporate, reorganise,
finance and to aid and assist, financially or otherwise,
companies, corporations, syndicates, partnerships and
associations of all kinds;
(j) to carry on any business or branch of a business which the
Company is authorised to carry on by means, or through the
agency, of any subsidiary company or companies, and to enter
into any arrangement with any such subsidiary company for
taking the profits and bearing the losses of any business or
branch so carried on or for financing any such subsidiary
company or guaranteeing its liabilities or to make any other
arrangement which may seem desirable to the Company or its
Directors with reference to any business or branch so
carried on including power at any time, and either
temporarily or permanently, to close any such branch or
business;
<PAGE>
6
(k) to acquire and carry on any business carried on by a
subsidiary or a holding company of the Company or another
subsidiary of a holding company of the Company;
(1) to carry on the business of a holding company and to
establish or promote any company or companies for the
purpose of taking over, acquiring or working any of the
property, rights and liabilities of the Company, or for the
purpose of carrying on any business which the Company is
authorised to carry on, or for any other purpose which may
seem to the Company or its Directors directly or indirectly
calculated to benefit or to advance the objects or interests
of the Company or the interests of its members, with power
to assist such company or companies in every way, but
especially by taking shares, stocks and securities thereof,
providing capital and paying preliminary expenses;
(m) to employ the funds of the Company in the development and
expansion of the business of the Company and all or any of
its subsidiary or associated companies and in any other
company whether now existing or hereafter to be formed and
engaged in any like business to the business of the Company
or in any other industry ancillary thereto or which can in
the opinion of the Company or its Directors conveniently be
carried on in connection therewith and to invest money of
the Company in any investments and to carry on the business
of a property company;
(n) to act as directors, secretaries, managers, registrars or
transfer agents or to appoint directors, secretaries,
managers, registrars or transfer agents of any subsidiary
company or of any company in which the Company is or may be
interested or of any other company and to take part in the
management, supervision and control of the business or
operations of any company or undertaking, and for that
purpose to appoint and remunerate any directors, managers,
trustees, solicitors, accountants, actuaries, architects,
valuers, surveyors or other experts or agents;
(o) to pay all the expenses of and preliminary and incidental to
the promotion, formation, establishment and registration of
the Company, and any other company promoted by the Company
or any company in which the Company is or may contemplate
being interested including in such expenses all or any part
of the costs and expenses of owners of any business or
property acquired by the Company; and to procure the
<PAGE>
7
registration, recognition or incorporation of the Company in
or under the laws of any place outside England and Wales;
(p) to issue and allot, credited as paid up in full or in part
or otherwise, shares, debentures or other securities of the
Company for cash or in payment or part payment for any
heritable or moveable, real or personal property purchased
or otherwise acquired by the Company or for any services
rendered to the Company or in satisfaction of any obligation
or liability undertaken or agreed to be undertaken by the
Company or for any other purpose;
(q) to give or pay any remuneration, brokerage, discount or
other compensation or reward or expenses for services
rendered or to be rendered in placing or procuring
subscriptions of, or otherwise assisting in the issue of,
any shares or debentures or other securities of the Company
or in or about the formation of the Company or the conduct
or course of its business, and to establish or promote, or
concur or participate in establishing or promoting any
company, fund or trust and to subscribe for, underwrite,
purchase or otherwise acquire securities of any company,
fund or trust and to carry on the business of company, fund
or trust promoters or managers, and of underwriters or
dealers in securities and to act as trustees of any kind for
any person, firm or company and to undertake and execute any
trust;
(r) to sell, exchange, transfer, let on rent, share of profit,
royalty or otherwise, grant licences, servitudes, easements,
options and other rights over and in any other manner deal
with, turn to account, or dispose of all or any part of the
undertaking, property and assets (present and future) of the
Company whether real or personal, heritable or moveable,
either together or in portions, for any such consideration
as may be thought fit by the Company or its Directors and in
particular (without prejudice to the generality of the
foregoing) for any shares, stock, debentures, debenture
stock or other securities, whether fully or partly paid up,
of any other company or partly in more than one of or in all
of such modes of payment and to hold, retain, sell, dispose
of, charge, mortgage and deal with any shares, stock,
debentures, debenture stock or other securities received;
(s) to establish, maintain, participate in and contribute to or
to procure the establishment and maintenance of,
participation in and contribution to, any pension,
superannuation, benevolent or life assurance fund, scheme
<PAGE>
8
or arrangement (whether contributory or otherwise) for the
benefit of any persons (including Directors, former
Directors, officers and former officers) who are or shall
have been at any time in the employment or service of the
Company or of any company which at the time is or was a
subsidiary or a holding company of the Company or another
subsidiary of a holding company of the Company or otherwise
associated with the Company or of the predecessors of the
Company in business or of any such other company as
aforesaid or of the relations, wives, widows, families,
connections or dependants of any such persons and for the
benefit of any other persons whose service or services have
directly or indirectly been of benefit to the Company and
for the benefit of their relations, connections or
dependants or any of them and to grant or procure the grant
of donations, gratuities, pensions, allowances, including
allowances on death, or other payments or benefits of any
kind to any of such persons as aforesaid; and to establish,
subsidise, subscribe to or support institutions,
associations, clubs, schools, funds or trusts calculated or
considered to be for the benefit of any of such persons as
aforesaid or otherwise to advance the interests and well-
being of the Company or of any such other company as
aforesaid or its members; and to make payments for or
towards the insurance of any such persons as aforesaid;
(t) (subject to the provisions of Sections 151 to 158 of the
Companies Act 1985) to establish and contribute to any
employees' share scheme (within the meaning of Section 743
of the Companies Act 1985) for the purchase or subscription
by trustees of shares of the Company or of a holding company
of the Company and to lend money to the Company's employees
to enable them to purchase or subscribe for shares of the
Company or of a holding company of the Company; to establish
and maintain any option or incentive scheme whereby selected
employees (including salaried Directors and officers) of the
Company are given the opportunity of acquiring shares in the
capital of the Company; to formulate and carry into effect
any scheme for sharing the profits of the Company with its
employees (including salaried Directors and officers) or any
of them; and to form or subscribe to any association,
institution or fund for the protection of the interests of
owners or employers by insurance against loss caused by bad
debts, strikes, fire, accidents, war risks or otherwise;
(u) to purchase and maintain insurance for or for the benefit of
any persons who are or were at any time Directors, officers,
employees or auditors
<PAGE>
9
of the Company or any other company which is its holding
company or subsidiary;
(v) to pay, subscribe or guarantee money to or for any purpose
which the Company or its Directors consider may be likely,
directly or indirectly, to further the interests of the
Company or of its members or for any charitable, benevolent,
national, educational, social, public, general or useful
object or for any exhibition;
(w) to cease carrying on or to wind up any business or activity
of the Company, and to cancel any registration of and to
wind up or procure the dissolution of the Company in any
state or territory
(x) to distribute among the members of the Company in specie or
otherwise, by way of dividend or bonus or by way of
reduction of capital, all or any property or assets of the
Company or any proceeds of sale or disposal thereof, and in
particular shares, debentures or other securities of other
companies belonging to the Company, or of which the Company
may have the power to dispose, but so that no distribution
amounting to a reduction of capital be made except with the
sanction (if any) for the time being required by law;
(y) to do all or any of the things or matters aforesaid in any
part of the world and either as principals, agents,
contractors, nominees, trustees or otherwise and either by
or through agents, contractors, nominees, trustees,
subsidiary companies or otherwise and either alone or in
conjunction with others;
(z) to do all such other things as in the opinion of the Company
are or may be incidental or conducive to the attainment of
the above objects or any of them;
And it is hereby declared that, for the purposes of this clause, (A)
"company" except where used in reference to the Company, shall include
any partnership or other body of persons, whether incorporated or not
incorporated, and whether domiciled or resident in the United Kingdom
or elsewhere, (B) "person" shall include any person acting in any
capacity whatsoever and any company, corporation, association,
syndicate or society as well as any other legal or natural person, (C)
"subsidiary" and "holding company" shall be construed in accordance
with Section 736 of the Companies Act 1985, (D) "securities" shall
include any fully, partly or nil paid share, stock, unit, debenture,
debenture or loan stock,
<PAGE>
10
deposit receipt, bill, note, warrant, coupon, right to subscribe or
convert, or similar right or obligation, (E) "and" and "or" shall mean
"and/or" where the context so permits, (F) "other" and "otherwise"
shall not be construed ejusdem generis where a wider construction is
possible, (G) reference to any Act of Parliament shall be deemed to
include any statutory amendment or modification thereof, and (H) the
objects specified in the different paragraphs of this clause shall
not, except where the context expressly so requires, be in any way
limited or restricted by reference to or inference from the terms of
any other paragraph or the name of the Company, but may be carried out
in as full and ample a manner and shall be construed in as wide a
sense as if each of the said paragraphs defined the objects of a
separate, distinct and independent company.
V. The liability of the members is limited.
VI. The share capital of the Company is (Pounds)4,000,000 divided into
4,000,000 shares of (Pounds)1 each, with power to increase the capital and
the Company shall have power to divide the original or any increased
capital into several classes, and to attach thereto any preferential,
deferred, qualified or other special rights, privileges, restrictions or
conditions.
WE, the person whose name and address is subscribed, are desirous of being
formed into a Company, in pursuance of this Memorandum of Association, and we
respectively agree to take the number of Shares in the capital of the Company
set opposite our name:
<PAGE>
11
<TABLE>
<CAPTION>
NAMES, ADDRESSES AND DESCRIPTIONS NUMBER OF SHARES TAKEN BY
OF SUBSCRIBERS EACH SUBSCRIBER
<S> <C>
DM Company Services (London)
Limited
Royal London House
22/25 Finsbury Square
London
EC2A 1DS 1
-
Solicitor
TOTAL 1
-
- -----------------------------------------------------------------------
</TABLE>
Dated the 2nd day of October 1997.
WITNESS to the above Signatures:
Aileen Taylor
Royal London House
22/25 Finsbury Square
London
EC2A 1DS
<PAGE>
THE COMPANIES ACTS 1985 AND 1989
_________________________________
_________________________________
PUBLIC COMPANY LIMITED BY SHARES
_________________________________
ARTICLES OF ASSOCIATION
OF
Texon International PLC
Incorporated as a private company on 9th October 1997
Reregistered as a public company on 17th December 1997
___________________________________
ADOPTED BY WRITTEN RESOLUTION
Passed on February 1998
___________________________________
Dickson Minto W.S.
Royal London House
22/25 Finsbury Square
London EC2A 1DS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Interpretation........................................................................... 1
2. Table A.................................................................................. 2
3. Public company........................................................................... 2
4. Share capital............................................................................ 2
5. Preference Shares........................................................................ 2
5.1 Dividend............................................................................ 3
5.2 Return of capital................................................................... 4
5.3 Further participation............................................................... 4
5.4 Increased Preference Dividend....................................................... 4
5.5 Redemption by Company............................................................... 4
5.7 Provisions applying to all redemptions.............................................. 5
5.8 Preference Share Dividend Reserve................................................... 6
5.9 Votes............................................................................... 6
5.10 Transfer............................................................................ 6
6. Non-Voting A Shares...................................................................... 6
7. Provisions applying on every transfer of Ordinary Shares................................. 7
8. Permitted transfers of Ordinary Shares................................................... 8
9. Pre-emption rights....................................................................... 9
10. Transfers which change control........................................................... 11
11. Drag-along rights........................................................................ 12
12. Compulsory transfer...................................................................... 13
13. General provisions....................................................................... 15
13.1 Shareholders' meetings and resolutions............................................. 15
13.2 Number of directors................................................................ 16
13.3 Alternate directors................................................................ 16
13.4 Appointment, retirement and removal of directors................................... 16
13.5 Disqualification and removal of directors.......................................... 17
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
13.6 Proceedings of directors.......................................................... 18
13.7 Borrowing powers of directors..................................................... 18
13.8 Dividends......................................................................... 19
13.9 Capitalisation of profits......................................................... 19
13.10 Notices........................................................................... 19
13.11 Indemnity......................................................................... 19
14. Institututional Directors and Shareholder Directors...................................... 20
</TABLE>
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<PAGE>
1. INTERPRETATION
1. In these Articles:
"A Shareholder" means a holder of A Shares from time to time;
"B Shareholder" means a holder of B Shares from time to time;
"the Act" means the Companies Act 1985 including any statutory modification
or re-enactment for the time being in force;
"Institutional Director(s)" means the director(s) appointed as such
pursuant to Article 14.1 or 14.2;
"Investor Affiliate" means: in relation to each Institution a person or any
person which is a member of that "Institutions Group" as such term is defined in
the Shareholders Agreement, any company being a group undertaking of that
Institution and so that if a party ("the second party") is an Investor Affiliate
of another party ("the first party") the Investor Affiliates of the second party
shall also be Investor Affiliates of the first party and vice versa;
"Institution(s)" has the meaning given to that expression in the
Shareholders Agreement;
"Listing" means the admission of any of the Company's shares to a
recognised investment exchange (as defined in section 207 of the Financial
Services Act 1986);
"Non Executive Director" means the director appointed as such pursuant to
Article 14.3;
"Non Voting A Shareholder" means a holder of Non Voting A Shares from time
to time;
"Option Agreement" the option agreement dated on or around the date of
adoption of these Articles between certain shareholders of the Company, the
Company and certain employees and former employees of the Company;
"Ordinary Shares" means the A Shares, and the B Shares subject to Article
6.5;
"Ordinary Shareholder" means a holder of Ordinary Shares from time to time;
"Redemption Date" means the date set out as such in Article 5;
"Remuneration Committee" has the meaning given to that expression in the
Shareholders Agreement;
"Sale" has the meaning given to it in Article 5.4(i);
<PAGE>
"Shareholders Agreement" means the agreement dated on or around the date of
adoption of these Articles made by (1) the Company (2) Peter Selkirk and others
(3) Apax European Buy-In Fund and others and (4) Apax Partners & Co Strategic
Investors Limited, as amended from time to time.
2. Words and expressions defined in the Act have the same meanings in
these Articles, unless inconsistent with the context.
3. The renunciation of a right to be allotted shares shall be treated as
if it were a transfer of those shares and therefore shall be governed by
Articles 7 to 12.
2. TABLE A
1. The regulations contained in Table A in the Schedule to the Companies
(Tables A-F) Regulations 1985, as amended ("Table A"), apply to the Company
except to the extent that they are excluded by or inconsistent with these
Articles.
2. The first sentence of regulation 24 and regulations 64, 73 to 78, 80,
81, 90, 94, 95, 115 and 118 of Table A do not apply.
3. PUBLIC COMPANY
The Company is a public company.
4. SHARE CAPITAL
The share capital of the Company at the date of adoption of these Articles
is (Pounds)9,200,000 divided into:
3,436,277 A ordinary shares of (Pounds)1.00 each (subject to Article 6.5,
"A Shares");
163,723 non-voting A ordinary shares of (Pounds)1.00 each ("Non-Voting A
Shares");
400,000 B ordinary shares of (Pounds)1.00 each ("B Shares"); and
52,000,000 redeemable cumulative preference shares of (Pounds)0.10 each
("Preference Shares").
5. PREFERENCE SHARES
The rights attaching to the Preference Shares are set out below.
-2-
<PAGE>
5.1 DIVIDEND
5.1.1 The Preference Shareholders have the right to a fixed cumulative
preferential dividend ("Preference Dividend") at the yearly rate of 15%
excluding any associated tax credit this rate (the "Preference Dividend Rate")
being a percentage of the nominal amount and premium paid on each Preference
Share. In respect of any Preference Dividend payable in respect of periods
ending on or prior to 31st December 2000, the amount (if any) paid in respect of
Preference Dividend on or prior to the due date for payment of such Preference
Dividend ("the Paid Amount") shall be deemed to satisfy an amount of the
Preference Dividend payable in respect of the period question equal to three
times the Paid Amount.
5.1.2 The Preference Dividend shall be paid before the transfer of any sums
to reserves.
The right to the Preference Dividend has priority over the rights of the
holders of any other class of shares.
5.1.3 The Preference Dividend accrues from day to day and shall be paid
half-yearly every 15 August and 15 February in respect of the half-years ending
on the immediately preceding 31 December and 30 June respectively out of the
profits of the Company available for distribution, except that the first
Preference Dividend shall be paid on 15 February 1999 and calculated in respect
of the period from 1 January 1998 up to and including 30 June 1998 but the
Company may not pay a preference dividend to the extent it is prohibited from
paying dividends pursuant to the provisions of the Senior Credit Agreement (as
defined in the Shareholders Agreement).
5.1.4 Any unpaid Preference Dividend shall be carried forward and paid in
priority to the Preference Dividend payable on any later date, increased by an
amount representing interest on the unpaid amount at a rate equal to the
Preference Dividend Rate which shall accrue from day to day and compound on each
30 June and 31 December. A reference in these Articles to an unpaid Preference
Dividend is deemed to include the amount representing interest on the unpaid
amount.
5.1.5 Every 15 February and 15 August , the amount of the Preference
Dividend, including any unpaid Preference Dividend carried forward, shall ipso
facto and without any resolution of the board or of the Company in general
meeting, become a debt due from and immediately payable by the Company to the
extent the Company has profits available for distribution.
5.1.6 The holders of a majority of the Preference Shares in issue are
entitled to require, by serving notice on the Company, the Company to procure
that its subsidiary undertakings distribute to the Company sufficient profits to
enable the Company to pay the accrued and/or unpaid Preference Dividend.
-3-
<PAGE>
5.2 RETURN OF CAPITAL
On a return of capital on liquidation or otherwise the assets of the
Company available for distribution among the shareholders shall be applied in
paying to the Preference Shareholders, in priority to any payment to the holders
of any other class of shares:
first, the nominal amount and premium paid on each of their Preference
Shares; and
secondly, a sum equal to any accrued and/or unpaid Preference Dividend
calculated to the date of return of capital and payable whether or not the
Company has enough profits available for distribution to pay the accrued and/or
unpaid Preference Dividend.
5.3 FURTHER PARTICIPATION
The Preference Shares do not confer any further right of participation in
the profits or assets of the Company.
5.4 INCREASED PREFERENCE DIVIDEND
On the first to occur of:
(i) a transfer of Ordinary Shares under Article 8.1, 9, 10 and/or 11
which results in a person and any other person:
(a) who in relation to him is a connected person, as defined in
section 839 of the Income and Corporation Taxes Act 1988; or
(b) with whom he is acting in concert, as defined in The City
Code on Takeovers and Mergers holding or increasing a holding of 90% of the
Ordinary Shares in issue ("Sale"); or
(ii) a Listing; or
(iii)30th September 2002;
the Preference Dividend Rate specified in Article 5.1.1 shall be increased
to 25% excluding any associated tax credit and, from such date, all references
in these Articles to the Preference Dividend Rate shall be treated as references
to such increased rate.
5.5 REDEMPTION BY COMPANY
The Company may redeem all or 100,000 multiples of the Preference Shares at
any time by serving notice on the Preference Shareholders specifying the number
of Preference Shares to
-4-
<PAGE>
be redeemed and a date between 14 and 28 days later (which for the purposes of
Article 5.7 shall be the Redemption Date) on which the redemption is to take
place.
5.7 PROVISIONS APPLYING TO ALL REDEMPTIONS
5.7.1 When only some of the Preference Shares are being redeemed, the
redemption shall take place in proportion as nearly as possible to each
Preference Shareholder's holding of Preference Shares.
5.7.2 On the Redemption Date the Company shall pay the following amount in
cash in respect of each Preference Share to be redeemed:
(i) the nominal amount and premium paid on the share;
(ii) a sum equal to any accrued and/or unpaid Preference Dividend
calculated to the date of return of capital and payable whether or not the
Company has enough profits available for distribution to pay the accrued
and/or unpaid Preference Dividend.
The amount payable in respect of all the Preference Shares to be redeemed
comprises the "redemption money".
5.7.3 On the Redemption Date the redemption money shall become a debt due
and payable by the Company to the Preference Shareholders, whether or not the
Company has enough profits available for distribution or other requisite funds
to pay the redemption money.
5.7.4 On the Redemption Date the redemption money shall be paid to each
Preference Shareholder in respect of those of his Preference Shares which are to
be redeemed against receipt of the relevant share certificate or an indemnity in
a form reasonably satisfactory to the Company in respect of a share certificate
which cannot be produced. If a Preference Shareholder produces neither the
share certificate nor an indemnity the Company may retain his redemption money
until delivery of the certificate or an indemnity.
5.7.5 The Company shall cancel share certificates in respect of redeemed
Preference Shares and issue fresh certificates without charge in respect of any
Preference Shares represented by those certificates and remaining outstanding.
5.7.6 As from the relevant Redemption Date the Preference Dividend shall
cease to accrue on the Preference Shares to be redeemed unless, despite
presentation of the relevant share certificate or an indemnity, the Company
fails to pay redemption money in respect of all the Preference Shares to be
redeemed. In that case the Preference Dividend shall continue to accrue or be
deemed to continue to accrue on the Preference Shares in respect of which
redemption money is outstanding.
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5.8 PREFERENCE SHARE DIVIDEND RESERVE
At the end of each financial year, the Company shall reserve from the
profits available for distribution the amount necessary to pay the Preference
Dividend due within the next financial year in respect of the Preference Shares
in issue at the beginning of that financial year.
5.9 VOTES
Preference Shareholders are entitled to receive notice of and to attend and
speak at general meetings of the Company. Preference Shareholders may not vote
at general meetings of the Company unless:
(i) the Preference Dividend is not paid in full on a due date, whether
or not the Company has enough profits available for distribution to pay it;
(ii) when Preference Shares are due for redemption, the Company does
not pay all the redemption money then payable to the Preference
Shareholders, whether or not the Company has enough profits available for
distribution or other requisite funds to pay the redemption money; or
(iii) any indebtedness of the Company or a subsidiary undertaking has
become repayable before its specified maturity or has been the subject of a
demand for repayment.
For so long as such a default continues Preference Shareholders may vote at
general meetings of the Company on the basis set out in regulation 54 of
Table A.
5.10 TRANSFER
5.10.1 Preference Shares may only and must be transferred in connection
with any transfer of Ordinary Shares pursuant to Articles 8, 9, 10 and 11 such
that after such transfer the ratio of the aggregate number of Preference Share
to the aggregate number of Ordinary Shares held by the transferor, any Investor
Affiliate(s) of such transferor and any nominee(s) of such transferor and any
such Investor Affiliate(s) shall be as near as may be possible to such ratio
prior to the transfer.
5.10.2 The directors may not register a transfer of Preference Shares
unless the proposed transferee has entered into an agreement to be bound by the
Shareholders Agreement in the form required by that agreement.
6. NON-VOTING A SHARES
6.1 Except as provided in Article 6.2, A Shares and Non-Voting A Shares
rank pari passu but they constitute separate classes of shares.
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6.2 Non-Voting A Shares do not entitle the Non-Voting A Shareholders to
vote at general meetings of the Company.
6.3 A Non-Voting A Shareholder may convert any or all of his Non-Voting
A Shares into A Shares of an equivalent par value credited with the same premium
which is credited to such Non-Voting A Shares at any time by serving notice on
the Company if any of the following circumstances applies:
6.3.1 a Listing;
6.3.2 a Sale;
6.3.3 the disposal of the whole or substantially the whole of the
undertaking and assets of the Company and its subsidiaries;
6.3.4 the Company becomes obliged to redeem Preference Shares before the
scheduled redemption date in Article 5.4; or
6.3.5 such conversion would not result in the breach by the Non-Voting A
Shareholder of any relevant regulations requiring that the amount of voting
shares he holds does not exceed certain limits.
6.4 An A Shareholder may convert any or all of his A Shares into Non-
Voting A Shares of an equivalent par value credited with the same premium which
is credited to such A Shares at any time by serving notice on the Company, if
the conversion is necessary to prevent any infringement or infraction by the A
Shareholder of a regulation requiring that the amount of shares he holds does
not exceed certain limits.
6.5 Save as specified in this Article 6, all references in these Articles
to Ordinary Shares and Ordinary Shareholders are deemed to include a reference
to Non-Voting A Shares and Non-Voting A Shareholders respectively and all
references to A Shares and A Shareholders are deemed to include a reference to
Non-Voting A Shares and Non-Voting A Shareholders respectively.
7. PROVISIONS APPLYING ON EVERY TRANSFER OF ORDINARY SHARES
7.1 The directors may not register a transfer of Ordinary Shares unless:
7.1.1 it is permitted by Article 8 or has been made in accordance with
Articles 9 and, if appropriate, 10 or Article 11 or 12; and
7.1.2 the proposed transferee has entered into an agreement to be bound by
the Shareholders Agreement in the form required by that agreement.
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7.2 Shareholders are not entitled to transfer Ordinary Shares unless the
transfer is permitted by Article 8 or has been made in accordance with Articles
9 and, if appropriate, 10 or Article 11 or 12.
7.3 No transfer of Ordinary Shares may be made by a person who holds
Preference Shares (a "Transferor") unless such transfer is made at the same time
as a transfer of a proportion of the Transferors Preference Shares equal to the
proportion of his Ordinary Shares being sold ("the Relevant Proportion") and no
person may acquire Ordinary Shares from a Transferor without acquiring the
Relevant Proportion of that Transferor's Preference Shares.
8. PERMITTED TRANSFERS OF ORDINARY SHARES
8.1 With the written consent of the holders of 90% or more of the Ordinary
Shares in issue, Ordinary Shares may be transferred to any person.
8.2 Ordinary Shares may be transferred to the trustees of a trust of which
the only beneficiaries (and the only people capable of being beneficiaries) are
the Ordinary Shareholder who established the trust and who is transferring the
relevant shares and/or his spouse and/or his lineal descendants by blood or
adoption; and the trustees of such a trust may not transfer Ordinary Shares
under Article 8.2 other than to replacement trustees of the same trust.
8.3 A shareholder which is a body corporate may transfer Ordinary Shares
to an Investor Affiliate if the transferee gives an undertaking to the Company
that if the transferee ceases to be an Investor Affiliate, all its shares in the
Company will, before the cessation, be transferred to another Investor
Affiliate.
8.4 An Ordinary Shareholder who holds Ordinary Shares as nominee or
trustee for or general partner of a limited partnership, unit trust or
investment trust company which is primarily a vehicle for institutional
investors may transfer those Ordinary Shares:
8.4.1 to another nominee or trustee for or general partner of the limited
partnership, unit trust or investment trust company;
8.4.2 on a distribution in kind under the relevant partnership agreement or
trust deed, to the partners of the limited partnership or their nominees or the
holders of units in the unit trust or their nominees; or
8.4.3 to a nominee or trustee for or general partner of a limited
partnership, unit trust or investment trust company which is primarily a vehicle
for institutional investors and which is advised or managed by the adviser or
manager of the former limited partnership, unit trust or investment trust
company or which has the same general partner.
8.5 Any Ordinary Share may be transferred pursuant to the terms of the
Option Agreement.
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9. PRE-EMPTION RIGHTS
9.1 An Ordinary Shareholder ("Selling Shareholder") who wishes to transfer
Ordinary Shares to a person to whom Article 8 does not apply shall serve notice
on the Company ("Sale Notice") stating the number of Ordinary Share and (if
appropriate) Preference Shares he wishes to transfer ("Sale Shares") and his
asking price for each share ("Asking Price").
9.2 The Selling Shareholder may state in the Sale Notice that he is only
willing to transfer all the Sale Shares, in which case no Sale Shares can be
sold unless offers are received for all of them.
9.3 The Sale Notice shall make the Company the agent of the Selling
Shareholder for the sale of the Sale Shares on the following terms, which the
Company shall notify to the other Ordinary Shareholders within seven days of
receiving the Sale Notice:
9.3.1 the price for each Sale Share is the Asking Price;
9.3.2 the Sale Shares are to be sold free from all liens, charges and
encumbrances together with all rights attaching to them;
9.3.3 each of the other Ordinary Shareholders of the same class of Ordinary
Shares being offered for sale (A Shares and Non-Voting A Shares being treated as
the same class for these purposes) (except those who are Compulsory Sellers for
the purposes of Article 12) is entitled to buy the Sale Shares in proportions
reflecting, as nearly as possible, the nominal amount of their existing holdings
of Ordinary Shares; an Ordinary Shareholder is entitled to buy fewer Sale Shares
than his proportional entitlement;
9.3.4 such Ordinary Shareholders may offer to buy any number of the Sale
Shares that are not accepted by the other Ordinary Shareholders of the same
class of Ordinary Shares ("Excess Shares");
9.3.5 if Ordinary Shareholders of the same class of Ordinary Shares do not
offer to buy all of the Sale Shares each of the Ordinary Shareholders of the
other class (except those who are Compulsory Sellers for the purposes of Article
12) is entitled to buy any Sale Share for which offers are not received in
proportions reflecting, as nearly as possible, the nominal amount of their
existing holdings of Ordinary Shares and the provisions of Articles 9.3.3 and
9.3.4 shall apply mutatis mutandis;
9.3.6 any additional terms pursuant to Article 9.2 apply; and
9.3.7 21 days after the Company's despatch of the terms for the sale of the
Sale Shares (the "Closing Date"):
(i) the Sale Notice shall become irrevocable;
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(ii) an Ordinary Shareholder who has not responded to the offer in
writing shall be deemed to have declined it; and
(iii)each offer made by an Ordinary Shareholder to acquire Sale Shares
shall become irrevocable.
9.4 If the Company receives offers from Ordinary Shareholders of the
same class of Ordinary Shares for fewer Sale Shares than the number of Sale
Shares, each such Ordinary Shareholder who offered to buy Excess Shares shall be
entitled to a number of Excess Shares in proportions reflecting, as nearly as
possible, the nominal amount of their holdings of Ordinary Shares. If no such
Ordinary Shareholders offered to buy Excess Shares and the Company receives
offers from all of the Ordinary Shareholders for fewer Sale Shares than the
number of Sale Shares each Ordinary Shareholder of the other class of Ordinary
Shares shall be entitled to a number of Excess Shares in proportions reflecting,
as nearly as possible, the nominal amount of their holdings of Ordinary Shares.
In no circumstances shall any Ordinary Shareholder be required to buy more Sale
Shares than the number he offered to buy.
9.5 Within seven days after the Closing Date, the Company shall notify
the Selling Shareholder and the Ordinary Shareholders who offered to buy Sale
Shares of the result of the offer and, if any Sale Shares are to be sold
pursuant to the offer:
9.5.1 the Company shall notify the Selling Shareholder of the names and
addresses of the Ordinary Shareholders who are to buy Sale Shares and the number
to be bought by each;
9.5.2 the Company shall notify each Ordinary Shareholder of the number of
Sale Shares he is to buy; and
9.5.3 the Company's notices shall state a place and time, between seven
and 14 days later, on which the sale and purchase of the Sale Shares is to be
completed.
9.6 If the Selling Shareholder does not transfer Sale Shares in accordance
with Article 9.5, the directors may authorise any director to transfer the Sale
Shares on the Selling Shareholder's behalf to the buying Ordinary Shareholders
concerned against receipt by the Company of the Asking Price per share. The
Company shall hold the Asking Price in trust for the Selling Shareholder without
any obligation to pay interest. The Company's receipt of the Asking Price shall
be a good discharge to the buying Ordinary Shareholder. The directors shall
then authorise registration of the transfer once appropriate stamp duty has been
paid. The defaulting Selling Shareholder shall surrender his share certificate
for the Sale Shares to the Company. On surrender, he shall be entitled to the
Asking Price for the Sale Shares.
9.7 If, by the Closing Date, the Company has not received offers for all
the Sale Shares, the Selling Shareholder may within the next two months transfer
the Sale Shares for which offers were not received (or, if the Sale Notice
stated that he was only willing to transfer
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all the Sale Shares, all the Sale Shares) to any person at no less than the
Asking Price per share, with any other terms being no more favourable than those
in the Sale Notice.
9.8 Notwithstanding any other provision of this Article 9, if the Sale
Shares comprise B Shares the Remuneration Committee may, within 7 days after
receipt of the relevant Sale Notice, specify that all or any such shares be
acquired by any person falling within the categories set out in Article 12. The
provisions of Article 9.1 to 9.7 shall apply to a transfer pursuant to any such
nomination. The provisions of Article 9.1 to 9.7 shall thereafter apply to any
of the Sale Shares not comprised in any such notification.
10. TRANSFERS WHICH CHANGE CONTROL
10.1 Article 10 applies when a transfer of Ordinary Shares is made (other
than a transfer under Article 8.2, 8.3, or 8.4 which would, if registered,
result in a person and any other person (in each case who is not a Shareholder
of the Company immediately following the issue of the Preference Shares (or a
person who becomes a Shareholder as a result of a transfer under Article 8.2,
8.3, or 8.4)):
(i) who in relation to him is a connected person, as defined in
section 839 of the Income and Corporation Taxes Act 1988; or
(ii) with whom he is acting in concert, as defined in The City Code
on Takeovers and Mergers (and Apax Partners & Co Strategic Investors
Limited's role or the role of any of its associates as investment adviser
or manager shall not be deemed to make its clients or its funds act in
concert or be connected persons) (each a "member of the purchasing group")
holding or increasing a holding of 30% or more of the Ordinary Shares in
issue.
10.2 No transfer to which Article 10 applies may be made or registered
unless:
10.2.1 it is agreed to in writing by the holders of 94% or more of the
Ordinary Shares in issue; or
10.2.2 the proposed transferee has made an offer to buy all the other
Ordinary Shares on the terms set out in Article 10.3 and the offer has closed
and each accepted offer has been completed, unless failure to complete is the
fault of the offeree.
10.3 The terms of the proposed transferee's offer shall be as follows:
10.3.1 the offer shall be open for acceptance for at least 21 days;
10.3.2 the consideration for each Ordinary Share shall be the higher of:
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(i) the highest consideration offered for each Ordinary Share whose
proposed transfer has led to the offer; and
(ii) the highest consideration paid by any member of the purchasing
group for an Ordinary Share in the twelve months up to the offer.
10.4 The proposed transferee shall offer to buy each Preference Share for
a cash consideration equal to the amount which would be payable to the holder if
the Preference Share were redeemed on the date of its purchase by the proposed
transferee, unless the Preference Share is redeemed in accordance with Article
5.7.
10.5 Any dispute on the appropriate consideration for the Ordinary Shares
shall be referred to an umpire chosen by the parties concerned or, if they
cannot agree on an umpire, nominated by the president of the Institute of
Chartered Accountants in England and Wales. The umpire shall act as an expert
and not as an arbitrator and his decision shall be final and binding. The
Selling Shareholder wishing to sell Ordinary Shares to the proposed transferee
shall pay half the umpire's costs and Ordinary Shareholders in dispute with the
proposed transferee shall pay the other half.
10.6 A transfer of Ordinary Shares to the proposed transferee shall be
made in accordance with Article 9.
11. DRAG-ALONG RIGHTS
11.1 If transfers under Article 8.1, 9 and/or 10 result in members of the
purchasing group holding or increasing their shareholding to 50% or more of the
Ordinary Shares in issue, the members of the purchasing group may, by serving a
"Compulsory Purchase Notice" on each other Ordinary Shareholder ("Minority
Shareholder"), require all the Minority Shareholders to sell all their Ordinary
Shares to one or more persons identified by the members of the purchasing group
at the consideration specified in Article 10.3.2.
11.2 If the members of the purchasing group hold all the Preference Shares
except those of the Minority Shareholders, their Compulsory Purchase Notices
shall also require the Minority Shareholders to sell all their Preference Shares
to one or more persons identified by the members of the purchasing group at the
consideration specified in Article 10.4, unless the Preference Shares are
redeemed in accordance with Article 5.7.
11.3 The shares subject to the Compulsory Purchase Notices shall be sold
and purchased in accordance with the provisions of Articles 12.6 to 12.8 mutatis
mutandis:
(i) the "completion date" being the date which is 14 days after the
service of the Compulsory Purchase Notices;
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(ii) "Sale Shares" being the Minority Shareholder's Ordinary Shares
and, if covered by the Compulsory Purchase Notice, his Preference Shares;
(iii) "Compulsory Sellers" being the Minority Shareholders; and
(iv) "Offerees" being the persons identified as purchasers in the
Compulsory Purchase Notice.
11.4 While Article 11 applies to a Minority Shareholder's shares, those
shares may not be transferred otherwise than under Article 11.
11.5 Article 9 does not apply to transfers of shares made under Article
11.
12. COMPULSORY TRANSFER
12.1 Article 12 applies when an employee of the Company or any of its
subsidiary undertakings who:
(i) is an Ordinary Shareholder; and/or
(ii) has established a trust which holds Ordinary Shares ceases for
any reason to be an employee of the Company or any of its subsidiary
undertakings.
12.2 Within two months after the cessation of employment, an Institutional
Director may serve notice requiring the Ordinary Shareholder (or his personal
representatives in the case of his death) and each trustee of the trust
("Compulsory Sellers") to offer some or all of their Ordinary Shares ("Sale
Shares") to:
(i) a person or persons intended to take the employee's place;
(ii) any of the existing employees of the Company or any of its
subsidiary undertakings;
(iii) an employees' share scheme of the Company and its subsidiary
undertakings; and/or
(iv) any other person or persons approved by resolution of the
directors ("Offerees").
The Institutional Director's notice may reserve to the Institutional Director
the right to finalise the identity of the Offerees once the price for the Sale
Shares has been agreed or certified.
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12.3 The Compulsory Sellers shall then offer their Sale Shares to the
Offerees free from all liens, charges and encumbrances together with all rights
attaching to them on the following terms.
12.4 The price for the Sale Shares shall be the price agreed between the
Compulsory Sellers and an Institutional Director or, if they do not agree a
price within 14 days of the Institutional Director's notice, the price certified
by the Company's auditors, acting as experts and not as arbitrators, to be:
12.4.1 if the employment ceases less than one year after the issue of the
Sale Shares, the lower of the issue price of the Sale Shares and the value
specified in Article 12.4.3; or
12.4.2 if the employment ceases at any time as a result of the resignation
of the employee or the lawful summary dismissal of the employee, the lower of
the issue price of the Sale Shares and the value specified in Article 12.4.3
(provided that a resignation by an employee who is redundant or a resignation in
circumstances constituting constructive dismissal or on retirement at the age of
65 shall not be treated as a resignation for the purposes of this Article
12.4.2);
12.4.3 in any other circumstances the market value of the Sale Shares
immediately after the cessation of employment; and
12.4.4 where the market value of the Sale Shares shall be calculated as
the appropriate proportion of the market value of all of the Ordinary Shares as
between a willing seller and a willing buyer with no discount arising in
relation to the size of the holding comprising the Sale Shares.
12.5 Within seven days after the price has been agreed or certified:
12.5.1 the Company shall notify the Compulsory Sellers of the names and
addresses of the Offerees and the number of Sale Shares to be offered to each;
12.5.2 the Company shall notify each Offeree of the number of Sale Shares
on offer to him; and
12.5.3 the Company's notices shall specify the price per share and state a
date, between seven and 14 days later, on which the sale and purchase of the
Sale Shares is to be completed ("completion date").
12.6 By the completion date the Compulsory Sellers shall deliver stock
transfer forms for the Sale Shares, with the relevant share certificates, to the
Company. On the completion date the Company shall pay the Compulsory Sellers,
on behalf of each of the Offerees, the agreed or certified price for the Sale
Shares to the extent the Offerees have put the Company in the requisite funds.
The Company's receipt for the price shall be a good discharge to the Offerees.
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The Company shall hold the price in trust for the Compulsory Sellers without any
obligation to pay interest.
12.7 To the extent that Offerees have not, by the completion date, put the
Company in funds to pay the agreed or certified price, the Compulsory Sellers
shall be entitled to the return of the stock transfer forms and share
certificates for the relevant Sale Shares and the Compulsory Sellers shall have
no further rights or obligations under Article 12 in respect of those Sale
Shares.
12.8 If a Compulsory Seller fails to deliver stock transfer forms for Sale
Shares to the Company by the completion date, the directors may (and shall, if
requested by the Institutional Director) authorise any director to transfer the
Sale Shares on the Compulsory Seller's behalf to each Offeree to the extent the
Offeree has, by the completion date, put the Company in funds to pay the agreed
or certified price for the Sale Shares offered to him. The directors shall then
authorise registration of the transfer once appropriate stamp duty has been
paid. The defaulting Compulsory Seller shall surrender his share certificate
for the Sale Shares to the Company. On surrender, he shall be entitled to the
agreed or certified price for the Sale Shares.
12.9 While Ordinary Shares are Sale Shares by virtue of Article 12.2, they
may not be transferred under Article 8 or 9.
13. GENERAL PROVISIONS
13.1 Shareholders' meetings and resolutions:
13.1.1 Regulation 37 of Table A is modified by the deletion of the words
"eight weeks" and the substitution for them of the words "28 days" and by the
insertion of the words "or the Institutional Director acting alone" after the
second word of that regulation.
13.1.2 A corporation which is a member of the Company may, by resolution
of its directors or other governing body, authorise such person as it thinks fit
to act as its representative at any meeting of the Company or at any meeting of
any class of members of the Company. The person so authorised is entitled to
exercise the same powers on behalf of the corporation which he represents as
that corporation could exercise if it were an individual member.
13.1.3 A poll may be demanded by the chairman or by any member present in
person or by proxy and entitled to vote and regulation 46 of Table A is modified
accordingly.
13.1.4 Where an ordinary resolution of the Company is expressed to be
required for any purpose, a special or extraordinary resolution is also
effective for that purpose, and where an extraordinary resolution is expressed
to be required for any purpose, a special resolution is also effective for that
purpose.
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13.1.5 Regulation 53 of Table A is modified by the addition at the end of
the following sentence: "If a resolution in writing is described as a special
resolution or as an extraordinary resolution it shall have effect accordingly."
13.1.6 Regulation 57 of Table A is modified by the inclusion after the
word "shall" of the phrase "unless the directors otherwise determine".
13.1.7 Regulation 59 of Table A is modified by the addition at the end of
the following sentence: "Deposit of an instrument of proxy shall not preclude a
member from attending and voting at the meeting or at any adjournment of it."
13.1.8 Regulation 62 of Table A is modified by the deletion in paragraph
(a) of the words "deposited at" and by the substitution for them of the words
"left at or sent by post or by facsimile transmission to", by the substitution
in paragraph (a) of the words "one hour" in place of "48 hours" and by the
substitution in paragraph (b) of the words "one hour" in place of "24 hours".
13.2 Number of directors
Unless otherwise determined by ordinary resolution, the number of directors
(other than alternate directors) is not subject to any maximum and the minimum
number is one.
13.3 Alternate directors
13.3.1 Each of the Institutional Directors and the Non-Executive Director
is entitled to appoint any person willing to act, whether or not he is a
director of the Company, to be an alternate director. That person need not be
approved by resolution of the directors and regulation 65 of Table A is modified
accordingly.
13.3.2 An alternate director who is absent from the United Kingdom is
entitled to receive notice of all meetings of directors and meetings of
committees of directors and regulation 66 of Table A is modified accordingly.
13.3.3 Regulation 68 of Table A is modified by the addition at the end of
the following sentence: "Any such notice may be left at or sent by post or
facsimile transmission to the office or such other place as may be designated
for the purpose by the directors."
13.4 Appointment, retirement and removal of directors
13.4.1 The directors are not subject to retirement by rotation and any
reference in any regulation of Table A to retirement by rotation is to be
disregarded.
13.4.2 The Company may by ordinary resolution appoint a person who is
willing to act to be a director either to fill a vacancy or as an additional
director.
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13.4.3 A person appointed by the directors to fill a vacancy or as an
additional director need not retire from office at the annual general meeting
next following his appointment and the last two sentences of regulation 79 of
Table A are deleted.
13.4.4 The holders of a majority of the shares giving the right to vote at
general meetings may at any time and from time to time by serving notice on the
Company remove any director from office and appoint any person to be a director.
A removal or appointment takes effect when the notice is received by the Company
or on a later date specified in the notice.
Article 13.4.4 does not apply to the removal or appointment of an
Institutional Director or Non-Executive Director.
13.5 DISQUALIFICATION AND REMOVAL OF DIRECTORS
13.5.1 The office of a director shall be vacated if:
(i) he ceases to be a director by virtue of any provision of the
Act or he becomes prohibited by law from being a director;
(ii) he becomes bankrupt or makes any arrangement or composition
with his creditors generally;
(iii) he becomes, in the opinion of all his co-directors, incapable
by reason of mental disorder of discharging his duties as director;
(iv) he resigns his office by notice in writing to the Company;
(v) he has for more than six consecutive months been absent without
permission of the directors from meetings of directors held during that
period and his alternate director (if any) has not during such period
attended any such meetings instead of him, and the directors resolve that
his office be vacated; or
(vi) (other than in the case of the Institutional Directors or any
Non-Executive Director) he is removed from office by notice addressed to
him at his last-known address and signed by all his co-directors.
13.5.2 A person voting against a resolution under section 303 of the Act to
remove an Institutional Director or Non-Executive Director is deemed, in respect
of that resolution, to have five times the votes of a person voting in favour of
the resolution and regulation 54 of Table A is modified accordingly.
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13.6 Proceedings of directors
13.6.1 Regulation 88 of Table A is modified by the exclusion of the third
sentence and the substitution for it of the following sentence: "Every director
shall receive notice of a meeting, whether or not he is absent from the United
Kingdom. A director may waive the requirement that notice be given to him of a
board meeting either prospectively or retrospectively."
13.6.2 The quorum for the transaction of business of the directors may be
fixed by the directors and unless so fixed shall be two at least one of which
shall be an Institutional Director.
13.6.3 Any director or his alternate may validly participate in a meeting
of the directors or a committee of directors through the medium of conference
telephone or similar form of communication equipment if all persons
participating in the meeting are able to hear and speak to each other throughout
such meeting. A person participating in this way is deemed to be present in
person at the meeting and is counted in a quorum and entitled to vote. Subject
to the Act, all business transacted in this way by the directors or a committee
of the directors is for the purposes of the Articles deemed to be validly and
effectively transacted at a meeting of the directors or of a committee of the
directors although fewer than two directors or alternate directors are
physically present at the same place. The meeting is deemed to take place where
the largest group of those participating is assembled or, if there is no such
group, where the chairman of the meeting then is.
13.6.4 Meetings of the board of directors shall take place no less
frequently than once per calendar month (save that there need be no scheduled
meeting in August) and at least five working days' notice shall be given to each
director provided that with the consent of a majority of the directors,
including the written consent of an Institutional Director, board meetings may
be held less frequently and convened on less notice.
13.6.5 If and for so long as there is a sole director, he may exercise all
the powers conferred on the directors by the Articles by resolution in writing
signed by him, and regulations 88, 89, 91 and 93 of Table A and Article 13.6.2
and 13.6.3 shall not apply.
13.6.6 Without prejudice to the obligation of any director to disclose his
interest in accordance with section 317 of the Act, a director may vote at a
meeting of directors or of a committee of directors on any resolution concerning
a matter in which he has, directly or indirectly, an interest or duty. The
director shall be counted in the quorum present when any such resolution is
under consideration and if he votes his vote shall be counted.
13.7 Borrowing powers of directors
The directors may exercise all the powers of the Company to borrow and
raise money and to mortgage and charge all or any part of the undertaking,
property and uncalled capital of the Company and, subject to the provisions of
the Act, to issue debentures and other securities,
-18-
<PAGE>
whether outright or as collateral security for any debt, liability or obligation
of the Company or of any third party.
13.8 Dividends
The directors may deduct from any dividend or other moneys payable to a
person in respect of a share any amounts due from him to the Company on account
of a call or otherwise in relation to a share.
13.9 Capitalisation of profits
The directors may, with the authority of an ordinary resolution of the
Company, resolve that any shares allotted under regulation 110 of Table A to any
member in respect of a holding by him of any partly paid shares rank for
dividends, so long as those shares remain partly paid, only to the extent that
those partly paid shares rank for dividend and regulation 110 of Table A is
modified accordingly.
13.10 Notices
13.10.1 Regulation 112 of Table A is modified by the deletion of the last
sentence and the substitution for it of the following: "A member whose
registered address is not within the United Kingdom shall be entitled to have
notices given to him at that address."
13.10.2 A notice sent by post to an address within the United Kingdom is
deemed to be given 24 hours after posting, if pre-paid as first class, and 48
hours after posting, if pre-paid as second class. A notice sent by post to an
address outside the United Kingdom is deemed to be given four days after
posting, if pre-paid as airmail. Proof that an envelope containing the notice
was properly addressed, pre-paid and posted is conclusive evidence that the
notice was given. A notice not sent by post but left at a member's registered
address is deemed to have been given on the day it was left.
13.10.3 Regulation 116 of Table A is modified by the deletion of the words
"within the United Kingdom".
13.10.4 Where the Articles require notice to be given by the holders
stated percentage of shares, notice may consist of several documents in similar
form each signed by or on behalf of one or more shareholders.
13.11 Indemnity
13.11.1 Subject to the provisions of the Act, but without prejudice to an
indemnity to which he may otherwise be entitled, every director, alternate
director or secretary of the Company shall be indemnified out of the assets of
the Company against all costs, charges, losses and liabilities incurred by him
in the proper execution of his duties or the proper exercise of his
-19-
<PAGE>
powers, authorities and discretions including, without limitation, a liability
incurred defending proceedings (whether civil or criminal) in which judgment is
given in his favour or in which he is acquitted or which are otherwise disposed
of without a finding or admission of material breach of duty on his part, or in
connection with any application in which relief is granted to him by the court
from liability for negligence, default, breach of duty or breach of trust in
relation to the affairs of the Company.
13.11.2 The directors may exercise all the powers of the Company to
purchase and maintain insurance for the benefit of a person who is a director,
alternate director, secretary or auditor, or former director, alternate
director, secretary or auditor, of the Company or of a company which is a
subsidiary of the Company or in which the Company has an interest (whether
director or indirect), or who is or was trustee of a retirements benefit scheme
or another trust in which a director, alternate director or secretary or former
director, alternate director or secretary is or has been interested,
indemnifying him against liability for negligence, default, breach of duty or
breach of trust or any other liability which may lawfully be insured against by
the Company.
14. INSTITUTUTIONAL DIRECTORS AND SHAREHOLDER DIRECTORS
14.1 For so long as Apax Partners & Co Strategic Investors Limited and/or
Apax Partners & Co Ventures Limited are advisors to persons holding more than
50% of the Ordinary Shares in issue from time to time then such Ordinary
Shareholders ("the Apax Shareholders") may, by notice in writing addressed to
the Company signed by or on behalf of each of them and delivered to the
registered office of the Company appoint up to two persons to be directors of
the Company and remove any person or persons so appointed and appoint another
person in his place. Such directors shall be designated as "Institutional
Directors" and shall enjoy the rights attributed to the Institutional Directors
pursuant the Shareholders Agreement.
14.2 Where the Apax Shareholders are not entitled to appoint an
Institutional Director pursuant to Article 14.1 Shareholders holding a majority
of the A Shares in issue from time to time may, by notice in writing addressed
to the Company signed by on behalf of each of them and delivered to the
registered office of the Company appoint up to two persons to be directors of
the Company and remove any person or persons so appointed and appoint another
person in his place provided always that there are no more than two such persons
holding the office of director at any one time. Any director so appointed shall
be designated an Institutional Director and shall enjoy the rights attributed to
the Institutional Directors pursuant the Shareholders Agreement.
14.3 Shareholders holding a majority of the A Shares in issue from time to
time may, in addition to any right under Article 14.2, by notice in writing
addressed to the Company signed by or on behalf of each of them and delivered to
the registered office of the Company appoint a person to be a director of the
Company (the "Non-Executive Director") and remove any person so appointed and
appoint another person in his place. Any person so appointed shall be
designated a Non Executive Director.
-20-
<PAGE>
14.4 Shareholders holding not less than 55.6% of the A Shares in issue from
to time may, by notice in writing expressed to be given pursuant to this Article
14.4 addressed to the Company and delivered to the registered office of the
Company, remove any director and appoint one or more persons to be a director or
directors. The Company shall forthwith inform the director of any such notice
removing him as served on the Company pursuant to this Article.
-21-
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
================================================================================
TEXON INTERNATIONAL PLC
10% Senior Notes due 2008
DM 245,000,000
------------------------
INDENTURE
Dated as of January 30, 1998
------------------------
THE BANK OF NEW YORK,
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions................................................. 1
SECTION 1.02. Other Definitions........................................... 28
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act............................................. 29
SECTION 1.04. Rules of Construction....................................... 30
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating............................................. 30
SECTION 2.02. Execution and Authentication................................ 32
SECTION 2.03. Registrar and Paying Agent.................................. 33
SECTION 2.04. Paying Agent to Hold Money in Trust;
Conversion of Applicable Currency......................... 34
SECTION 2.05. Securityholder Lists........................................ 34
SECTION 2.06. Transfer and Exchange....................................... 35
SECTION 2.07. Replacement Securities...................................... 42
SECTION 2.08. Outstanding Securities...................................... 43
SECTION 2.09. Temporary Securities........................................ 43
SECTION 2.10. Cancelation................................................. 44
SECTION 2.11. Defaulted Interest.......................................... 44
SECTION 2.12. CUSIP and CINS Numbers...................................... 45
SECTION 2.13. Deposit of Moneys........................................... 45
SECTION 2.14. Certain Matters Relating to Global
Securities................................................ 46
SECTION 2.15. Substitution of Currency.................................... 47
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee.......................................... 47
SECTION 3.02. Selection of Securities
To Be Redeemed............................................ 48
SECTION 3.03. Notice of Redemption........................................ 48
SECTION 3.04. Effect of Notice of Redemption.............................. 50
SECTION 3.05. Deposit of Redemption Price................................. 50
SECTION 3.06. Securities Redeemed in Part................................. 51
<PAGE>
2
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities....................................... 52
SECTION 4.02. Maintenance of Office or Agency;
Reports to Holders........................................ 52
SECTION 4.03. Limitation on Indebtedness.................................. 53
SECTION 4.04. Limitation on Restricted Payments........................... 56
SECTION 4.05. Limitation on Restrictions on
Distributions from Subsidiaries........................... 60
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock.......................................... 61
SECTION 4.07. Limitation on Transactions with
Affiliates................................................ 66
SECTION 4.08. Change of Control........................................... 67
SECTION 4.09. Compliance Certificate...................................... 70
SECTION 4.10. Further Instruments and Acts................................ 70
SECTION 4.11. Limitation on Liens......................................... 70
SECTION 4.12. Limitation on Guarantees of Company
Indebtedness.............................................. 70
SECTION 4.13. Limitation on Lines of Business............................. 71
SECTION 4.14. Limitation on Sale/Leaseback
Transaction............................................... 71
SECTION 4.15. Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries.................. 71
SECTION 4.16. Additional Amounts.......................................... 71
SECTION 4.17. Payment of Non-Income Taxes and Similar
Charges................................................... 72
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company May Merge or Transfer
Assets.................................................... 73
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default........................................... 75
SECTION 6.02. Acceleration................................................ 77
SECTION 6.03. Other Remedies.............................................. 78
<PAGE>
3
SECTION 6.04. Waiver of Past Defaults..................................... 78
SECTION 6.05. Control by Majority......................................... 78
SECTION 6.06. Limitation on Suits......................................... 79
SECTION 6.07. Rights of Holders to
Receive Payment........................................... 79
SECTION 6.08. Collection Suit by Trustee.................................. 79
SECTION 6.09. Trustee May File Proofs of Claim............................ 80
SECTION 6.10. Priorities.................................................. 80
SECTION 6.11. Undertaking for Costs....................................... 80
SECTION 6.12. Waiver of Stay or Extension Laws............................ 81
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee........................................... 81
SECTION 7.02. Rights of Trustee........................................... 82
SECTION 7.03. Individual Rights of Trustee................................ 83
SECTION 7.04. Trustee's Disclaimer........................................ 83
SECTION 7.05. Notice of Defaults.......................................... 84
SECTION 7.06. Reports by Trustee to Holders............................... 84
SECTION 7.07. Compensation and Indemnity.................................. 84
SECTION 7.08. Replacement of Trustee...................................... 85
SECTION 7.09. Successor Trustee by Merger................................. 86
SECTION 7.10. Eligibility; Disqualification............................... 87
SECTION 7.11. Preferential Collection of Claims
Against Company........................................... 87
SECTION 7.12. Trustee Acting in Other Capacities.......................... 87
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities;
Defeasance................................................ 87
SECTION 8.02. Conditions to Defeasance.................................... 89
SECTION 8.03. Application of Trust Money.................................. 91
SECTION 8.04. Repayment to Company........................................ 91
SECTION 8.05. Indemnity for Government
Obligations............................................... 91
SECTION 8.06. Reinstatement............................................... 92
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders.................................. 92
SECTION 9.02. With Consent of Holders..................................... 93
<PAGE>
4
SECTION 9.03. Compliance with Trust Indenture Act......................... 94
SECTION 9.04. Revocation and Effect of Consents and
Waivers................................................... 94
SECTION 9.05. Notation on or Exchange
of Securities............................................. 95
SECTION 9.06. Trustee to Sign Amendments.................................. 95
SECTION 9.07. Payment for Consent......................................... 95
ARTICLE 10
Miscellaneous
-------------
SECTION 10.01. Trust Indenture Act Controls............................... 96
SECTION 10.02. Notices.................................................... 96
SECTION 10.03. Communication by Holders with Other
Holders.................................................. 97
SECTION 10.04. Certificate of Opinion as to Conditions
Precedent................................................ 98
SECTION 10.05. Statements Required in Certificate or
Opinion.................................................. 98
SECTION 10.06. When Securities Disregarded................................ 98
SECTION 10.07. Rules by Trustee, Paying Agent and
Registrar................................................ 99
SECTION 10.08. Legal Holidays............................................. 99
SECTION 10.09. Governing Law.............................................. 99
SECTION 10.10 Jurisdiction............................................... 99
SECTION 10.11. No Recourse Against Others.................................100
SECTION 10.12. Successors.................................................100
SECTION 10.13. Multiple Originals.........................................100
SECTION 10.14. Table of Contents; Headings................................102
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Transferor Letter of Representation
for Transfers of U.S. Global Security to
Regulation S Global Security During the
Restricted Period
Exhibit D - Form of Transferor Letter of Representation
for Transfers of U.S. Global Security to
Regulation S Global Security After the
Restricted Period
Exhibit E - Form of Transferor Letter of Representation
for Transfers of Regulation S Global Security
to U.S. Global Security During the Restricted
Period
Exhibit F - Form of Transferor Letter of Representation
for Transfers of IAI Global Security to
Rule 144A Global Security
<PAGE>
5
Exhibit G - Form of Transferor Letter of Representation
for Transfers of Rule 144A Global Security to
IAI Global Security
Exhibit H - Form of Letter of Representation for
Exchanges of U.S. Global Security for
Regulation S Global Security
Exhibit I - Form of Letter of Representation for Exchange
of Regulation S Global Security for U.S.
Global Security
Exhibit J - Form of Letter of Representation for
Exchanges of U.S. Global Security for another
U.S. Global Security
Annex A - Form of Transferee Letter of Representations
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1)............................................................7.10
(a)(2)............................................................7.10
(a)(3)............................................................N.A.
(a)(4)............................................................N.A.
(a)(5)............................................................7.08; 7.10
(b)...............................................................7.08; 7.10
(c)...............................................................N.A.
311(a)...............................................................7.11
(b)...............................................................7.11
(c)...............................................................N.A.
312(a)...............................................................2.05
(b)...............................................................10.03
(c)...............................................................10.03
313(a)...............................................................7.06
(b)(1)............................................................N.A.
(b)(2)............................................................7.06
(c)...............................................................10.02
(d)...............................................................7.06
314(a)...............................................................4.02; 4.12;
10.02
(b)...............................................................N.A.
(c)(1)............................................................10.04
(c)(2)............................................................10.04
(c)(3)............................................................N.A.
(d)...............................................................N.A.
(e)...............................................................10.05
(f)...............................................................4.12
315(a)...............................................................7.01
(b)...............................................................7.05; 10.02
(c)...............................................................7.01
(d)...............................................................7.01
(e)...............................................................6.11
316(a)(last
sentence)............................................................10.06
(a)(1)(A).........................................................6.05
(a)(1)(B).........................................................6.04
(a)(2)............................................................N.A.
(b)...............................................................6.07
317(a)(1)............................................................6.08
(a)(2)............................................................6.09
(b)...............................................................2.04
318(a)...............................................................10.01
(c)...............................................................10.01
N.A. means Not Applicable.
_____________________
Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be part of the Indenture.
<PAGE>
INDENTURE dated as of January 30, 1998, between Texon
International plc, a public limited company incorporated in
England and Wales (the "Company") and THE BANK OF NEW YORK, a New
York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 10% Senior
Notes due 2008 (the "Initial Securities") and, if and when issued as provided in
the Exchange and Registration Rights Agreement of even date herewith, the
Company's 10% Senior Series A Notes due 2008 (the "Exchange Securities", and
together with the Initial Securities, the "Securities").
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions. For purposes of the following definitions
------------
and this Indenture generally, (i) all calculations and determinations shall be
made in accordance with U.K. GAAP and shall be based upon the consolidated
financial statements of the Company and its subsidiaries prepared in accordance
with U.K. GAAP and (ii) references to specific amounts in one currency mean such
amounts or their equivalent in other currencies on the date of determination. As
used in this Indenture, the following terms shall have the following meanings:
"Acquisition" means the acquisition by the Company of all the
outstanding share capital of United Texon Limited pursuant to the Acquisition
Agreement dated December 23, 1997, between the Company, Apax European Buy-In
Fund and the other parties thereto.
"Additional Amounts" shall have the meaning set forth in paragraph 2
of Exhibit A hereto.
"Additional Assets" means (i) any tangible property or assets (other
than Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
<PAGE>
2
Restricted Subsidiary; or (iv) any reimbursement to the Company or its
Restricted Subsidiaries for expenditures made, and costs incurred, to repair,
rebuild, replace or restore property subject to loss, damage or taking to the
extent that the Net Proceeds consist of insurance proceeds received on account
of such loss, damage or taking; provided, however, that any such Restricted
-------- -------
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing 5% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares), property or other assets (each referred to for
the purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory in the
ordinary course of business, (iii) the disposition of all or substantially all
of the assets of the Company in the manner permitted pursuant to Section 5.01,
(iv) for purposes of Section 4.06 only, a disposition subject to Section 4.04,
(v) grant of a non-exclusive license of intellectual property in the ordinary
course of business, (vi) the surrender waiver of contract rights or settlement,
release of surrender of tort or other claims and (vii) the sale or other
disposition of the Leicester Plant, other than to an Affiliate of the Company.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the
<PAGE>
3
present value (discounted at the interest rate borne by the Securities,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement, the other Senior Credit Documents and any
Refinancing Indebtedness with respect thereto, as amended from time to time,
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post-filing interest is allowed in
such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means as of any date, an amount equal to the sum of
(i) 60% of the aggregate book value of inventory plus (ii) 85% of the aggregate
book value of all accounts receivable (net of bad debt reserves) of the Company
and its Restricted Subsidiaries on a Consolidated basis, as determined in
accordance with U.K. GAAP consistently applied less (iii) the outstanding
principal amount of all Indebtedness that is permitted to be outstanding by
virtue of clause (iv) of Section 4.03, including any Refinancing Indebtedness in
respect thereof. To the extent that information is not available as to the
amount of inventory or accounts receivable as of a specific date, the Company
shall use the most recent available information for purposes of calculating the
Borrowing Base.
<PAGE>
4
"Business Day" means a day other than a Saturday, Sunday or other day
on which banking institutions in Luxembourg, the State of New York, Frankfurt,
or London or a place of payment are authorized or required by law to close.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to
be classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with U.K. GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with U.K. GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the government of the United States or the United
Kingdom or any agency or instrumentality thereof, having maturities of not more
than one year from the date of acquisition; (ii) marketable general obligations
issued by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and, at the time of acquisition thereof,
having a credit rating of "A" or better from either Standard & Poor's Ratings
Service, a division of the McGraw-Hill Companies, Inc., or Moody's Investors
Service, Inc.; (iii) certificates of deposit, time deposits, eurodollar time
deposits, overnight bank deposits or bankers' acceptances having maturities of
not more than one year from the date of acquisition thereof issued by any
commercial bank the long-term debt of which is rated at the time of acquisition
thereof at least "A" or the equivalent thereof by Standard & Poor's Ratings
Service, a division of the McGraw-Hill Companies, Inc., or "A" or the equivalent
thereof by Moody's Investors Service, Inc., and having capital and surplus in
excess of $500 million; (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (i), (ii)
and (iii) entered into with any bank meeting the qualifications specified in
clause (iii) above; (v) commercial paper rated at the time of acquisition
thereof at least "A-2" or the equivalent thereof by Standard & Poor's Ratings
Service, a division of the McGraw-Hill
<PAGE>
5
Companies, Inc., or "P-2" or the equivalent thereof by Moody's Investors
Service, Inc., or carrying an equivalent rating by a nationally recognized
rating agency, if both of the two named rating agencies cease publishing ratings
of investments, and in either case maturing within 270 days after the date of
acquisition thereof; and (vi) interests in any investment company which invests
solely in instruments of the type specified in clauses (i) through (v) above.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the first public offering of Voting Stock of the Company,
the Permitted Holders cease to be the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a
majority in the aggregate of the total voting power of the Voting Stock of
the Company, whether as a result of issuance of securities of the Company,
any merger, consolidation, liquidation or dissolution of the Company, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (i), the Permitted Holders shall be
deemed to own beneficially any Voting Stock of an entity (the "specified
entity") held by any other entity (the "parent entity") so long as the
Permitted Holders beneficially own (as so defined), directly or indirectly,
in the aggregate a majority of the voting power of the Voting Stock of the
parent entity);
(ii) (A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (i) above) of more than
35% of the total voting power of the Voting Stock of the Company and (B)
the Permitted Holders do not "beneficially own" (as defined in clause (i)
above), directly or indirectly, in the aggregate a greater percentage of
the total voting power of the Voting Stock of the Company than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors (for the purposes of this clause (ii), such other person shall be
deemed to own beneficially any Voting Stock of a specified corporation held
by a parent corporation, if such other person "beneficially owns" (as
defined in this clause (ii)), directly or indirectly, more than 35% of the
voting power of the Voting Stock of such
<PAGE>
6
parent corporation and the Permitted Holders do not "beneficially own" (as
defined in clause (i) above), directly or indirectly, in the aggregate a
greater percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person (in each case, other than a Person that is controlled by the
Permitted Holders), and, in the case of any such merger or consolidation,
the securities of the Company that are outstanding immediately prior to
such transaction and that represent 100% of the aggregate voting power of
the Voting Stock of the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities
are changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation that represent immediately after
such transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving corporation; or
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning of
such period or whose election or nomination for elec tion was previously
so approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
<PAGE>
7
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination in respect of the most recent such quarter to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
-------- -------
that (A) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (B) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets that are the subject of such Asset Disposition for
such period or increased by an amount equal to the EBITDA (if negative) directly
attributable thereto for such period and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (C) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (D) if since
<PAGE>
8
the beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) shall have made any Asset Disposition or any
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (B) or (C) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Disposition, Investment or acquisition of assets occurred on the first day
of such period. For purposes of this definition, whenever pro forma effect is to
be given to an acquisition of assets, the amount of income or earnings related
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer of
the Company after consultation with the independent certified public accountants
of the Company. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months).
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of liabilities of the Company and its
consolidated Restricted Subsidiaries which may properly be classified as current
liabilities (including taxes accrued as estimated), on a consolidated basis,
after eliminating (a) all intercompany items between the Company and any
Restricted Subsidiary and (b) all current maturities of long-term Indebtedness,
all as determined in accordance with U.K. GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Restricted Subsidiaries, plus, to the
extent Incurred by the Company and its Restricted Subsidiaries in such period
but not included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations and Attributable Debt, (ii) amortization of debt
discount and debt issuance cost, (iii) capitalized interest, (iv) noncash
interest expense, (v) commissions, discounts and other fees and charges with
respect to letters of credit (other than with respect to trade letters of credit
in the ordinary course of business) and bankers' acceptance financing,
<PAGE>
9
(vi) interest accruing on any Indebtedness of any other Person to the extent
such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary;
provided that payment of such amounts by the Company or any Restricted
- --------
Subsidiary is being made to, or is sought by, the holders of such Indebtedness
pursuant to such Guarantee, (vii) net costs associated with Hedging Obligations
(including amortization of fees), other than costs associated with Currency
Agreements made to hedge currency exposure in connection with trade receivables
or payables and purchases of supplies in the ordinary course of business, (viii)
payments in respect of Preferred Stock of Restricted Subsidiaries of the Company
or Disqualified Stock of the Company held by Persons other than the Company or a
Wholly Owned Subsidiary, and (ix) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust;
provided, however, that there shall be excluded therefrom any such interest
- -------- -------
expense of any Unrestricted Subsidiary to the extent the related Indebtedness is
not Guaranteed or paid by the Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and its consolidated Subsidiaries; provided, however, that there
-------- -------
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in clause (iv) below, the Company's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(iii) below) and (B) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income; (ii) any net income (loss) of any
Person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acqui sition; (iii) any
net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of other distributions (whether of capital or by means of intercompany loans,
advances or transfers) by such Restricted Subsidiary, directly or indirectly, to
the Company, except that (A) subject to the limitations
<PAGE>
10
contained in clause (iv) below, the Company's equity in the net income of any
such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend or other distribution (whether of
capital or by means of an intercompany loan, advance or transfer)(subject, in
the case of a dividend or other distribution that could have been made to
another Restricted Subsidiary, to the limitation contained in this clause) and
(B) the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income; (iv)
any gain or loss realized upon the sale or other disposition of any asset of the
Company or its consolidated Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any Person; (v) any extraordinary
gain or loss; and (vi) the cumulative effect of a change in accounting
principles. Notwithstanding the foregoing, for the purpose of Section 4.04 only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Tangible Assets" means, as of any date of
determination, the sum of the amounts that would appear on a consolidated
balance sheet of the Company and its consolidated Restricted Subsidiaries as the
total assets (less accumulated depreciation and amortization, allowances for
doubtful receivables, other applicable reserves and other properly deductible
items) of the Company and its consolidated Restricted Subsidiaries, determined
on a consolidated basis in accordance with U.K. GAAP consistently applied, and
after deducting therefrom Consolidated Current Liabilities and, to the extent
otherwise included, the amounts of (without duplication): (a) the excess of cost
over fair market value of assets or businesses acquired; (b) any revaluation or
other write-up in book value of assets subsequent to the last day of the fiscal
quarter of the Company immediately preceding the Issue Date as a result of a
change in the method of valuation in accordance with U.K. GAAP; (c) unamortized
debt discount and expenses and other unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, licenses,
<PAGE>
11
organization or developmental expenses and other intangible items; (d) minority
interests in consolidated Subsidiaries held by Persons other than the Company or
a Restricted Subsidiary; (e) treasury stock; (f) cash set aside and held in a
sinking or other analogous fund established for the purpose of redemption or
other retirement of Capital Stock to the extent such obligation is not reflected
in Consolidated Current Liabilities; and (g) Investments in and assets of
Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with U.K. GAAP
consistently applied; provided, however, that "Consolidation" shall not include
-------- -------
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in a Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Corporate Trust Office" means the office in the Borough of Manhattan,
The City of New York, at which the Trustee's corporate trust business is
principally administered, which at the date hereof is located at 101 Barclay
Street, Floor 21 West, New York, NY 10286.
"Credit Agreement" means the Credit Agreement dated as of January 28,
1998, as amended, waived or otherwise modified from time to time, by and among
the Company, Chase Manhattan plc, The Chase Manhattan Bank and Chase Manhattan
International Limited (except to the extent that any such amendment, waiver or
other modification thereto would be prohibited by the terms of this Indenture,
unless otherwise agreed to by the Holders of at least a majority in aggregate
principal amount of Securities at the time outstanding).
<PAGE>
12
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default, all as described under Section 6.01.
"Definitive Securities" means Securities in definitive registered form
substantially in the form of Exhibit A (with respect to Initial Securities) or
Exhibit B (with respect to Exchange Securities) attached hereto.
"Depositary" means the book-entry depositary or its nominee or the
custodian of either, designated by the Company in the Depositary Agreement until
a successor shall have been appointed and become such pursuant to the applicable
provisions of the Depositary Agreement, and thereafter, "Depositary" shall mean
or include such successor.
"Depositary Agreement" means the Note Depositary Agreement dated as of
the date of this Indenture between the Company and The Bank of New York.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Securities.
"DTC" means The Depository Trust Company or its successors.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense and (iv) amortization expense, in each case
for such period. Notwithstanding the foregoing, the provision for taxes based
on the income or profits of, and the depreciation and amortization of, a
Subsidiary of the Company shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same
<PAGE>
13
proportion) that the net income of such Subsidiary was included in calculating
Consolidated Net Income.
"Euroclear Operator" means Morgan Guaranty Trust Company of New York
(Brussels office), as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" has the meaning ascribed to it in the Exchange and
Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning ascribed to it
in the Exchange and Registration Rights Agreement.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated January 27, 1998, by and between the Initial
Purchasers and the Company, as such agreement may be amended, modified, or
supplemented from time to time in accordance with the terms thereof.
"Exchange Securities" means the 10% Senior Series A Notes due 2008 to
be issued pursuant to this Indenture in connection with the offer to exchange
Securities for the Initial Securities that may be made by the Company pursuant
to the Exchange and Registration Rights Agreement.
"Federal Republic of Germany Obligations" means securities that are
direct and unconditional obligations of the Federal Republic of Germany or any
of its states (Bundeslander), as defined in Section 1807 No. 2 of the German
Civil Code (Burgerliches Gesetzbuch), as from time to time amended, and are not
callable or redeemable at the option of the issuer thereof.
"Global Security" means a security evidencing all or part of the
Securities deposited with the Depositary in accordance with Section 2.01 and
that is substantially in the form of Exhibit A (with respect to Initial
Securities) or Exhibit B (with respect to Exchange Securities) attached hereto.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
<PAGE>
14
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
-------- -------
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means (i) in the case of Global
Securities, the bearer thereof which shall initially be the Depositary and (ii)
in the case of Definitive Securities, the Person in whose name a Definitive
Security is registered on the Registrar's books.
"IAI" or "Institutional Accredited Investor" means an "accredited
investor" within the meaning of Rule 501(a) (1), (2), (3) or (7) under the
Securities Act that is an institutional investor.
"IAI Global Security" has the meaning set forth in Section 2.01.
"Incur" means to issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
-------- -------
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Person at the time it becomes a Restricted Subsidiary.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
<PAGE>
15
(i) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion
of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of the Company, the maximum liquidation
preference (or, if greater, maximum mandatory redemption or repurchase
price) with respect to any Preferred Stock (but excluding, in each case,
any accrued dividends except to the extent such dividends increase such
preference (or price));
(vii) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
-------- -------
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other
Persons;
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person; and
(ix) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
<PAGE>
16
rise to the obligation, of any contingent obligations at such date.
"Initial Global Securities" means the Regulation S Global Security,
the Rule 144A Global Security and the IAI Global Security.
"Initial Purchasers" means Chase Manhattan Bank AG, Chase Securities
Inc. and Chase Manhattan International Limited.
"Initial Securities" means the % Senior Notes due 2008, issued under
this Indenture on or about the date hereof.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
--------
however, that upon a redesignation of such Subsidiary as a Restricted
- -------
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and
<PAGE>
17
(ii) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Leicester Plant" means the real property and related equipment owned
by Texon UK Limited located in Leicester, England.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Maturity Date" means February 1, 2008.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise), but only
as and when received, but excluding any other consideration received in the form
of assumption by the acquiring Person of Indebtedness or other obligations
relating to the properties or assets that are the subject of such Asset
Disposition or received in any other noncash form) therefrom, in each case net
of (i) all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all Federal, state, provincial, foreign and local
taxes required to be paid or accrued as a liability under U.K. GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Sub sidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with U.K. GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset Disposition; and (v)
any portion of the purchase price from an Asset Disposition placed in escrow
(whether as a reserve for adjustment of the purchase price, for satisfaction of
indemnities in respect of such Asset Disposition or
<PAGE>
18
otherwise in connection with such Asset Disposition); provided, however, that
upon termination of such escrow, Net Available Cash shall be increased by any
portion of funds therein released to the Company or any Restricted Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the proceeds in cash or Cash Equivalents of such issuance or sale
net of attorneys' fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees or
expenses actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Non-U.S. Persons" means Persons who are not U.S. Persons.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Finance Director, any executive director or the Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from
legal counsel who is acceptable to the Trustee. Unless otherwise required by
the TIA, the counsel may be an employee of or counsel to the Company or the
Trustee.
"Permitted Holders" means Apax Ventures IV, Apax Ventures IV
International Partners L.P., Apax European Buy-In Fund International Partners
L.P., Apax European Buy-In Fund, Apax CR III or Chase Equity Associates L.P.,
any of their respective Affiliates, and any limited partnership, investment
trust or investment fund which in each case is managed or advised by any of Apax
Partners & Co. Strategic Investors Limited, Apax Partners & Co. Ventures Limited
and Chase Capital Partners or any of their respective Affiliates; and any Person
acting in the capacity of an underwriter in connection with a public or private
offering of the Company's Capital Stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that shall,
upon the making of such Investment, become a Restricted Subsidiary; provided,
--------
however, that the primary business of such Restricted Subsidiary is a Related
- -------
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted
<PAGE>
19
Subsidiary; provided, however, that such Person's primary business is a Related
-------- -------
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; provided, however, that such trade terms may include such
-------- -------
concessionary trade terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances; (v) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary and not exceeding (Pounds)1.0 million in the aggregate
outstanding at any one time; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (viii) a
joint venture or other entity principally engaged in a Related Business,
provided, however, that the aggregate amount of all such Investments under this
- -------- -------
clause (viii) shall not exceed (Pounds)2.0 million; and (ix) any Person to the
extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to Section 4.06.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes, assessments, governmental charges or claims or
import duties or for the payment of rent, government contracts, performance and
return of money bonds and other obligations of a like nature in each case
Incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and landlords', suppliers', materialmen's, repairmen's
and mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (c) Liens for
property taxes not yet due or payable or subject to penalties for non-
<PAGE>
20
payment and which are being contested in good faith and by appropriate
proceedings; provided that any reserve or other appropriate provision required
--------
in accordance with U.K. GAAP shall have been made therefor; (d) Liens in favor
of issuers of surety bonds or letters of credit issued pursuant to the request
of and for the account of such Person in the ordinary course of its business;
(e) minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (f) Liens granted by
the Company securing Indebtedness Incurred to finance the construction, purchase
or lease of, or repairs, improvements or additions to, property; provided,
--------
however, that the Lien may not extend to any other property owned by the Company
- -------
or any Restricted Subsidiary at the time the Lien is Incurred, and the
Indebtedness secured by the Lien may not be Incurred more than 365 days after
the later of the acquisition, completion of construction, repair, improvement,
addition or commencement of full operation of the property subject to the Lien;
(g) Liens existing on the Issue Date; (h) Liens on property or shares of stock
of a Person at the time such Person becomes a Subsidiary; provided, however,
-------- -------
such Liens are not created, Incurred or assumed in connection with, or in
contemplation of, such other Person becoming such a Subsidiary; provided
--------
further, however, that such Liens may not extend to any other property owned by
- ------- -------
the Company or any Restricted Subsidiary; (i) Liens on property at the time the
Company or a Restricted Subsidiary acquired the property, including any
acquisition by means of a merger or consolidation with or into the Company or
any Restricted Subsidiary; provided, however, that such Liens are not created,
-------- -------
Incurred or assumed in connection with, or in contemplation of, such
acquisition; provided further, however, that the Liens may not extend to any
-------- ------- -------
other property owned by the Company or any Restricted Subsidiary; (j) Liens
securing Indebtedness or other obligations of a Restricted Subsidiary owing to
the Company or a Wholly Owned Subsidiary; (k) Liens securing Hedging Obligations
so long as the related Indebtedness is, and is permitted to be under this
Indenture, secured by a Lien on the same property securing such Hedging
Obligations; (l) Liens to secure any refinancing, refunding, extension, renewal
or replacement (or successive refinancings, refundings, extensions,
<PAGE>
21
renewals or replacements) as a whole, or in part, of any Indebtedness secured by
any Lien referred to in the foregoing clauses (f), (g), (h) and (i); provided,
--------
however, that (x) such new Lien shall be limited to all or part of the same
- -------
property that secured the original Lien (plus improvements on such property) and
(y) the Indebtedness secured by such Lien at such time is not increased to any
amount greater than the sum of (A) the outstanding principal amount or, if
greater, committed amount of the Indebtedness described under clauses (f), (g),
(h), or (i) at the time the original Lien became a Permitted Lien under this
Indenture and (B) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal or
replacement; (m) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (n) judgment and attachment Liens not giving rise to an
Event of Default; (o) leases or subleases granted to others in the ordinary
course of business; (p) Liens arising out of consignment or similar arrangements
for the sale of goods entered into by the Company or its Restricted Subsidiaries
in the ordinary course of business; (q) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (r) Liens granted by the
Company on the stock of United Texon Limited securing Indebtedness of the
Company under the Revolving Facility; (s) Liens granted by the Company securing
Indebtedness of the Company permitted under clauses (b)(iii) and (viii) of
Section 4.03, or securing Refinancing Indebtedness in respect thereof; (t) Liens
securing Indebtedness (other than Preferred Stock) of a Restricted Subsidiary
permitted under clause (a) or clauses (b)(i), (iv), (v), (vi), (vii), (viii) or
(ix) of Section 4.03; and (u) Liens securing aggregate Indebtedness outstanding
from time to time not in excess of 10% of Consolidated Net Tangible Assets.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
<PAGE>
22
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth on Exhibit A.
"Public Equity Offering" means an underwritten primary public offering
of ordinary shares of the Company pursuant to (i) an effective registration
statement under the Securities Act or (ii) a placement outside the United States
involving the distribution of an offering circular to at least 100 bona fide
prospective purchasers and listing of such ordinary shares on the Luxembourg
Stock Exchange or other Recognized Stock Exchange (a "Qualified Placement").
"Public Market" means any time after (i) a Public Equity Offering has
been consummated and (ii) at least 15% of the total issued and outstanding
ordinary shares of the Company has been distributed by means of an effective
registration statement under the Securities Act or a Qualified Placement.
"Purchase Agreement" means the agreement for the purchase of DM 245.0
million principal amount of senior Securities among the Company and the Initial
Purchasers dated January 27, 1998.
"Purchase Date" shall have the meaning set forth in Section 4.06(c).
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligation
under any title retention agreement and other purchase money obligations with
respect to the acquisition of an asset in the ordinary course of business, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that any Lien arising
in connection with any such Indebtedness shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached; and
provided further, that such Indebtedness is Incurred within 180 days after such
acquisition by the Company or Restricted Subsidiary of such
<PAGE>
23
asset and does not exceed the lesser of the fair market value or the purchase
price of such asset.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Recognized Stock Exchange" means a recognized stock exchange within
the meaning of Section 841 of the U.K. Income and Corporation Taxes Act of 1988.
"Redemption Date" when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture or
paragraph 6 or 7 of the Securities.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances", and "refinanced"
shall have a correlative meaning) any Indebtedness existing on the date of this
Indenture or Incurred in compliance with this Indenture (including Indebtedness
of the Company that refinances Indebtedness of any Restricted Subsidiary (to the
extent permitted in this Indenture) and Indebtedness of any Restricted
Subsidiary that refinances Indebtedness of another Restricted Subsidiary)
including Indebtedness that refinances Refinancing Indebtedness; provided,
--------
however, that (i) the Refinancing Indebtedness has a Stated Maturity no earlier
- -------
than the Stated Maturity of the Indebtedness being refinanced, (ii) the
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced and (iii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced; provided
--------
further, however, that Refinancing Indebtedness shall not include (A)
- ------- -------
Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the
Company or (B) Indebtedness of the Company or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary.
"Registered Exchange Offer" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
<PAGE>
24
"Regulation S Global Security" has the meaning set forth in Section
2.01.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
as conducted on the Issue Date.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness.
"Restricted Period" means the period of 40 consecutive days beginning
on and including the first day after the Issue Date.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Revolving Facility" means the Revolving Facility under the Credit
Agreement (as defined therein).
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Security" has the meaning set forth in Section 2.01.
"Sale/Leaseback Transaction" means an arrangement
relating to property now owned or hereafter acquired whereby the Company or a
Restricted Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person, other than leases between the
Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means, collectively, the Initial Securities and, when and
if issued as provided in the Exchange and Registration Rights Agreement, the
Exchange Securities.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
25
"Senior Credit Documents" means the collective reference to the Credit
Agreement and the Security Documents (each as defined in the Credit Agreement).
"Senior Indebtedness" means all Indebtedness of the Company including
principal of, premium (if any), accrued interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post-filing interest is allowed in
such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and other amounts owing with respect to such Indebtedness, whether
outstanding on the Issue Date or thereafter Incurred, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that the obligations constituting such Indebtedness are not superior
in right of payment to the Securities; provided, however, that Senior
-------- -------
Indebtedness shall not include (i) any obligation of the Company to any
Subsidiary of the Company, (ii) any liability for taxes owed or owing by the
Company, (iii) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (iv) any Indebtedness or obligation of
the Company which is subordinate or junior in any respect to any other
Indebtedness or obligation of the Company, including any Subordinated
Obligations, (v) any obligations with respect to any Capital Stock, or (vi) any
Indebtedness Incurred in violation of this Indenture.
"Shelf Registration Statement" has the meaning ascribed to it in the
Exchange and Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
<PAGE>
26
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person, or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United Kingdom or the United States of
America or any agency thereof or obligations Guaranteed by the United Kingdom or
the United States of America or any agency thereof, (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of America
having capital, surplus and undivided profits aggregating in excess of
$250,000,000 (or the foreign currency equivalent thereof) and whose long-term
debt is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc. ("S&P"), and (v) investments in securities with maturities of
six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America,
<PAGE>
27
or by any political subdivision or taxing authority thereof, and rated at least
"A" by S&P or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb) as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transactions" means the establishment of and initial drawings under
the Revolving Facility, the Offering and the Acquisition (including the use of
the proceeds of such financings and the payment of related fees and expenses).
"Transfer Restricted Security" has the meaning ascribed to it in the
Exchange and Registration Rights Agreement.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any Vice President or any other officer or
assistant officer of the Trustee assigned by the Trustee to the Corporate Trust
Office to administer its corporate trust matters.
"U.K. GAAP" means accounting principles generally accepted in the
United Kingdom and approved by the Institute of Chartered Accountants of England
and Wales or other applicable authority, as in effect as of the Issue Date. All
ratios and comparisons contained in this Indenture shall be computed in
conformity with U.K. GAAP.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such
<PAGE>
28
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
-------- -------
designated has total consolidated assets of (Pounds)10,000 or less or (B) if
such Subsidiary has consolidated assets greater than (Pounds)10,000, then such
designation would be permitted under Section 4.04. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
--------
however, that immediately after giving effect to such designation (x) the
- -------
Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and
(y) no Default shall have occurred and be continuing. Any such designation of a
Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"U.S. Persons" shall have the meaning given in Regulation S under the
Securities Act.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company
all the Capital Stock of which (other than directors' qualifying shares) is
owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
------------------
Defined in
Term Section
---- -----------
"Affiliate Transaction"............................. 4.07
"Agent Members"..................................... 2.15
"Applicable Procedures"............................. 2.06(a)
"Bankruptcy Law".................................... 6.01
<PAGE>
29
"Company Order"..................................... 2.02
"covenant defeasance option"........................ 8.01(b)
"Custodian"......................................... 6.01
"Default Interest Payment Date...................... 2.11
"Event of Default".................................. 6.01
"IAI Global Security"............................... 2.01
"legal defeasance option"........................... 8.01(b)
"Legal Holiday"..................................... 10.08
"Offer"............................................. 4.06
"Offer Amount"...................................... 4.06
"Offer Period"...................................... 4.06
"Paying Agent"...................................... 2.03
"Permitted Indebtedness"............................ 4.03(b)
"Purchase Date"..................................... 4.06
"Registrar"......................................... 2.03
"Regulation S Global Security....................... 2.01
"Regulation S Security.............................. 2.01
"Restricted Payment"................................ 4.04
"Rule 144A Global Security"......................... 2.01
"Successor Company"................................. 5.01
"Taxes"............................................. 4.17
"U.S. Global Security".............................. 2.01
"U.S. Security"..................................... 2.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
<PAGE>
30
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with U.K. GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any non-interest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with U.K. GAAP and accretion of principal on such security shall
be deemed to be the Incurrence of Indebtedness; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating. The Initial Securities and the
----------------
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. Any Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that
--------
any such notation, legend or endorsement is in a form acceptable to the
<PAGE>
31
Company). Each Security shall be dated the date of its issuance and shall show
the date of its authentication. The terms of the Securities set forth in
Exhibits A and B are part of the terms of this Indenture.
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
Initial Securities offered and sold to QIBs in reliance on Rule 144A
as provided in the Purchase Agreement, shall be issued initially in the form of
a single Global Security in global bearer form without interest coupons
substantially in the form of Exhibit A hereto, with such applicable legends as
are set forth in Exhibit A hereto, except as otherwise permitted herein (the
"Rule 144A Global Security"). On the Issue Date a similar Global Security, (the
"IAI Global Security" and, together with the Rule 144A Global Security, the
"U.S. Global Securities") in global bearer form shall also be issued to
accommodate transfers of Securities to IAIs. The U.S. Global Securities shall
be deposited initially with the Depositary pursuant to the terms of the
Depositary Agreement, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of each U.S.
Global Security may from time to time be increased or decreased by adjustments
made by annotation or endorsement thereon by the Trustee on behalf of the
Company (or by the issue of a further U.S. Global Security of the same type), in
connection with a corresponding decrease or increase in the aggregate principal
amount of the other U.S. Global Security or the Regulation S Global Security or
in consequence of the issue of Definitive Securities or additional U.S.
Securities, as hereinafter provided. The U.S. Global Securities and all other
Initial Securities evidencing the debt, or any portion of the debt, initially
evidenced by such U.S. Global Securities, other than Securities transferred or
exchanged upon certification as provided in Section 2.06(a)(i)(1), (2) or (6),
shall collectively be referred to herein as the "U.S. Securities".
Initial Securities offered and sold in reliance on Regulation S as
provided in the Purchase Agreement, shall be issued initially in the form of a
single Global Security in global bearer form without interest coupons
substantially in the form of Exhibit A hereto, with such applicable legends as
are set forth in Exhibit A hereto, except as otherwise permitted herein, which
shall be deposited initially with the Depositary pursuant to the terms of the
Depositary Agreement, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. Such Global Security shall be referred to
herein as the "Regulation S Global
<PAGE>
32
Security". The aggregate principal amount of the Regulation S Global Security
may from time to time be increased or decreased by adjustments made by
annotation or endorsement thereon by the Trustee on behalf of the Company (or by
the issue of a further Regulation S Global Security), in connection with a
corresponding decrease or increase in the aggregate principal amount of a U.S.
Global Security or in consequence of the issue of Definitive Securities or
additional Regulation S Securities, as hereinafter provided. The Regulation S
Global Security and all other Initial Securities that are not U.S. Global
Securities shall collectively be referred to herein as the "Regulation S
Securities".
SECTION 2.02. Execution and Authentication. Two Officers shall sign
-----------------------------
the Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and deliver (1) Initial Securities for
original issue in an aggregate principal amount of DM 245,000,000, and (2)
Exchange Securities for issue only in a Registered Exchange Offer, pursuant to
the Exchange and Registration Rights Agreement for a like principal amount of
Initial Securities exchanged pursuant thereto, in each case upon a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company (a "Company Order"). Such
Company Order shall specify the amount of the Securities to be authenticated,
the date on which the original issue of Securities is to be authenticated,
whether the Securities are to be Initial Securities or Exchange Securities,
whether the Securities are to be Definitive Securities or Global Securities and
whether or not the Securities shall bear the Private Placement Legend, or such
other information as the Trustee may reasonably request. The aggregate
principal amount of Securities outstanding at any time may not exceed DM
245,000,000 except as provided in Section 2.07. Upon
<PAGE>
33
receipt of a Company Order, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of the
Company.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent
has the same rights as any Registrar, Paying Agent or agent for service of
notices and demands.
The Securities shall be issuable only in denominations of DM1,000 and
any integral multiple thereof. The Global Securities shall be in bearer form
without coupons and the Definitive Securities shall be in registered form.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
---------------------------
an office or agency outside of the United Kingdom, where (a) Global Securities
may be presented or surrendered for transfer or for exchange of beneficial
interests therein in accordance with Section 2.06, (b) Global Securities may be
presented or surrendered for payment ("Paying Agent") and (c) notices and
demands in respect of such Global Securities and this Indenture may be served.
In the event that Definitive Securities are issued, (x) Definitive Securities
may be presented or surrendered for registration of transfer or for exchange,
(y) Definitive Securities may be presented or surrendered for payment and (z)
notices and demands in respect of the Definitive Securities and this Indenture
may be served at an office of the registrar (the "Registrar") or the Paying
Agent, as applicable, maintained by the Company in the Borough of Manhattan, The
City of New York. The Registrar shall keep a register of the Definitive
Securities and of their transfer and exchange. The Company, upon notice to the
Trustee, may have one or more co-Registrars and one or more additional Paying
Agents reasonably acceptable to the Trustee. The term "Registrar" includes any
co-Registrar and the term "Paying Agent" includes any additional Paying Agent.
The Company initially appoints the Trustee as Registrar and Paying Agent until
such time as the Trustee has resigned or a successor has been appointed. The
Company may change any Registrar or Paying Agent without notice to any Holder.
The Company may act as Registrar or Paying Agent. In all circumstances, the
Company shall ensure that (i) at least one Paying Agent shall be located outside
the United Kingdom, (ii) at least one Paying Agent shall be, if and so
<PAGE>
34
long as the Securities are listed on the Luxembourg Stock Exchange, located in
Luxembourg or such other place as the Luxembourg Stock Exchange may approve and
(iii) if and so long as the Securities are listed on any other securities
exchange, any applicable requirements of such exchange as to Paying Agents are
satisfied.
SECTION 2.04. Paying Agent To Hold Money in Trust; Conversion of
--------------------------------------------------
Applicable Currency. (a) Prior to each due date of the principal, interest and
- --------------------
Additional Amounts, if any, on any Security, the Company shall deposit with the
Paying Agent a sum sufficient to pay such principal, interest and Additional
Amounts, if any, when so becoming due. The Company shall require each Paying
Agent (other than the Trustee) to agree in writing that the Paying Agent shall
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest or Additional
Amounts, if any, on the Securities and shall notify the Trustee of any default
by the Company in making any such payment. If the Company or a Subsidiary of
the Company acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this Section,
the Paying Agent shall have no further liability for the money delivered to the
Trustee.
(b) The Paying Agent may act as a foreign exchange agent for purposes
of converting Deutsche Marks to U.S. dollars pursuant to paragraph 3 of the
Securities and, when acting as a foreign exchange agent, the Paying Agent may
derive profits from such activities in addition to the fees earned by it for its
services as Paying Agent and, if applicable, Trustee and Registrar. Each such
conversion shall be made on such terms, conditions, and charges not inconsistent
with the terms of the Securities as the Paying Agent may from time to time
establish in accordance with its regular foreign exchange practices, and subject
to applicable U.S. law and regulations.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
---------------------
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders of Definitive Securities. If
the Trustee is not the Registrar, the Company shall furnish to the Trustee, in
writing at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably
<PAGE>
35
require of the names and addresses of Securityholders of Definitive Securities.
SECTION 2.06. Transfer and Exchange. (a) Provisions Applicable
---------------------- ---------------------
Solely to Initial Securities. The following procedures and restrictions shall
- -----------------------------
not apply with respect to Initial Securities transferred or exchanged for the
account of a Person who is not an Affiliate of the Company at the time of the
transfer or exchange and has not been an Affiliate during the preceding three
months, provided that a period of at least two years has elapsed since the later
--------
of the date the Initial Securities were acquired from the Company or from an
Affiliate of the Company.
(i) Notwithstanding any other provisions of this Indenture or the
Securities, transfers of interests in an Initial Global Security of the
kinds described in clauses (1) through (5) below and exchanges of interests
in Initial Global Securities or of other Initial Securities as described in
clauses (6) through (9) below, shall be made only in accordance with this
Section 2.06(a), and all transfers of an interest in the Regulation S
Global Security shall comply with clause (10) below.
(1) Transfers of U.S. Global Security to Regulation S Global
--------------------------------------------------------
Security During the Restricted Period. If the holder of a beneficial
--------------------------------------
interest in a U.S. Global Security wishes at any time during the
Restricted Period to transfer such interest to a Person who wishes to
take delivery thereof in the form of a beneficial interest in the
Regulation S Global Security, such transfer may be effected, subject
to the rules and procedures of DTC, the Euroclear Operator and Cedel,
to the extent applicable (the "Applicable Procedures"), only in
accordance with the provisions of this Section 2.06(a)(i)(1). Upon
receipt by the Depositary of a certificate in substantially the form
set forth in Exhibit C given by the transferor, the Depositary shall
present the Initial Global Securities to the Trustee to reduce the
principal amount of the appropriate U.S. Global Security and to
increase the principal amount of the Regulation S Global Security, by
the principal amount of the beneficial interest in such U.S. Global
Security to be so transferred, by annotation thereon.
<PAGE>
36
(2) Transfers of U.S. Global Security to Regulation S Global
--------------------------------------------------------
Security After the Expiration of the Restricted Period. If the holder
-------------------------------------------------------
of a beneficial interest in a U.S. Global Security wishes at any time
after the expiration of the Restricted Period to transfer such
interest to a Person who wishes to take delivery thereof in the form
of a beneficial interest in the Regulation S Global Security, such
transfer may be effected, subject to the Applicable Procedures, only
in accordance with this Section 2.06(a)(i)(2). Upon receipt by the
Depositary of a certificate in substantially the form set forth in
Exhibit D given by the transferor, the Depositary shall present the
Initial Global Securities to the Trustee to reduce the principal
amount of the appropriate U.S. Global Security, and to increase the
principal amount of the Regulation S Global Security, by the principal
amount of the beneficial interest in such U.S. Global Security to be
so transferred, by annotation thereon.
(3) Transfers of Regulation S Global Security to U.S. Global
--------------------------------------------------------
Security During the Restricted Period. If the holder of a beneficial
--------------------------------------
interest in the Regulation S Global Security wishes at any time during
the Restricted Period to transfer such interest to a Person who wishes
to take delivery thereof in the form of a beneficial interest in a
U.S. Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this Section
2.06(a)(i)(3). Upon receipt by the Depositary with respect to a
transfer of a beneficial interest in the Regulation S Global Security
during the Restricted Period (but not after the expiration of the
Restricted Period) of a certificate in substantially the form set
forth in Exhibit E given by the transferor (and, in the case of a
transfer to the IAI Global Security, a signed letter from the
transferee in substantially the form set forth in Annex A thereto),
the Depositary shall present the Initial Global Securities to the
Trustee to reduce the principal amount of the Regulation S Global
Security, and to increase the principal amount of the appropriate U.S.
Global Security, by the principal amount of the beneficial interest in
the Regulation S Global Security to be so transferred, by annotation
thereon.
<PAGE>
37
(4) Transfers of IAI Global Security to Rule 144A Global
----------------------------------------------------
Security. If the holder of a beneficial interest in the IAI Global
---------
Security (whether during the Restricted Period or after the expiration
of the Restricted Period) wishes to transfer such interest to a Person
who wishes to take delivery thereof in the form of a beneficial
interest in the Rule 144A Global Security, such transfer may be
effected, subject to the Applicable Procedures, only in accordance
with this Section 2.06(a)(i)(4). Upon receipt by the Depositary of a
certificate in substantially the form set forth in Exhibit F given by
the transferor, the Depositary shall present the Initial Global
Securities to the Trustee to reduce the principal amount of the IAI
Global Security from which such transfer is to be made, and to
increase the principal amount of the Rule 144A Global Security, by the
principal amount of the beneficial interest in the IAI Global Security
to be so transferred, by annotation thereon.
(5) Transfers of Rule 144A Global Security to IAI Global
----------------------------------------------------
Security. If the holder of a beneficial interest in the Rule 144A
---------
Global Security (whether during the Restricted Period or after the
expiration of the Restricted Period) wishes to transfer such interest
to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the IAI Global Security, such transfer may be
effected, subject to the Applicable Procedures, only in accordance
with this Section 2.06(a)(i)(5). Upon receipt by the Depositary of a
certificate in substantially the form set forth in Exhibit G given by
the transferor and a signed letter from the transferee substantially
in the form set forth in Annex A thereto, the Depositary shall present
the Initial Global Securities to the Trustee to reduce the principal
amount of the Rule 144A Global Security from which such transfer is to
be made, and to increase the principal amount of the IAI Global
Security, by the principal amount of the beneficial interest in the
Rule 144A Global Security to be so transferred, by annotation thereon.
(6) Exchanges of U.S. Global Security for Regulation S Global
---------------------------------------------------------
Security. If the holder of a beneficial interest in a U.S. Global
---------
Security wishes at any time to exchange such interest for a
<PAGE>
38
beneficial interest in the Regulation S Global Security, such exchange
may be effected, subject to the Applicable Procedures, only in
accordance with the provisions of this Section 2.06(a)(i)(6). Upon
receipt by the Depositary of a certificate in substantially the form
set forth in Exhibit H, given by the holder of the beneficial
interest, the Depositary shall present the Initial Global Securities
to the Trustee to reduce the principal amount of such U.S. Global
Security, and to increase the principal amount of the Regulation S
Global Security, by the principal amount of the beneficial interest in
such U.S. Global Security to be so exchanged, by annotation thereon.
(7) Exchanges of Regulation S Global Security for U.S. Global
---------------------------------------------------------
Security. If the holder of a beneficial interest in the Regulation S
---------
Global Security wishes at any time to exchange such interest for a
beneficial interest in a U.S. Global Security, such exchange may be
effected, subject to the Applicable Procedures, only in accordance
with the provisions of this Section 2.06(a)(i)(7). Upon receipt by
the Depositary of a certificate in substantially the form set forth in
Exhibit I, given by the holder of the beneficial interest, the
Depositary shall present the Initial Global Securities to the Trustee
to reduce the principal amount of the Regulation S Global Security,
and to increase the principal amount of such U.S. Global Security, by
the principal amount of the beneficial interest in the Regulation S
Global Security to be so exchanged, by annotation thereon.
(8) Exchanges of U.S. Global Security for another U.S. Global
---------------------------------------------------------
Security. If the holder of a beneficial interest in a U.S. Global
---------
Security wishes at any time to exchange such interest for a beneficial
interest in the other U.S. Global Security, such exchange may be
effected, subject to the Applicable Procedures, only in accordance
with the provisions of this Section 2.06(a)(i)(8). Upon receipt by
the Depositary of a certificate in substantially the form set forth in
Exhibit J given by the holder of the beneficial interest (and
including, in the case of an exchange into the IAI Global Security, a
signed letter substantially in the form set forth in Annex A thereto),
the Depositary shall present the Initial Global Securities to the
Trustee to reduce the
<PAGE>
39
principal amount of the U.S. Global Security to be exchanged, and to
increase the principal amount of the other U.S. Global Security, by
the principal amount of the beneficial interest in the U.S. Global
Security to be so exchanged, by annotation thereon.
(9) Other Exchanges. In the event that an Initial Global
----------------
Security or any portion thereof is exchanged for Initial Securities in
definitive form pursuant to Section 2.06(d) hereof, such Definitive
Securities may in turn be exchanged (on transfer or otherwise) for
other Definitive Securities and only in accordance with such
procedures, which shall be substantially consistent with the
provisions of clauses (1) through (8) above and (10) below) (including
the certification requirements intended to ensure that transfers and
exchanges of beneficial interests in an Initial Security comply with
U.S. securities laws and any Applicable Procedure, as may from time to
time be adopted by the Company and the Registrar.
(10) Interests in Regulation S Global Security to be Held Through
------------------------------------------------------------
the Euroclear Operator or Cedel. Until the expiration of the
--------------------------------
Restricted Period, interests in the Regulation S Global Security may
be held only through the Euroclear Operator and Cedel; provided,
--------
however, that this clause (10) shall not prohibit any transfer in
-------
accordance with Section 2.06(a)(i)(3).
(ii) Each Initial Security issued hereunder shall, upon issuance,
bear the applicable legend set forth on the form of the Security attached
hereto as Exhibit A and such legend shall not be removed from such Initial
Security except as provided in the next sentence. The legend required for
an Initial Security may be removed from an Initial Security if there is
delivered to the Company such satisfactory evidence, which may include an
opinion of independent counsel licensed to practice law in the State of New
York, as may be reasonably required by the Company, that neither such
legend nor the restrictions on transfer set forth therein are required to
ensure that transfers of such Security shall not violate the registration
requirements of the Securities Act. Upon provision of such satisfactory
evidence, the Trustee, at the written direction of the Company, shall
authenticate and deliver in exchange for such Security another Security
<PAGE>
40
or Securities having an equal aggregate principal amount that does not bear
such legend. If such a legend required for an Initial Security has been
removed from an Initial Security as provided above, no other Security
issued in exchange for all or any part of such Security shall bear such
legend, unless the Company has reasonable cause to believe that such other
Security is a "restricted security" within the meaning of Rule 144 and
instructs the Trustee to cause a legend to appear thereon.
(b) Any Initial Securities which are presented to the Trustee for
exchange pursuant to the Exchange Offer shall be exchanged for Exchange
Securities of equal principal amount upon surrender to the Trustee of the
Initial Securities to be exchanged; provided, however, that the Initial
-------- -------
Securities so surrendered for exchange shall be duly endorsed and accompanied by
a letter of transmittal or, in the case of Definitive Securities, written
instrument of transfer in form satisfactory to the Company, the Trustee and the
Registrar duly executed by the Holder thereof or his attorney who shall be duly
authorized in writing to execute such document. Whenever any Initial Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder the same aggregate principal amount
of Exchange Securities as those Initial Securities that have been surrendered.
(c) Transfer of a Global Security shall be by delivery. Each Global
Security authenticated under this Indenture shall be in bearer form and
delivered to the Depositary or a nominee or custodian therefor, and each such
Global Security shall constitute a single Security for all purposes of this
Indenture.
(d) All Global Securities shall be exchanged by the Company (with
authentication by the Trustee) for one or more Definitive Securities, if (a) DTC
(i) has notified the Company that it is unwilling or unable to continue as, or
ceases to be, a clearing agency registered under the Exchange Act and (ii) a
successor to DTC registered as a clearing agency under the Exchange Act is not
able to be appointed by the Company within 90 days of such notification or (b)
the Depositary is at any time unwilling or unable to continue as Depositary and
a successor Depositary is not able to be appointed by the Company within 90
days. If an Event of Default occurs and is continuing, the Company shall, at
the request of the Holder thereof, exchange all or part of a Global Security for
one or more Definitive Securities (with authentication by the Trustee);
provided, however, that the principal amount at maturity of such
- -------- -------
<PAGE>
41
Definitive Securities and such Global Security after such exchange shall be
DM1,000 or integral multiples thereof. Whenever all of a Global Security is
exchanged for one or more Definitive Securities, it shall be surrendered by the
Holder thereof to the Trustee for cancelation. Whenever a part of a Global
Security is exchanged for one or more Definitive Securities the Global Security
shall be surrendered by the Holder thereof to the Trustee who shall cause an
adjustment to be made to Schedule A of such Global Security such that the
principal amount of such Global Security shall be equal to the portion of such
Global Security not exchanged and shall thereafter return such Global Security
to such Holder. All Definitive Securities issued in exchange for a Global
Security or any portion thereof shall be registered in such names as the
Depositary shall instruct the Trustee based on the instructions of DTC. Every
Security authenticated and delivered in exchange for or in lieu of a Global
Security, or any portion thereof, pursuant to Section 2.06(a), 2.06(b), 2.07,
2.09 or 3.06 hereof or otherwise, shall be authenticated and delivered in the
form of, and shall be, a Global Security. A Global Security may not be
exchanged for a Definitive Security other than as provided in this Section
2.06(d).
(e) Definitive Securities shall be transferable only upon the
surrender of a Definitive Security for registration of transfer. When a
Definitive Security is presented to the Registrar or a co-registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if its requirements for such transfers are met. When a Definitive
Security is presented to the Registrar or co-registrar with a request to
transfer in part, the transferor shall be entitled to receive without charge a
Definitive Security representing the balance of such Definitive Security not
transferred. When Definitive Securities are presented to the Registrar or a co-
registrar with a request to exchange them for an equal aggregate principal
amount of Definitive Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Definitive Securities at the Registrar's or co-
registrar's request.
(f) The Company shall not be required to make, and the Registrar need
not register transfers or exchanges of, Definitive Securities selected for
redemption (except, in the case of Definitive Securities to be redeemed in part,
the portion thereof not to be redeemed) or any Definitive Securities for a
period of 15 days before a selection of Definitive Securities to be redeemed.
<PAGE>
42
(g) Prior to the due presentation for registration of transfer of any
Definitive Security, the Company, the Trustee, the Paying Agent, the Registrar
or any co-registrar may deem and treat the Person in whose name a Definitive
Security is registered as the absolute owner of such Definitive Security for the
purpose of receiving payment of principal, interest or Additional Amounts, if
any, on such Definitive Security and for all other purposes whatsoever, whether
or not such Definitive Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected
by notice to the contrary.
(h) The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with any transfer
or exchange pursuant to this Section 2.06 (other than in respect of the
Registered Exchange Offer, except as otherwise provided in the Exchange and
Registration Rights Agreement).
(i) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
(j) Holders of Initial Securities (or holders of interests therein)
and prospective purchasers designated by such Holders (or holders of interests
therein) shall have the right to obtain from the Company upon request by such
Holders (or holders of interests therein) or prospective purchasers, during any
period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act or exempt from reporting pursuant to 12g3-2(b) under the Exchange
Act, the information required by paragraph d(4)(i) of Rule 144A in connection
with any transfer or proposed transfer of such Securities.
SECTION 2.07. Replacement Securities. If a mutilated Definitive
-----------------------
Security is surrendered to the Registrar, if a mutilated Global Security is
surrendered to the Trustee or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security in such form as the
Security being replaced if the requirements of Section 8-405 of the Uniform
Commercial Code are met, such that the Holder (i) notifies the Company or the
Trustee within a reasonable time after he has notice of such loss, destruction
or wrongful taking and the Registrar, in the case of Definitive Securities, does
<PAGE>
43
not register a transfer prior to receiving such notification, (ii) so requests
the Company or the Trustee prior to the Security being acquired by a bona fide
purchaser and (iii) satisfies any other reasonable requirements of the Trustee.
If required by the Trustee or the Company, such Holder shall furnish an
indemnity bond sufficient in the judgment of the Trustee to protect the Company,
the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss
that any of them may suffer if a Security is replaced. The Company and the
Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
-----------------------
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. Subject to Section 10.06, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal, interest and Additional Amounts, if any, payable on that date
with respect to the Securities (or portions thereof) to be redeemed or maturing,
as the case may be, and the Paying Agent is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or portions thereof)
cease to be outstanding and interest and Additional Amounts, if any, on them
cease to accrue.
SECTION 2.09. Temporary Securities. Until permanent Definitive
---------------------
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Definitive Securities upon receipt of a Company Order in
the form of an Officers' Certificate. The Officers' Certificate shall specify
the amount of temporary Definitive Securities to be authenticated and the date
on which the temporary Definitive Securities are to be authenticated. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations
<PAGE>
44
that the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
upon receipt of a Company Order pursuant to Section 2.02 permanent Definitive
Securities and deliver them in exchange for temporary Definitive Securities.
SECTION 2.10. Cancelation. The Company at any time may deliver
------------
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall cancel and forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee, at the written
direction of the Company, shall destroy any canceled securities and deliver a
certificate of such destruction to the Company, unless the Company directs the
Trustee in writing to deliver canceled Securities to the Company. Subject to
Section 2.07, the Company may not issue new Securities to replace Securities it
has redeemed, paid or delivered to the Trustee for cancelation. The Trustee
shall not authenticate Securities in place of canceled Securities other than
pursuant to the terms of this Indenture. If the Company shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancelation pursuant to this Section
2.10.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
-------------------
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) to, in
the case Definitive Securities, the Persons who are Securityholders on a
subsequent special record date and, in the case of a Global Security, to the
Holder thereof (but only in respect of the principal amount of such Global
Security on such date), which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest. The Company
shall notify the Trustee and Paying Agent in writing of the amount of defaulted
interest proposed to be paid on each Security and the date of the proposed
payment (a "Default Interest Payment Date"), and at the same time the Company
shall deposit with the Trustee or Paying Agent an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest or
shall make arrangements satisfactory to the Trustee or Paying Agent for such
deposit prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such defaulted
interest as in this Section 2.11; provided, however, that in no event shall the
-------- -------
Company
<PAGE>
45
deposit monies proposed to be paid in respect of defaulted interest later than
10:00 a.m. New York City time on the proposed Default Interest Payment Date. At
least 15 days before the subsequent special record date, the Company shall
publish in a leading newspaper having a general circulation in New York (which
is expected to be the Wall Street Journal) (and so long as the Securities are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)) or, in the case of Definitive
Securities, mail by first-class mail to each Holder's registered address, with a
copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid. Such notice shall also be given in
accordance with the applicable requirements of any other securities exchange on
which the Securities are listed.
SECTION 2.12. CUSIP and CINS Numbers. The Company in issuing the
-----------------------
Securities may use a "CUSIP" or "CINS" number (if then generally in use) and, if
so, the Trustee shall use the "CUSIP" or "CINS" number in notices of redemption
as a convenience to Holders; provided, however, that any such notice may state
-------- -------
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company shall promptly notify the Trustee of any
change in the CUSIP or CINS number.
SECTION 2.13. Deposit of Moneys. In the case of the Regulation S
------------------
Global Security (except as set forth below) and any Definitive Securities, prior
to 10:00 a.m. London time on the second Business Day preceding each Interest
Payment Date or the Maturity Date and on the Business Day immediately following
any acceleration of the Notes pursuant to Section 6.02, the Company shall
deposit with the Paying Agent in immediately available funds money in such coin
or currency of the Federal Republic of Germany as at the time of payment shall
be legal tender for payment of public and private debts, sufficient to make cash
payments, if any, due on such Interest Payment Date, Maturity Date or Business
Day, as the case may be, in a timely manner which permits the Paying Agent to
remit payment to the Holders on such Interest Payment Date, Maturity Date or
Business Day, as the case may be.
<PAGE>
46
In the case of the Rule 144A Global Security and the IAI Global
Security, in the event any Holder elects to receive payment in Deutsche Marks
pursuant to paragraph 3 of the Notes, then prior to 10:00 a.m. London time on
the second Business Day preceding each Interest Payment Date or the Maturity
Date and on the Business Day immediately following any acceleration of the Notes
pursuant to Section 6.02, the Company shall deposit with the Paying Agent in
immediately available funds money in such coin or currency of the Federal
Republic of Germany as at the time of payment shall be legal tender for payment
of public and private debts, sufficient to make cash payments, if any, due on
such Interest Payment Date, Maturity Date or Business Day, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to such
Holders on such Interest Payment Date, Maturity Date or Business Day, as the
case may be. In the event the Holders do not elect to receive payment in
Deutsche Marks pursuant to paragraph 3 of the Notes (and, in the case of the
Regulation S Global Security, in the event the Holders do not provide the DTC
with payment instructions for receipt of payments in Deutsche Marks), then prior
to 10:00 a.m. London time on the third Business Day preceding each Interest
Payment Date or the Maturity Date and on the Business Day immediately following
any acceleration of the Notes pursuant to Section 6.02, the Company shall
deposit with the Paying Agent in immediately available funds money in such coin
or currency of the Federal Republic of Germany as at the time of payment shall
be legal tender for payment of public and private debts, sufficient to make cash
payments, if any, due on such Interest Payment Date, Maturity Date or Business
Day, as the case may be, in a timely manner which permits the Paying Agent to
remit payment to such Holders on such Interest Payment Date, Maturity Date or
Business Day, as the case may be.
Payments with respect to the Rule 144A Global Security and the IAI
Global Security shall be converted by the Paying Agent into U.S. dollars prior
to payment, except to the extent DTC notifies the Paying Agent that a holder of
a beneficial interest in the Rule 144A Global Security or the IAI Global
Security has elected to receive payment in Deutsche Marks in accordance with
governing DTC procedures.
SECTION 2.14. Certain Matters Relating to Global Securities.
----------------------------------------------
(a) Owners of beneficial interests in any Global Security shall have
no rights under this Indenture with respect to such Global Security held on
their behalf by the Depositary or under the Global Security, and the Depositary
<PAGE>
47
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of the Global Security for all purposes
whatsoever, except as otherwise provided herein. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Security.
(b) The Holder of any Global Security may grant proxies and otherwise
authorize any person to take any action which a Holder is entitled to take under
this Indenture or the Securities.
SECTION 2.15. Substitution of Currency. If the Federal Republic of
-------------------------
Germany adopts the Euro, the regulations of the European Commission relating to
the euro shall apply to the Securities and the Indenture. The circumstances and
consequences described in this Section 2.15 entitle neither the Company nor any
Holder to early redemption, rescission, notice, repudiation, adjustment or
renegotiation of the terms and conditions of the Securities or the Indenture or
to raise other defenses or to request any compensation claim, nor shall they
affect any of the other obligations of the Company under the Securities and this
Indenture.
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
-------------------
Securities pursuant to paragraph 6 or 7 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
shall occur.
The Company shall give each notice to the Trustee provided for in this
Section at least 45 days before the redemption date and at least 15 days prior
to the giving of the notice contemplated by Section 3.03 unless the Trustee
consents to a shorter period. Such notice to the Trustee shall be accompanied
by an Officers' Certificate and an Opinion of Counsel from the Company to the
effect that such redemption shall comply with the conditions herein. If fewer
than all the Securities are to be redeemed, the record date relating to such
redemption shall be selected by the
<PAGE>
48
Company and given to the Trustee, which record date shall be not fewer than 15
days after the date of notice to the Trustee. Any such notice may be canceled
at any time prior to notice of such redemption being published or mailed to any
Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
---------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed in compliance with the requirements of the principal securities
exchange, if any, on which such Securities are listed or, if such Securities are
not so listed or such exchange prescribes no method of selection, on a pro rata
basis by lot or by such other method that the Trustee in its sole discretion
shall deem to be fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances (and in
such manner as complies with applicable legal and exchange requirements). The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than DM1,000 in original
principal amount. Securities and portions of them the Trustee selects shall be
in amounts of DM1,000 or a whole multiple of DM1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company
promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
---------------------
than 60 days before a date for redemption of Securities, the Company shall
publish in a leading newspaper having a general circulation in New York (which
is expected to be the Wall Street Journal), or, in the case of Definitive
Securities, mail or cause to be mailed a notice of redemption by first class
mail, postage prepaid, to the registered address of each Holder whose Securities
are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price and the amount of accrued and unpaid
interest, if any, and Additional Amounts, if any, to be paid;
(3) the name and address of the Paying Agent;
<PAGE>
49
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued and unpaid
interest, if any, and Additional Amounts, if any;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities (or
portion thereof) to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is pro hibited from making such payment
pursuant to the terms of this Indenture, interest and Additional Amounts,
if any, on Securities (or portion thereof) called for redemption ceases to
accrue on and after the redemption date;
(7) (i) if any Global Security is being redeemed in part, the portion
of the principal amount of such Security to be redeemed and that, after the
redemption date, interest and Additional Amounts, if any, shall cease to
accrue on the portion called for redemption, and upon surrender of such
Global Security, the Global Security with a notation on Schedule A thereof
adjusting the principal amount thereof to be equal to the unredeemed
portion, shall be returned and (ii) if any Definitive Security is being
redeemed in part, the portion of the principal amount of such Security to
be redeemed, and that, after the redemption date, upon surrender of such
Definitive Security, a new Definitive Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof shall be issued in
the name of the Holder thereof, upon cancelation of the original Security;
(8) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(9) the CUSIP or CINS number, if any, printed on the Securities being
redeemed; and
(10) that no representation is made as to the correctness or accuracy
of the CUSIP or CINS number, if any, listed in such notice or printed on
the Securities.
If at the time a notice of redemption is being made to Holders of
Securities pursuant to this Section 3.04, Securities are listed on the
Luxembourg Stock Exchange, and
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50
so long as the rules of the Luxembourg Stock Exchange so require, the Company
shall also cause a notice of redemption to be published in a leading daily
newspaper of general circulation in Luxembourg (which is expected to be the
Luxemburger Wort), at least 30 days but not more than 60 days before the
Redemption Date. Notice of redemption shall also be given in accordance with
any applicable requirements of any other securities exchange on which the
Securities are listed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
-------------------------------
redemption is given in accordance with Section 3.03, Securities called for
redemption become due and payable on the redemption date and at the redemption
price plus accrued and unpaid interest and Additional Amounts, if any, stated in
the notice. Upon surrender to the Trustee or Paying Agent, such Securities
shall be paid at the redemption price stated in the notice, plus accrued
interest and Additional Amounts, if any, to the redemption date; provided that
--------
in the case of Definitive Securities if the redemption date is after a regular
record date and on or prior to the interest payment date, the accrued interest
shall be payable to the Securityholder of the redeemed Securities registered on
the relevant record date. Failure to give notice or any defect in the notice to
any Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. In the case of the
----------------------------
Regulation S Global Security (except as set forth below) or any Definitive
Securities, prior to 10:00 a.m. London time on the second Business Day
preceeding any redemption date, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) in immediately available funds money in such coin or currency of
the Federal Republic of Germany as at the time of payment shall be legal tender
for payment of public and private debts, sufficient to pay the redemption price
of and accrued and unpaid interest and Additional Amounts, if any, on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption that have been delivered by the Company to the
Trustee for cancelation.
<PAGE>
51
In the case of the Rule 144A Global Security and the IAI Global
Security, in the event any Holder elects to receive payment in Deutsche Marks
pursuant to paragraph 3 of the Notes, then prior to 10:00 a.m. London time on
the second Business Day preceeding any redemption date, the Company shall
deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying
Agent, shall segregate and hold in trust) in immediately available funds money
in such coin or currency of the Federal Republic of Germany as at the time of
payment shall be legal tender for payment of public and private debts,
sufficient to pay the redemption price of and accrued and unpaid interest and
Additional Amounts, if any, on all Securities to be redeemed on that date other
than Securities or portions of Securities called for redemption that have been
delivered by the Company to the Trustee for cancelation. In the event the
Holders do not elect to receive payment in Deutsche Marks pursuant to paragraph
3 of the Notes (and, in the case of the Regulation S Global Security, in the
event the Holders do not provide the DTC with payment instructions for receipt
of payments in Deutsche Marks), then prior to 10:00 a.m. London time on the
third Business Day preceeding any redemption date, the Company shall deposit
with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent,
shall segregate and hold in trust) in immediately available funds money in such
coin or currency of the Federal Republic of Germany as at the time of payment
shall be legal tender for payment of public and private debts, sufficient to pay
the redemption price of and accrued and unpaid interest and Additional Amounts,
if any, on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption that have been delivered by the
Company to the Trustee for cancelation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the redemption date due to the failure of
the Company to deposit sufficiant funds with the Paying Agent, the principal
amount at maturity thereof, premium, if any, accrued and unpaid interest and
Additional Amounts, if any, thereon shall, until paid, bear interest as provided
in Section 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
----------------------------
Definitive Security that is redeemed in part, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder (at the Company's expense)
a new Definitive Security equal in principal amount to the unredeemed portion of
the Definitive Security surrendered. Upon surrender of a Global Security that
is redeemed in part, the Paying Agent shall forward such Global Security to
<PAGE>
52
the Trustee who shall make a notation on Schedule A thereof to reduce the
principal amount of such Global Security to an amount equal to the unredeemed
portion of the Global Security surrendered.
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities. The Company shall promptly pay
----------------------
the principal of and interest and Additional Amounts, if any, on the Securities
on the dates and in the manner provided in the Securities and in this Indenture.
Principal, interest and Additional Amounts shall be considered paid on the date
due if at 10:00 a.m. London time on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, interest and Additional Amounts then due and the Trustee or the
Paying Agent, as the case may be, is not prohibited from paying such money to
the Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue princi pal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Maintenance of Office or Agency; Reports to Holders.
----------------------------------------------------
(a) The Company shall maintain the office or agency (which office may be an
office of the Trustee or an affiliate of the Trustee, Registrar or co-Registrar)
required under Section 2.03 where Securities may be surrendered for registration
of transfer or for exchange and where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Company
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
10.02. The Company hereby initially designates the office of the Trustee,
located at 101 Barclay Street, New York, NY 10286, as its office or agency
outside the United Kingdom as required under Section 2.03 hereof.
<PAGE>
53
(b) Whether or not required by the rules and regulations of the
Commission, the Company shall furnish to the holders of the Securities (i) all
annual and quarterly financial information that would be required to be
contained in a filing with the Commission on Forms 20-F and 10-Q (or any
successor forms) if the Company were required to file such Forms (except that
quarterly financial information need not contain any reconciliation to U.S.
generally accepted accounting principles), including a "Management's Discussion
and Analysis of Financial Conditions and Results of Operations" and, with
respect to the annual financial information, a report thereon by the Company's
certified independent accounts and (ii) all information that would be required
to be contained in current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports;
provided, however, that (x) such quarterly financial information may be prepared
- -------- -------
in accordance with generally accepted accounting principles in the United
Kingdom, shall be furnished within 60 days following the end of each fiscal
quarter of the Company and may be provided in a report on Form 6-K, (y) such
annual financial information shall be furnished within 120 days following the
end of the fiscal year of the Company and (z) such information that would be
required to be contained in a report on Form 8-K may be provided in a report on
Form 6-K. In addition, whether or not required by the rules and regulations of
the Commission, the Company shall file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such a filing). In addition, the Company shall furnish to the
Holders of the Securities and to prospective investors, upon the requests of
such Holders, any information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act so long as the Securities are not freely
transferable under the Act by Persons not "affiliates" under the Securities Act.
The Company shall also comply with the provisions of TIA Section 314(a).
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall
---------------------------
not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness;
provided, however, that the Company or a Restricted Subsidiary may Incur
Indebtedness if on the date thereof the Consolidated Coverage Ratio would be
greater than 2.0:1. Notwithstanding the foregoing, the Company shall not permit
any Restricted Subsidiary to issue, to any party other than the Company or a
Wholly Owned Subsidiary of the Company, (i) any Preferred Stock or (ii) any
Indebtedness that by its terms is subordinated or junior in right of payment to
any other Indebtedness of such Restricted Subsidiary.
<PAGE>
54
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness (hereafter
"Permitted Indebtedness"):
(i) Indebtedness (x) of the Company under the Revolving Facility
(as the same may be amended from time to time without increasing the
committed amount available or outstanding, except as otherwise permitted by
this Section) and (y) of the Company and Restricted Subsidiaries under
other credit agreements in an aggregate principal amount at any time
outstanding for both (x) and (y) not to exceed the greater of (A)
(Pounds)15.0 million, less any repayments and commitment reductions made
pursuant to clause (a)(iii)(A) of Section 4.06, and (B) the Borrowing Base
at the time such Indebtedness is Incurred;
(ii) Indebtedness of the Company owing to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and
held by the Company or any Wholly Owned Subsidiary; provided, however, that
any subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly Owned Subsidiary) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iii) Indebtedness represented by the Securities;
(iv) any Indebtedness (other than the Indebtedness described in
clauses (i) through (iii) above) outstanding on the Issue Date;
(v) any Refinancing Indebtedness Incurred in respect of any
Indebtedness described in clause (i), (iii), or (iv) or paragraph (a)
above;
(vi) (A) Indebtedness or Preferred Stock of a Restricted Subsidiary
Incurred and outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness or
Preferred Stock Incurred in contemplation of, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Subsidiary or was otherwise acquired by the
Company); provided, however, that at the time such Restricted Subsidiary is
acquired
<PAGE>
55
by the Company, the Company would have been able to Incur $1.00 of
additional Indebtedness pursuant to paragraph (a) after giving effect to
such acquisition (including the Incurrence of such Indebtedness or
Preferred Stock pursuant to this clause (vi)) and (B) Refinancing
Indebtedness Incurred by a Restricted Subsidiary in respect of
Indebtedness Incurred by such Restricted Subsidiary pursuant to this
clause (vi);
(vii) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by the
Company and its Restricted Subsidiaries in the ordinary course of their
business and which do not secure other Indebtedness, and (B) of the Company
or any Restricted Subsidiary under Currency Agreements and Interest Rate
Agreements, in each case entered into for bona fide hedging purposes of the
Company or such Restricted Subsidiary in the ordinary course of business
and not for purposes of speculation; provided, however, that, in the case
of Currency Agreements and Interest Rate Agreements, such Currency
Agreements and Interest Rate Agreements do not increase the Indebtedness of
the Company or any Restricted Subsidiary outstanding at any time other than
as a result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder;
(viii) Purchase Money Indebtedness and Capitalized Lease Obligations
in an aggregate principal amount on the date of Incurrence which, when
added to all other Purchase Money Indebtedness and Capitalized Lease
Obligations Incurred pursuant to this clause (viii) and then outstanding,
shall not exceed (Pounds)5.0 million;
(ix) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to paragraph (a) or any other clause of this paragraph (b)) in an
aggregate principal amount on the date of Incurrence which, when added to
all other Indebtedness Incurred pursuant to this clause (ix) and then
outstanding, shall not exceed (Pounds)12.0 million;
(x) Indebtedness represented by a grant or advance made available by
a federal, state or governmental agency or department or other like body
which is repayable only upon the Company or a Restricted Subsidiary (as the
case may be) failing to satisfy one or more conditions set out in the terms
of such grant or advance, provided there has been no such failure to
<PAGE>
56
satisfy any of such conditions, not to exceed (Pounds)1.0 million
outstanding from time to time;
(xi) Indebtedness arising from indemnification agreements or purchase
price adjustments in the ordinary course of business; or
(xii) Indebtedness owed in respect of compensation claims or other
employee insurance arrangements in the ordinary course of business.
(c) Notwithstanding the foregoing, the Company may not Incur any
Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Securities to at least the same extent as such Subordinated
Obligations.
(d) Notwithstanding any other provision of this Section 4.03, the maximum
amount of Indebtedness that the Company or any Restricted Subsidiary may Incur
pursuant to this Section shall not be deemed to be exceeded solely as a result
of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this Section 4.03, (i) Indebtedness Incurred pursuant to
the Credit Agreement prior to or on the date of the Indenture shall be treated
as Incurred pursuant to clause (i) of paragraph (b) above, (ii) Indebtedness
permitted by this Section 4.03 need not be permitted solely by reference to one
provision permitting such Indebtedness but may be permitted in part by one such
provision and in part by one or more other provisions of this Section permitting
such Indebtedness and (iii) in the event that Indebtedness or any portion
thereof meets the criteria of more than one of the types of Indebtedness
described in this Section, the Company, in its sole discretion, shall classify
such Indebtedness and only be required to include the amount of such
Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
----------------------------------
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to:
(i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except (A) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (B)
<PAGE>
57
dividends or distributions payable to the Company or another Restricted
Subsidiary (and, if such Restricted Subsidiary is not wholly owned and such
dividend or distribution is being paid on Voting Stock other than Preferred
Stock, to its other shareholders on a pro rata basis);
(ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company held by any Person or any Capital Stock of a
Restricted Subsidiary held by any Affiliate of the Company (other than a
Restricted Subsidiary);
(iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition); or
(iv) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment described in clauses (i)
through (iv) hereof being herein referred to as a "Restricted Payment") if at
the time the Company or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under paragraph (a) of Section 4.03; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a resolution of the Board of Directors) declared or
made subsequent to the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from January 1, 1998, to
<PAGE>
58
the end of the most recent fiscal quarter ending at least 45 days prior to the
date of such Restricted Payment, (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issue or sale of its Capital Stock (other than Disqualified Stock) subsequent to
the Issue Date (other than an issuance or sale to a Subsidiary of the Company or
an employee stock ownership plan or other trust established by the Company or
any of its Subsidiaries;
(C) the amount by which Indebtedness of the Company or its Restricted
Subsidiaries is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary) subsequent to the Issue Date of any
Indebtedness of the Company or its Restricted Subsidiaries issued after the
Issue Date that is convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash or other
property distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange); and
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends, repayments
of the principal of loans or advances or other transfers of assets to the
Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of "Investment") not to exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments previously made
by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary,
which amount was included in the calculation of the amount of Restricted
Payments.
<PAGE>
59
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of the Company or
Subordinated Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary
or an employee stock ownership plan or other trust established by the Company or
any of its Subsidiaries; provided, however, that (A) such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale shall be excluded from clause (3)(B) of
paragraph (a) above;
(ii) any purchase or redemption of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
paragraph (b) of Section 4.03; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments;
(iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 4.06; provided, however, that
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
Section 4.04(a); provided, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments; or
(v) the repurchase of shares of, or options to purchase shares of,
common stock of the Company or any of its Subsidiaries from employees, former
employees, directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former employees,
directors or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto) approved by
the Board of Directors under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such common stock; provided,
however, that the aggregate
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60
amount of such repurchases shall not exceed (Pounds)1.0 million in any calendar
year; provided further, however, that such repurchases shall be excluded in the
calculation of the amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries. The Company shall not, and shall not permit any
- ------------------------
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness owed to the Company or any Restricted
Subsidiary, (ii) make any loans or advances to the Company or any Restricted
Subsidiary or (iii) transfer any of its property or assets to the Company or any
Restricted Subsidiary, except:
(1) any encumbrance or restriction arising under applicable law;
(2) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date;
(3) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred in contemplation
of, or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was otherwise
acquired by the Company) and outstanding on such date;
(4) any encumbrance or restriction pursuant to an agreement
constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to an
agreement referred to in clause (1) or (2) of this Section or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or (2) of
this Section or this clause (3); provided, however, that the encumbrances and
restrictions contained in any such refinancing agreement or amendment are no
less favorable to the Securityholders than encumbrances and restrictions
contained in such agreements;
<PAGE>
61
(5) in the case of clause (iii), any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or transfer of
any property or asset that is subject to a lease, license or similar contract,
(B) by virtue of any transfer of, agreement to transfer, option or right with
respect to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture or (C) contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such encumbrance or restrictions restrict the transfer
of the property subject to such security agreements or mortgages;
(6) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and
(7) Purchase Money Indebtedness and Capital Lease Obligations
permitted by clause (viii) of Section 4.03.
Nothing contained in this Section 4.05 shall prevent the Company from
entering into any agreement or instrument providing for the incurrence of
Permitted Liens, nor shall this Section 4.05 be deemed to restrict the sale or
other disposition of property or assets of the Company or any of its Restricted
Subsidiaries in compliance with the other provisions of the Indenture.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
---------------------------------------------------
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Disposition at least equal to the fair market value of the shares and
assets subject to such Asset Disposition;
(ii) at least 80% of the consideration thereof received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents; and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the
<PAGE>
62
Company (or such Restricted Subsidiary, as the case may be):
(A) first, to the extent the Company elects (or is required by the
terms of any Senior Indebtedness or Indebtedness (other than Preferred Stock) of
a Wholly Owned Subsidiary), to prepay, repay or purchase Senior Indebtedness
(other than the Securities) or Indebtedness (other than Preferred Stock) of a
Wholly Owned Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company) within 365 days after the later of the
date of such Asset Disposition or the receipt of such Net Available Cash;
(B) second, to the extent of the balance of Net Available Cash after
application in accordance with clause (A), to the extent the Company or such
Restricted Subsidiary elects, to reinvest in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by the Company or another Restricted Subsidiary) within
365 days from the later of such Asset Disposition or the receipt of such Net
Available Cash;
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an Offer (as
defined below) to purchase Securities pursuant to and subject to the conditions
of Section 4.06(b), and
(D) fourth, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A), (B) and (C), to (x) acquire
Additional Assets (other than Indebtedness and Capital Stock) or (y) prepay,
repay or purchase Indebtedness of the Company (other than Indebtedness owed to
an Affiliate of the Company and other than Disqualified Stock of the Company) or
Indebtedness of any Restricted Subsidiary (other than Indebtedness owed to the
Company or an Affiliate of the Company), in each case described in this clause
(D) within one year from the receipt of such Net Available Cash or, if the
Company has made an Offer pursuant to clause (C), six months from the date such
Offer is consummated;
<PAGE>
63
provided, however that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A), (C) or (D) above, the Company
or such Restricted Subsidiary shall retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.06, the
Company and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 4.06 except to the extent that
the aggregate Net Available Cash from all Asset Dispositions that is not applied
in accordance with this Section 4.06 exceeds (Pounds)3.0 million.
For the purposes of this Section 4.06, the following are deemed to be
cash: (x) the assumption of Indebtedness of the Company (other than Disqualified
Stock of the Company) or any Restricted Subsidiary and the release of the
Company or such Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition and (y) securities received by the
Company or any Restricted Subsidiary from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Securities pursuant to clause (a)(iii)(C) of this Section 4.06, the Company
shall be required to purchase Securities tendered pursuant to an offer by the
Company for the Securities (the "Offer") at a purchase price of 100% of their
principal amount plus accrued interest and Additional Amounts, if any, to the
date of purchase (and, in the case of Definitive Securities, subject to the
right of Holders of record on a record date to receive interest on the relevant
interest payment date and Additional Amounts, if any, in respect thereof) in
accordance with the procedures (including prorationing in the event of
oversubscription) set forth in Section 4.06(c). If the aggregate purchase price
of Securities tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of the Securities, the Company shall apply the
remaining Net Available Cash in accordance with clause (a)(iii)(D) of this
Section 4.06. The Company shall not be required to make an Offer for Securities
pursuant to this Section if the Net Available Cash available therefor (after
application of the proceeds as provided in clauses (A) and (B) of this Section
4.06 (a)(iii)) is less than (Pounds)3.0 million for any particular Asset
Disposition (which lesser amount shall be carried
<PAGE>
64
forward for purposes of determining whether an Offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
If the Purchase Date (as defined below) is on or after an interest
record date and on or before the related Interest Payment Date, any accrued and
unpaid interest shall be paid in the case of a Global Security, to the Holder
thereof or, in the case of a Definitive Security, to the Person in whose name
such Definitive Security is registered at the close of business on such Record
Date, and no additional interest shall be payable to Holders with respect to
Securities tendered pursuant to the Offer.
(c) (1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and to publish in a leading newspaper having a general circulation
in New York (which is expected to be the Wall Street Journal) (and, if and so
long as the Securities are listed on the Luxembourg Stock Exchange and the rules
of such Stock Exchange shall so require, a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort)) or, in
the case of Definitive Securities, mail or cause to be mailed a notice of an
Offer by first class mail, postage prepaid, to the registered address of each
Holder whose Securities are to be purchased. The notice shall state that the
Holder may elect to have his Securities purchased by the Company either in whole
or in part (subject to pro-rationing as hereinafter described in the event the
Offer is oversubscribed) in integral multiples of DM1,000 of principal amount,
at the applicable purchase price. The notice shall specify a purchase date not
less than 30 days nor more than 60 days after the date of such notice (the
"Purchase Date") and shall contain (or, in the case of a notice by publication,
shall contain instructions on how to obtain from the Company by first class
mail, postage prepaid) such information concerning the business of the Company
which the Company in good faith believes shall enable such Holders to make an
informed decision (which at a minimum shall include (i) a description of
material developments in the Company's business subsequent to the date of the
latest annual, quarterly or Form 8-K information provided pursuant to this
Indenture, (ii) if material, appropriate pro forma financial information and
(iii) all instructions and materials necessary to tender Securities pursuant to
the Offer, together with the address referred to in clause (3)). Notice of an
Offer shall also be given in accordance with any applicable requirements of any
other securities exchange on which the Securities are listed.
<PAGE>
65
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provisions of this
Section. Upon the expiration of the period for which the Offer remains open
(the "Offer Period"), the Company shall deliver to the Trustee for adjustment
(in the case of Global Securities) or cancelation (in the case of Definitive
Securities) the Securities or portions thereof that have been properly tendered
to and are to be accepted by the Company. On the Purchase Date, the Paying
Agent shall promptly cause the principal amount of any Global Security tendered
pursuant to the Offer to be adjusted on Schedule A thereof to be equal to any
unpurchased portion of such Global Security which unpurchased portion must be
equal to DM1,000 in principal amount at maturity or an integral multiple
thereof, and shall promptly authenticate and mail or deliver to each tendering
Holder of a Definitive Security, a new Definitive Security or Securities equal
in principal amount to any unpurchased portion of the Definitive Security
surrendered which unpurchased portion must be equal to DM1,000 in principal
amount at maturity or an integral multiple thereof. The Trustee shall promptly
(but in any case not later than five Business Days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
Securities tendered by such Holder and accepted by the Company for purchase.
Any Securities not so accepted shall be promptly mailed or delivered by or on
behalf of the Company to the Holder thereof. The Company shall publicly
announce the results of the Offer not later than the third Business Day
following the Purchase Date. In the event that the aggregate principal amount
of the Securities or portion thereof surrendered by Securityholders thereof
pursuant to an Offer is less than the Offer Amount, the Trustee shall deliver
the excess to the Company immediately after the expiration of the Offer Period
for application in accordance with this Section.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appro priate form duly completed, to the
Company at the address
<PAGE>
66
specified in the notice at least three Business Days prior to the Purchase Date.
Holders shall be entitled to withdraw their election if the Trustee or the
Company receives not later than one Business Day prior to the Purchase Date, a
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered by the Holder for purchase
and a statement that such Holder is withdrawing his election to have such
Security purchased. If at the expiration of the Offer Period the aggregate
principal amount of Securities surrendered by Holders exceeds the Offer Amount,
the Company shall select the Securities to be purchased in compliance with the
requirements of the principal securities exchange, if any, on which such
Securities are listed or, if such Securities are not so listed or such exchange
prescribes no method of selection, subject to applicable law, on a pro rata
basis (with such adjustments as may be deemed appropriate by the Company so that
only Securities in denominations of DM1,000, or integral multiples thereof,
shall be purchased).
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations, including any securities laws of the United Kingdom and
Luxembourg and the requirements of the Luxembourg Stock Exchange or any other
securities exchange on which the Securities are listed, to the extent such laws
or regulations are applicable, in connection with the repurchase of Securities
pursuant to this Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a)
-------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into or conduct any transaction (including, the
purchase, sale, lease or exchange of any
<PAGE>
67
property or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") on terms (i) that are less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate and (ii) that, in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, are not in
writing and have not been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction and who are not
employed by or otherwise associated with such Affiliate. In addition, if such
Affiliate Transaction involves an amount in excess of $5.0 million, a fairness
opinion must be provided by an independent internationally recognized appraisal
or investment banking firm.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii)
loans or advances to employees in the ordinary course of business in accordance
with past practices of the Company or its Subsidiaries, but in any event not to
exceed (Pounds)1.0 million in the aggregate outstanding at any one time, (iv)
the payment of reasonable fees and the provision of reasonable indemnities in
the ordinary course of business to directors of and consultants to the Company
or its Subsidiaries who are not employees of the Company or its Subsidiaries,
(v) any transaction between the Company and a Wholly Owned Subsidiary or between
Wholly Owned Subsidiaries, (vi) transactions pursuant to written agreements as
in effect on the Issue Date, (vii) any issuance of Capital Stock by the Company,
and (viii) employment agreements providing for reasonable compensation and
reasonable indemnities in the ordinary course of business.
SECTION 4.08. Change of Control. (a) Upon a Change of Control, each
------------------
Holder shall have the right to require that the Company repurchase all of such
Holder's Securities at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and Additional Amounts, if any,
to the date of repurchase (and, in the case of Definitive Securities, subject to
the right of Holders of record on a record date to receive interest on the
relevant interest payment date and Additional Amounts, if any, in respect
thereof), in accordance with the terms contemplated in Section 4.08(b);
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68
provided, however, that notwithstanding the occurrence of a Change in Control,
- -------- -------
the Company shall not be obligated to purchase the Securities pursuant to this
Section 4.08 in the event that it has exercised its right to redeem all the
Securities under paragraph 6 or 7 of the Securities. In the event that at the
time of such Change of Control the terms of the Bank Indebtedness restrict or
prohibit the repurchase of Securities pursuant to this Section, then prior to
the publishing or mailing of the notice to Holders provided for in Section
4.08(b) below but in any event within 30 days following any Change of Control,
the Company shall (i) repay in full all Bank Indebtedness or offer to repay in
full all Bank Indebtedness and repay the Bank Indebtedness of each lender who
has accepted such offer or (ii) obtain the requisite consent under the
agreements governing the Bank Indebtedness to permit the repurchase of the
Securities as provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), the Company
shall deliver written notice to the Trustee and publish a notice in a leading
newspaper having a general circulation in New York (which is expected to be the
Wall Street Journal) (and, if and so long as the Securities are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require,
a newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or, in the case of Definitive Securities, mail a notice
to each Holder, in each case with a copy to the Trustee, with the following
information:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and Additional
Amounts, if any, to the date of repurchase (and in the case of
Definitive Securities, subject to the right of Holders of record on a
record date to receive interest on the relevant interest payment date
and Additional Amounts, if any, in respect thereof);
(2) the circumstances and relevant facts and financial
information regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is first published
or, where relevant, mailed, except as may otherwise be required by
applicable law); and
<PAGE>
69
(4) the instructions determined by the Company, consistent with
this Section, that a Holder must follow in order to have its
Securities purchased.
Such notice shall also be given in accordance with any applicable
requirements of any other securities exchange on which the Securities are
listed.
(c) Holders electing to have their Securities purchased shall be
required to surrender the Securities, with an appropriate form duly completed,
to the Company at the address specified in the notice at least three Business
Days prior to the purchase date. Holders shall be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the purchase date a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Securities which were delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities that are purchased by the
Company under this Section shall be delivered to the Trustee for adjustment (in
the case of Global Securities) or cancelation (in the case of Definitive
Securities), and the Trustee shall promptly cause the principal amount of any
Global Security tendered under this Section to be adjusted on Schedule A thereof
to be equal to any unpurchased portion of such Global Security which unpurchased
portion must be equal to DM1,000 in principal amount at maturity or an integral
multiple thereof, and shall promptly authenticate and mail or deliver to each
tendering Holder of a Definitive Security, a new Definitive Security or
Securities equal in principal amount to any unpurchased portion of the
Definitive Security surrendered which unpurchased portion must be equal to
DM1,000 in principal amount at maturity or an integral multiple thereof. The
Trustee shall promptly (but in any case not later than five Business Days after
the purchase date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Securities tendered by such Holder and accepted by the
Company for purchase pursuant to this Section. Any Securities not so accepted
shall be promptly mailed or delivered by or on behalf of the Company to the
Holder thereof. The Company shall publicly announce the results of the Offer
not later than the second Business Day following the purchase date.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations,
<PAGE>
70
including any securities laws of the United Kingdom and Luxembourg and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Securities are listed, to the extent such laws or regulations are
applicable in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.09. Compliance Certificate. The Company shall deliver to
-----------------------
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with Section 314(a)(4) of
the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
-----------------------------
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Limitation on Liens. The Company shall not, and shall
--------------------
not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien, other than Permitted Liens, on any of its property or
assets (including Capital Stock), whether owned on the Issue Date or thereafter
acquired, securing any obligation, unless contemporaneously therewith (or prior
to) effective provision is made to secure the Securities on an equal and ratable
basis with such obligation for so long as such obligation is so secured;
provided, however, that the Company shall not permit any Lien securing any
- -------- -------
Subordinated Obligation or Preferred Stock of the Company.
SECTION 4.12. Limitation on Guarantees of Company Indebtedness. The
-------------------------------------------------
Company shall not permit any Restricted Subsidiary to Guarantee any Indebtedness
of the Company or to secure any Indebtedness of the Company with a Lien on the
assets of such Restricted Subsidiary, unless contemporaneously therewith (or
prior thereto) effective provision is made to Guarantee or secure the
Securities, as the case may be, on an equal and ratable basis with such
<PAGE>
71
Guarantee or Lien for so long as such Guarantee or Lien remains effective, and
in an amount equal to the amount of Company Indebtedness so Guaranteed or
secured; provided, however, that any Guarantee by a Restricted Subsidiary of a
-------- -------
Subordinated Obligation of the Company shall be subordinated and junior in right
of payment to the contemporaneous Guarantee of the Securities by such Restricted
Subsidiary; and provided, further, that the Company shall not permit a
-------- -------
Restricted Subsidiary to secure any Subordinated Obligation of the Company or to
Guarantee or secure any Preferred Stock of the Company.
SECTION 4.13. Limitation on Lines of Business. The Company shall
--------------------------------
not, and shall not permit any Restricted Subsidiary to, engage in any business,
other than a Related Business.
SECTION 4.14. Limitation on Sale/Leaseback Transactions. The Company
------------------------------------------
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (a) the Company
or such Subsidiary would be entitled to (i) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 4.03 and (ii) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Securities pursuant
to Section 4.11, (b) the net cash proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair value (as determined in good faith by the Board of
Directors) of such property and (c) the transfer of such property is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
Section 4.06.
SECTION 4.15. Limitation on the Sale or Issuance of Capital Stock of
------------------------------------------------------
Restricted Subsidiaries. The Company shall not sell any Capital Stock of a
- ------------------------
Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly
or indirectly, to issue, sell or otherwise dispose of any of its Capital Stock
except: (i) to the Company or a Wholly Owned Subsidiary; or (ii) if,
immediately after giving effect to such issuance or sale, neither the Company
nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary.
The proceeds of any sale of such Capital Stock permitted hereby shall be treated
as Net Available Cash from an Asset Disposition and shall be applied in
accordance with Section 4.06.
SECTION 4.16. Additional Amounts. At least 10 days prior to the
-------------------
first date on which payment of principal,
<PAGE>
72
redemption price, interest, liquidated damages or premium is to be made on the
Securities by the Company, and at least 10 days prior to any subsequent such
date if there has been any change with respect to the matters set forth in the
Officers' Certificate described in this Section 4.16, the Company shall furnish
the Trustee and the Paying Agent, if other than the Trustee, with an Officers'
Certificate instructing the Trustee and the Paying Agent whether such payment of
principal, redemption price, interest, liquidated damages or premium on the
Securities (whether or not in the form of Definitive Securities) shall be made
to the Holders without withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or other governmental charges of
whatever nature (collectively "Taxes") imposed or levied by or on behalf of the
United Kingdom or any political subdivision thereof or any authority having the
authority to tax therein, unless the withholding or deduction of such Taxes is
then required by law. If any such withholding or deduction shall be required,
then such Officer's Certificate shall specify the amount, if any, required to be
withheld on such payments to such Holders and certify that the Company has
remitted or shall remit any required withholding payments to the appropriate
governmental authority or authorities, as the case may be, and the Company shall
pay to the Trustee or the Paying Agent the Additional Amounts pursuant to
Paragraph 2 of the Initial Securities or the Exchange Securities, as applicable.
The Company shall indemnify the Trustee and the Paying Agent for, and hold each
of them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on its part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officers' Certificate
furnished to them pursuant to this Section 4.16.
SECTION 4.17. Payment of Non-Income Taxes and Similar Charges. The
------------------------------------------------
Company shall pay any present or future stamp, court or documentary taxes, or
any other excise or property taxes, charges or similar levies which arise in any
jurisdiction from the execution, delivery or registration of this Indenture or
the Securities or any other document or instrument referred to herein or
therein, or the receipt of any payments with respect to the Securities,
excluding any such taxes, charges or similar levies imposed by any jurisdiction
outside of the United Kingdom, the United States of America or any jurisdiction
in which a Paying Agent is located, other than those resulting from, or required
to be paid in connection with, the enforcement of the Securities or any other
such document or instrument following the occurrence of any Event of Default
with respect to the Securities.
<PAGE>
73
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company May Merge or Transfer Assets. The Company
------------------------------------------
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a corporation organized and existing
under the laws of England and Wales or the United States of America,
any state thereof or the District of Columbia and the Successor
Company (if not the Company) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under
the Securities and this Indenture;
(ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the
Successor Company or any Restricted Subsidiary as a result of such
transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction), no Default
shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction,
the Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) immediately after giving effect to such transaction,
the Successor Company shall have Consolidated Net Worth in an amount
which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction;
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture
(if any) comply with this Indenture; and
(vi) the Company shall have delivered to the Trustee an
opinion of tax counsel reasonably acceptable to the Trustee stating
that (A) any payment of principal, redemption price or purchase price
of,
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74
premium (if any), Additional Amounts (if any) and interest on the
Securities by the Successor Company to a Holder (or beneficial owner,
if not a Holder) after the consolidation, merger, conveyance, transfer
or lease of assets shall be exempt from the Taxes described and
defined under Section 4.16 and (B) no other taxes on income (including
taxable capital gains) shall be payable under the laws of the United
Kingdom or any other jurisdiction where the Successor Company is or
becomes located by a Holder (or beneficial owner, if not a Holder) who
is not and is not deemed to be a resident of the United Kingdom or
other jurisdiction where the Successor Company is or becomes located
and does not carry on a trade in the United Kingdom through a branch,
agency or permanent establishment to which the Securities of that
Holder are attributable (or, as the case may be, does not carry on any
business activities through a branch, agency or permanent
establishment in such other jurisdiction where the Successor Company
is or becomes located) in respect of the acquisition, ownership or
disposition of Securities, including the receipt of principal, premium
(if any), Additional Amounts (if any) or interest paid pursuant to
such Securities.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets shall not be released from the obligation to pay
the principal of and interest on the Securities.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), (a) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company and (b) the Company may merge with a
Wholly-Owned Subsidiary incorporated solely for the purpose of reincorporating
the Company in another jurisdiction to realize tax or other benefits.
<PAGE>
75
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on, or
Additional Amounts, if any, with respect to, any Security when the
same becomes due and payable, and such default continues for a period
of 30 days;
(2) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated
Maturity, upon redemption, upon required repurchase, upon declaration
or otherwise;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 or
4.17 (in each case, other than a failure to purchase Securities when
required), and such failure continues for 30 days after the notice
specified below;
(5) the Company fails to comply with any of its agreements
in the Securities or this Indenture (other than those referred to in
(1), (2), (3) or (4) above) and such failure continues for 60 days
after the notice specified below;
(6) Indebtedness of the Company or any Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds (Pounds)7.5
million or its foreign currency equivalent at the time;
(7) the Company or any of its Subsidiaries suspends making
payment of, or is unable to, or admits inability to pay its debts (or
any class of its debts) as they fall due, or is deemed unable to pay
its debts pursuant to or for the purposes of any applicable law, or is
adjudicated or found bankrupt or insolvent or a moratorium is declared
in respect of its Indebtedness;
<PAGE>
76
(8) the Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against
it in an involuntary case;
(C) consents to the appointment of a Custodian of it or
for any substantial part of its property;
(D) makes a general assignment for the benefit of, or
enters into a composition or other arrangement with, its
creditors;
(E) passes a resolution or presents a petition for its
winding-up, liquidation or administration;
or takes any comparable action under any other laws relating to
insolvency, bankruptcy or debt moratorium;
(9) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary
in an involuntary case;
(B) appoints a Custodian of the Company or any
Subsidiary or for any substantial part of its property; or
(C) orders the winding up, liquidation or administration
of the Company or any Subsidiary;
or any similar relief is granted under any other laws and the
order or decree remains unstayed and in effect for 60 days; or
(10) any judgment or decree for the payment of money in
excess of (Pounds)7.5 million or its foreign currency equivalent
at the time is entered against the Company or any Subsidiary and
is not discharged, waived or stayed and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment
or decree or (B) there is a period of 60 days following the entry
of such judgment or decree during which such judgment or decree
is not discharged, waived or the execution thereof stayed.
<PAGE>
77
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means the English Insolvency Act 1986 as
supplemented or amended together with all rules, regulations and instruments
made thereunder and applicable English law relating to bankruptcy, insolvency,
winding up, administration, receivership and other similar matters, Title 11,
United States Code, or any similar Federal, state or other law for the relief of
- ------------------
debtors. The term "Custodian" means any receiver, trustee, assignee,
liquidator, administrator, administrative receiver, custodian or similar
official under any Bankruptcy Law.
A Default under clause (4) or (5) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the outstanding
Securities notify the Company of the Default and the Company does not cure such
Default within the time specified in clauses (4) and (5) after receipt of such
notice. Such notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (4),
(5) or (10), its status and what action the Company is taking or proposes to
take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
-------------
Event of Default specified in Section 6.01(7), (8) or (9) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company, may declare the principal of and accrued but unpaid
interest and Additional Amounts, if any, on all the Securities to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default specified in Section 6.01(7), (8)
or (9) with respect to the Company occurs, the principal of and interest and
Additional Amounts, if any, on all the Securities shall ipso facto become and be
---- -----
immediately due and payable without any declaration or other act on the part of
the Trustee or
<PAGE>
78
any Securityholders. The Holders of a majority in principal amount of the
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
---------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
------------------------
principal amount of the then outstanding Securities by notice to the Trustee may
waive (including pursuant to consents obtained in connection with a tender offer
or exchange offer for the Securities) an existing Default and its consequences
except (i) a Default in the payment of the principal of or interest on a
Security or (ii) a Default in respect of a provision that under Section 9.02
cannot be amended without the consent of each Securityholder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
--------------------
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
-------- -------
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemni-
<PAGE>
79
fication satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not pursue
--------------------
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
-------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest and Additional Amounts, if any, on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
---------------------------
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal and accrued interest and Additional
Amounts, if any, then due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts provided for in Section 7.07.
<PAGE>
80
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
---------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, any Subsidiary,
their creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
-----------
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal, interest and Additional Amounts, if any,
ratably, and any liquidated damages without preference or priority of
any kind, according to the amounts due and payable on the Securi ties
for principal, interest, Additional Amounts, if any, and any
liquidated damages, respectively; and
THIRD: to the Company.
The Trustee may, upon prior notice to the Company, fix a record date
and payment date for any payment to Securityholders pursuant to this Section.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
----------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder
<PAGE>
81
pursuant to Section 6.07 or a suit by Holders of more than 10% in principal
amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
---------------------------------
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
------------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
<PAGE>
82
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph
(b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05; and
(4) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on or to invest any
money received by it except as the Trustee may agree in writing with the
Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The
------------------
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
<PAGE>
83
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on an
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
--------- -------
misconduct or negligence.
(e) The Trustee may consult with counsel (which may be an employee of
or counsel to the Company) and the advice or opinion of counsel with respect to
legal matters relating to this Indenture and the Securities shall be full and
complete authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document unless requested in writing to do so by the
Holders of not less than a majority in principal amount of the Securities at the
time outstanding, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
-----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
---------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Secur-
<PAGE>
84
ities, it shall not be accountable for the Company's use of the proceeds from
the Securities, and it shall not be responsible for any statement of the Company
in this Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
-------------------
continuing and if it is known to a Trust Officer of the Trustee, the Trustee
shall give to each Securityholder notice of the Default within the earlier of 90
days after it occurs or 30 days after it is known to a Trust Officer or written
notice of it is received by the Trustee. Except in the case of a Default in
payment of principal or premium (if any), interest or Additional Amounts, if
any, on any Security (including payments pursuant to Sections 4.06 and 4.08
hereof), the Trustee may withhold the notice if and so long as a committee of
its Trust Officers in good faith determines that withholding the notice is in
the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
------------------------------
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with Section 313(a) of the TIA. The Trustee shall also comply with
Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
---------------------------
the Trustee such compensation for its services hereunder as shall be agreed upon
in writing with the Company. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees and expenses) incurred by it without negligence or bad faith on its part in
<PAGE>
85
connection with the administration of this trust, the performance of its duties
hereunder and the exercise of its rights hereunder. The Trustee shall notify
the Company of any claim for which it may seek indemnity promptly upon obtaining
actual knowledge thereof; provided that any failure so to notify the Company
--------
shall not relieve the Company of its indemnity obligations hereunder. The
Company need not reimburse any expense or indemnify against any loss, liability
or expense incurred by the Trustee through its own wilful misconduct, negligence
or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest and any Additional Amounts on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture or the resignation or removal of the Trustee.
When the Trustee incurs expenses after the occurrence of a Default specified in
Section 6.01(7), (8) or (9) with respect to the Company, the expenses are
intended to constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. A resignation or removal of
-----------------------
the Trustee and appointment of successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section. The Trustee may resign at any time by so notifying the Company. The
Holders of a majority in principal amount of the Securities may remove the
Trustee by so notifying the Trustee and the Company and may appoint a successor
Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, or is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists
<PAGE>
86
in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appoint ment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
----------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is
<PAGE>
87
anywhere in the Securities or in this Indenture provided that the certificate of
the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
------------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
--------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated therein.
SECTION 7.12. Trustee Acting in Other Capacities. Except as
-----------------------------------
otherwise specifically provided herein, (a) all references in this Indenture to
the Trustee shall be deemed to refer to the Trustee in its capacities as
Trustee, Registrar and Paying Agent, and (b) every provision of this Indenture
relating to the conduct or affecting the liability of or offering protection,
immunity or indemnity to the Trustee shall be deemed to apply with the same
force and effect to the Trustee acting in its capacities as Registrar and Paying
Agent.
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
-------------------------------------------------
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the giving of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the Trustee funds or U.S. Government
Obligations on which payment of principal and interest when due shall be
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon and Additional Amounts, if any, to maturity or such
redemption date (other than Securities
<PAGE>
88
replaced pursuant to Section 2.07), and if in either case the Company pays all
other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all of its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02(b),
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15, 5.01(iii) and
5.01(iv) and the operation of Section 6.01(4), 6.01(6), 6.01(7) (with respect to
Subsidiaries of the Company only), 6.01(8) (with respect to Subsidiaries of the
Company only), 6.01(9) (with respect to Subsidiaries of the Company only) and
6.01(10) ("covenant defeasance option"). The Company may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant defeasance
option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default with respect
thereto and the Company will not be required to repurchase the Securities upon a
Change of Control. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
specified in Section 6.01(4), 6.01(6), 6.01(7) (with respect to Subsidiaries of
the Company only), 6.01(8) (with respect to Subsidiaries of the Company only),
6.01(9) (with respect to Subsidiaries of the Company only) and 6.01(10), or
because of the failure of the Company to comply with clause (iii) and (iv) of
Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.09, 2.11, 2.12,
4.02(a), 4.16, 4.17. 6.07, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until
the Securities have been paid in full. Thereafter, the Company's obligations in
Sections 7.07, 8.04, 8.05 and 8.06 shall survive.
<PAGE>
89
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
-------------------------
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the
Trustee cash in Deutsche Marks or Federal Republic of Germany
Obligations for the payment of principal, premium (if any) and
interest on the Securities to maturity or redemption, as the case may
be;
(2) the Company delivers to the Trustee a certificate from
an internationally recognized firm of independent accountants
expressing their opinion that the payments of principal and interest
when due and without reinvestment on the deposited Federal Republic of
Germany Obligations plus any deposited money without investment shall
provide cash at such times and in such amounts as shall be sufficient
to pay principal and interest when due on all the Securities to
maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(7), (8) or (9)
with respect to the Company occurs which is continuing at the end of
the period;
(4) the deposit does not constitute a default under any
other agreement binding on the Company and is not prohibited by
Article 10;
(5) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the deposit does
not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee (A) an Opinion of Counsel in the
United States reasonably acceptable to the Trustee stating that (i)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable U.S. Federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel in the United States shall confirm that, the
Securityholders shall not recognize any income, gain or loss for U.S.
Federal income tax purposes as a result of such deposit and defeasance
and shall be subject to U.S. Federal income tax on the same amounts,
in the same manner and at the same times as would have been
<PAGE>
90
the case if such deposit and defeasance had not occurred and (B) an
Opinion of Counsel in the United Kingdom reasonably acceptable to the
Trustee to the effect that (i) Holders shall not recognize any income,
gain or loss for United Kingdom income tax purposes as a result of
such deposit and defeasance and shall be subject to United Kingdom
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such deposit and defeasance had
not occurred and (ii) payments from the defeasance trust shall be free
and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of the United
Kingdom or any political subdivision thereof or therein having the
power to tax;
(7) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee (A) an Opinion of Counsel
in the United States reasonably acceptable to the Trustee to the
effect that the Securityholders shall not recognize any income, gain
or loss for U.S. Federal income tax purposes as a result of such
covenant defeasance and shall be subject to U.S. Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred and
(B) an Opinion of Counsel in the United Kingdom reasonably acceptable
to the Trustee to the effect that (i) Holders shall not recognize any
income, gain or loss for United Kingdom income tax purposes as a
result of such covenant defeasance and shall be subject to United
Kingdom income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had
not occurred and (ii) payments from the defeasance trust shall be free
and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of the United
Kingdom or any political subdivision thereof or therein having the
power to tax;
(8) the Company shall have delivered to the Trustee an
Opinion of Counsel reasonably acceptable to the Trustee to the effect
that, as of the date of such opinion, the trust funds shall not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally
under any applicable English or U.S. Federal or state law, and that
the Trustee has a perfected security interest in such trust funds for
the ratable benefit of the Holders; and
<PAGE>
91
(9) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Securities
as contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
---------------------------
trust cash in Deutsche Marks or Federal Republic of Germany Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited
money and the cash in Deutsche Marks or Federal Republic of Germany Obligations
through the Paying Agent and in accordance with this Indenture to the payment of
principal of and interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
---------------------
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors; provided, however, that the Trustee or
-------- -------
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company give notice to the Holders or cause to be published
notice once, in The New York Times and The Wall Street Journal (national
edition) (and, if and so long as the Securities are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, in a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)), that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification, any unclaimed balance of such money then remaining shall be repaid
to the Company. Such notice shall also be given in accordance with any
applicable requirements of any other securities exchange on which the Securities
are listed.
SECTION 8.05. Indemnity for Government Obligations. The Company
-------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited Federal Republic of Germany
<PAGE>
92
Obligations or the principal and interest received on such Federal Republic of
Germany Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
--------------
unable to apply any cash in Deutsche Marks or Federal Republic of Germany
Obligations in accordance with this Article 8 by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 8 until
such time as the Trustee or Paying Agent is permitted to apply all such cash in
Deutsche Marks or Federal Republic of Germany Obligations in accordance with
this Article 8; provided, however, that, if the Company has made any payment of
--------- -------
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the cash in Deutsche Marks or
Federal Republic of Germany Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Company and the
---------------------------
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to
or in place of certificated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes
of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the
Code;
(4) to secure the Securities;
(5) to add to the covenants of the Company for the benefit
of the Holders or to surrender any right or power herein conferred
upon the Company;
<PAGE>
93
(6) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA;
(7) to make any change that does not adversely affect the
rights of any Securityholder; or
(8) to provide for the issuance of the Exchange Securities
(which shall have terms substantially identical in all material
respects to the Initial Securities (except that the transfer
restrictions contained in the Initial Securities shall be modified or
eliminated, as appropriate), and which shall be treated, together with
any outstanding Initial Securities, as a single issue of securities.
After an amendment under this Section becomes effective, the Company
shall give to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company and the Trustee
------------------------
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities (the "Majority Securityholders")(including consents
------------------------
obtained in connection with a tender offer or exchange offer for the
Securities). However, without the consent of each Holder of an outstanding
Security affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment of
interest (including any liquidated damages) on any Security;
(3) reduce the principal of or extend the Stated Maturity
of any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that
stated in the Security;
<PAGE>
94
(6) impair the right of any Holder to receive payment of
principal of and interest and Additional Amounts, if any, on such
Holder's Securities on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect
to such Holder's Securities;
(7) make any change in Section 6.04 or 6.07 or the second
sentence of this Section; or
(8) make any change in paragraph 2 of the Securities that
adversely affects the rights of any Holder of the Securities under
such paragraph 2 or amend the terms of the Securities in a way that
would result in a loss of an exemption from any of the Taxes or an
exemption from any obligation to withhold or deduct Taxes unless the
Company agrees to pay Additional Amounts, if any, in respect thereof.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall give to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
------------------------------------
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents
---------------------------------
and Waivers. A consent to an amendment or a waiver by a Holder of a Security
- ------------
shall bind the Holder and every subsequent Holder of that Security or portion
of the Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent or waiver is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent or waiver
as to such Holder's Security or portion of the Security if the Trustee receives
the notice of revocation before the date the amendment or waiver becomes
effective. After an amendment or waiver becomes effective, it shall bind every
Securityholder. An amendment or waiver becomes effective once the requisite
number of consents is received by the Company or the Trustee.
<PAGE>
95
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
--------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
---------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment
the Trustee shall be entitled to receive indemnity reasonably satisfactory to it
and to receive, and (subject to Section 7.01) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture, that such
amendment is the legal, valid and binding obligation of the Company enforceable
against it in accordance with its terms, subject to customary exceptions, and
complies with the provisions hereof (including Section 9.03).
SECTION 9.07. Payment for Consent. Neither the Company nor any
--------------------
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
<PAGE>
96
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
Miscellaneous
-------------
SECTION 10.01. Trust Indenture Act Controls. If any provision of
-----------------------------
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 10.02. Notices. Any notice or communication shall be in
--------
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Texon International plc
100 Ross Walk
Leicester, U.K.
LE4 5BX
Attention of:
Chief Financial Officer
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention of:
Corporate Trust Department
with a copy to:
The Bank of New York
46 Berkeley Street
London W1X 6AA
Attention of:
Corporate Trust Department
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to the Company or the Trustee shall be deemed
<PAGE>
97
to have been given or made upon actual receipt thereof by the addressee (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication given by publication to a Securityholder
shall be deemed given on the first date on which publication is made, if
published, or five (5) calendar days after mailing if sent by first class mail,
postage prepaid as applicable.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is published or mailed in the
manner provided above, it is duly given, whether or not the addressee reads or
receives it.
Notices regarding the Securities shall be (i) if Global Securities are
outstanding, published in a leading newspaper having a general circulation in
New York (which is expected to be the Wall Street Journal) (and, if and so long
as the Securities are listed on the Luxembourg Stock Exchange and the rules of
such Stock Exchange shall so require, a newspaper having a general circulation
in Luxembourg (which is expected to be the Luxemburger Wort)) or (ii) in the
case of Definitive Securities, mailed to Holders by first-class mail at their
respective addresses as they appear on the registration books of the Registrar
(and if and so long as the Notes are listed on the Luxembourg Stock Exchange and
the rules of such Stock Exchange shall so require, published in a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)). If and so long as the Securities are listed on any other
securities exchange, notice shall also be given in accordance with any
applicable requirements of such securities exchange.
SECTION 10.03. Communication by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
<PAGE>
98
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion. Each
----------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such individual, such covenant or condition has been complied with.
SECTION 10.06. When Securities Disregarded. In determining whether
----------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Trust Officer of the
<PAGE>
99
Trustee knows are so owned shall be so disregarded. Also, subject to the
foregoing, only Securities outstanding at the time shall be considered in any
such determination.
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar. The
---------------------------------------------
Trustee may make reasonable rules for action by or at a meeting of
Securityholders. If and so long as the Securities are listed on any securities
exchange, such rules shall, to the extent not inconsistent with the provisions
of this Indenture, comply with any applicable requirements of such securities
exchange. The Registrar and the Paying Agent may make reasonable rules for
their functions.
SECTION 10.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
---------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York, the United Kingdom, Luxembourg or a place of payment. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue with respect to
such payment for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 10.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
--------------
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 10.10 Jurisdiction. The Company agrees that any suit, action
-------------
or proceeding against the Company or any Note Guarantor brought by any Holder or
the Trustee arising out of or based upon this Indenture or the Securities may be
instituted in any state or Federal court in the Borough of Manhattan, The City
of New York, New York, and any appellate court from any thereof, and it
irrevocably submits to the non-exclusive jurisdiction of such courts in any
suit, action or proceeding. The Company irrevocably waives, to the fullest
extent permitted by law, any objection to any suit, action, or proceeding that
may be brought in connection with this Indenture or the Securities, including
such actions, suits or proceedings relating to securities laws of the United
States of America or any state thereof, in such courts whether on the grounds of
venue, residence or domicile or on the ground that any such suit, action or
proceeding has been brought in an inconvenient forum. The Company agrees that
final judgment in any such suit, action or proceeding brought in such court
shall be conclusive and binding upon the Company and may be enforced
<PAGE>
100
in any court to the jurisdiction of which the Company is subject by a suit upon
such judgment; provided that service of process is effected upon the Company in
--------
the manner provided by this Indenture. The Company has appointed CT Corporation
Systems, with offices on the date hereof at 1633 Broadway, New York, New York,
10019, as its authorized agent (the "Authorized Agent"), upon whom process may
----------------
be served in any suit, action or proceeding arising out of or based upon this
Indenture, the Securities or the transactions contemplated herein which may be
instituted in any state or Federal court in the Borough of Manhattan, The City
of New York, New York, by any Holder or the Trustee, and expressly accepts the
non-exclusive jurisdiction of any such court in respect of any such suit, action
or proceeding. The Company hereby represents and warrants that the Authorized
Agent has accepted such appointment and has agreed to act as said agent for
service of process, and the Company agrees to take any and all action, including
the filing of any and all documents that may be necessary to continue such
respective appointment in full force and effect as aforesaid. Service of
process upon the Authorized Agent shall be deemed, in every respect, effective
service of process upon the Company. Notwithstanding the foregoing, any action
involving the Company arising out of or based upon this Indenture or the
Securities may be instituted by any Holder or the Trustee in any court of
competent jurisdiction in the United Kingdom.
SECTION 10.11. No Recourse Against Others. A director, officer,
---------------------------
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consi
deration for the issue of the Securities.
SECTION 10.12. Successors. All agreements of the Company in this
-----------
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 10.13. Multiple Originals. The parties may sign any number
-------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
<PAGE>
101
SECTION 10.14. Table of Contents; Headings. The table of contents,
----------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
TEXON INTERNATIONAL PLC
by
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
AS TRUSTEE,
by
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS
OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED
SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (1)(A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED AND REMAINS EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) IN AN OFFSHORE TRANSACTION WITHIN THE MEANING
OF, AND IN COMPLIANCE WITH, REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF DM500,000, AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND (2) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
THE STATES OF THE UNITED STATES, SUBJECT TO APPLICABLE CERTIFICATION
REQUIREMENTS AND OTHER REQUIREMENTS PROVIDED FOR IN THE INDENTURE PURSUANT TO
WHICH THIS SECURITY IS ISSUED AND TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (1)(E) OR (1)(F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO IT AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT ALL
CERTIFICATIONS OF TRANSFER REQUIRED BY THE INDENTURE ARE COMPLETED AND
<PAGE>
A-2
DELIVERED BY THE TRANSFEROR TO THE COMPANY, THE TRUSTEE AND/OR THE BOOK-ENTRY
DEPOSITARY AS REQUIRED BY THE INDENTURE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
[INCLUDE IF SECURITY IS A REGULATION S SECURITY--UNTIL 40 DAYS AFTER
THE COMMENCEMENT OF THE OFFERING, AN OFFER OR SALE OF SECURITIES WITHIN THE
UNITED STATES BY A DEALER (AS DEFINED IN THE U.S. SECURITIES ACT) MAY VIOLATE
THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT IF SUCH OFFER OR SALE
IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A UNDER THE U.S. SECURITIES
ACT.]
TEXON INTERNATIONAL PLC
10% SENIOR NOTE DUE 2008
[IF REGULATION S SECURITY - CINS Number G87667AA2]
ISIN Number USG87667AA27]
[IF RULE 144A SECURITY - CUSIP Number 883060AA3]
[IF IAI SECURITY - CUSIP Number 883060AB1]
No. _________
[INCLUDE IF GLOBAL SECURITY-Texon International plc, a public limited
company incorporated in England and Wales, promises to pay to the bearer upon
surrender hereof the principal sum indicated on Schedule A hereof, on
February 1, 2008. This Security is an [IAI] [Rule 144A] [Regulation S] Global
Security referenced in the Indenture referred to on the other side of this
Security.
[INCLUDE IF DEFINITIVE SECURITY-Texon International plc, a public
limited company incorporated in England and Wales, promises to pay to [ ],
or registered assigns, the principal sum of DM[ ] on February 1,
2008.]
Interest Payment Dates: February 1 and August 1, commencing August 1,
1998.
[INCLUDE IF DEFINITIVE SECURITY-Record Dates: January 15 and July 15.]
<PAGE>
A-3
Additional provisions of this Security are set forth on the [other
side] [the following pages] of this Security.
[Seal] TEXON INTERNATIONAL PLC,
by
_______________________
Name:
Title:
by
_______________________
Name:
Title:
Dated: January 30, 1998
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies that
this is one of the Securities
referred to in the Indenture
by
_____________________________
Authorized Signatory
<PAGE>
A-4
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10% Senior Note due 2008
1. Interest
--------
Texon International plc, a public limited company incorporated in
England and Wales (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Company"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. As provided in the Exchange and Registration Rights Agreement, the
Company will use its reasonable best efforts to have the Exchange Offer
Registration Statement and, if applicable, a Shelf Registration Statement (each
a "Registration Statement") declared effective by the SEC as promptly as
practicable after the filing thereof. If (i) the applicable Registration
Statement is not filed with the Commission on or prior to 60 days after the
Issue Date; (ii) the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, is not declared effective within 120
days after the Issue Date (or, in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of the SEC's staff, if later, 45 days after publication of the
change in law or interpretation); (iii) the Registered Exchange Offer is not
consummated on or prior to 150 days after the Issue Date, unless a Shelf
Registration Statement is filed in lieu of an Exchange Offer Registration
Statement in response to a change in law or the applicable interpretations of
the SEC's staff; or (iv) the Shelf Registration Statement is filed and declared
effective within 120 days after the Issue Date (or, in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of the SEC's staff, if later, 45 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
or amended Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will, as provided in the Exchange and Registration Rights Agreement, pay
liquidated damages to each holder of Transfer Restricted Securities, during the
period of one or more such Registration Defaults, in an amount equal to DM0.192
per week per DM1,000 principal amount of the Securities constituting Transfer
Restricted Securities held by such holder until (i) the applicable Registration
Statement is
<PAGE>
A-5
filed, (ii) the Exchange Offer Registration Statement is declared effective and
the Registered Exchange Offer is consummated, (iii) the Shelf Registration
Statement is declared effective or (iv) the Shelf Registration Statement again
becomes effective or an additional Shelf Registration Statement is filed and
becomes effective, as the case may be. All accrued liquidated damages shall be
paid to holders in the same manner as interest payments on the Securities on
semi-annual payment dates that correspond to interest payment dates for the
Securities and references herein and in the Indenture to interest shall, unless
the context requires otherwise, also be references to any such liquidated
damages. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease.
The Company will pay interest semiannually on February 1 and August
1 of each year, commencing August 1, 1998. Interest on the Securities will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from January 30, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The Company shall pay interest
on overdue principal at the rate borne by the Securities plus 1% per annum, and
it shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
2. Additional Amounts
------------------
All payments made by the Company on the Securities (whether or not in
the form of Definitive Securities) shall be made without withholding or
deduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (collectively, "Taxes")
imposed or levied by or on behalf of the United Kingdom or any political
subdivision thereof or any authority having power to tax therein (each a "U.K.
Tax Authority"), unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on account of, any
Taxes of any U.K. Tax Authority shall at any time be required on any payments
made by the Company with respect to the Securities, including payments of
principal, redemption price, interest, liquidated damages or premium, the
Company shall pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of such payments by
the Holders of the Securities or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; provided, however, that no such Additional Amounts shall be payable
-------- -------
with respect to:
<PAGE>
A-6
(i) in the case of Securities listed on a Recognized Stock Exchange at
the time such Additional Amounts would be payable, any payments on a
Security held by or on behalf of a Holder or a beneficial owner who is
liable for such Taxes in respect of such Security by reason of the Holder
or beneficial owner having some connection with the United Kingdom
(including being a citizen or resident or national of, or carrying on a
business or maintaining a permanent establishment in, or being physically
present in, the United Kingdom) other than by the mere holding of such
Security or enforcement of rights thereunder or the receipt of payments in
respect thereof;
(ii) in the case of Securities listed on a Recognized Stock Exchange
at the time such Additional Amounts would be payable, any Taxes that are
imposed or withheld as a result of a change in law after the Issue Date
where such withholding or imposition is by reason of the failure of the
Holder or beneficial owner of the Security to comply with any request by
the Company to provide information concerning the nationality, residence or
identity of such Holder or beneficial owner or to make any declaration or
similar claim or satisfy any information or reporting requirement, which is
required or imposed by a statute, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all
or part of such Taxes;
(iii) except in the case of the winding up of the Company, any
Security presented for payment (where presentation is required) in the
United Kingdom (unless by reason of the Company's actions presentment could
not have been made elsewhere); or
(iv) any Security presented for payment (where Securities are in the
form of Definitive Securities and presentation is required) more than 30
days after the relevant payment is first made available for payment to the
Holder (except to the extent that the Holder would have been entitled to
Additional Amounts had the Security been presented on the last day of such
30 day period).
Such Additional Amounts shall also not be payable where, had the
beneficial owner of the Security been the Holder of the Security, he would not
have been entitled to payment of Additional Amounts by reason of clauses (i) to
(iv) inclusive above.
<PAGE>
A-7
Upon request, the Company shall provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts.
Copies of such documentation shall be made available to the Holders upon
request.
3. Method of Payment
-----------------
[IF GLOBAL SECURITY--The Company will pay interest on the Securities
(except defaulted interest, which shall be paid as provided in the Indenture) to
the bearer hereof. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the Federal Republic of Germany that at the time of payment is legal
tender for payment of public and private debts. Immediately available funds for
the payment of the principal of (and premium, if any), interest and Additional
Amounts, if any, on this Security due on any Interest Payment Date, Maturity
Date, Redemption Date or other repurchase date will be made available to the
Paying Agent to permit the Paying Agent to pay such funds to the Holders on such
respective dates.[IF REGULATION S SECURITY--Holders of Book-Entry Interests in
this Security (including Euroclear and Cedel on behalf of all their account
holders) must provide instructions to the DTC for receipt of payments in
Deutsche Marks.]]
[IF RULE 144A OR IAI GLOBAL SECURITY--Amounts payable on this Security
shall be made in U.S. dollars (or in such other coin or currency of the United
States of America as at the time of payment is legal tender for the payment
therein of public and private debts) except to the extent any holder of Book-
Entry Interests in this Security (a "U.S. Book-Entry Holder") elects to receive
payments in Deutsche Marks in accordance with the procedures set forth below.
To the extent that any U.S. Book-Entry Holder has not made such election in
respect of any payment of principal or interest, the aggregate amount designated
for all such U.S. Book-Entry Holders in respect of such payment (the "DM
Conversion Amount") will be converted by the Paying Agent into U.S. dollars and
paid to or as directed by the Book-Entry Depositary for payment through DTC's
settlement system to its relevant participants. All costs of any such
conversion and any wire transfers will be deducted from such payments. Any such
conversion shall be based on The Bank of New York's bid quotation, at or prior
to 11:00 a.m. New York time, on the second New York Business Day (as defined
below) preceding the relevant payment date, for the purchase by the Paying Agent
of the DM Conversion Amount of U.S. dollars for settlement on such payment date.
If such bid quotation is not available for any reason, the Paying Agent will
endeavor
<PAGE>
A-8
to obtain a bid quotation from a leading foreign exchange bank in New York City
selected by the Paying Agent for such purpose. If no bid quotation from a
leading foreign exchange bank is available, payment of the DM Conversion Amount
will be made in Deutsche Marks to or as directed by the Book-Entry Depositary
for distribution to the account or accounts specified by DTC to the Book-Entry
Depositary.
A U.S. Book-Entry Holder may elect to receive payment of principal and
interest with respect to the Notes in Deutsche Marks by causing DTC through its
relevant participant to notify the Book-Entry Depositary by the time specified
below of (i) such U.S. Book-Entry Holder's election to receive all or a portion
of such payment in Deutsche Marks and (ii) wire transfer instructions to a
Deutsche Mark account in the Federal Republic of Germany. Such election in
respect of any payment must be made by the U.S. Book-Entry Holder at the time
and in the manner required by DTC's procedures applicable from time to time and
shall, in accordance with such procedures, be irrevocable and shall relate only
to such payment. DTC notifications of such election, wire transfer instructions
and the amount payable in Deutsche Marks must be received by the Book-Entry
Depositary prior to 5:00 p.m. New York time on the tenth day prior to the
payment date for the payment of principal. Any payments in Deutsche Marks shall
be made by or as directed by the Book-Entry Depositary by wire transfer of same-
day funds to Deutsche Mark accounts designated by DTC. The term "New York
Business Day" means any day other than a Saturday or Sunday or a day on which
banking institutions in New York City are authorized or required by law or
executive order to close.]
[IF DEFINITIVE SECURITY--The Company will pay interest (except
defaulted interest, which shall be paid as provided in the Indenture) on the
Securities to the Persons who are registered holders of Securities at the close
of business on the January 15 or July 15 next preceding the interest payment
date even if the Securities are canceled after the record date and on or before
the interest payment date. Holders must surrender Securities to a Paying Agent
at an office of the Paying Agent maintained for such purpose to collect
principal payments. The Company will pay principal and interest in Deutsche
Marks or such other coin or currency of the Federal Republic of Germany that at
the time of payment is legal tender for payment of public and private debts;
provided, however, that with respect to any payment of principal or interest on
- -------- -------
Definitive Securities with an aggregate principal amount in excess of
DM1,000,000 held by any Holder or group of Holders, such payment will be made,
at the written request of such Holder or Holders
<PAGE>
A-9
(which shall be a single request with appropriate wire transfer instructions),
by wire transfer of immediately available funds to the Paying Agent, who in turn
will wire such funds to such single account as such Holder or Holders may in
writing to the Paying Agent direct; provided further that the Paying Agent has
----------------
received written wire transfer instructions at least fifteen days prior to the
date of any such payment.]
4. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint
and change any Paying Agent, Registrar or co-registrar without notice. The
Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-
registrar. The Company shall at all times ensure that (i) at least one Paying
Agent is located outside the United Kingdom, (ii) if and so long as the
Securities are listed on the Luxembourg Stock Exchange, a Paying Agent is
located in Luxembourg or such other place as the Luxembourg Stock Exchange may
approve and (iii) if and so long as the Securities are listed on any other
securities exchange, any requirements of such securities exchange as to Paying
Agents are satisfied.
5. Indenture
---------
The Company issued the Securities under an Inden ture dated as of
January 30, 1998 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
------
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to DM 245.0 million aggregate principal amount at any one time
outstanding (subject to Section 2.07 of the Indenture). This Security is one of
the Initial Securities referred to in the Indenture. The Securities include the
Initial Securities and any Exchange Securities issued in exchange for the
Initial Securities pursuant to the Indenture. The Initial Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the issuance of debt by
the Company,
<PAGE>
A-10
the payment of dividends and other distributions and acquisitions or retirements
of the Company's Capital Stock and Subordinated Obligations, the incurrence by
the Company and its Subsidiaries of Liens on its property and assets which do
not equally and ratably secure the Securities, the sale or transfer of assets
and Subsidiary Stock, investments by the Company, the lines of business in which
the Company may operate, consolidations, mergers and transfers of all or
substantially all of the Company's assets, sale and leaseback transactions and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Company and its Subsidiaries to restrict distributions and dividends from
Subsidiaries. The limitations are subject to a number of important
qualifications and exceptions.
6. Optional Redemption
-------------------
The Securities will be redeemable, at the Company's option, in whole
or in part, at any time on or after February 1, 2003, and prior to maturity. On
and after that date, the Company may redeem the Securities in whole at any time
or in part from time to time at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest and Additional Amounts,
if any, to the redemption date (and in the case of Definitive Securities,
subject to the right of Holders of record on the relevant record date to receive
interest due on the related interest payment date and Additional Amounts, if
any, in respect thereof), if redeemed during the 12-month period commencing
February 1 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
- ---- ----------
<S> <C>
2003.................................................... 105.000%
2004.................................................... 103.333%
2005.................................................... 101.667%
2006 and thereafter..................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to February 1,
2001, the Company may redeem in the aggregate up to 33 1/3% of the original
aggregate principal amount of the Securities with the proceeds of one or more
Public Equity Offerings by the Company following which there is a Public Market,
at a redemption price (expressed as a percentage of principal amount thereof) of
110% plus accrued interest and Additional Amounts, if any, to the redemption
date (and in the case of Definitive Securities, subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment
<PAGE>
A-11
date and Additional Amounts, if any, in respect thereof); provided, however,
-------- -------
that at least 66 2/3% of the original aggregate principal amount of the
Securities must remain outstanding after each such redemption; and provided,
--------
further, that such redemption shall occur within 90 days of the date of the
- -------
closing of any such Public Equity Offering.
7. Optional Tax Redemption
-----------------------
The Securities may also be redeemed, at the option of the Company, in
whole but not in part, at any time upon giving not less than 30 nor more than 60
days' notice to the Holders (which notice shall be irrevocable), at a redemption
price equal to the principal amount thereof, together with accrued and unpaid
interest, if any, to the date fixed by the Company for redemption (a "Tax
Redemption Date") and all Additional Amounts, if any, then due and which will
become due on the Tax Redemption Date as a result of the redemption or
otherwise, if the Company determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations, protocols or rulings
promulgated thereunder) of the United Kingdom (or any political subdivision or
taxing authority of the United Kingdom) affecting taxation, which change or
amendment becomes effective on or after the Issue Date, (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the Issue Date or (iii) the
issuance of Definitive Securities due to (A) DTC being at any time unwilling or
unable to continue as or ceasing to be a clearing agency registered under the
Exchange Act, and a successor to DTC registered as a clearing agency under the
Exchange Act is not able to be appointed by the Company within 90 days or (B)
the Depositary being at any time unwilling or unable to continue as a Depositary
and a successor Depositary is not able to be appointed by the Company within 90
days, the Company is, or on the next interest payment date would be, required to
pay Additional Amounts, and the Company determines that such payment obligation
cannot be avoided by the Company taking reasonable measures. Notwithstanding
the foregoing, no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to make such
payment or withholding if a payment in respect of the Securities were then due.
Prior to the publication or, where relevant, mailing of any notice of redemption
of the Securities pursuant to the foregoing, the Company will deliver to the
Trustee an opinion of a tax counsel reasonably satisfactory
<PAGE>
A-12
to the Trustee to the effect that the circumstances referred to above exist. The
Trustee shall accept such opinion as sufficient evidence of the satisfaction of
the conditions precedent described above, in which event it shall be conclusive
and binding on the Holders.
8. Notice of Redemption
--------------------
Notice of redemption will be given at least 30 days but not more than
60 days before the Redemption Date by publishing in a leading newspaper having a
general circulation in New York (which is expected to be the Wall Street
Journal) (and, if and so long as the Securities are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or, in the case of Definitive Securities, mailing notice
to each Holder of Securities to be redeemed at such Holder's registered address.
Such notice shall also be given in accordance with any applicable requirements
of any other securities exchange on which the Securities are listed. Securities
in denominations larger than DM1,000 may be redeemed in part but only in whole
multiples of DM1,000. If money sufficient to pay the redemption price of and
accrued interest and Additional Amounts, if any, on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest and Additional Amounts, if any, will
cease to accrue on such Securities (or such portions thereof) called for
redemption.
9. Change of Control Offer
-----------------------
Upon a Change of Control, the Company will be required to make an
offer to purchase, subject to certain conditions specified in the Indenture, all
outstanding Securities at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest and Additional
Amounts, if any, to the date of repurchase (and in the case of Definitive
Securities subject to the right of holders of record on the relevant record date
to receive interest due on the related interest payment date and Additional
Amounts, if any, in respect thereof) as provided in, and subject to the terms
of, the Indenture. Holders of Securities that are subject to an offer to
purchase will receive such an offer from the Company and may elect to have such
Securities purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
<PAGE>
A-13
10. Limitation on Sale of Assets.
-----------------------------
When the aggregate amount of Net Available Cash (after application in
accordance with Section 4.06(a)(iii) of the Indenture) from any particular Asset
Disposition exceeds (Pounds)3.0 million (which amount shall be calculated as set
forth in Section 4.06(b) of the Indenture), the Company will be obligated to
make an offer to purchase the maximum principal amount of Securities that is an
integral multiple of DM1,000, that may be purchased with the Net Available Cash
allotted to such offer at a purchase price of 100% of the principal amount
thereof, plus accrued and unpaid interest and Additional Amounts, if any, to the
date fixed for the closing of such offer. If the aggregate principal amount of
Securities surrendered by Holders thereof exceeds the amount of Net Available
Cash allotted to such offer, subject to applicable law, the Trustee shall select
the Securities to be redeemed in accordance with the Indenture; provided,
--------
however, that no Securities of DM1,000 or less shall be purchased in part.
- -------
Holders of Securities that are the subject of an offer to purchase will receive
such an offer from the Company in the manner provided in the Indenture (which
may be by publication) prior to any related purchase date and may elect to have
such Securities purchased by completing the form entitled "Option of Holders to
Elect Purchase" appearing below.
11. Denominations; Transfer; Exchange
---------------------------------
[IF GLOBAL SECURITY-- The Securities are in bearer form without
coupons in denominations of DM1,000 and whole multiples of DM1,000.]
[IF DEFINITIVE SECURITY-- The Securities are in registered form
without coupons in denominations of DM1,000 and whole multiples of DM1,000.]
A Holder may transfer or exchange Securities in accordance with the
Indenture. The Trustee or the Depositary may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and other
certifications (including certifications to ensure compliance with applicable
securities laws) and to pay any taxes and fees required by law or permitted by
the Indenture. The Company shall not be required to make, and the Registrar
need not register transfers or exchanges of, Definitive Securities selected for
redemption (except, in the case of Definitive Securities to be redeemed in part,
the portion thereof not to be redeemed) or any Definitive
<PAGE>
A-14
Securities for a period of 15 days before a selection of Definitive Securities
to be redeemed.
12. Persons Deemed Owners
---------------------
[IF GLOBAL SECURITY--The bearer of this Security shall be treated as
the owner of it for all purposes, subject to the terms of the Indenture.]
[IF DEFINITIVE SECURITY--The registered Holder of this Security shall
be treated as the owner of it for all purposes, subject to the terms of the
Indenture.]
13. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
14. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee cash in Deutsche Marks or Federal Republic of
Germany Obligations for the payment of principal of and interest on the
Securities to redemption or maturity, as the case may be.
15. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
(including consents obtained in connection with a tender offer or exchange offer
for the Securities) and (ii) any default or noncompliance with any provision may
be waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities (including consents obtained in connection
with a tender offer or exchange offer for the Securities). Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated
<PAGE>
A-15
Securities, or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act, or
to make any other change that does not adversely affect the rights of any
Securityholder, or to provide for the issuance and authorization of the Exchange
Securities.
16. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to para graph 6 or 7 of
the Securities, upon acceleration or other wise; (iii) failure by the Company
to comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company or any Subsidiary if the amount accelerated (or so
unpaid) exceeds (Pounds)7,500,000 or its foreign currency equivalent; (v)
certain events of bankruptcy or insolvency with respect to the Company and its
Subsidiaries; and (vi) certain judgments or decrees for the payment of money in
excess of (Pounds)7,500,000 or its foreign currency equivalent against the
Company or a Subsidiary. If an Event of Default (other than a Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities may declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable
immediately. Certain events of bankruptcy, insolvency, or reorganization are
Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securi ties unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may with hold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if and so long as a
committee of its Trust Officers in good faith determines that withholding notice
is in the interest of the Holders.
<PAGE>
A-16
17. Successors.
-----------
Subject to certain exceptions set forth in the Indenture, when a
successor assumes all the obligations of its predecessor under the Securities
and the Indenture in accordance with the terms of the Indenture, the predecessor
will be released from those obligations.
18. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securi ties and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may other wise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
19. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their crea tion. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
20. Authentication
--------------
This Security shall not be valid until an author ized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
21. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
22. CUSIP [IF REGULATION S SECURITY--and CINS] Numbers
--------------------------------------------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP [IF REGULATION S
SECURITY--and CINS] numbers to be printed on the Securities and has
<PAGE>
A-17
directed the Trustee to use CUSIP [IF REGULATION S SECURITY --and CINS] numbers
in notices of redemption as a convenience to Securityholders. No representation
is made as to the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
23. Governing Law
-------------
The laws of the State of New York shall govern the Indenture and the
Securities without regard to conflict of law provisions thereof to the extent
that the application of the laws of another jurisdiction would be required
thereby.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH HAS IN
IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
TEXON INTERNATIONAL PLC
ATTENTION: SECRETARY
100 ROSS WALK
LEICESTER, U.K.
LE4 5BX
<PAGE>
A-18
[For Global Securities]
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Security shall be DM[
]. The following decreases/increases in the principal amount at maturity of
this Security have been made:
<TABLE>
<CAPTION>
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- ----------- ----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
</TABLE>
<PAGE>
A-19
[For Definitive Securities]
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
A-20
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to
Section 4.06 or 4.08 of the Indenture, check the box:
___
/ /
----
If you want to elect to have only part of this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
DM
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a participant in a recognized signature
guarantee medallion program)
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
TEXON INTERNATIONAL PLC
10% SENIOR NOTE DUE 2008
CUSIP[/CINS] Number [ ]
No. _________
[INCLUDE IF GLOBAL SECURITY--Texon International plc, a public limited
company incorporated in England and Wales, promises to pay to the bearer upon
surrender hereof the principal sum indicated on Schedule A hereof, on February
1, 2008.
[INCLUDE IF DEFINITIVE SECURITY--Texon International plc, a public
limited company incorporated in England and Wales, promises to pay to [ ],
or registered assigns, the principal sum of DM[ ] on February 1, 2008.]
Interest Payment Dates: February 1 and August 1.
[INCLUDE IF DEFINITIVE SECURITY--Record Dates: January 15 and July
15.]
<PAGE>
B-2
Additional provisions of this Security are set forth on the other side
of this Security.
[Seal] TEXON INTERNATIONAL PLC,
by
_______________________
Name:
Title:
by
_______________________
Name:
Title:
Dated: January 30, 1998
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies that
this is one of the Securities
referred to in the Indenture
by
_____________________________
Authorized Signatory
<PAGE>
B-3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
10% Senior Note due 2008
1. Interest
--------
Texon International plc, a public limited company incorporated in
England and Wales (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Company"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above.
The Company will pay interest semiannually on February 1 and August
1 of each year, commencing August 1, 1998. Interest on the Securities will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from January 30, 1998. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The Company shall pay interest
on overdue principal at the rate borne by the Securities plus 1% per annum, and
it shall pay interest on overdue installments of interest at the same rate to
the extent lawful.
2. Additional Amounts
------------------
All payments made by the Company on the Securities (whether or not in
the form of Definitive Securities) shall be made without withholding or
deduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (collectively, "Taxes")
imposed or levied by or on behalf of the United Kingdom or any political
subdivision thereof or any authority having power to tax therein (each a "U.K.
Tax Authority"), unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on account of, any
Taxes of any U.K. Tax Authority shall at any time be required on any payments
made by the Company with respect to the Securities, including payments of
principal, redemption price, interest, liquidated damages or premium, the
Company shall pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of such payments by
the Holders of the Securities or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; provided, however, that no such Additional Amounts shall be payable
-------- -------
with respect to:
<PAGE>
B-4
(i) in the case of Securities listed on a Recognized Stock Exchange at
the time such Additional Amounts would be payable, any payments on a
Security held by or on behalf of a Holder or a beneficial owner who is
liable for such Taxes in respect of such Security by reason of the Holder
or beneficial owner having some connection with the United Kingdom
(including being a citizen or resident or national of, or carrying on a
business or maintaining a permanent establishment in, or being physically
present in, the United Kingdom) other than by the mere holding of such
Security or enforcement of rights thereunder or the receipt of payments in
respect thereof;
(ii) in the case of Securities listed on a Recognized Stock Exchange
at the time such Additional Amounts would be payable, any Taxes that are
imposed or withheld as a result of a change in law after the Issue Date
where such withholding or imposition is by reason of the failure of the
Holder or beneficial owner of the Security to comply with any request by
the Company to provide information concerning the nationality, residence or
identity of such Holder or beneficial owner or to make any declaration or
similar claim or satisfy any information or reporting requirement, which is
required or imposed by a statute, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all
or part of such Taxes;
(iii) except in the case of the winding up of the Company, any
Security presented for payment (where presentation is required) in the
United Kingdom (unless by reason of the Company's actions presentment could
not have been made elsewhere); or
(iv) any Security presented for payment (where Securities are in the
form of Definitive Securities and presentation is required) more than 30
days after the relevant payment is first made available for payment to the
Holder (except to the extent that the Holder would have been entitled to
Additional Amounts had the Security been presented on the last day of such
30 day period).
Such Additional Amounts shall also not be payable where, had the
beneficial owner of the Security been the Holder of the Security, he would not
have been entitled to payment of Additional Amounts by reason of clauses (i) to
(iv) inclusive above.
<PAGE>
B-5
Upon request, the Company shall provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts.
Copies of such documentation shall be made available to the Holders upon
request.
3. Method of Payment
-----------------
[IF GLOBAL SECURITY--The Company will pay interest on the Securities
(except defaulted interest, which shall be paid as provided in the Indenture) to
the bearer hereof. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the Federal Republic of Germany that at the time of payment is legal
tender for payment of public and private debts. Immediately available funds for
the payment of the principal of (and premium, if any), interest and Additional
Amounts, if any, on this Security due on any Interest Payment Date, Maturity
Date, Redemption Date or other repurchase date will be made available to the
Paying Agent to permit the Paying Agent to pay such funds to the Holders on such
respective dates.[IF REGULATION S SECURITY--Holders of Book-Entry Interests in
this Security (including Euroclear and Cedel on behalf of all their account
holders) must provide instructions to the DTC for receipt of payments in
Deutsche Marks.]]
[IF RULE 144A OR IAI GLOBAL SECURITY--Amounts payable on the Rule 144A
Global Note and the Institutional Accredited Investor Global Note shall be made
in U.S. dollars (or in such other coin or currency of the United States of
America as at the time of payment is legal tender for the payment therein of
public and private debts) except to the extent any holder of Book-Entry
Interests in either such Global Note (a "U.S. Book-Entry Holder") elects to
receive payments in Deutsche Marks in accordance with the procedures set forth
below. To the extent that any U.S. Book-Entry Holder has not made such election
in respect of any payment of principal or interest, the aggregate amount
designated for all such U.S. Book-Entry Holders in respect of such payment (the
"DM Conversion Amount") will be converted by the Paying Agent into U.S. dollars
and paid to or as directed by the Book-Entry Depositary for payment through
DTC's settlement system to its relevant participants. All costs of any such
conversion and any wire transfers will be deducted from such payments. Any such
conversion shall be based on The Bank of New York's bid quotation, at or prior
to 11:00 a.m. New York time, on the second New York Business Day (as defined
below) preceding the relevant payment date, for the purchase by the Paying Agent
of the DM Conversion Amount of U.S. dollars for
<PAGE>
B-6
settlement on such payment date. If such bid quotation is not available for any
reason, the Paying Agent will endeavor to obtain a bid quotation from a leading
foreign exchange bank in New York City selected by the Paying Agent for such
purpose. If no bid quotation from a leading foreign exchange bank is available,
payment of the DM Conversion Amount will be made in Deutsche Marks to or as
directed by the Book-Entry Depositary for distribution to the account or
accounts specified by DTC to the Book-Entry Depositary.
A U.S. Book-Entry Holder may elect to receive payment of principal and
interest with respect to the Notes in Deutsche Marks by causing DTC through its
relevant participant to notify the Book-Entry Depositary by the time specified
below of (i) such U.S. Book-Entry Holder's election to receive all or a portion
of such payment in Deutsche Marks and (ii) wire transfer instructions to a
Deutsche Mark account in the Federal Republic of Germany. Such election in
respect of any payment must be made by the U.S. Book-Entry Holder at the time
and in the manner required by DTC's procedures applicable from time to time and
shall, in accordance with such procedures, be irrevocable and shall relate only
to such payment. DTC notifications of such election, wire transfer instructions
and the amount payable in Deutsche Marks must be received by the Book-Entry
Depositary prior to 5:00 p.m. New York time on the tenth day prior to the
payment date for the payment of principal. Any payments in Deutsche Marks shall
be made by or as directed by the Book-Entry Depositary by wire transfer of same-
day funds to Deutsche Mark accounts designated by DTC. The term "New York
Business Day" means any day other than a Saturday or Sunday or a day on which
banking institutions in New York City are authorized or required by law or
executive order to close.]
[IF DEFINITIVE SECURITY--The Company will pay interest (except
defaulted interest) on the Securities to the Persons who are registered holders
of Securities at the close of business on the January 15 or July 15 next
preceding the interest payment date even if the Securities are canceled after
the record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent at an office of the Paying Agent
maintained for such purpose to collect principal payments. The Company will pay
principal and interest in Deutsche Marks or such other coin or currency of the
Federal Republic of Germany that at the time of payment is legal tender for
payment of public and private debts; provided, however, that with respect to any
-------- -------
payment of principal or interest on Definitive Securities with an aggregate
principal amount in excess of DM1,000,000 held by any Holder or group of
<PAGE>
B-7
Holders, such payment will be made, at the written request of such Holder or
Holders (which shall be a single request with appropriate wire transfer
instructions), by wire transfer of immediately available funds to the Paying
Agent, who in turn will wire such funds to such single account as such Holder or
Holders may in writing to the Paying Agent direct; provided further that the
----------------
Paying Agent has received written wire transfer instructions at least fifteen
days prior to the date of any such payment.]
4. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York, a New York banking corporation
("Trustee"), will act as Paying Agent and Registrar. The Company may appoint
and change any Paying Agent, Registrar or co-registrar without notice. The
Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-
registrar. The Company shall at all times ensure that (i) at least one Paying
Agent is located outside the United Kingdom, (ii) if and as long as the
Securities are listed on the Luxembourg Stock Exchange, a Paying Agent is
located in Luxembourg or such other place as the Luxembourg Stock Exchange may
approve and (iii) if and so long as the Securities are listed on any other
securities exchange, any requirements of such securities exchange as to Paying
Agents are satisfied.
5. Indenture
---------
The Company issued the Securities under an Inden ture dated as of
January 30, 1998 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
------
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to DM245.0 million aggregate principal amount at any one time
outstanding (subject to Section 2.07 of the Indenture). This Security is one of
the Initial Securities referred to in the Indenture. The Securities include the
Initial Securities and any Exchange Securities issued in exchange for the
Initial Securities pursuant to the Indenture. The Initial Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes
<PAGE>
B-8
certain limitations on the issuance of debt by the Company, the payment of
dividends and other distributions and acquisitions or retirements of the
Company's Capital Stock and Subordinated Obligations, the incurrence by the
Company and its Subsidiaries of Liens on its property and assets which do not
equally and ratably secure the Securities, the sale or transfer of assets and
Subsidiary Stock, investments by the Company, the lines of business in which the
Company may operate, consolidations, mergers and transfers of all or
substantially all of the Company's assets, sale and leaseback transactions and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Company and its Subsidiaries to restrict distributions and dividends from
Subsidiaries. The limitations are subject to a number of important
qualifications and exceptions.
6. Optional Redemption
-------------------
The Securities will be redeemable, at the Company's option, in whole
or in part, at any time on or after February 1, 2003, and prior to maturity. On
and after that date, the Company may redeem the Securities in whole at any time
or in part from time to time at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest and Additional Amounts,
if any, to the redemption date (and in the case of Definitive Securities,
subject to the right of Holders of record on the relevant record date to receive
interest due on the related interest payment date and Additional Amounts, if
any, in respect thereof), if redeemed during the 12-month period commencing
February 1 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ ----------
<S> <C>
2003....................................................... 105.000%
2004....................................................... 103.333%
2005....................................................... 101.667%
2006 and thereafter....................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to February 1,
2001, the Company may redeem in the aggregate up to 33 1/3% of the original
aggregate principal amount of the Securities with the proceeds of one or more
Equity Offerings by the Company, at a redemption price (expressed as a
percentage of principal amount thereof of 110% plus accrued interest and
Additional Amounts, if any, to the redemption date (and in the case of
Definitive Securities, subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant
<PAGE>
B-9
interest payment date and Additional Amounts, if any, in respect thereof);
provided, however, that at least 66 2/3% of the original aggregate principal
- -------- -------
amount of the Securities must remain outstanding after each such redemption; and
provided, further, that such redemption shall occur within 90 days of the date
- -------- -------
of the closing of any such Equity Offering.
7. Optional Tax Redemption
-----------------------
The Securities may also be redeemed, at the option of the Company, in
whole but not in part, at any time upon giving not less than 30 nor more than 60
days' notice to the Holders (which notice shall be irrevocable), at a redemption
price equal to the principal amount thereof, together with accrued and unpaid
interest, if any, to the date fixed by the Company for redemption (a "Tax
Redemption Date") and all Additional Amounts, if any, then due and which will
become due on the Tax Redemption Date as a result of the redemption or
otherwise, if the Company determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations, protocols or rulings
promulgated thereunder) of the United Kingdom (or any political subdivision or
taxing authority of the United Kingdom) affecting taxation, which change or
amendment becomes effective on or after the Issue Date, (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the Issue Date or (iii) the
issuance of Definitive Securities due to (A) DTC being at any time unwilling or
unable to continue as or ceasing to be a clearing agency registered under the
Exchange Act, and a successor to DTC registered as a clearing agency under the
Exchange Act is not able to be appointed by the Company within 90 days or (B)
the Depositary being at any time unwilling or unable to continue as a Depositary
and a successor Depositary is not able to be appointed by the Company within 90
days, the Company is, or on the next interest payment date would be, required to
pay Additional Amounts, and the Company determines that such payment obligation
cannot be avoided by the Company taking reasonable measures. Notwithstanding
the foregoing, no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to make such
payment or withholding if a payment in respect of the Securities were then due.
Prior to the publication or, where relevant, mailing of any notice of redemption
of the Securities pursuant to the foregoing, the Company will deliver to the
<PAGE>
B-10
Trustee an opinion of a tax counsel reasonably satisfactory to the Trustee to
the effect that the circumstances referred to above exist. The Trustee shall
accept such opinion as sufficient evidence of the satisfaction of the conditions
precedent described above, in which event it shall be conclusive and binding on
the Holders.
8. Notice of Redemption
--------------------
Notice of redemption will be given at least 30 days but not more than
60 days before the Redemption Date by publishing in a leading newspaper having a
general circulation in New York (which is expected to be the Wall Street
Journal) (and, if and so long as the Securities are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or, in the case of Definitive Securities, mailing notice
to each Holder of Securities to be redeemed at such Holder's registered address.
Such notice shall also be given in accordance with any applicable requirements
of any other securities exchange on which the Securities are listed. Securities
in denominations larger than DM1,000 may be redeemed in part but only in whole
multiples of DM1,000. If money sufficient to pay the redemption price of and
accrued interest and Additional Amounts, if any, on all Securities (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest and Additional Amounts, if any, will
cease to accrue on such Securities (or such portions thereof) called for
redemption.
9. Change of Control Offer
-----------------------
Upon a Change of Control, the Company will be required to make an
offer to purchase, subject to certain conditions specified in the Indenture, all
outstanding Securities at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest and Additional
Amounts, if any, to the date of repurchase (and in the case of Definitive
Securities subject to the right of holders of record on the relevant record date
to receive interest due on the related interest payment date and Additional
Amounts, if any, in respect thereof) as provided in, and subject to the terms
of, the Indenture. Holders of Securities that are subject to an offer to
purchase will receive such an offer from the Company and may elect to have such
Securities purchased by completing the
<PAGE>
B-11
form entitled "Option of Holder to Elect Purchase" appearing below.
10. Limitation on Sale of Assets.
-----------------------------
When the aggregate amount of Net Available Cash (after application in
accordance with Section 4.06(a)(iii) of the Indenture) from any particular Asset
Disposition exceeds (Pounds)3.0 million (which amount shall be calculated as set
forth in Section 4.06(b) of the Indenture), the Company will be obligated to
make an offer to purchase the maximum principal amount of Securities, that is an
integral multiple of DM1,000, that may be purchased with the Net Available Cash
allotted to such offer at a purchase price of 100% of the principal amount
thereof, plus accrued and unpaid interest and Additional Amounts, if any, to the
date fixed for the closing of such offer. If the aggregate principal amount of
Securities surrendered by Holders thereof exceeds the amount of Net Available
Cash allotted to such offer, subject to applicable law, the Trustee shall select
the Securities to be redeemed in accordance with the Indenture; provided,
--------
however, that no Securities of DM1,000 or less shall be purchased in part.
- -------
Holders of Securities that are the subject of an offer to purchase will receive
such an offer from the Company in the manner provided in the Indenture (which
may be by publication) prior to any related purchase date and may elect to have
such Securities purchased by completing the form entitled "Option of Holders to
Elect Purchase" appearing below.
11. Denominations; Transfer; Exchange
---------------------------------
[IF GLOBAL SECURITY-- The Securities are in bearer form without
coupons in denominations of DM1,000 and whole multiples of DM1,000.]
[IF DEFINITIVE SECURITY-- The Securities are in registered form
without coupons in denominations of DM1,000 and whole multiples of DM1,000.]
A Holder may transfer or exchange Securities in accordance with the
Indenture. The Trustee or the Depositary may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and other
certifications (including certifications to ensure compliance with applicable
securities laws) and to pay any taxes and fees required by law or permitted by
the Indenture. The Company shall not be required to make, and the Registrar
need not register transfers or exchanges of, Definitive Securities selected for
redemption (except, in the case of Definitive Securities to be redeemed in part,
<PAGE>
B-12
the portion thereof not to be redeemed) or any Definitive Securities for a
period of 15 days before a selection of Definitive Securities to be redeemed.
12. Persons Deemed Owners
---------------------
[IF GLOBAL SECURITY--The bearer of this Security shall be treated as
the owner of it for all purposes, subject to the terms of the Indenture.]
[IF DEFINITIVE SECURITY--The registered Holder of this Security shall
be treated as the owner of it for all purposes, subject to the terms of the
Indenture.]
13. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
14. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee cash in Deutsche Marks or Federal Republic of
Germany Obligations for the payment of principal of and interest on the
Securities to redemption or maturity, as the case may be.
15. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
(including consents obtained in connection with a tender offer or exchange offer
for the Securities) and (ii) any default or noncompliance with any provision may
be waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities (including consents obtained in connection
with a tender offer or exchange offer for the Securities). Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with
<PAGE>
B-13
Article 5 of the Indenture, or to provide for uncertificated Securities in
addition to or in place of certificated Securities, or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make any other change that does not adversely
affect the rights of any Securityholder, or to provide for the issuance and
authorization of the Exchange Securities.
16. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to para graph 6 or 7 of
the Securities, upon acceleration or other wise; (iii) failure by the Company
to comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company or any Subsidiary if the amount accelerated (or so
unpaid) exceeds (Pounds)7,500,000 or its foreign currency equivalent; (v)
certain events of bankruptcy or insolvency with respect to the Company and its
Subsidiaries; and (vi) certain judgments or decrees for the payment of money in
excess of (Pounds)7,500,000 or its foreign currency equivalent against the
Company or a Subsidiary. If an Event of Default (other than a Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities may declare the principal of and
accrued but unpaid interest on all the Securities to be due and payable
immediately. Certain events of bankruptcy, insolvency, or reorganization are
Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securi ties unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may with hold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if and so long as a
committee of its Trust Officers in good
<PAGE>
B-14
faith determines that withholding notice is in the interest of the Holders.
17. Successors.
-----------
Subject to certain exceptions set forth in the Indenture, when a
successor assumes all the obligations of its predecessor under the Securities
and the Indenture in accordance with the terms of the Indenture, the predecessor
will be released from those obligations.
18. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securi ties and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may other wise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
19. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their crea tion. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
20. Authentication
--------------
This Security shall not be valid until an author ized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
21. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
B-15
22. CUSIP [and CINS] Numbers
------------------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP [and CINS]
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP [and CINS] numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
23. Governing Law
-------------
The laws of the State of New York shall govern the Indenture and the
Securities without regard to conflict of law provisions thereof to the extent
that the application of the laws of another jurisdiction would be required
thereby.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITY HOLDER A COPY OF THE INDENTURE WHICH HAS IN
IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
TEXON INTERNATIONAL PLC
ATTENTION: SECRETARY
100 ROSS WALK
LEICESTER, U.K.
LE4 5BX
<PAGE>
B-16
[For Global Securities]
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Security shall be DM[
]. The following decreases/increases in the principal amount at maturity of
this Security have been made:
<TABLE>
<CAPTION>
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- ----------- ----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
__________ __________ __________ ___________ ________
</TABLE>
<PAGE>
B-17
[For Definitive Securities]
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a participant in a
recognized signature
guarantee medallion program)
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
B-18
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to
Section 4.06 or 4.08 of the Indenture, check the box:
__
/ /
---
If you want to elect to have only part of this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
DM
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears on the other side of the Security)
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a participant in a recognized signature
guarantee medallion program)
<PAGE>
EXHIBIT C
FORM OF TRANSFER CERTIFICATE - *
U.S. GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
DURING THE RESTRICTED PERIOD
(Transfers pursuant to Section 2.06(a)(i)(1)
of the Indenture)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the [Rule 144A Global Securities (CUSIP No.
883060AA3)] [IAI Global Securities (CUSIP No. 883060AB1)] and held by you on
behalf of The Depository Trust Company who in turn is holding an interest
therein on behalf of the undersigned (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Securities to a Person
who, during the Restricted Period, will take delivery thereof in the form of an
equal aggregate principal amount of Securities evidenced by the Regulation S
Global Security (CINS No. G87667AA2), which amount, immediately after such
transfer, is to be held through the Euroclear Operator or Cedel or both.
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected pursuant to
and in accordance with Rule 903 or Rule 904 under the United States Securities
Act of 1933, as amended (the "Securities Act") and accordingly the Transferor
does hereby further certify that:
<PAGE>
C-2
(1) the offer of the Securities was not made to a person in the
United States or to or for the account or benefit of a U.S. person;
(2) either:
(A) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on
its behalf reasonably believed that the transferee was outside the
United States, or
(B) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the Transferor
nor any person acting on its behalf knows that the transaction was
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention
of the requirements of Rule 903 or 904 of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest
being transferred as described above will be held through the
Euroclear Operator or Cedel or both.
This certificate and the statements contained herein are made for the
benefit of the Company, the Note Guarantors and the Initial Purchaser. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
Dated: [Insert Name of Transferor]
By:__________________________
Name:
Title:
<PAGE>
C-3
(If the transferor is a corporation, partnership or
fiduciary, the title to the Person signing on behalf of
such transferor must be stated.)
____________________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of transfer certificate.
<PAGE>
EXHIBIT D
FORM OF TRANSFER CERTIFICATE -*
U.S. GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
AFTER THE RESTRICTED PERIOD
(TRANSFERS PURSUANT TO SECTION 2.06(A)(I)(2)
OF THE INDENTURE)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the [Rule 144A Global Securities (CUSIP No.
883060AA3)] [IAI Global Securities (CUSIP No. 883060AB1)] and held by you on
behalf of The Depository Trust Company who in turn is holding an interest
therein on behalf of the undersigned (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Securities to a Person
who will take delivery thereof in the form of an equal aggregate principal
amount of Securities evidenced by the Regulation S Global Security (CINS No.
G87667AA2).
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected pursuant to
and in accordance with Rule 903 and Rule 904 under the United States Securities
Act of 1933, as amended (the "Securities Act") and accordingly the Transferor
does hereby certify that:
(1) the offer of the Securities was not made to a person in the
United States or to or for the account or benefit of a U.S. person;
<PAGE>
D-2
(2) either:
(A) at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on
its behalf reasonably believed that the transferee was outside the
United States, or
(B) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither the Transferor
nor any person acting on its behalf knows that the transaction was
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in contravention
of the requirements of Rule 903 or 904 of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
This certificate and the statements contained herein are made for the
benefit of the Company, the Note Guarantors and the Initial Purchaser. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
Dated: [Insert Name of Transferor]
By:__________________________
Name:
Title:
(If the transferor is a corporation, partnership or
fiduciary, the title to the Person signing on behalf of
such transferor must be stated.)
____________________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of transfer certificate.
<PAGE>
EXHIBIT E
FORM OF TRANSFER CERTIFICATE - *
REGULATION S GLOBAL SECURITY TO
U.S. GLOBAL SECURITY
DURING THE RESTRICTED PERIOD
(TRANSFERS PURSUANT TO SECTION 2.06(A)(I)(3)
OF THE INDENTURE)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the Regulation S Global Security (CINS No.
G87667AA2) and held by you on behalf of the Depository Trust Company who in turn
is holding an interest therein on behalf of [insert name of transferor] (the
"Transferor") through the Euroclear Operator or Cedel or both. The Transferor
has requested a transfer of such beneficial interest in the Securities to a
Person who, and during the Restricted Period, will take delivery thereof in the
form of an equal principal amount of Securities evidenced by the [Rule 144A
Global Security (CUSIP No. 883060AA3)] [IAI Global Security (CUSIP No.
883060AB1)].
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been [effected pursuant to
and in accordance with Rule 144A under the United States Securities Act of 1933,
as amended, and accordingly the Transferor does hereby further certify that the
Transferor and any person acting on its behalf reasonably believes (i) the
transferee of such Securities is purchasing the Securities for its own account,
or for one or more accounts with respect to which such transferee exercises sole
investment discretion,
<PAGE>
E-2
(ii) such transferee and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, and (iii) such transferee is purchasing the
Securities in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United
States.]** [(i) made to an Institutional Accredited Investor purchasing for its
own account, or for the account of an Institutional Accredited Investor, in a
principal amount of Notes of DM500,000 or greater, that has furnished to the
Depositary a signed letter in substantially the form set forth in Annex A hereto
and (ii) effected in accordance with any applicable securities laws of any state
of the United States.]***
This certificate and the statements contained herein are made for the
benefit of the Company, the Note Guarantors and the Initial Purchaser.
Dated:
[Insert Name of Transferor]
By: ________________________
Name:
Title:
(If the transferor is a corporation, partnership or
fiduciary, the title of the Person signing on behalf of
such transferor must be stated.)
_______________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of transfer certificate.
** Include if transfer is to the Rule 144A Global Security.
*** Include if transfer is to the IAI Global Security.
<PAGE>
EXHIBIT F
FORM OF TRANSFER CERTIFICATE - *
IAI SECURITY TO
RULE 144A GLOBAL SECURITY
(TRANSFERS PURSUANT TO SECTION 2.06(A)(I)(4)
OF THE INDENTURE)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the IAI Global Security (CUSIP No. 883060AB1)
and held by you on behalf of the Depository Trust Company who in turn is holding
an interest therein on behalf of [insert name of transferor] (the "Transferor").
The Transferor has requested a transfer of such beneficial interest in the
Securities to a Person who will take delivery thereof in the form of an equal
principal amount of Securities evidenced by the Rule 144A Global Security (CUSIP
No. 883060AA3).
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected pursuant to
and in accordance with Rule 144A under the United States Securities Act of 1933,
as amended, and accordingly the Transferor does hereby further certify that the
Transferor and any person acting on its behalf reasonably believes (i) the
transferee of such Securities is purchasing the Securities for its own account,
or for one or more accounts with respect to which such transferee exercises sole
investment discretion, (ii) such transferee and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, and (iii) such
transferee is purchasing the Securities in a transaction meeting the
requirements of Rule 144A and in
<PAGE>
F-2
accordance with any applicable securities laws of any state of the United
States.
This certificate and the statements contained herein are made for the
benefit of the Company, the Note Guarantors and the Initial Purchaser.
Dated:
[Insert Name of Transferor]
By: ________________________
Name:
Title:
(If the transferor is a corporation, partnership or
fiduciary, the title of the Person signing on behalf of
such transferor must be stated.)
_______________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of transfer certificate.
<PAGE>
EXHIBIT G
FORM OF TRANSFER CERTIFICATE - *
RULE 144A SECURITY TO
IAI GLOBAL SECURITY
(TRANSFERS PURSUANT TO SECTION 2.06(A)(I)(5)
OF THE INDENTURE)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the Rule 144A Global Security (CUSIP No.
883060AA3) and held by you on behalf of the Depository Trust Company who in turn
is holding an interest therein on behalf of [insert name of transferor] (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Securities to a Person who will take delivery thereof in the
form of an equal principal amount of Securities evidenced by the IAI Global
Security (CUSIP No. 883060AB1).
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been (i) made to an
Institutional Accredited Investor purchasing for its own account, or for the
account of an Institutional Accredited Investor, in a principal amount of Notes
of DM500,000 or greater, that has furnished to the Depositary a signed letter
substantially in the form set forth in Annex A hereto and (ii) effected in
accordance with any applicable securities laws of any state of the United
States.
<PAGE>
G-2
This certificate and the statements contained herein are made for the
benefit of the Company, the Note Guarantors and the Initial Purchaser.
Dated:
[Insert Name of Transferor]
By: ________________________
Name:
Title:
(If the transferor is a corporation, partnership or
fiduciary, the title of the Person signing on behalf of
such transferor must be stated.)
_______________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of transfer certificate.
<PAGE>
EXHIBIT H
FORM OF EXCHANGE CERTIFICATE - *
EXCHANGES OF U.S. GLOBAL SECURITY
FOR REGULATION S GLOBAL SECURITY
(EXCHANGE PURSUANT TO SECTION 2.06(A)(I)(6)
OF THE INDENTURE)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the [Rule 144A Global Security (CUSIP No.
883060AA3)] [IAI Global Security (CUSIP No. 883060AB1)] and held by you on
behalf of The Depository Trust Company who in turn is holding an interest
therein on behalf of the undersigned (the "Beneficial Owner"). The Beneficial
Owner has requested that its beneficial interest in such Securities be exchanged
for a beneficial interest in an equal aggregate principal amount of Securities
evidenced by the Regulation S Global Security (CINS No. G87667AA2).
In connection with such request and in respect of such Securities, the
Beneficial Owner does hereby certify that (a) upon such exchange, it will be the
beneficial owner of such Securities, (b) it is [not a U.S. person (as defined in
Regulation S under the Securities Act) and is]** located outside the United
States (within the meaning of Regulation S) and acquired, or has agreed to
acquire and upon such exchange will have acquired, such Securities in an
offshore transaction (within the meaning of Regulation S) outside the United
States and otherwise in compliance with Regulation S[, (c) it is not an
"affiliate" (as defined in Rule 144 under the Securities Act) of the Company or
a person acting on behalf of such an affiliate and (d) it is
<PAGE>
H-2
not in the business of buying and selling securities or, if it is in such
business, it did not acquire such Securities from the Company or any affiliate
thereof in the initial distribution of the Securities].** [In addition, the
Beneficial Owner hereby agrees that it will not, on or before the 40th day after
the Issue Date, offer, sell, pledge or otherwise transfer the Securities issued
in such exchange except (a) to a Person who it reasonably believes (or it and
anyone acting on its behalf reasonably believes) is a "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A and in accordance with any applicable
securities laws of any state of the United States, (b) in an offshore
transaction meeting the requirements of Rule 903 or Rule 904 under the
Securities Act or (c) to an Institutional Accredited Investor purchasing for its
own account or for the account of such an Institutional Accredited Investor, in
each case in a minimum principal amount of Notes of DM500,000, that has
delivered to the Depositary a transfer letter in the form required by the
Indenture which provides among other things, that the transferee is acquiring
such Notes not for distribution in violation of the Securities Act, and, in each
case, in accordance with any applicable securities laws of any state of the
United States.]**
This certificate and the statements contained herein are made for the benefit of
the Company, the Note Guarantors and the Initial Purchaser.
Dated: [Insert Name of Beneficial Owner]
By:____________________
Name:
Title:
(If the Beneficial Owner is a corporation, partnership or
fiduciary, the title of the Person signing on behalf of such
transferor must be stated.)
_____________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of exchange certificate.
** Insert these bracketed provisions only if the exchange will occur during
the Restricted Period.
<PAGE>
EXHIBIT I
FORM OF EXCHANGE CERTIFICATE -*
EXCHANGES OF REGULATION S GLOBAL SECURITY
FOR U.S. GLOBAL SECURITY
(EXCHANGE PURSUANT TO SECTION 2.06(A)(I)(5)
OF THE INDENTURE)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the Regulation S Global Security (CINS No.
G87667AA2) and held by you on behalf of The Depository Trust Company who in turn
is holding an interest therein on behalf of the undersigned (the "Beneficial
Owner"). The Beneficial Owner has requested that its beneficial interest in
such Securities be exchanged for a beneficial interest in an equal aggregate
principal amount of Securities evidenced by the [Rule 144A Global Security
(CUSIP No. 883060AA3)] [IAI Global Security (CUSIP No. 883060AB1)].
In connection with such request and in respect of such Securities, as
the Beneficial Owner we acknowledge (or if we are acting for the account of
another Person, such Person has confirmed to us in writing that it acknowledges)
that the Securities have not been and will not be registered under the
Securities Act of 1933, as amended (the "Act").
We certify that we are (or it is) the beneficial owner of the
Securities and that we are (or it is) [a "qualified institutional buyer": (as
defined in Rule 144A under the Act) acting for our own account or for the
account of one or more qualified institutional buyers, and, accordingly, we
agree (or if we were acting for the account of one or more qualified
institutional buyers, each such
<PAGE>
I-2
qualified institutional buyer]** [an Institutional Accredited Investor acting
for our own account or on the account of an Institutional Accredited Investor,
exchanging beneficial interests in an aggregate principal amount of Notes of
DM500,000 or greater, have (or it has) furnished the Depositary a signed letter
substantially in the form set forth in Annex A hereto, and accordingly, we agree
(or if we are acting on behalf of an Institutional Accredited Investor, such
Institutional Accredited Investor]*** has confirmed to us that it agrees) that
we (or it) will not offer, sell, pledge or otherwise transfer the Securities
except in accordance with the Private Placement Legend set forth in the
Securities which limits sales, among other things, (i) (A) to a Person whom we
and anyone acting on our behalf reasonably believe (or it and anyone acting on
its behalf reasonably believes) is a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A, (B) pursuant to the exemption
from registration under the Act provided by Rule 144 (if available) or (C) to an
Institutional Accredited Investor purchasing for its own account or for the
account of an Institutional Accredited Investor, in a minimum principal amount
of Notes of DM500,000 that delivers a letter to the Depositary in the form
required by the Indenture, in each case in accordance with any applicable
securities laws of the states of the United States or (ii) in an offshore
transaction meeting the requirements of Rule 903 or Rule 904 of Regulation S, in
each case subject to the requirements of the Indenture.
If we are a broker-dealer, we further certify that we are acting for
the account of our customer and that our customer has confirmed the accuracy of
the representations contained herein that are applicable to it (including the
representations with respect to beneficial ownership).
This certificate and the statements contained herein are made for the
benefit of the Company, the Note Guarantors and the Initial Purchaser. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
Dated: [Insert Name of Transferor]
By:__________________________
Name:
Title:
<PAGE>
I-3
(If the transferor is a corporation,
partnership or fiduciary, the title to the Person
signing on behalf of such transferor must be stated.)
____________________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of transfer certificate.
** For exchange into Rule 144A Global Security.
*** For exchange into IAI Global Security.
<PAGE>
EXHIBIT J
FORM OF EXCHANGE CERTIFICATE -*
EXCHANGES OF U.S. GLOBAL SECURITY
FOR ANOTHER U.S. GLOBAL SECURITY
(EXCHANGE PURSUANT TO SECTION 2.06(A)(I)(6)
OF THE INDENTURE)
The Bank of New York, as Depositary
101 Barclay Street
Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: Texon International plc
10% Senior Notes
due 2008 (the "Securities")
Reference is hereby made to the Indenture dated as of January 30, 1998
(the "Indenture"), between Texon International plc (the "Company") and The Bank
of New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
This letter relates to DM245.0 million aggregate principal amount of
Securities which are evidenced by the [Rule 144A Global Security (CUSIP No.
883060AA3)] [IAI Global Security (CUSIP No. 883060AB1)] and held by you on
behalf of The Depository Trust Company who in turn is holding an interest
therein on behalf of the undersigned (the "Beneficial Owner"). The Beneficial
Owner has requested that its beneficial interest in such Securities be exchanged
for a beneficial interest in an equal aggregate principal amount of Securities
evidenced by the [Rule 144A Global Security (CUSIP No. 883060AA3)] [IAI Global
Security (CUSIP No. 883060AB1)].
In connection with such request and in respect of such Securities, as
the Beneficial Owner we acknowledge (or if we are acting for the account of
another Person, such Person has confirmed to us in writing that it acknowledges)
that the Securities have not been and will not be registered under the
Securities Act of 1933, as amended (the "Act").
We certify that we are (or it is) the beneficial owner of the Securities
and that we are (or it is) [a "qualified institutional buyer": (as defined in
Rule 144A under the Act) acting for our own account or for the account of one or
more qualified institutional buyers, and, accordingly, we agree (or if we were
acting for the account of one or more
<PAGE>
J-2
qualified institutional buyers, each such qualified institutional buyer]** [an
Institutional Accredited Investor acting for our own account or the account of
an Institutional Accredited Investor, exchanging beneficial interests in an
aggregate principal amount of Notes of DM500,000 or greater, and have (or it
has) furnished the Depositary a signed letter substantially in the form set
forth in Annex A hereto, and accordingly, we agree (or if we are acting on
behalf of an Institutional Accredited Investors, such Institutional Accredited
Investor]*** has confirmed to us that it agrees) that we (or it) will not offer,
sell, pledge or otherwise transfer the Securities except (i) (A) to a Person
whom we and anyone acting on our behalf reasonably believe (or it and anyone
acting on its behalf reasonably believes) is a qualified institutional buyer in
a transaction meeting the requirements of Rule 144A, B) pursuant to the
exemption from registration under the Act provided by Rule 144 (if available) or
(C) to an Institutional Accredited Investor purchasing for its own account or
for the account of such an Institutional Accredited Investor, in a minimum
principal amount of Notes of DM500,000, that delivers a letter to the Depositary
in the form required by the Indenture, in each case in accordance with any
applicable securities laws of the states of the United States or (ii) in an
offshore transaction meeting the requirements of Rule 903 or Rule 904 of
Regulation S.
If we are a broker-dealer, we further certify that we are acting for
the account of our customer and that our customer has confirmed the accuracy of
the representations contained herein that are applicable to it (including the
representations with respect to beneficial ownership).
This certificate and the statements contained herein are made for the
benefit of the Company, the Note Guarantors and the Initial Purchaser. Terms
used in this certificate and not otherwise defined in the Indenture have the
meanings set forth in Regulation S under the Securities Act.
Dated: [Insert Name of Transferor]
By:__________________________
Name:
Title:
<PAGE>
J-3
(If the transferor is a corporation,
partnership or fiduciary, the title to the Person
signing on behalf of such transferor must be stated.)
____________________
* If the Security is a Definitive Security, appropriate changes need to be
made to this form of transfer certificate.
** For exchanges into Rule 144A Global Security.
*** For exchanges into IAI Global Security.
<PAGE>
ANNEX A
FORM OF
TRANSFEREE LETTER OF REPRESENTATION
Texon International plc
c/o The Bank of New York
101 Barclay Street
Floor 21 West
New York, NY 10286
Dear Sirs:
This certificate is delivered to request a transfer of DM principal
amount of the 10% Senior Notes due 2008 (the "Notes") of Texon International plc
(the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: _____________________________
Address: __________________________
Taxpayer ID Number: _______________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")), purchasing for our own account or for the account of such an
institutional "accredited investor" at least DM500,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes and invest in
or purchase securities similar to the Notes in the normal course of our
business. We, and any accounts for which we are acting, are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date that is two years after the later of the
date of
<PAGE>
ANNEX A
Page 2
original issue and the last date on which the Company or any affiliate of the
Company was the owner of such Notes (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a)(1) to the Company, (2) pursuant to a
registration statement which has been declared effective and remains effective
under the Securities Act, (3) for so long as the Notes are eligible for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB")
that is purchasing for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance on Rule 144A, (4) in
an offshore transaction within the meaning of, and in compliance with,
Regulation S under the Securities Act, (5) to an "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
an institutional investor (an "Institutional Accredited Investor") purchasing
for its own account or for the account of such an Institutional Accredited
Investor, in each case in a minimum principal amount of Notes of DM500,000, or
(6) pursuant to any other available exemption from the registration requirements
of the Securities Act and (b) in accordance with all applicable securities laws
of the states of the U.S., subject in each of the foregoing cases to any
requirement of law that the disposition of our property or the property of such
investor account or accounts be at all times within our or their control and in
compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to
be made pursuant to clause (5) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee substantially in
the form of this letter to the Book-Entry Depositary, which shall provide, among
other things, that the transferee is an Institutional Accredited Investor within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that
it is acquiring such Notes not for distribution in violation of the Securities
Act. We acknowledge that the Company reserves the right prior to any offer,
sale or other transfer prior to the Resale Termination Date of the Notes
(including beneficial interests in the Global Notes) pursuant to clause (a)(4),
(a)(5) or (a)(6) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and, prior
to any offer, sale or other transfer pursuant to clause (a)(1) through (a)(6)
above, to require the transfer certifications required pursuant to the Indenture
and the Note Depositary Agreement.
<PAGE>
ANNEX A
Page 3
TRANSFEREE: _________________
BY: _________________________
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
TEXON INTERNATIONAL PLC
DM 245 MILLION
10% SENIOR NOTES DUE 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
January 27, 1998
CHASE MANHATTAN INTERNATIONAL LIMITED
125 London Wall, 9th Floor
London, EC2Y 5AJ
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
CHASE MANHATTAN BANK AG
Ulmenstrasse 30
60325 Frankfurt am Main
Germany
Ladies and Gentlemen:
Texon International plc, a company incorporated under the laws of
England and Wales (the "Company"), proposes to issue and sell to Chase Manhattan
-------
International Limited ("CMIL"), Chase Securities Inc. ("CSI") and Chase
---
Manhattan Bank AG (together with CMIL and CSI, the "Initial Purchasers"), upon
------------------
the terms and subject to the conditions set forth in a purchase agreement dated
January 27, 1998 (the "Purchase Agreement"), DM 245 million aggregate principal
------------------
amount of its 10% Senior Notes due 2008 (the "Securities"). Capitalized terms
----------
used but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the holders (including the Initial Purchasers and other holders of
beneficial interests in global securities that will be shown on records
maintained
<PAGE>
2
in book-entry form by The Depositary Trust Company) of the Securities, the
Exchange Securities (as defined herein) and the Private Exchange Securities (as
defined herein) (collectively, the "Holders"), as follows:
-------
1. Registered Exchange Offer. The Company shall (i) prepare and,
--------------------------
not later than 60 days following the date of original issuance of the Securities
(the "Issue Date"), file with the Commission a registration statement (the
----------
"Exchange Offer Registration Statement") on an appropriate form under the
- --------------------------------------
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "Registered Exchange Offer") to issue and deliver to such Holders, in
-------------------------
exchange for the Securities, a like aggregate principal amount of debt
securities of the Company (the "Exchange Securities") that are identical in all
-------------------
material respects to the Securities, except for the transfer restrictions
relating to the Securities, (ii) use its reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 120 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 150 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). The Exchange Securities will
----------------------------------
be issued under the Indenture or an indenture (the "Exchange Securities
-------------------
Indenture") between the Company and the Trustee or such other bank or trust
- ---------
company that is reasonably satisfactory to the Initial Purchasers, as trustee
(the "Exchange Securities Trustee"), such indenture to be identical in all
---------------------------
material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not an Initial
Purchaser holding Securities that have, or that are reasonably likely to have,
the status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Securities in the ordinary course of such Holder's business and (d) has
no arrangements or understandings with any person to participate in the
distribution of the
<PAGE>
3
Exchange Securities) and to trade such Exchange Securities from and after their
receipt without any limitations or restrictions under the Securities Act and
without material restrictions under the securities laws of the several states of
the United States. The Company, the Initial Purchasers and each Exchanging
Dealer acknowledge that, pursuant to current interpretations by the Commission's
staff of Section 5 of the Securities Act, each Holder that is a broker-dealer
electing to exchange Securities, acquired for its own account as a result of
market-making activities or other trading activities, for Exchange Securities
(an "Exchanging Dealer"), is required to deliver a prospectus containing
-----------------
substantially the information set forth in Annex A hereto on the cover, in Annex
B hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
----------------
principal amount of debt securities of the Company (the "Private Exchange
----------------
Securities") that are identical in all material respects to the Exchange
- ----------
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number, and, if applicable, the same CINS number, as the Exchange
Securities.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
<PAGE>
4
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws, rules and
regulations (including of any securities exchange on which the Securities
are listed) that are applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancelation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver (i) in the case of Securities
in definitive form, to each Holder, Exchange Securities or Private Exchange
Securities, as the case may be, equal, in principal amount to the
Securities of such Holder so accepted for exchange and (ii) in the case of
securities in global form, to the Book-Entry Depositary, Exchange
Securities or Private Exchange Securities, as the case may be, in global
form equal in principal amount to the Securities so accepted for exchange,
as further set forth in the Indenture.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided that (i) in
--------
the
<PAGE>
5
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer, such period shall be the lesser of 180 days
and the date on which all Exchanging Dealers have sold all Exchange Securities
held by them and (ii) the Company shall make such prospectus and any amendment
or supplement thereto available to any broker-dealer for use in connection with
any resale of any Exchange Securities for a period of not less than 90 days
after the consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company or,
if it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for use
therein (the "Holders' Information")) does not, when it becomes
--------------------
<PAGE>
6
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not, as of the
consummation of the Registered Exchange Offer, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
-------------------
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 150 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities or (vi) the Company so elects, then the following provisions
shall apply:
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable (but in no event more than 45 days after so
required or requested pursuant to this Section 2) with the Commission, and
thereafter shall use its reasonable best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Securities (as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with
----------------------------
any Exchange Offer Registration Statement, a "Registration Statement");
----------------------
provided, however, that no Holder of Securities or Exchange Securities
-------- -------
shall be entitled to have Securities or Exchange Securities held by it
covered by such Shelf Registration Statement unless such Holder agrees in
<PAGE>
7
writing to be bound by all provisions of this Agreement applicable to such
Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer
Restricted Securities for a period ending on the earlier of (i) two years
from the Issue Date or such shorter period that will terminate when all the
Transfer Restricted Securities covered by the Shelf Registration Statement
have been sold pursuant thereto and (ii) the date on which the Securities
become eligible for resale without volume restrictions pursuant to Rule 144
under the Securities Act (in any such case, such period being called the
"Shelf Registration Period"). The Company shall be deemed not to have used
--------------------------
its reasonable best efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily takes any action
that would result in Holders of Transfer Restricted Securities covered
thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable
law.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with
respect to Holders' Information) does not, when it is filed or becomes
effective, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any prospectus forming part of
any Shelf Registration Statement, and any supplement to such prospectus (in
either case, other than with respect to Holders' Information), does not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the
-------------------
Holders of Transfer Restricted Securities will suffer damages if the Company
fails to fulfill its
<PAGE>
8
obligations under Section 1 or Section 2, as applicable, and that it would not
be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with the Commission on or prior
to 60 days after the Issue Date, (ii) the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, is not declared
effective within 120 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's staff, if later, within 45 days
after publication of the change in law or interpretation), (iii) the Registered
Exchange Offer is not consummated on or prior to 150 days after the Issue Date,
or (iv) the Shelf Registration Statement is filed and declared effective within
120 days after the Issue Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 45 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company will be
--------------------
obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to DM0.192 per week per DM1,000 principal amount of Transfer
Restricted Securities held by such Holder until (i) the applicable Registration
Statement is filed, (ii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective or an additional Shelf Registration is filed
and becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. As used
herein, the term "Transfer Restricted Securities" means (i) each Security until
------------------------------
the date on which such Security has been exchanged for a freely transferable
Exchange Security in the Registered Exchange Offer, (ii) each Security or
Private Exchange Security until the date on which it has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) each Security or Private Exchange Security until
the date on which it is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.
Notwithstanding anything to the contrary in this
<PAGE>
9
Section 3(a), the Company shall not be required to pay liquidated damages to a
Holder of Transfer Restricted Securities if such Holder failed to comply with
its obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on
each interest payment date specified by the Indenture and the Securities to the
holder entitled to receive the interest payment to be made on such date. Each
obligation to pay liquidated damages shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to be declared or to remain effective or (iii) the
Exchange Offer Registration Statement to be declared effective and the
Registered Exchange Offer to be consummated, in each case to the extent required
by this Agreement.
4. Registration Procedures. In connection with any Registration
------------------------
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, a
reasonable time prior to the filing thereof with the Commission, a copy of
the Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and shall use its reasonable
best efforts to reflect in each such document, when so filed with the
Commission, such comments as any Initial Purchaser may reasonably propose;
(ii) include the information set forth in
<PAGE>
10
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in
Annex C hereto in the "Plan of Distribution" section of the prospectus
forming a part of the Exchange Offer Registration Statement, and include
the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and (iii) if requested
by any Initial Purchaser, include the information required by Items 507 or
508 of Regulation S-K, as applicable, in the prospectus forming a part of
the Exchange Offer Registration Statement.
(b) The Company shall advise the Initial Purchasers, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use
of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities, the
Exchange Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material
<PAGE>
11
fact required to be stated therein or necessary to make the statements
therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents to
the use of such prospectus or any amendment or supplement thereto by each
of the selling Holders of Transfer Restricted Securities in connection with
the offer and sale of the Transfer Restricted Securities covered by such
prospectus or any amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements
and schedules and, if any Initial Purchaser or Exchanging Dealer or any
such Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period or
the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the
<PAGE>
12
Shelf Registration Statement and any amendment or supplement thereto as
such Initial Purchaser, Exchanging Dealer or other persons may reasonably
request; and the Company consents to the use of such prospectus or any
amendment or supplement thereto by any such Initial Purchaser, Exchanging
Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in
connection with the registration or qualification of, such Securities,
Exchange Securities or Private Exchange Securities for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities, Exchange Securities or Private Exchange Securities
covered by such Registration Statement; provided that the Company will not
--------
be required to register or qualify generally to do business in any
jurisdiction where it is not then so registered or qualified or deal in
securities in any jurisdiction where it would not otherwise be required to
register or qualify or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not
then so subject.
(i) The Company will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders thereof may
request in writing prior to sales of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an
effective Registration Statement, the Company will promptly prepare and
file with the Commission a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other
required
<PAGE>
13
document so that, as thereafter delivered to purchasers of the Securities,
Exchange Securities or Private Exchange Securities from a Holder, the
prospectus will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number and, if applicable, a
CINS number for the Securities, the Exchange Securities and the Private
Exchange Securities, as the case may be, and provide the applicable trustee
with printed certificates for the Securities, the Exchange Securities or
the Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders
as soon as practicable after the effective date of the applicable
Registration Statement an earning statement satisfying the provisions of
Section 11(a) of the Securities Act; provided that in no event shall such
--------
earning statement be delivered later than 45 days after the end of a 12-
month period (or 90 days, if such period is a fiscal year) beginning with
the first month of the Company's first fiscal quarter commencing after the
effective date of the applicable Registration Statement, which statement
shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture
Act as required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Company may from
time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Company may exclude from such registration the Transfer
Restricted Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
<PAGE>
14
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such
Holder will discontinue disposition of such Transfer Restricted Securities
until such Holder's receipt of copies of the supplemental or amended
prospectus contemplated by Section 4(j) or until advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may be
-------
resumed. If the Company shall give any notice under Section 4(b)(ii)
through (v) during the period that the Company is required to maintain an
effective Registration Statement (the "Effectiveness Period"), such
--------------------
Effectiveness Period shall be extended by the number of days during such
period from and including the date of the giving of such notice to and
including the date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies
of the supplemental or amended prospectus contemplated by Section 4(j) (if
an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action,
if any, as Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold
or the managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Securities, Exchange Securities or Private
Exchange Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities, and
Private Exchange Securities being sold and any underwriter participating in
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its Material Subsidiaries and (ii) use its reasonable
best efforts to have its
<PAGE>
15
officers, directors, employees, accountants and counsel supply all relevant
information reasonably requested by such representative, Special Counsel or
any such underwriter (an "Inspector") in connection with such Shelf
---------
Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection
with such Shelf Registration Statement, use its reasonable best efforts to
cause (i) its counsel to deliver an opinion relating to the Shelf
Registration Statement and the Securities, Exchange Securities or Private
Exchange Securities, as applicable, in customary form, (ii) its officers to
execute and deliver all customary documents and certificates reasonably
requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) and (iii) its
independent public accountants to provide a comfort letter or letters in
customary form, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No.
72.
5. Registration Expenses. The Company will bear all expenses
----------------------
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders
for the reasonable fees and disbursements of one firm of attorneys (in addition
to any local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Securities, the Exchange Securities and the Private Exchange
Securities to be sold pursuant to each Registration Statement (the "Special
-------
Counsel") acting for the Initial Purchasers or Holders in connection therewith
- -------
(which counsel shall be Cravath, Swaine & Moore unless otherwise affirmatively
stated by the Holders).
6. Indemnification. (a) In the event of a Shelf Registration
----------------
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or an Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers,
<PAGE>
16
directors, employees, representatives and agents, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
-------- -------
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, an untrue statement
or alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Holders' Information; and
provided, further, that with respect to any such untrue statement in or omission
- -------- -------
from any related preliminary prospectus, the indemnity agreement contained in
this Section 6(a) shall not inure to the benefit of any Holder from whom the
person asserting any such loss, claim, damage, liability or action received
Securities, Exchange Securities or Private Exchange Securities to the extent
that such loss, claim, damage, liability or action of or with respect to such
Holder results from the fact that both (A) a copy of the final prospectus was
not sent or given to such person at or prior to the written confirmation of the
sale of such Securities, Exchange Securities or Private Exchange Securities to
such person and (B) the untrue statement in or omission from the related
preliminary prospectus was corrected in the final prospectus unless, in either
case, such failure to deliver the final prospectus was a result of non-
compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
<PAGE>
17
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
-------- -------
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
--------
however, that the failure to notify the indemnifying party shall not relieve it
- -------
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
-------- -------
notify the indemnifying party shall not relieve it from any
<PAGE>
18
liability which it may have to an indemnified party otherwise than under this
Section 6. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than the reasonable costs of investigation;
provided, however, that an indemnified party shall have the right to employ its
- -------- -------
own counsel in any such action, but the fees, expenses and other charges of such
counsel for the indemnified party will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based upon advice of counsel to the indemnified party)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based upon advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld),
<PAGE>
19
but if settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement (i) includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
7. Contribution. If the indemnification provided for in Section 6
-------------
is unavailable or insufficient to hold harmless an indemnified party under
Section 6(a) or 6(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company from the offering and sale
of the Securities, on the one hand, and a Holder with respect to the sale by
such Holder of Securities, Exchange Securities or Private Exchange Securities,
on the other, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and such Holder, on the other, with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and a Holder, on the other, with respect to such offering and such
sale shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Securities (before deducting expenses) received by or on
behalf of the Company as set forth in the table on the cover of the Offering
Memorandum, on the one hand, bear to the total proceeds received by such Holder
with respect to its sale of Securities, Exchange Securities or Private Exchange
Securities, on the other. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
<PAGE>
20
relates to the Company or information supplied by the Company, on the one hand,
or to any Holders' Information supplied by such Holder, on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 7 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7 shall be deemed to include, for
purposes of this Section 7, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 7, an indemnifying party that is a Holder of Securities, Exchange
Securities or Private Exchange Securities shall not be required to contribute
any amount in excess of the amount by which the total price at which the
Securities, Exchange Securities or Private Exchange Securities sold by such
indemnifying party to any purchaser exceeds the amount of any damages which such
indemnifying party has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable best
-------------------
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time it is not required
to file such reports, it will, upon the written request of any Holder of
Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. The Company covenants that it will take such further action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Securities, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
<PAGE>
21
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
9. Underwritten Registrations. If any of the Transfer Restricted
---------------------------
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
------------- -----------------------
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class; provided, however, that this
-------- -------
Section 10(a), Section 6 and Section 7 may not be amended without the prior
written consent of each Holder of Securities, Exchange Securities and Private
Exchange Securities (including any Person who was a Holder of Securities,
Exchange Securities and Private Exchange Securities disposed of pursuant to any
Registration Statement). Notwithstanding the foregoing, a waiver or, consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose Securities, Exchange Securities or
Private Exchange Securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders may
be given by Holders of a majority in aggregate principal amount of the
Securities, the Exchange Securities and the Private Exchange Securities
<PAGE>
22
being sold by such Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
--------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder of Securities, Exchange Securities or Private
Exchange Securities in definitive form, at the most current address given
by such Holder to the Company in accordance with the provisions of this
Section 10(b), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture,
with a copy in like manner to each Initial Purchaser.
(2) if to a Holder of Securities, Exchange Securities or Private
Exchange Securities in global form, to the Person and in the manner
provided for in Section 4.02 of the Depositary Agreement, with a copy in
like manner to each Initial Purchaser.
(3) if to an Initial Purchaser, initially at its address set forth in
the Purchase Agreement; and
(4) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
-------------
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
--------------------
"business day" means a day other than a Saturday, Sunday or other day on which
------------
banking institutions in Luxembourg, the State of New York, Frankfurt or London
are authorized or required by law to close, (b)
<PAGE>
23
the term "subsidiary" has the meaning set forth in Rule 405 under the Securities
----------
Act and (c) except where otherwise expressly provided, the term "affiliate" has
---------
the meaning set forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
---------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of New York, without regard to
principles of conflicts of laws to the extent that the application of the laws
of another jurisdiction would be required thereby.
(h) Consent to Jurisdiction; Appointment of Agent for Service of
------------------------------------------------------------
Process; Judgement Currency. (i) The Company agrees that any suit, action or
- ----------------------------
proceeding against the Company arising out of or relating to this Agreement may
be instituted in any state or U.S. Federal court in the Borough of Manhattan,
The City of New York, New York, and any appellate court from any thereof, and it
irrevocably submits to the non-exclusive jurisdiction of such courts in any
suit, action or proceeding. The Company irrevocably waives, to the fullest
extent permitted by law, any objection to any suit, action, or proceeding that
may be brought in connection with this Agreement, including such actions, suits
or proceedings relating to securities laws of the United States of America or
any state thereof, in such courts whether on the grounds of venue, residence or
domicile or on the ground that any such suit, action or proceeding has been
brought in an inconvenient forum. The Company agrees that final judgment in any
such suit, action or proceeding brought in such court shall be conclusive and
binding upon the Company, and may be enforced in any court to the jurisdiction
of which the Company is subject by a suit upon such judgment; provided that
--------
service of process is effected upon the Company in the manner provided by this
Section 10(h).
(ii) The Company irrevocably appoints CT Corporation System, with
offices on the date hereof at 1633 Broadway, New York, New York, 10019, as
its authorized agent (the "Authorized Agent"), upon whom process may be
----------------
served in any suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated herein which may be instituted
in any state or U.S. Federal court in the Borough of Manhattan, The City of
New York, New York, and expressly accepts the non-exclusive jurisdiction of
any such court in respect of any such suit, action or
<PAGE>
24
proceeding. The Company hereby represents and warrants that the Authorized
Agent has accepted such appointment and has agreed to act as said agent for
service of process, and the Company agrees to take any and all action,
including the filing of any and all documents that may be necessary to
continue such respective appointment in full force and effect for a period
of ten years from the date of this Agreement. Service of process upon the
Authorized Agent shall be deemed, in every respect, effective service of
process upon the Company. Notwithstanding the foregoing, any action
involving the Company arising out of or relating to this Agreement may be
instituted in any court of competent jurisdiction in any other
jurisdiction.
(iii) Any action, suit or proceeding brought by the Company against
an Initial Purchaser (including for the purposes of this Section
10(h)(iii), such Initial Purchaser's affiliates, the Initial Purchaser's
and its affiliates' respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such
Initial Purchaser within the meaning of the Securities Act or the Exchange
Act) under Section 6 or 7, arising out of or based upon this Agreement and
the transactions contemplated herein shall be brought solely in a U.S.
Federal or state court in the Borough of Manhattan, The City of New York,
New York, and the Company shall not initiate nor seek to initiate, in the
United Kingdom or in any other jurisdiction other than in such New York
courts, any action, suit or proceeding against any Initial Purchaser under
Section 6 or 7, arising out of or based upon this Agreement and the
transactions contemplated hereby. The foregoing shall apply, without
limitation, to any action seeking to obtain any injunction or declaratory
judgment against the enforcement of, or a declaratory judgment concerning,
any claim by any Initial Purchaser in respect of this Agreement and any
transaction contemplated hereby, and any action challenging the
enforceability of or seeking to invalidate in any respect the submission by
the Company hereunder to the jurisdiction of such New York courts or the
designation, pursuant to Section 10(g) of this Agreement, of the laws of
the State of New York as the law applicable to this Agreement.
(iv) If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder into any currency other than
United States dollars, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate
<PAGE>
25
of exchange used shall be the rate at which in accordance with normal
banking procedures CSI could purchase United States dollars with the other
currency in New York City on the business day preceding that on which final
judgment is given. The obligation of the Company in respect of any sum due
to any Holder shall, notwithstanding any judgment in a currency other than
United States dollars, not be discharged until the first business day,
following receipt by any Holder of any sum adjudged to be so due in such
other currency, on which (and only to the extent that) such Holder may in
accordance with normal banking procedures purchase United States dollars
with such other currency; if the United States dollars so purchased are
less than the sum originally due to any Holder hereunder, the Company
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Holder against such loss. If the United States dollars so
purchased are greater than the sum originally due to any Holder hereunder,
such Holder agrees to pay to the Company an amount equal to the excess of
the dollars so purchased over the sum originally due to the such Holder
here under.
(v) The provisions of this subsection (h) of this Section 10 shall
survive any termination or cancellation of this Agreement.
(i) Remedies. In the event of a breach by the Company or by any
---------
Holder of any of its obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(j) No Inconsistent Agreements. The Company represents, warrants and
---------------------------
agrees that (i) it has not entered into, shall not, on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the provisions
hereof, (ii) it has not
<PAGE>
26
previously entered into any agreement which remains in effect granting any
registration rights with respect to any of its debt securities to any person and
(iii) without limiting the generality of the foregoing, without the written
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Transfer Restricted Securities, it shall not grant to any person the
right to request the Company to register any debt securities of the Company
under the Securities Act unless the rights so granted are not in conflict or
inconsistent with the provisions of this Agreement.
(k) No Piggyback on Registrations. Neither the Company nor any of its
------------------------------
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(l) Severability. The remedies provided herein are cumulative and not
-------------
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE>
27
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
TEXON INTERNATIONAL PLC
By
_________________________________
Name:
Title:
Accepted:
On behalf of Chase Manhattan Bank AG,
Chase Securities Inc. and
Chase Manhattan International Limited
CHASE MANHATTAN INTERNATIONAL LIMITED
By
--------------------
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until [
] 199[ ], all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
<PAGE>
2
in the Letter of Transmittal. The Company has agreed in accordance with Section
5 of the Exchange and Registration Rights Agreement to pay all expenses incident
to the Registered Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any broker-
dealers and the Company will indemnify the Holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
THIS NOTE DEPOSITARY AGREEMENT is made as of the 30th
day of January 1998 (this "Agreement") by and between TEXON
---------
INTERNATIONAL PLC, a public limited company incorporated
under the laws of England and Wales (the "Company"), and THE
-------
BANK OF NEW YORK, a New York banking corporation, as Book-
Entry Depositary (the "Book-Entry Depositary").
---------------------
ARTICLE I
Definitions and Other General Provisions
----------------------------------------
SECTION 1.01. Definitions. Terms not defined herein have the
------------
meanings ascribed to them in the Indenture. The following terms, as used herein,
have the following meanings:
"Board Resolution" means a copy of a resolution certified by the
----------------
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors of the Company and to be in full force and effect on the
date of such certification.
"Book-Entry Depositary" means the party named as such in this
---------------------
Agreement or its nominee or the custodian of either until a successor shall have
become such pursuant to Section 3.08 hereof, and thereafter "Book-Entry
Depositary" shall mean such successor or its nominee or the custodian of either.
"Book-Entry Interest" means beneficial interests in the Securities
-------------------
that will be shown on records maintained in book-entry form by DTC.
"Book-Entry Register" has the meaning ascribed thereto in Section 2.03
-------------------
hereof.
"Business Day" means each day that is not a Legal Holiday.
------------
"Certificateless Depositary Interests" means collectively, (i) the
------------------------------------
beneficial interests that shall at all times prior to the issuance of Definitive
Securities in respect thereof represent the right to receive 100% of the
principal, premium (if any), interest, and Additional Amounts (if any) of and
liquidated damages (if any) in respect to the underlying Regulation S Global
Security, (ii) the beneficial interests that shall at all times prior
<PAGE>
2
to the issuance of Definitive Securities in respect thereof represent the right
to receive 100% of the principal, premium (if any), interest, and Additional
Amounts (if any) of and liquidated damages (if any) in respect of the underlying
Rule 144A Global Security and (iii) the beneficial interests that shall at all
times prior to the issuance of Definitive Securities in respect thereof
represent the right to receive 100% of the principal, premium (if any),
interest, and Additional Amounts (if any) of and liquidated damages (if any) in
respect of the underlying IAI Global Security, and that in each case is issued
to the Depositary or its nominee by the Book-Entry Depositary.
"Company" means the party named as such in this Agreement until a
-------
successor replaces it pursuant to the applicable provisions of the Indenture
and, thereafter, means the successor.
"Company Order" means a written order or request signed in the name of
-------------
the Company by two Officers or by an Officer and either an Assistant Treasurer
or an Assistant Secretary of the Company.
"Corporate Trust Office" means the office of the Book-Entry Depositary
----------------------
in the Borough of Manhattan, The City of New York, at which its corporate trust
business is principally administered, which at the date hereof is located at 101
Barclay Street, Floor 21 West, New York, NY 10286.
"Definitive Securities" means the Securities issued pursuant to the
---------------------
Indenture in definitive registered form substantially in the form of Exhibit A
(with respect to Initial Securities) or Exhibit B (with respect to Exchange
Securities) attached thereto.
"Depositary" means DTC or any successor, as the Holder of the
----------
Certificateless Depositary Interests as recorded on the Book-Entry Register.
"DTC" means The Depository Trust Company or its nominee.
---
"Exchange Securities" means the Exchange Securities issued pursuant to
-------------------
the Indenture.
"Global Securities" means the Global Securities issued pursuant to the
-----------------
Indenture, initially in the form of the Rule 144A Global Security, the IAI
Global Security and the Regulation S Global Security.
<PAGE>
3
"Holder" means the Depositary.
------
"Indenture" means the indenture dated as of January 30, 1998, between
---------
the Company and The Bank of New York as Trustee, relating to the 10% Senior
Notes due 2008 of the Company and the Exchange Securities as originally executed
or as it may from time to time be supplemented or amended by one or more
indentures supplemental thereto entered into pursuant to the applicable
provisions thereof, including for all purposes to the extent applicable, the
provisions of the TIA that are deemed to be a part of and govern such
instrument.
"Legal Holiday" has the meaning ascribed thereto in the Indenture.
-------------
"Letter of Representations" means the Letter of Representations to DTC
-------------------------
dated January 27, 1998, from the Book-Entry Depositary and the Company.
"Officer" means the Chairman of the Board, the Chief Executive
-------
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company.
"Opinion of Counsel" means a written opinion from legal counsel, who
------------------
may be an employee of or counsel to the Company and who shall otherwise be
satisfactory to the Book-Entry Depositary.
"Responsible Officer", with respect to the Book-Entry Depositary,
-------------------
means the chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
senior trust officer, any trust officer or assistant trust officer, the
controller and any assistant controller or any other officer of the Book-Entry
Depositary customarily performing functions similar to those performed by any of
the above-designated officers and also means, with respect to a particular
corporate trust or agency matter, any other officer to whom such matter is
referred because of his or her knowledge and familiarity with the particular
subject.
<PAGE>
4
"Security" means any 10% Senior Note due 2008 of the Company issued
--------
under the Indenture.
SECTION 1.02. Rules of Construction. Unless the context otherwise
----------------------
requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) "including" means including without limitation; and
(d) words in the singular include the plural and words in the plural
include the singular.
ARTICLE II
Book-Entry Interests
--------------------
SECTION 2.01 Deposit of the Global Securities. The Book-Entry
---------------------------------
Depositary hereby accepts custody of the Global Securities from the Trustee and
shall act as Book-Entry Depositary in accordance with the terms of this
Agreement. The Book-Entry Depositary shall hold each such Global Security at
its Corporate Trust Office in The City of New York or at such place or places as
it shall determine with the consent of the Company and shall issue the
Certificateless Depositary Interests in accordance with the Letter of
Representations.
SECTION 2.02. Book-Entry System. (a) Upon acceptance by DTC of the
------------------
Certificateless Depositary Interests for entry into its book-entry settlement
system in accordance with the terms of the Letter of Representations, Book-Entry
Interests will be issued by DTC and traded through DTC's book-entry system, and
ownership of such Book-Entry Interests shall be shown in, and the transfer of
such ownership shall be effected only through, records maintained by (i) DTC or
its successors or (ii) institutions that have accounts with DTC or its
successors. Book-Entry Interests shall be transferable only as units
representing authorized denominations of the Securities.
(b) The Certificateless Depositary Interests shall be issuable only
to DTC, or successors of DTC or their respective nominees. Except as provided
in Sections 2.04 and 2.07, no owner of beneficial interests in the
Certificateless Depositary Interests shall be entitled to receive a Security on
account of such beneficial interest, and such beneficial owner's interest
therein shall be shown
<PAGE>
5
only in accordance with the procedures of DTC as set forth in the Letter of
Representations.
SECTION 2.03. Registration of Transfer of the Certificateless
-----------------------------------------------
Depositary Interests. The Book-Entry Depositary agrees to maintain at the Book-
- ---------------------
Entry Depositary's Corporate Trust Office a register (the "Book-Entry Register")
-------------------
in which the Book-Entry Depositary shall (i) record DTC as the initial
registered owner of the Certificateless Depositary Interests and (ii) record the
registration and transfer of the Certificateless Depositary Interests. The
Certificateless Depositary Interests cannot be transferred unless such transfer
is recorded on the Book-Entry Register. The Book-Entry Depositary shall not
constitute the agent of the Company for any other purpose and, in particular, it
shall not constitute the agent of the Company in relation to any payments it may
make to owners of the Certificateless Depositary Interests or be authorized to
undertake any obligations on behalf of the Company.
The foregoing paragraph shall not (i) impose an obligation on the
Book-Entry Depositary to record the interests in or transfers of Book-Entry
Interests held by institutions that have accounts with DTC or its successors or
Persons that may hold Book-Entry Interests through such institutions or (ii)
restrict transfers of such Book-Entry Interests held by such institutions or
persons. The person in whose name the Certificateless Depositary Interests are
registered on the Book-Entry Register shall be the "Holder" of the
Certificateless Depositary Interests for the purposes of this Agreement. The
Book-Entry Depositary shall treat the Holder or its nominee or their respective
successors as the absolute owner thereof for all purposes whatsoever and shall
not be bound or affected by any notice to the contrary, other than an order of a
court having jurisdiction over the Book-Entry Depositary.
SECTION 2.04. Transfer of the Global Securities. The Book-Entry
----------------------------------
Depositary shall hold each Global Security in custody for the benefit of the
Depositary. The Book-Entry Depositary shall not transfer or lend the Global
Securities or any interest therein except (i) to reduce the principal amount of
one Global Security and increase the principal amount of another Global Security
as provided in Section 2.06(a) of the Indenture and (ii) that the Book-Entry
Depositary may transfer the Global Securities as a whole to a successor Book-
Entry Depositary with the consent of the Company. Notwithstanding the
foregoing, the Depositary may not under any circumstances request the Book-Entry
Depositary to surrender or deliver the Global Securities to the Depositary. If
(i) DTC (A) notifies the
<PAGE>
6
Company that it is unwilling or unable to continue as, or ceases to be, a
clearing agency registered under the Exchange Act and (B) a successor to DTC
registered as a clearing agency under the Exchange Act is not able to be
appointed by the Company within 90 days of such notification or (ii) the Book-
Entry Depositary notifies the Company and the Trustee under Section 3.08 hereof
that it is at any time unwilling or unable to continue as Book-Entry Depositary
and a successor Book-Entry Depositary is not able to be appointed by the Company
within 90 days of such notification, then the Book-Entry Depositary will
promptly notify the Trustee and request the Trustee to issue Definitive
Securities in such names and denominations as the Holder shall specify in
accordance with Section 2.06(d) of the Indenture and the Book-Entry Depositary
agrees that in such event it will promptly surrender the Global Securities held
by it to the Trustee in connection with such exchange and that such Global
Securities will be canceled upon issuance of such Definitive Securities.
SECTION 2.05. Cancellation. If the Global Securities are surrendered
-------------
for payment, or for redemption or purchase of Securities evidenced thereby or
for exchange for Definitive Securities to any Person other than the Trustee,
such Global Securities shall, subject to Section 2.07, be delivered to the
Trustee for cancellation.
SECTION 2.06. Payments in Respect of the Certificateless Depositary
-----------------------------------------------------
Interests and Global Securities. (a) Whenever the Book-Entry Depositary shall
- --------------------------------
receive from the Trustee (or other paying agent under the Indenture) any payment
on the Global Securities, such payments shall be distributed promptly in the
currencies in which they are received to the Holder or in accordance with the
Holder's instructions on the payment date for the Global Securities. So long as
DTC is the Holder, such payments shall be made in accordance with the Letter of
Representations.
(b) The Book-Entry Depositary will forward to the Company or its
agent such information from its records as the Company may reasonably request to
enable the Company or its agent to file necessary reports with governmental
agencies, and the Book-Entry Depositary, the Company or their agents may (but
shall not be required to) file any such reports necessary to obtain benefits
under any applicable tax treaties for the Holder of, or beneficial owners of
interests in, the Certificateless Depositary Interests.
SECTION 2.07. Change in Principal Amount of Global Securities. (a)
------------------------------------------------
Upon transfer or exchange of a
<PAGE>
7
beneficial interest in one Global Security to another Global Security as
provided in Section 2.06 of the Indenture, the Book-Entry Depositary shall
adjust accordingly the principal amounts of the Certificateless Depositary
Interests and shall confirm such adjustments with the Depositary.
(b) In the event that the Company exercises any right of redemption
in respect of any Securities constituting a part of a Global Security or
purchases any Securities constituting a part of a Global Security pursuant to an
offer to purchase Securities pursuant to Section 4.06(a)(iii)(c) or Section 4.08
of the Indenture, the Book-Entry Depositary shall promptly deliver such Global
Security to the Trustee and request the Trustee to endorse Schedule A to such
Global Security to reflect the reduction in the principal amount of such Global
Security as a result of such redemption or offer. The redemption price or
purchase price payable in connection with the redemption or purchase of a
portion of such Global Security shall be equal to the amount received by the
Book-Entry Depositary in respect of the aggregate principal amount of the
Securities so redeemed or purchased.
If an Event of Default (as defined in the Indenture) occurs and is
continuing, the Book-Entry Depositary shall, at the request of the Holder of, or
beneficial owner of an interest in a Certificateless Depositary Interest (such
request of the beneficial owner to be given only through the Holder), promptly
deliver the Global Security relating to such Certificateless Depositary Interest
to the Trustee and request that the Trustee exchange all or part of such Global
Security for one or more Definitive Securities registered as specified by the
Holder and endorse Schedule A to such Global Security to reflect the reduction
in principal amount of such Global Security resulting from such exchange;
provided that the principal amount at maturity of such Definitive Securities and
- --------
of such Global Security after such exchange shall be DM1,000 or integral
multiples thereof.
Whenever the principal amount at maturity of a Global Security held by
the Book-Entry Depositary is changed by the Trustee, the Book-Entry Depositary
shall notify the Depositary of the corresponding change in the principal amount
of the related Certificateless Depositary Interest.
SECTION 2.08. Record Date. Whenever any payment is to be made in
------------
respect of the Global Securities or the Book-Entry Depositary shall receive
notice of any action to be taken by the holder of a Global Security or holders
of interests therein, or whenever the Book-Entry Depositary
<PAGE>
8
otherwise deems it appropriate in respect of any other matter, the Book-Entry
Depositary shall fix a record date for the determination of the Holder who shall
be entitled to receive payment in respect of the Certificateless Depositary
Interests or to take any such action or to act in respect of any such matter.
Subject to the provisions of this Agreement, only the Holder who is registered
on the Book-Entry Register at the close of business on such record date shall be
entitled to receive any such payment, to give instructions as to such action or
to act in respect of any such matter.
SECTION 2.09. Action in Respect of the Certificateless Depositary
---------------------------------------------------
Interests or the Global Securities. (a) Not later than 10 days after receipt
- -----------------------------------
by the Book-Entry Depositary of notice of any solicitation of consents or
request for a waiver or other action by the holder of a Global Security or
holders of interests therein under this Agreement or the Indenture, the Book-
Entry Depositary shall mail to the Holder a notice containing (i) such
information as is contained in such notice, (ii) a statement that the Holder at
the close of business on a specified record date (established in accordance with
Section 2.08 hereof) will be entitled, subject to the provisions of or governing
the Certificateless Depositary Interests or Global Securities, as the case may
be, to instruct the Book-Entry Depositary as to the consent, waiver or other
action, if any, pertaining to the Certificateless Depositary Interests or Global
Securities, as the case may be, and (iii) a statement as to the manner in which
such instructions may be given. Upon the written request of the Holder received
on or before the date established by the Book-Entry Depositary for such purpose,
the Book-Entry Depositary shall endeavor insofar as practicable and permitted
under the provisions of or governing the Certificateless Depositary Interests or
Global Securities, as the case may be, to take such action regarding the
requested consent, waiver or other action in respect of such Certificateless
Depositary Interests or Global Securities, as the case may be, in accordance
with any instructions set forth in such request. The Book-Entry Depositary
shall not itself exercise any discretion in the granting of consents or waivers
or the taking of any other action in respect of the Certificateless Depositary
Interests or Global Securities.
(b) Subject to Section 3.03(f), the Holder may direct the time,
method and place of conducting any proceeding for any remedy available to the
Book-Entry Depositary or of exercising any trust or power conferred on the Book-
Entry Depositary. However, the Book-Entry
<PAGE>
9
Depositary may refuse to follow any direction that conflicts with law or this
Agreement or the Indenture or, subject to Section 3.01 hereof, that the Book-
Entry Depositary determines would involve it in personal liability.
SECTION 2.10. Changes Affecting the Global Securities. Upon any
----------------------------------------
reclassification of the Global Securities, upon any exchange of the Global
Securities for Exchange Securities pursuant to the Registration Rights Agreement
or otherwise or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the Company or to which the Company is
a party, any securities that shall be received by the Book-Entry Depositary in
exchange for or in respect of a Global Security shall be treated as a new Global
Security under this Agreement and any corresponding Certificateless Depositary
Interest shall thenceforth represent such new securities so received.
SECTION 2.11. Surrender of the Global Securities. In the event of the
-----------------------------------
redemption, payment or purchase in full of all the Securities represented by the
Global Securities, then the Global Securities shall become void and the Book-
Entry Depositary shall surrender the Global Securities to the Trustee for
cancellation.
SECTION 2.12. Reports. The Book-Entry Depositary shall immediately
--------
(and in no event later than 10 days from receipt) send to the Holder a copy of
any notices, reports and other communications received from the Company that are
received by the Book-Entry Depositary as holder of the Global Securities.
SECTION 2.13. Additional Amounts. All payments made by the Book-
-------------------
Entry Depositary pursuant to this Agreement shall be made without deduction or
withholding for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (collectively, "Taxes")
-----
imposed or levied by or on behalf of the United Kingdom or any political
subdivision thereof or any authority having power to tax therein (each a "U.K.
----
Tax Authority"), unless the withholding or deduction of such Taxes is then
- -------------
required by law. If any such deduction or withholding shall at any time be
required on any distributions in respect of the Certificateless Depositary
Interests by the Book-Entry Depositary to the Holder of any payments in respect
of principal, redemption price, interest, liquidated damages or premium on the
Global Securities, the Book-Entry Depositary agrees that it shall pay or cause
to be paid such additional amounts (the "Additional Amounts") as may be
------------------
necessary in order that the
<PAGE>
10
net amounts received in respect of such payments by the Holder, after such
deduction or withholding, shall equal the amounts specified in the Global
Securities to which the Holder is entitled (subject to the limitations contained
in the Security, such limitations to be applied for these purposes by treating
the owner of any interest in the Certificateless Depositary Interests as a
holder or beneficial owner for purposes of Section 2 of the Security).
Notwithstanding anything to the contrary provided above, the Book-Entry
Depositary shall pay or cause to be paid any Additional Amounts only out of
funds that shall be received by it from the Company for that purpose.
At least 10 days prior to the first date on which payment of
principal, premium (if any) and interest on the Certificateless Depositary
Interests is to be made, and at least 10 days prior to any subsequent such date
if there has been any change with respect to the matters set forth in the below-
mentioned Officers' Certificate, the Company will furnish the Book-Entry
Depositary with an Officers' Certificate instructing the Book-Entry Depositary
whether such payment of principal, premium (if any), or interest on such
Certificateless Depositary Interests shall be made to the Holder without
withholding for or on account of any tax, assessment or other governmental
charge. If any such withholding shall be required, then such Officers'
Certificate shall specify the amount required to be withheld on such payments to
the Holder and certify that the Company has paid or shall pay such amounts
withheld to the appropriate governmental authority or authorities. The Book-
Entry Depositary shall have no responsibility for determining whether the Holder
or any owner of a Book-Entry Interest is entitled to the payment of Additional
Amounts in accordance with the preceding paragraph, but shall be entitled to
rely conclusively for this purpose on an Officers' Certificate or on
certifications from the Depositary, which need only specify the amount of
Additional Amounts payable to the Holder, net of amounts to which the Holder or
any owner of a Book-Entry Interest is not entitled in accordance with the
preceding paragraph. The Company shall indemnify the Book-Entry Depositary for,
and hold it harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on its part arising out of or in connection with
actions taken or omitted by it in reliance on any Officers' Certificate
furnished to it pursuant to this Section 2.13.
<PAGE>
11
ARTICLE III
The Book-Entry Depositary
-------------------------
SECTION 3.01. Certain Duties and Responsibilities. (a) The Book-
------------------------------------
Entry Depositary undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement.
(b) No provision of this Agreement shall be construed to relieve the
Book-Entry Depositary from liability for its own negligent action, its own
negligent failure to act or its own wilful misconduct, except that:
(i) the duties and obligations of the Book-Entry Depositary with
respect to the Certificateless Depositary Interests and the Global
Securities shall be determined solely by the express provisions of this
Agreement and the Book-Entry Depositary shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Agreement, and no implied covenants or obligations shall be read into
this Agreement against the Book-Entry Depositary; and
(ii) in the absence of bad faith on its part, the Book-Entry
Depositary may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Book-Entry Depositary and
conforming to the requirements of this Agreement, but in the case of any
such statements, certificates or opinions that by any provision hereof are
specifically required to be furnished to the Book-Entry Depositary, the
Book-Entry Depositary shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Agreement.
(iii) No provision of this Agreement shall require the Book-Entry
Depositary to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(c) The Book-Entry Depositary shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Book-Entry
Depositary, unless it
<PAGE>
12
shall be proved that the Book-Entry Depositary was negligent in ascertaining the
pertinent facts.
(d) The Book-Entry Depositary shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with the
direction of the Holder relating to the time, method and place of conducting any
proceeding for any remedy available to the Book-Entry Depositary, or exercising
any power conferred upon the Book-Entry Depositary, under this Agreement or the
Indenture.
(e) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Book-Entry Depositary shall be subject to the
provisions of this Section 3.01.
(f) The Book-Entry Depositary owes no fiduciary duties to any person
by virtue of this Agreement except as expressly set forth herein.
SECTION 3.02. Notice of Default. Within 90 days after the occurrence
------------------
of any Event of Default with respect to the Global Securities (a "Security
--------
Default") of which a Responsible Officer of the Book-Entry Depositary assigned
- -------
to its corporate trust department has actual knowledge, the Book-Entry
Depositary shall transmit by mail to the Holder in the manner provided in
Section 4.02 hereof, notice of such Security Default, unless such Security
Default shall have been cured or waived.
SECTION 3.03. Certain Rights of Book-Entry Depositary. Subject to
----------------------------------------
the provisions of Section 3.01 hereof:
(a) the Book-Entry Depositary may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, security or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate or Company
Order and any resolution of the Board of Directors of the Company, as the case
may be, may be sufficiently evidenced by a Board Resolution;
<PAGE>
13
(c) the Book-Entry Depositary may consult with counsel of its
selection and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection with respect to any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon in
accordance with such advice or Opinion of Counsel;
(d) the Book-Entry Depositary shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, coupon, security or other paper or
document, but the Book-Entry Depositary, in its discretion, may make reasonable
further inquiry or investigation into such facts or matters related to the
issuance of the Global Securities and if the Book-Entry Depositary shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, at reasonable times
during normal business hours, personally or by agent or attorney;
(e) the Book-Entry Depositary may execute any of the powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys, and the Book-Entry Depositary shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed
with due care by it hereunder;
(f) the Book-Entry Depositary shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement or the Indenture at
the request, order or direction of the Holder pursuant to this Agreement, unless
the Holder shall have offered to the Book-Entry Depositary reasonable security
or indemnity against the costs, expenses and liabilities that might be incurred
by it in compliance with such request or direction; provided that such request,
--------
order or direction shall not expose the Book-Entry Depositary to personal
liability;
(g) the Book-Entry Depositary shall not be liable for any action taken
or omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Agreement; and
(h) whenever in the administration of its duties under this Agreement
the Book-Entry Depositary shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in
<PAGE>
14
respect thereof be herein specifically prescribed) may, in the absence of bad
faith on the part of the Book-Entry Depositary, be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Book-Entry
Depositary, and such certificate, in the absence of bad faith on the part of the
Book-Entry Depositary, shall be full warrant to the Book-Entry Depositary for
any action taken, suffered or omitted by it under the provisions of the
Agreement, upon the faith thereof.
SECTION 3.04. Not Responsible for Recitals or Issuance of Securities.
-------------------------------------------------------
The recitals contained in the Indenture and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, or the Note Guarantors, as the case may be, and the Book-Entry
Depositary assumes no responsibility for their correctness. The Book-Entry
Depositary makes no representations as to the validity or sufficiency of this
Agreement or of the Securities or of the Certificateless Depositary Interests or
of the Book-Entry Interests or any offering materials in connection therewith.
The Book-Entry Depositary shall not be accountable for the use or application by
the Company of the proceeds with respect to the Securities.
SECTION 3.05. Money Held in Trust. Money held by the Book-Entry
-------------------
Depositary in trust hereunder need not be segregated from other funds held by
the Book-Entry Depositary, except to the extent required by law. The Book-Entry
Depositary shall be under no obligation to invest or pay interest on any money
received by it hereunder, except as otherwise agreed in writing with the
Company. Any interest accrued on funds deposited with the Book-Entry Depositary
under this Agreement shall be paid to the Company from time to time and the
Holder shall have no claim to any such interest.
SECTION 3.06. Compensation and Reimbursement. The Company agrees:
-------------------------------
(a) to pay to the Book-Entry Depositary from time to time reasonable
compensation for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law with regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Book-Entry Depositary and any predecessor Book-Entry Depositary upon its request
for all reasonable expenses, disbursements and advances incurred or made by the
Book-Entry Depositary in accordance with any provision of
<PAGE>
15
this Agreement (including the reasonable compensation and the reasonable
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(c) to indemnify the Book-Entry Depositary and any predecessor Book-
Entry Depositary for, and to hold it harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of this Agreement and its
duties hereunder or the exercise of its rights hereunder, including the costs
and expenses of defending itself against or investigating any claim of liability
in connection with the exercise or performance of any of its powers, rights or
duties hereunder.
The obligations of the Company under this Section 3.06 to compensate
and indemnify the Book-Entry Depositary and any predecessor Book-Entry
Depositary and to pay or reimburse the Book-Entry Depositary and any predecessor
Book-Entry Depositary for expenses, disbursements and advances shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Agreement, other termination of this Agreement, payment of the
Certificateless Depositary Interests and the Securities or the resignation or
removal of the Book-Entry Depositary. Such additional indebtedness shall be a
senior lien to that of the Securities and the Certificateless Depositary
Interests upon all property and funds held or collected by the Book-Entry
Depositary as such, except funds held in trust for the benefit of the Holder,
and the Securities and the Certificateless Depositary Interests are hereby
subordinated to such senior claim.
SECTION 3.07. Book-Entry Depositary Required; Eligibility. At all
--------------------------------------------
times when there is a Book-Entry Depositary hereunder, such Book-Entry
Depositary shall be a corporation organized and doing business under the laws of
the United States of America, any state thereof or the District of Columbia,
having, together with its parent, a combined capital and surplus of at least
$50,000,000, subject to supervision or examination by Federal, state or District
of Columbia authority and willing to act on reasonable terms. Such corporation
shall have its principal place of business in the Borough of Manhattan, The City
of New York, if there be such a corporation in such location willing to act upon
reasonable and customary terms and conditions. If such corporation, or its
parent, publishes reports of condition at least annually, pursuant to law or to
the requirements of the aforesaid supervising or
<PAGE>
16
examining authority, then for the purposes of this Section 3.07, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. The Book-Entry Depositary hereunder shall at all times be the Trustee
under the Indenture, subject to receipt of an Opinion of Counsel that the same
Person is precluded by law from acting in such capacities. If at any time the
Book-Entry Depositary shall cease to be eligible in accordance with the
provisions of this Section 3.07, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
SECTION 3.08. Resignation and Removal; Appointment of Successor. (a)
--------------------------------------------------
No resignation or removal of the Book-Entry Depositary and no appointment of a
successor Book-Entry Depositary pursuant to this Article shall become effective
until (i) the acceptance of appointment by the successor Book-Entry Depositary
in accordance with the applicable requirements of Section 3.09 hereof or (ii)
the issuance of Definitive Securities in accordance with Section 2.04 or Section
2.07 hereof and the Indenture.
(b) The Book-Entry Depositary may resign with respect to the Global
Securities by giving written notice thereof to the Company and the Holder, in
accordance with Section 4.01 and Section 4.02 hereof, 60 days prior to the
effective date of such resignation. The Book-Entry Depositary may be removed at
any time upon 90 days' notice by the filing with it of an instrument in writing
signed on behalf of the Company and specifying such removal and the date when it
is intended to become effective. If the instrument of acceptance by a successor
Book-Entry Depositary required by Section 3.09 hereof shall not have been
delivered to the Book-Entry Depositary within 30 days after the giving of such
notice of resignation or removal, the resigning Book-Entry Depositary may
petition any court of competent jurisdiction for the appointment of a successor
Book-Entry Depositary.
(c) If at any time:
(i) the Book-Entry Depositary shall cease to be eligible under Section
3.07 hereof, or shall cease to be eligible as Trustee under the Indenture,
and shall fail to resign after written request therefor by the Company or
by the Holder, or
<PAGE>
17
(ii) the Book-Entry Depositary shall become incapable of acting with
respect to the Certificateless Depositary Interests or shall be adjudged a
bankrupt or insolvent, or a receiver or liquidator of the Book-Entry
Depositary or of its property shall be appointed or any public officer
shall take charge or control of the Book-Entry Depositary or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (x) the Company, by Board Resolution, may remove the
Book-Entry Depositary and appoint a successor Book-Entry Depositary, or (y) the
Holder may, on behalf of itself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Book-Entry Depositary and
the appointment of a successor Book-Entry Depositary or Book-Entry Depositaries,
unless Definitive Securities have been issued in accordance with the Indenture.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Book-Entry Depositary and appoint a successor Book-Entry
Depositary.
(d) If the Book-Entry Depositary shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Company, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Company) and shall
comply with the applicable requirements of Section 3.09 hereof. If no successor
Book-Entry Depositary with respect to the Global Securities shall have been so
appointed by the Company and accepted appointment in the manner required by
Section 3.09, the Holder may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Book-Entry Depositary unless Definitive Securities have been issued in
accordance with the Indenture.
(e) The Company shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to the
Holder in accordance with Section 4.02 hereof. Each notice shall include the
name of the successor Book-Entry Depositary and the address of its Corporate
Trust Office.
SECTION 3.09. Acceptance of Appointment by Successor. (a) In case
---------------------------------------
of the appointment hereunder of a successor Book-Entry Depositary, every such
successor Book-Entry Depositary so appointed shall execute, acknowledge and
deliver to the Company and to the retiring Book-Entry Depositary an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring
<PAGE>
18
Book-Entry Depositary shall become effective and such successor Book-Entry
Depositary, without any further act, deed or conveyance, shall become vested
with all the rights, powers, agencies and duties of the retiring Book-Entry
Depositary, with like effect as if originally named as Book-Entry Depositary
hereunder; but, on the request of the Company or the successor Book-Entry
Depositary, such retiring Book-Entry Depositary shall, upon payment of all
amounts due and payable to it pursuant to Section 3.06 hereof, execute and
deliver an instrument transferring to such successor Book-Entry Depositary all
the rights and powers of the retiring Book-Entry Depositary and shall duly
assign, transfer and deliver to such successor Book-Entry Depositary all
property and money held by such retiring Book-Entry Depositary hereunder. Any
retiring Book-Entry Depositary shall, nonetheless, retain a prior claim upon all
property or funds held or collected by such Book-Entry Depositary to secure any
amounts then due it pursuant to Section 3.06 hereof.
(b) Upon request of any such successor Book-Entry Depositary, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Book-Entry Depositary all such
rights, powers and agencies referred to in paragraph (a) of this Section 3.09.
(c) No successor Book-Entry Depositary shall accept its appointment
unless at the time of such acceptance such successor Book-Entry Depositary shall
be eligible under this Article.
(d) Upon acceptance of appointment by any successor Book-Entry
Depositary as provided in this Section 3.09, the Company shall give notice
thereof to the Holder in accordance with Section 4.02 hereof. If the acceptance
of appointment is substantially contemporaneous with the resignation of the
Book-Entry Depositary, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 3.08(b) hereof. If the
Company fails to give such notice within 10 days after acceptance of appointment
by the successor Book-Entry Depositary, the successor Book-Entry Depositary
shall cause such notice to be given at the expense of the Company.
SECTION 3.10. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any corporation into which the Book-Entry Depositary may be merged or
- ---------
converted or with which it may be consolidated, or any corporation resulting
<PAGE>
19
from any merger, conversion or consolidation to which the Book-Entry Depositary
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of the Book-Entry Depositary, shall be the successor of
the Book-Entry Depositary hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
ARTICLE IV
Miscellaneous Provisions
------------------------
SECTION 4.01. Notices to Book-Entry Depositary or Company. Any
--------------------------------------------
request, demand, authorization, direction, notice, consent, or waiver or other
document provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with,
(a) the Book-Entry Depositary by the Holder, by the Trustee or the
Company shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and sent by
facsimile transmission, personally delivered, couriered or mailed, first-class
postage prepaid, to the Book-Entry Depositary at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration Department, or at any other
address previously furnished in writing by the Book-Entry Depositary to the
Holder, the Trustee and the Company and shall be deemed duly given upon actual
receipt thereof, or
(b) the Company, by the Book-Entry Depositary or by the Holder shall
be sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or filed in writing and sent by facsimile
transmission, personally delivered, couriered or mailed, first-class postage
prepaid to Texon International plc, Attention: Company Secretary, 100 Ross
Walk, Leicester, U.K. LE4 5BX or at any other address previously furnished in
writing to the Book-Entry Depositary by the Company.
SECTION 4.02. Notice to Holders; Waiver. Where this Agreement
--------------------------
provides for notice to the Holder of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided or as provided in
the Letter of Representations) if in writing and personally delivered, couriered
or mailed, first-class postage prepaid, to the Holder at the address notified to
the Book-Entry Depositary, in each case not later than the latest date, and
<PAGE>
20
not earlier than the earliest date, prescribed for the giving of such notice.
Where this Agreement provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by the Holder shall be filed with the Book-Entry Depositary,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Book-Entry
Depositary shall constitute a sufficient notification for every purpose
hereunder.
SECTION 4.03. Effect of Headings and Table of Contents. The Article
-----------------------------------------
and Section headings herein are for convenience only and shall not affect the
construction hereof.
SECTION 4.04. Successors and Assigns. All covenants and agreements
-----------------------
in this Agreement and the Securities by the Company shall bind its successors
and assigns, whether so expressed or not.
SECTION 4.05. Separability Clause. In case any provision in this
--------------------
Agreement or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions hereof and
thereof shall not in any way be affected or impaired thereby.
SECTION 4.06. Benefits of Agreement. Nothing in this Agreement, the
----------------------
Securities, or Indenture, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, any benefits or any
legal or equitable right, remedy or claim under this Agreement. The holders
from time to time of the Book-Entry Interests shall be parties to this Agreement
and shall be bound by all of the terms and conditions hereof and of the
Indenture and the Securities, by their acceptance of delivery of the Book-Entry
Interests.
SECTION 4.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
<PAGE>
21
SECTION 4.08. Consent to Jurisdiction; Appointment of Agent for
-------------------------------------------------
Service of Process. (a) The Company agrees that any suit, action or proceeding
- -------------------
against the Company arising out of or relating to this Agreement may be
instituted in any state or U.S. Federal court in the Borough of Manhattan, The
City of New York, New York, and any appellate court from any thereof, and it
irrevocably submits to the non-exclusive jurisdiction of such courts in any
suit, action or proceeding. The Company irrevocably waives, to the fullest
extent permitted by law, any objection to any suit, action, or proceeding that
may be brought in connection with this Agreement, including such actions, suits
or proceedings relating to securities laws of the United States of America or
any state thereof, in such courts whether on the grounds of venue, residence or
domicile or on the ground that any such suit, action or proceeding has been
brought in an inconvenient forum. The Company agrees that final judgment in any
such suit, action or proceeding brought in such court shall be conclusive and
binding upon the Company and may be enforced in any court to the jurisdiction of
which the Company is subject by a suit upon such judgment; provided that service
--------
of process is effected upon the Company in the manner provided by this Section
4.08.
(b) The Company irrevocably appoints CT Corporation System, with
offices on the date hereof at 1633 Broadway, New York, New York, 10019, as its
authorized agent (the "Authorized Agent"), upon whom process may be served in
----------------
any suit, action or proceeding arising out of or relating to this Agreement or
the transactions contemplated herein which may be instituted in any state or
U.S. Federal court in the Borough of Manhattan, The City of New York, New York,
and expressly accepts the non-exclusive jurisdiction of any such court in
respect of any such suit, action or proceeding. The Company hereby represents
and warrants that the Authorized Agent has accepted such appointment and has
agreed to act as said agent for service of process, and the Company agrees to
take any and all action, including the filing of any and all documents that may
be necessary to continue such respective appointment in full force and effect
for a period of ten years from the date of this Agreement. Service of process
upon the Authorized Agent shall be deemed, in every respect, effective service
of process upon the Company. Notwithstanding the foregoing, any action
involving the Company arising out of or relating to this Agreement may be
instituted in any court of competent jurisdiction in any other jurisdiction.
(c) The provisions of this Section 4.08 shall survive any termination
or cancellation of this Agreement.
<PAGE>
22
SECTION 4.09. Counterparts. This Agreement may be executed in any
-------------
number of counterparts by the parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
SECTION 4.10. Inspection of Agreement. A copy of this Agreement
------------------------
shall be available at all reasonable times during normal business hours at the
Corporate Trust Office of the Book-Entry Depositary for inspection by any
Holder.
SECTION 4.11. Satisfaction and Discharge. This Agreement upon
---------------------------
Company Order shall cease to be of further effect, and the Book-Entry
Depositary, at the expense of the Company shall execute proper instruments
acknowledging satisfaction and discharge of this Agreement, when (i) the
Indenture has been satisfied and discharged pursuant to the provisions thereof
or Definitive Securities have been issued and the Global Securities have been
canceled in accordance with the provisions of Section 2.05 hereof and the
Indenture, (ii) the Company has paid or caused to be paid all sums payable
hereunder by the Company and (iii) the Company has delivered to the Book-Entry
Depositary an Officer's Certificate and an Opinion of Counsel, stating that all
conditions precedent herein provided relating to the satisfaction and discharge
of this Agreement have been complied with.
SECTION 4.12. Amendments. The Company and the Book-Entry Depositary
-----------
may amend this Agreement without the consent of the Depositary or any holder of
Book-Entry Interests:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to add to the covenants and agreements of the Book-Entry
Depositary or the Company;
(c) to effectuate the assignment of the Book-Entry Depositary's rights
and duties to a qualified successor, as provided herein;
(d) to comply with any requirements of the Securities Act, the
Exchange Act or the U.S. Investment Company Act of 1940, as amended, and the
TIA; or
(e) to modify, alter, amend or supplement this Agreement in any other
manner that is not adverse to the Depositary or the holders of Book-Entry
Interests.
<PAGE>
23
Except as set forth in this Section 4.12, no amendment that adversely
affects the Depositary or the holders of Book-Entry Interests may be made to
this Agreement or the Book-Entry Interests without the consent of the Depositary
or the holders of the Book-Entry Interests.
SECTION 4.13. Book-Entry Depositary To Sign Amendments. The Book-
-----------------------------------------
Entry Depositary shall sign any amendment authorized pursuant to Section 4.12 if
the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Book-Entry Depositary. If it does, the Book-Entry Depositary
may but need not sign it. In signing such amendment the Book-Entry Depositary
shall be entitled to receive indemnity reasonably satisfactory to it and shall
be fully protected in reasonably relying upon, an Officers' Certificate (which
need only cover the matters set forth in clause (a) below) and an Opinion of
Counsel stating that:
(a) such amendment is authorized or permitted by this Agreement;
(b) the Company has all necessary corporate power and authority to
execute and deliver the amendment and that the execution, delivery and
performance of such amendment has been duly authorized by all necessary
corporate action;
(c) the execution, delivery and performance of the amendment do not
conflict with, or result in the breach of or constitute a default under any of
the terms, conditions or provisions of (i) this Agreement, (ii) the Articles of
Association of the Company, (iii) any law or regulation applicable to the
Company, (iv) any material order, writ, injunction or decree of any court or
governmental instrumentality applicable to the Company or (v) any material
agreement or instrument to which the Company is subject; and
(d) such amendment has been duly and validly executed and delivered by
the Company, and this Agreement together with such amendment constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles.
<PAGE>
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
TEXON INTERNATIONAL PLC,
by
______________________________
Name:
Title:
THE BANK OF NEW YORK, as Book-Entry Depositary,
by
______________________________
Name:
Title:
<PAGE>
EXHIBIT 21.1
TEXON INTERNATIONAL PLC
LIST OF SUBSIDIARIES
Name of Subsidiary Jurisidiction of Incorporation
- ------------------ ------------------------------
United Texon Ltd. England and Wales
Archview Ltd. England and Wales
USM (Holdings) England and Wales
UT France S.A.S. France
Texon France S.A. France
USM Texon Ltd. England and Wales
Shoeimpex Ltd. England and Wales
Texon UK Ltd. England and Wales
BUSM Ltd. Ireland
Manto de Elias S.L. Spain
Texon Materiales SL Spain
Texon Overseas Ltd. England and Wales
USM Texon Materials Inc. United States
Texon (H.K.) Ltd. Hong Kong
Texon Taiwan Ltd. Taiwan
USM (China Holdings) Ltd. British Virgin Islands
Foshan Texon Cellulose Board Mfg. Co. Ltd. China
Texon Verwaltungs GmbH Germany
USM Holdings GmbH Germany
DVSG Holdings GmbH Germany
Texon Components GmbH Germany
USM Benelux BV England and Wales/Netherlands
Texon Mexicana S.A. Mexico
USM Company of New Zealand Ltd. New Zealand
United Shoe Machinery of Australia Pty Ltd. Australia
Texon Italia SpA Italy
USM Holding GmbH Austria
USM Texon Osterreich GmbH Austria
<PAGE>
EXHIBIT 23.2
The Board of Directors
Texon International plc:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG
/s/ KPMG
London
6 April 1998
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR TENDERS OF
DM 245,000,000 Aggregate Principal Amount of
10% Senior Notes due 2008
TEXON INTERNATIONAL PLC
Pursuant to the Prospectus
dated ________ __, 1998 of Texon International plc
- ------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON THE EARLIER
OF ________ __, 1997 (UNLESS EXTENDED) OR THE DATE ON WHICH 100% OF THE OLD
NOTES ARE VALIDLY TENDERED AND NOT WITHDRAWN (THE "EXPIRATION DATE"). TENDERED
---------------
OLD SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE
OF THE EXCHANGE OFFER.
- ------------------------------------------------------------------------------
Deliver to: The Chase Manhattan Bank, Exchange Agent:
By Mail, by Overnight
Courier
or by Hand:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
By Facsimile:
(212) 946-8177
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned (the "Holder") acknowledges that he or she has
------
received the Prospectus, dated ________ __, 1998 (the "Prospectus"), of Texon
----------
International plc, a company incorporated under the laws of England and Wales
(the "Company"), and this Letter of Transmittal, which may be amended from time
-------
to time (this "Letter"), which together constitute the Company's offer (the
------
"Exchange Offer") to exchange an aggregate principal amount of up to DM
- ---------------
245,000,000 of its 10% Series A Senior Notes due 2008 (the "Exchange Notes"),
--------------
which have been registered under the Securities Act of 1933 (the "Securities
----------
Act"), pursuant to a Registration Statement of which the Prospectus constitutes
a part, for a like principal amount of the issued and outstanding 10% Senior
Notes due 2008 (the "Old Notes") of which DM 245,000,000 aggregate principal
---------
amount is outstanding the "Old Notes").
---------
For each Old Note accepted for exchange, the Holder of such Old Note
will receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note. The Exchange Notes will bear interest from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid on the Old Notes, from January 30, 1998. Registered holders of
Exchange Notes on the relevant record date for the first interest payment date
following the consummation of the Exchange Offer will receive interest accruing
from the most recent date to which interest has been paid or, if no interest has
been paid, from January 30, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer.
This Letter is to be used: (i) by all Holders who are not members of
the Automated Tender Offering Program ("ATOP") at the Depository Trust Company
----
("DTC"), (ii) by Holders who are ATOP members but choose not to use ATOP or
---
(iii) if the Old Securities are to be tendered in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 2 hereto. Delivery of
this Letter to DTC does not constitute delivery to the Exchange Agent.
Notwithstanding anything to the contrary in the Exchange and
Registration Rights Agreement, dated January 27, 1998, among the Company and the
initial purchasers of Old Notes (the "Exchange and Registration Rights
--------------------------------
Agreement"), the Company will accept for exchange any and all Old Notes validly
tendered on or prior to 5:00 p.m., New York City time, on the earlier of
_________ __, 1998 (unless the Exchange Offer is extended by the Company) or the
date on which 100% of the Old Notes are validly tendered and not withdrawn (the
"Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to
---------------
5:00 p.m., New York City time, on the Expiration Date.
IMPORTANT: HOLDERS WHO WISH TO TENDER OLD SECURITIES IN THE EXCHANGE OFFER MUST
COMPLETE THIS LETTER OF TRANSMITTAL AND TENDER THE OLD SECURITIES TO THE
EXCHANGE AGENT AND NOT TO THE COMPANY.
The Exchange Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered for exchange. The Exchange Offer is not
being made to, nor will tenders be accepted from or on behalf of, Holders of Old
Notes in any jurisdiction in which the making or acceptance of the Exchange
Offer would not be in compliance with the laws of such jurisdiction.
The instructions included with this Letter of Transmittal must be
followed in their entirety. Questions and request for assistance or for
additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address listed above.
-2-
<PAGE>
APPROPRIATE SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company the principal amount of
Old Notes indicated below under "Description of Old Notes," in accordance with
and upon the terms and subject to the conditions set forth in the Prospectus,
receipt of which is hereby acknowledged, and in this Letter of Transmittal, for
the purpose of exchanging each DM 1,000 principal amount of Old Notes designated
herein held by the undersigned and tendered hereby for DM 1,000 principal amount
of the Exchange Notes. Exchange Notes will be issued only in integral multiples
of DM 1,000 to each tendering Holder of Old Notes whose Old Notes are accepted
in the Exchange Offer. Holders may tender all or a portion of their Old Notes
pursuant to the Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered herewith in accordance with the terms of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to all such Old Notes that are
being tendered hereby and that are being accepted for exchange pursuant to the
Exchange Offer. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company), with respect to the Old Notes tendered hereby and accepted for
exchange pursuant to the Exchange Offer with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to deliver the Old Notes tendered hereby to the Company (together with
all accompanying evidences of transfer and authenticity) for transfer or
cancellation by the Company.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Company to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered.
The undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus and the instructions contained in this Letter of Transmittal.
See Instruction 4 hereto.
The name(s) and address(es) of the registered Holder(s) should be
printed herein under "Description of Old Notes" (unless a label setting forth
such information appears thereunder), exactly as they appear on the Old Notes
tendered hereby. The certificate number(s) and the principal amount of Old
Notes to which this Letter relates, together with the principal amount of such
Old Notes that the undersigned wishes to tender, should be indicated in the
appropriate boxes herein under "Description of Old Notes."
The undersigned agrees that acceptance of any tendered Old Notes by
the Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Exchange and Registration Rights Agreement and that, upon the issuance of the
Exchange Notes, the Company will have no further obligations or liabilities
thereunder.
-3-
<PAGE>
The undersigned understands that the tender of Old Notes pursuant to
one of the procedures described in the Prospectus under "The Exchange Offer --
Exchange Offer Procedures" and the Instructions hereto will constitute the
tendering Holder's acceptance of the terms and the conditions of the Exchange
Offer. The undersigned hereby represents and warrants to the Company that the
Exchange Notes to be acquired by such Holder pursuant to the Exchange Offer are
being acquired in the ordinary course of such Holder's business, that such
Holder has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes. The Company's acceptance of Old Notes for
exchange tendered pursuant to the Exchange Offer will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT IT IS NOT ENGAGED
IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF THE EXCHANGE SECURITIES.
The undersigned also acknowledges that this Exchange Offer is being
made based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") which lead the Company to believe that the
----------
Exchange Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof (other than (i) a broker-dealer who acquired the Old Notes as a result
of market-making activities or other trading activities, (ii) an Initial
Purchaser who acquired the Old Notes directly from the Company solely in order
to resell pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act, or (iii) a person that is an "affiliate" (as
defined in Rule 405 of the Securities Act) of the Company), without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders are not participating and have no arrangement
or understanding with any person to participate in the distribution of such
Exchange Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no arrangement or understanding to
participate in a distribution of Exchange Notes. If any holder is an affiliate
of the Company or is engaged in or has any arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, such holder (i) could not rely on the applicable interpretations
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
of Old Notes, it represents that the Old Notes to be exchanged for the Exchange
Notes were acquired by it as a result of market-making activities or other
trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a Prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Exchange Notes issued in
consideration of Old Notes accepted for exchange, and/or any principal amount of
Old Notes not tendered or not accepted for exchange, will only be issued in the
name of the Holder(s) appearing herein under "Description of Old Notes." Unless
otherwise indicated under "Special Delivery Instructions," please mail the
Exchange Notes issued in consideration of Old Notes accepted for exchange,
and/or any principal amount of Old Notes not tendered or not accepted for
exchange (and accompanying documents, as appropriate), to the Holder(s) at the
address(es) appearing herein under "Description of Old Notes." In the event
that the Special Delivery Instructions are completed, please mail the Exchange
Notes issued in consideration of Old Notes accepted for exchange, and/or any Old
Notes for any principal amount not tendered or not accepted for exchange, in the
name of the Holder(s) appearing herein under "Description of Old Notes," and
send such Exchange Notes and/or Old Notes to, the address(es) so indicated. Any
transfer of Old Notes to a different holder must be completed, according to the
provisions on transfer of Old Notes contained in the Indenture.
-4-
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX BELOW.
-5-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of
Transmittal or notice of withdrawal, as the case may be, must be guaranteed by
an institution which falls within the definition of "eligible guarantor
institution" contained in Rule 17Ad-15 as promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended
(hereinafter, an "Eligible Institution") unless (i) the Old Notes tendered
-------------------- ------
hereby are tendered by the Holder(s) of the Old Notes who has (have) not
completed the box entitled "Special Delivery Instructions" on this Letter of
Transmittal or (ii the Old Securities are tendered for the account of an
Eligible Institution.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD SECURITIES;
GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be used: (i)
by all Holders who are not ATOP members, (ii by Holders who are ATOP members but
choose not to use ATOP or (ii if the Old Notes are to be tendered in accordance
with the guaranteed delivery procedures set forth in the Prospectus under "The
Exchange Offer -- Guaranteed Delivery Procedures." To validly tender Old Notes,
a Holder must physically deliver a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) with any required signature guarantees and
all other required documents to the Exchange Agent at its address set forth on
the cover of this Letter of Transmittal prior to the Expiration Date (as defined
below) or the Holder must properly complete and duly execute an ATOP ticket in
accordance with DTC procedures. Otherwise, the Holder must comply with the
guaranteed delivery procedures set forth in the next paragraph. Notwithstanding
anything to the contrary in the Exchange and Registration Rights Agreement, the
term "Expiration Date" means 5:00 p.m., New York City time, on the earlier of
---------------
_________ __, 1998 (or such later date to which the Company may, in its sole
discretion, extend the Exchange Offer) or the date on which 100% of the Old
Notes are validly tendered and not withdrawn. If this Exchange Offer is
extended, the term "Expiration Date" shall mean the latest time and date to
---------------
which the Exchange Offer is extended. The Company expressly reserves the right,
at any time or from time to time, to extend the period of time during which the
Exchange Offer is open by giving oral (confirmed in writing) or written notice
of such extension to the Exchange Agent and by making a public announcement of
such extension prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
If a Holder of the Old Notes desires to tender such Old Notes and time
will not permit such Holder's required documents to reach the Exchange Agent
before the Expiration Date, a tender may be effected if (a) the tender is made
through an Eligible Institution, (b) on or prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery (by telegram, facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three New York Stock Exchange trading days
after the Expiration Date, any documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and (c)
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date. See "The Exchange Offer -- Guaranteed Delivery Procedures" as
set forth in the Prospectus.
Only a Holder of Old Notes may tender Old Notes in the Exchange Offer.
The term "Holder" as used herein with respect to the Old Notes means any person
in whose name Old Notes are registered on the books of the Trustee. If the
Letter of Transmittal or any Old Notes are signed by trustees, executors,
-6-
<PAGE>
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be so submitted.
Any beneficial Holder whose Old Notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to validly surrender those Old Notes in the Exchange Offer should contact
such registered Holder promptly and instruct such registered Holder to tender on
his behalf. If such beneficial Holder wishes to tender on his own behalf, such
beneficial Holder must, prior to completing and executing the Letter of
Transmittal, make appropriate arrangements to register ownership of the Old
Notes in such beneficial holder's name. It is the responsibility of the
beneficial holder to register ownership in his own name if he chooses to do so.
The transfer of record ownership may take considerable time.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL (OR FACSIMILE
HEREOF) AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
EXCHANGING HOLDER, but, except as otherwise provided below, the delivery will be
deemed made only when actually received or confirmed by the Exchange Agent. If
sent by mail, registered mail with return receipt requested, properly insured,
is recommended. In all cases, sufficient time should be allowed to assure
timely delivery to the Exchange Agent before the Expiration Date. No Letters of
Transmittal or Old Notes should be sent to the Company.
No alternative, conditional or contingent tenders will be accepted.
All tendering Holders, by execution of this Letter of Transmittal (or facsimile
hereof), waive any right to receive notice of acceptance of their Old Notes for
exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate,
the certificate numbers and principal amount of the Old Notes to which this
Letter of Transmittal relates should be listed on a separate signed schedule
attached hereto.
4. WITHDRAWAL OF TENDER. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written or facsimile transmission notice of
withdrawal must (i) be received by the Exchange Agent at the address set forth
herein prior to 5:00 p.m., New York City time, on the Expiration Date, (ii
specify the name of the person having tendered the Old Notes to be withdrawn,
(ii identify the Old Notes to be withdrawn and (iv be (a) signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or (b) accompanied by evidence satisfactory to the Company that the Holder
withdrawing such tender has succeeded to beneficial ownership of such Old Notes.
If Old Notes have been tendered pursuant to the ATOP procedure with DTC, any
notice of withdrawal must otherwise comply with the procedures of DTC. Old
Notes properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Exchange Offer; provided, however, that withdrawn Old Notes may
-------- -------
be retendered by again following one of the procedures described herein at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. All
questions as to the validity, form and eligibility (including time of receipt)
of notice of withdrawal will be determined by the Company, whose determinations
will be final and binding on all parties. Neither the Company, the Exchange
Agent, nor any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. The Exchange Agent intends to use
reasonable efforts to give notification of such defects and irregularities.
5. PARTIAL TENDERS; PRO RATA EFFECT. Tenders of the Old Notes will
be accepted only in integral multiples of DM 1,000. If less than the entire
principal amount evidenced by any Old Notes is to be tendered, fill in the
principal amount that is to be tendered in the box entitled "Principal Amount
Tendered" below.
-7-
<PAGE>
The entire principal amount of all Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
Holder(s) of the Old Notes tendered hereby, the signature must correspond with
the name as written on the face of the certificate representing such Old Notes
without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any of the Old Notes tendered hereby are registered in different
names, it will be necessary to complete, sign and submit as many separate copies
of this Letter of Transmittal and any necessary accompanying documents as there
are different registrations.
When this Letter of Transmittal is signed by the Holder(s) of Old
Notes listed and tendered hereby, no endorsements or separate bond powers are
required.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
7. SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders should indicate
in the applicable box the name and address to which Exchange Notes issued in
consideration of Old Notes accepted for exchange, or Old Notes for principal
amounts not exchanged or not tendered, are to be sent, if different from the
name and address of the person signing this Letter of Transmittal.
8. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Old Securities for principal amounts
not exchanged are to be delivered to any person other than the Holder of the Old
Notes or if a transfer tax is imposed for any reason other than the exchange of
Old Securities pursuant to the Exchange Offer, the amount of any such transfer
taxes (whether imposed on the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted, the amount of such transfer taxes
will be billed directly to such tendering Holder.
9. IRREGULARITIES. All questions as to validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Old Notes
will be resolved by the Company, in its sole discretion, whose determination
shall be final and binding. The Company reserves the absolute right to reject
any or all tenders of any particular Old Notes that are not in proper form, or
the acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defect,
irregularity or condition of tender with regard to any particular Old Notes.
The Company's interpretation of the terms of, and conditions to, the Exchange
Offer (including the instructions herein) will be final and binding. Unless
waived, any defects or irregularities in connection with tenders must be cured
within such time as the Company shall determine. Neither the Company nor the
Exchange Agent shall be under any duty to give notification of defects in such
tenders or shall incur any liability for failure to give such notification. The
Exchange Agent intends to use reasonable efforts to give notification of such
defects and irregularities. Tenders of Old Notes will not be deemed to have
been made until all defects and irregularities have been cured or waived. Any
Old Notes received by the Exchange Agent that are not properly tendered and as
to which the irregularities have not been cured or waived will be returned by
the Exchange Agent to the
-8-
<PAGE>
tendering Holder, unless otherwise provided by this Letter of Transmittal, as
soon as practicable following the Expiration Date.
10. INTEREST ON EXCHANGED OLD NOTES. Holders whose Old Notes are
accepted for exchange will not receive accrued interest thereon on the date of
exchange. Instead, interest accruing from January 30, 1998 through the
Expiration Date will be payable on the Exchange Notes on August 1, 1998, in
accordance with the terms of the Exchange Securities. See "The Exchange Offer -
- - Interest on the Exchange Notes and "Description of Notes" sections of the
Prospectus.
11. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Holders whose
certificates for Old Securities have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER
WITH ALL REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a registered Holder of Old Notes or
Exchange Notes is required to provide the Trustee (as payer) with such Holder's
correct TIN on Substitute Form W-9 below or otherwise establish a basis for
exemption from backup withholding. If such Holder is an individual, the TIN is
his social security number. If the Trustee is not provided with the correct
TIN, a $50 penalty may be imposed by the Internal Revenue Service, and payments
made to such Holder with respect to Old Securities or Exchange Securities may be
subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31%
of any payments made to the Holder or other payee. Backup withholding is not an
additional Federal income tax. Rather, the Federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments made with respect to Old
Notes or Exchange Notes the Holder is required to provide the Trustee with: (i)
the Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) such Holder is exempt from backup withholding, (B) the Holder
has not been notified by the Internal Revenue Service that the Holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (C) the Internal Revenue Service has notified the Holder that the Holder is
no longer subject to backup withholding; and (ii if applicable, an adequate
basis for exemption.
-9-
<PAGE>
<TABLE>
<CAPTION>
PAYER'S NAME: THE CHASE MANHATTAN BANK
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY Social Security Number
SIGNING AND DATING BELOW
FORM W-9
DEPARTMENT OF THE
TREASURY-INTERNAL OR______________________
REVENUE SERVICE Employer Identification
Number
<S> <C> <C>
PART 2 - CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
PAYEE'S REQUEST FOR (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
TAXPAYER IDENTIFICATION number to be issued to me); and
NUMBER ("TIN") (2) I am not subject to backup withholding because (i) I am exempt from backup withholding, (ii) I
have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding
as a result of failure to report all interest or dividends, or (iii) the IRS has notified me that I am
no longer subject to backup withholding.
CERTIFICATE INSTRUCTION -- You must cross out item (2) in Part 2 above if you have been notified by
the IRS that you are subject to backup withholding because of under reporting interest or dividends on
your tax return. However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
-------------------------------------------------------------------------------------------------------
Part 3
SIGNATURE..........................................DATE.................,
1998 Awaiting TIN [ ]
NAME (Please Print)........................................................
---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
Signature.......................................Date..........................
Name (Please Print)...........................................................
- ------------------------------------------------------------------------------
-10-
<PAGE>
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1 and 7)
To be completed ONLY if the Exchange Notes issued in consideration of Old Notes
exchanged, or certificates for Old Notes in a principal amount not surrendered
for exchange are to be mailed to someone other than the undersigned or to the
undersigned at an address other than that below.
Mail to:
Name:________________________________________________________________________
(Please Print)
Address:_____________________________________________________________________
(Zip Code)
==============================================================================
DESCRIPTION OF OLD NOTES
(See Instructions 2 and 7)
<TABLE>
<CAPTION>
=======================================================================================================================
Name(s) and Address(es) of Certificate(s)
Registered Holder(s) (Attach additional signed list, if necessary)
(Please fill in, in blank)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Certificate Number(s)/*/ Aggregate Principal Amount Principal Amount of Old Notes
of Tendered// (must be integral
Old Notes Evidenced by multiples of DM 1,000)
Certificate(s)
-------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Total
=========================================================================================
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated, the entire principal amount of Old Notes
evidenced by any certificate will be deemed to have been tendered.
-11-
<PAGE>
(Boxes below to be checked by Eligible Institutions only)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution___________________________________________
DTC Account Number______________________________________________________
Transaction Code Number_________________________________________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)_________________________________________
Window Ticket Number (if any)___________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________
Name of Institution which Guaranteed Delivery___________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution___________________________________________
DTC Account Number______________________________________________________
Transaction Code Number_________________________________________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name ______________________________________________________________________
Address ______________________________________________________________________
______________________________________________________________________
-12-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
PLEASE SIGN HERE
WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X ________________________________ ________________
X ________________________________ ________________
SIGNATURE(S) OF OWNER(S) DATED
OF AUTHORIZED SIGNATORY
Area Code and Telephone Number: __________________________________
This box must be signed by registered holder(s) of Old Notes as their name(s)
appear(s) on certificate(s) for Old Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become registered holder(s)
by endorsement and documents transmitted with this Letter (including such
opinions of counsel, certifications and other information as may be required by
the Company or the Trustee for the Old Notes to comply with the restrictions on
transfer applicable to the Old Notes). If signature is by an attorney-in-fact,
trustee, executor, administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below.
Name(s)________________________________________________________________________
_______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title)__________________________________________________________
Address________________________________________________________________________
_______________________________________________________________________________
(INCLUDE ZIP CODE)
Tax Identification or Social Security Number(s)_______________________________
______________________________________________________________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 6 to determine if required)
Authorized Signature__________________________________________________________
Name__________________________________________________________________________
Name of Firm__________________________________________________________________
Title_________________________________________________________________________
Address_______________________________________________________________________
Area Code and Telephone Number________________________________________________
Dated_________________________________________________________________________
- ------------------------------------------------------------------------------
-13-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
---------------------------------------------------- ------------------------------------------------
FOR THIS TYPE GIVE THE SOCIAL FOR THIS TYPE GIVE THE EMPLOYER
OF ACCOUNT: SECURITY NUMBER OF ACCOUNT: IDENTIFICATION
OF-- NUMBER OF--
---------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner/1/
2. Two or more individuals The actual owner of the 7. A valid trust, estate, Legal entity/3/
(joint account) account or, if combined or pension trust
funds, the first
individual on the
account./2/
8. Corporate The corporation
3. Custodian account of a The minor/4/ 9. Association, club, The organization
minor (Uniform Gift to religious, charitable,
Minors Act) educational or other
tax-exempt organization
4.a. The usual revocable The grantor-trustee 10. Partnership The partnership
savings trust (grantor
is also trustee) 11. A broker or registered The broker or nominee
b. So-called trust account The actual owner nominee
that is not a legal or
valid trust under State 12. Account with the The public entity
law Department of
Agriculture in the
5. Sole proprietorship The owner/1/ name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- -------------------------
1/ You must show your individual name, but you may also enter your business
- - or "doing business as" name. You may use either your SSN or EIN.
2/ List first and circle the name of the person whose number you furnish.
- -
3/ List first and circle the name of the legal trust, estate, or pension
- - trust. (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
4/ Circle the minor's name and furnish the minor's social security number.
- -
-14-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 U.C. who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except a
corporation that provides medical and health care services or bills and collects
payments for such services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are exempt from
backup withholding for barter exchange transactions, patronage dividends, and
payments by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government,
or an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of
1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
.Payments to nonresident aliens subject to withholding under section 1441.
.Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
.Payments of patronage dividends not paid in money.
.Payments made by certain foreign organizations.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
.Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
.Payments described in section 6049(b)(5) to nonresident aliens.
.Payments on tax-free covenant bonds under section 1451.
.Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
-15-
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TEXON INTERNATIONAL PLC
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) of Texon
International plc (the "Company") made pursuant to the Prospectus, dated
------- -------
, 1998 (as the same may be amended or supplemented from time to time, the
- --
"Prospectus"), and the related Letter of Transmittal (the "Letter of
- ----------- ---------
Transmittal") if the Letter of Transmittal and all other required documents
cannot be delivered or transmitted by facsimile transmission, mail or hand
delivery to The Chase Manhattan Bank (the "Exchange Agent") on or prior to 5:00
--------------
p.m., New York City time, on the Expiration Date (as defined in the Prospectus)
or the procedures for delivery by book-entry transfer cannot be completed on a
timely basis. See "The Exchange Offer -- Guaranteed Delivery Procedures"
section in the Prospectus. The term "Old Notes" means the Company's outstanding
---------
10% Senior Notes due 2008.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON THE EARLIER
OF , 1998 (UNLESS EXTENDED) OR THE DATE ON WHICH 100% OF THE OLD
-------- --
NOTES ARE VALIDLY TENDERED AND NOT WITHDRAWN (THE "EXPIRATION DATE"). TENDERED
---------------
OLD NOTES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE
EXCHANGE OFFER.
Deliver to: The Chase Manhattan Bank, Exchange Agent:
By Hand, Mail or Overnight Courier:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
By Facsimile:
(212) 946-8177
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which are hereby
--------------
acknowledged, the aggregate principal amount of Old Notes set forth below
pursuant to the guaranteed delivery procedure described in "The Exchange Offer -
- - Guaranteed Delivery Procedures" section in the Prospectus and the Letter of
Transmittal.
Principal Amount of Old Notes Signature(s)_________________________
Tendered $___________________ _____________________________________
Certificate Nos.
(if available)_______________ Please Print the Following Information
Names(s) of Registered Holders_______
Total Principal Amount _____________________________________
Represented by Old Notes
Certificate(s)_____________ Address_______________________________
If Old Notes will be tendered by book- ______________________________________
entry transfer, provide the following
information:
DTC Account Number___________ Area Code and Telephone Number(s)____
_____________________________________
Dated: _____________________, 1998
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," hereby guarantees to deliver to the Exchange Agent, at its address
set forth above, either the Old Notes tendered hereby in proper form for
transfer, or confirmation of the book-entry transfer of such Old Notes pursuant
to the procedures for book-entry transfer set forth in the Prospectus, in either
case together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, and any other
documents required by the Letter of Transmittal within three New York Stock
Exchange trading days after the date of execution of this Notice of Guaranteed
Delivery.
Name of Firm ______________________ (Authorized Signature)__________
Address____________________________ Name____________________________
___________________________________ Date____________________________
Zip Code
Area Code and
Telephone Number___________________
<PAGE>
TEXON INTERNATIONAL PLC
OFFER FOR ALL OUTSTANDING
10% SENIOR NOTES DUE 2008
IN EXCHANGE FOR REGISTERED
10% SERIES A SENIOR NOTES DUE 2008
- ------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON THE EARLIER
OF _________ __, 1998 (UNLESS EXTENDED) OR THE DATE ON WHICH 100% OF THE OLD
NOTES (THE "OLD NOTES") ARE VALIDLY TENDERED AND NOT WITHDRAWN (THE "EXPIRATION
DATE"). TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER.
- ------------------------------------------------------------------------------
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus, dated ________ __, 1998
(as the same may be amended or supplemented from time to time, the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
---------- ---------
Transmittal"), relating to the offer (the "Exchange Offer") of Texon
--------------
International plc (the "Company") to exchange an aggregate principal amount of
-------
up DM 245,000,000 of its 10% Series A Senior Notes Due 2008 (the "Exchange
--------
Notes") which have been registered under the Securities Act of 1933 pursuant to
a Registration Statement of which the Prospectus constitutes a part for a like
principal amount of its outstanding 10% Senior Notes due 2008 (the "Old Notes")
---------
of which DM 245,000,000 aggregate principal amount is outstanding upon the terms
and subject to the conditions described in the Prospectus and the Letter of
Transmittal. The Exchange Notes are being offered to satisfy certain
obligations of the Company under the Purchase Agreement, dated as of January 27,
1998, between the Company and the initial purchasers of the Old Notes (the
"Initial Purchasers") and the Exchange and Registration Rights Agreement, dated
- -------------------
January 27, 1998, among the Company and the Initial Purchasers.
Holders of Old Notes who cannot deliver all required documents to the
Exchange Agent on or prior to the Expiration Date (as defined below), or who
cannot complete the procedures for book-entry transfer on a timely basis, must
follow guaranteed delivery described in the Prospectus under "The Exchange Offer
- --Guaranteed Delivery Procedures."
This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A TENDER
OF SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on _________ __, 1998, unless extended by the Company. Any
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
before the Expiration Date.
<PAGE>
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise provided
in Instruction 8 of the Letter of Transmittal.
3. The Exchange Offer expires at 5:00 p.m., New York City time, on
________ __, 1998 (unless extended by the Company) or the date on which 100% of
the Old Notes are validly tendered and not withdrawn.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATIONAL
PURPOSES ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES HELD BY US
AND REGISTERED IN OUR NAME FOR YOUR ACCOUNT OR BENEFIT.
-2-
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE REGISTERED EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Texon
International plc with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES
10% Senior Notes
Due 2008 .........................._______________________________________
[ ] Please do not tender any Old Notes held by
you for my account.
Dated: , 1998 ______________________________________
______________________________________
Signature(s)
______________________________________
______________________________________
______________________________________
Please print name(s) here
______________________________________
______________________________________
Address(es)
______________________________________
Area Code and Telephone Number
______________________________________
Tax Identification or Social Security No(s).
None of the Old Notes held by us for your account will be tendered unless
we receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
-3-
<PAGE>
TEXON INTERNATIONAL PLC
Offer for all Outstanding
10% Senior Notes due 2008
in Exchange for Registered
10% Series A Senior Notes due 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON THE EARLIER
OF ________ __, 1998 (UNLESS EXTENDED) OR THE DATE ON WHICH 100% OF THE OLD
NOTES ARE VALIDLY TENDERED AND NOT WITHDRAWN (THE "EXPIRATION DATE"). TENDERED
---------------
OLD NOTES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE EXPIRATION DATE OF THE
EXCHANGE OFFER.
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Texon International plc (the "Company") is offering, upon and subject to
-------
the terms and conditions set forth in the Prospectus, dated _________ __, 1998
(as the same may be amended or supplemented from time to time, the
"Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
---------- ---------
Transmittal"), to exchange (the "Exchange Offer") an aggregate principal amount
- ----------- --------------
of up to DM 245,000,000 of its 10% Series A Senior Notes Due 2008 (the "Exchange
--------
Notes") for a like principal amount of its outstanding 10% Senior Notes Due 2008
- -----
(the "Old Notes"). The Exchange Notes are being offered to satisfy certain
---------
obligations of the Company under the Purchase Agreement, dated as of January 27,
1998, between the Company and the initial purchasers of the Old Notes (the
"Initial Purchasers") and the Exchange and Registration Rights Agreement, dated
- -------------------
January 27, 1998, among the Company and the initial purchasers of the Old Notes.
We are requesting that you contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee regarding the Exchange
Offer. For your information and for forwarding to your clients for whom you
hold Old Notes registered in your name or in the name of your nominee, or who
hold Old Notes registered in their own names, we are enclosing the following
documents:
1. Prospectus dated ________ __, 1998;
2. The Letter of Transmittal for your use and for the information of your
clients, including Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if time will not permit all required documents to reach the Exchange Agent (as
defined below) prior to the
<PAGE>
Expiration Date (as defined below) or if the procedures for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Return envelopes addressed to The Chase Manhattan Bank, the Exchange
Agent (the "Exchange Agent") for the Old Notes.
--------------
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on _________ __, 1998 (unless extended by the Company)
or the date on which 100% of the Old Notes are validly tendered and not
withdrawn (the "Expiration Date"). Old Notes tendered pursuant to the Exchange
---------------
Offer may be withdrawn, subject to the procedures described in the Prospectus,
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent, all in accordance with the instructions set forth in the Letter
of Transmittal and the Prospectus.
If holders of Old Notes wish to tender but time will not permit all
required documents to reach the Exchange Agent prior to the Expiration Date or
to comply with the book-entry transfer procedures on a timely basis, a tender
may be effected by following the guaranteed delivery procedures described in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 8 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The Chase
Manhattan Bank, as the Exchange Agent for the Old Notes, at its address set
forth on the front of the Letter of Transmittal.
Very truly yours,
TEXON INTERNATIONAL PLC
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
-2-
