=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
---------------------------
Date of Report (Date of earliest event reported): May 31, 1999
WITCO CORPORATION
(Exact name of registrant as specified in its charter)
---------------------------
Delaware 001-4654 13-187000
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
---------------------------
One American Lane
Greenwich, Connecticut
06831-2559
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (203) 552-2000
N/A
(Former name or former address, if changed since last report)
=============================================================================
<PAGE>
This Form 8-K/A amends the Form 8-K filing made on June 4, 1999.
ITEM 5. OTHER EVENTS
As previously disclosed, Witco Corporation, a Delaware corporation
("Witco"), Crompton & Knowles Corporation, a Massachusetts corporation
("Crompton") and Park Merger Co., a Delaware corporation and wholly owned
subsidiary of Crompton ("Newco"), have entered into an Agreement and Plan of
Reorganization, dated as of May 31, 1999 (the "Merger Agreement"). In
connection with the Merger Agreement, Witco and Crompton have also entered
into cross stock option agreements, each dated May 31, 1999. Pursuant to the
Witco stock option agreement, Witco granted to Crompton an irrevocable option
to purchase, under certain circumstances, up to 11,471,159 shares of Witco
Common Stock at a price, subject to certain adjustments, of $17.50 per share.
Pursuant to the Crompton stock option agreement, Crompton granted to Witco an
irrevocable option to purchase, under certain circumstances, up to 13,025,917
shares of Crompton Common Stock at a price, subject to certain adjustments, of
$18.375 per share.
A copy of the Merger Agreement is attached as Exhibit 99.3 hereto, and is
hereby incorporated herein by reference.
A copy of the Crompton stock option agreement and the Witco stock option
agreement are attached as Exhibit 99.4 and Exhibit 99.5 hereto, respectively,
and are hereby incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
- Not Applicable
(b) Pro forma financial information.
- Not Applicable
(c) Exhibits.
99.3 Agreement and Plan of Reorganization dated as of May 31, 1999, by
and among Crompton & Knowles Corporation, Park Merger Co. and Witco
Corporation.
99.4 Stock Option Agreement dated May 31, 1999, between Crompton &
Knowles Corporation, as issuer, and Witco Corporation, as grantee.
99.5 Stock Option Agreement dated May 31, 1999, between Witco
Corporation, as issuer, and Crompton & Knowles Corporation, as
grantee.
1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WITCO CORPORATION
(Registrant)
Date: June 8, 1999 By: /s/ Camillo DiFrancesco
---------------------------------
Name: Camillo DiFrancesco
Title: Senior Vice President &
Chief Financial Officer
2
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of the Exhibit
99.3 Agreement and Plan of Reorganization dated as of May 31, 1999,
by and among Crompton & Knowles Corporation, Park Merger Co. and
Witco Corporation.
99.4 Stock Option Agreement dated May 31, 1999, between Crompton &
Knowles Corporation, as issuer, and Witco Corporation, as
grantee.
99.5 Stock Option Agreement dated May 31, 1999, between Witco
Corporation, as issuer, and Crompton & Knowles Corporation, as
grantee.
3
EXECUTION COPY
==============================================================================
AGREEMENT AND PLAN OF REORGANIZATION
by and among
CROMPTON & KNOWLES CORPORATION
PARK MERGER CO.
and
WITCO CORPORATION
--------------------
Dated as of May 31, 1999
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE FIRST STEP MERGER
1.1 The First Step Merger........................................... 1
1.2 Effective Time.................................................. 2
1.3 Effects of the First Step Merger................................ 2
1.4 Conversion of Crompton Common Stock............................. 2
1.5 Newco Common Stock.............................................. 2
1.6 Dissenting Shares............................................... 2
1.7 Options......................................................... 3
1.8 Certificate of Incorporation.................................... 3
1.9 By-Laws......................................................... 3
1.10 Board of Directors; Management.................................. 3
ARTICLE II
THE SECOND STEP MERGER
2.1 The Second Step Merger.......................................... 4
2.2 Effective Time.................................................. 4
2.3 Effects of the Second Step Merger............................... 4
2.4 Conversion of Witco Common Stock................................ 4
2.5 Newco Common Stock.............................................. 5
2.6 Options......................................................... 5
2.7 Certificate of Incorporation.................................... 6
2.8 By-Laws......................................................... 6
2.9 Tax Consequences................................................ 6
2.10 Management Succession........................................... 6
2.11 Board of Directors.............................................. 6
2.12 Name; Corporate Offices......................................... 6
ARTICLE III
EXCHANGE OF SHARES
3.1 Newco to Make Shares Available.................................. 7
3.2 Exchange of Shares.............................................. 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARK AND NEWCO
4.1 Organization and Standing....................................... 9
4.2 Subsidiaries.................................................... 9
<PAGE>
4.3 Corporate Power and Authority................................... 10
4.4 Capitalization of Crompton...................................... 10
4.5 Conflicts, Consents and Approval................................ 11
4.6 Brokerage and Finder's Fees; Expenses........................... 12
4.7 Opinion of Financial Advisor.................................... 12
4.8 Employee Benefit Plans.......................................... 12
4.9 Crompton SEC Documents.......................................... 15
4.10 Taxes........................................................... 16
4.11 Registration Statement.......................................... 16
4.12 Compliance with Law............................................. 17
4.13 Litigation...................................................... 17
4.14 No Material Adverse Change...................................... 17
4.15 Board Meeting................................................... 17
4.16 Undisclosed Liabilities......................................... 18
4.17 Labor Relations................................................. 18
4.19 Permits; Compliance............................................. 18
4.20 Environmental Matters........................................... 18
4.21 Witco Stock Ownership........................................... 19
4.22 Contracts....................................................... 19
4.23 State Takeover Laws............................................. 20
4.24 Crompton Rights Agreement....................................... 20
4.25 Year 2000....................................................... 20
4.26 Intellectual Property........................................... 20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MADISON
5.1 Organization and Standing....................................... 21
5.2 Subsidiaries.................................................... 21
5.3 Corporate Power and Authority................................... 22
5.4 Capitalization of Witco......................................... 22
5.5 Conflicts; Consents and Approvals............................... 23
5.6 Brokerage and Finder's Fees; Expenses........................... 23
5.7 Opinion of Financial Advisor.................................... 24
5.8 Employee Benefit Plans.......................................... 24
5.9 Witco SEC Documents............................................. 26
5.10 Taxes........................................................... 27
5.11 Registration Statement.......................................... 27
5.12 Compliance with Law............................................. 27
5.13 Litigation...................................................... 28
5.14 No Material Adverse Change...................................... 28
5.15 Board Meeting................................................... 28
5.16 Undisclosed Liabilities......................................... 28
5.17 Labor Relations................................................. 28
5.19 Permits; Compliance............................................. 29
<PAGE>
5.20 Environmental Matters........................................... 29
5.21 Crompton Stock Ownership........................................ 30
5.22 Contracts....................................................... 30
5.23 DGCL Section 203 and State Takeover Laws........................ 30
5.24 Witco Rights Agreement.......................................... 30
5.25 Year 2000....................................................... 30
5.26 Intellectual Property........................................... 30
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Businesses prior to the Effective Time............... 31
6.2 Forbearances.................................................... 31
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Mutual Agreements............................................... 33
7.2 Additional Agreements of Crompton............................... 34
7.3 Additional Agreements of Witco.................................. 40
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the
Second Step Merger............................................ 43
8.2 Conditions to Obligations of Crompton and Newco................. 44
8.3 Conditions to Obligations of Witco.............................. 45
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination..................................................... 45
9.2 Effect of Termination........................................... 47
9.3 Amendment....................................................... 47
9.4 Extension; Waiver............................................... 48
ARTICLE X
GENERAL PROVISIONS
10.1 Closing......................................................... 48
10.2 Nonsurvival of Representations, Warranties and Agreements....... 48
10.3 Fees and Expenses............................................... 48
10.4 Notices......................................................... 49
10.5 Interpretation.................................................. 50
10.6 Counterparts.................................................... 50
10.7 Entire Agreement................................................ 50
<PAGE>
10.8 Governing Law................................................... 51
10.9 Severability.................................................... 51
10.10 Assignment; Third-Party Beneficiaries........................... 51
10.11 Certain Agreements of Crompton and Witco........................ 51
10.12 Representations and Warranties of Newco......................... 51
Exhibit A -- Form of Certificate of Incorporation of Newco
Exhibit B -- Form of By-Laws of Newco
Exhibit C -- Form of Crompton Option Agreement
Exhibit D -- Form of Witco Option Agreement
Exhibit E -- Form of Affiliate Letter Addressed to Crompton
Exhibit F -- Form of Affiliate Letter Addressed to Witco
Exhibit G -- Board of Directors of the Combined Company
<PAGE>
INDEX OF DEFINED TERMS
Defined Term Section
$2.65 Cumulative Convertible Preferred.................... 5.4(c)
Action.................................................... 4.13
Agreement................................................. preamble
Applicable Laws........................................... 4.12
Certificate of Merger..................................... 2.2
Claim..................................................... 4.2(c)
Closing................................................... 10.1
Closing Date.............................................. 10.1
Code...................................................... 1.7
Combined Company.......................................... recitals
Commission................................................ 4.14
Common Certificate........................................ 2.4(b)
Confidentiality Agreement................................. 7.1(f)
Contract.................................................. 4.22
Controlled Group Liability................................ 4.8(a)
Crompton.................................................. preamble
Crompton Acquisition Agreement 7.2(g)
Crompton Articles......................................... 4.1
Crompton By-Laws.......................................... 4.1
Crompton Competing Transaction............................ 7.2(g)
Crompton Common Certificate............................... 1.4(b)
Crompton Common Stock..................................... 1.4(a)
Crompton Disclosure Schedule.............................. Article IV
Crompton Employee Benefit Plans........................... 4.8(a)
Crompton Filed SEC Documents.............................. 4.14
Crompton Option Agreement................................. recitals
Crompton Plan............................................. 4.8(a)
Crompton Rights Agreement................................. 1.4(a)
Crompton SEC Documents.................................... 4.9
Crompton Stock Plans...................................... 1.7
Crompton Stockholder Rights............................... 1.4(a)
Crompton Stockholders..................................... 4.3
Crompton Stockholders Approval............................ 7.2(a)
Deutsche Bank............................................. 5.6
Delaware Secretary........................................ 1.2
DGCL...................................................... 1.1
Dissenting Shares......................................... 1.6
Effective Time............................................ 2.2
Environmental Laws........................................ 4.20(a)
ERISA..................................................... 4.8(a)
<PAGE>
Defined Term Section
ERISA Affiliate........................................... 4.8(a)
Exchange Act.............................................. 4.9
Exchange Agent............................................ 3.1
Exchange Fund............................................. 3.1
Exchange Ratio............................................ 2.4(a)
First Effective Time...................................... 1.2
First Merger Effective Time............................... 1.4(a)
First Merger Exchange Ratio............................... 1.4(a)
First Step Merger......................................... recitals
GAAP...................................................... 4.9
Goldman Sachs............................................. 4.6
Governmental Authority.................................... 4.5(d)
Hazardous Materials....................................... 4.20(a)
HSR Act................................................... 4.5(d)
Indemnified Parties....................................... 7.2(c)
Injunction................................................ 8.1(e)
Insurance Amount.......................................... 7.2(d)
Intellectual Property..................................... 4.26
IRS....................................................... 4.8(b)
Joint Proxy Statement..................................... 4.11
Massachusetts Secretary................................... 1.2
Material Adverse Effect................................... 4.1
MBCL...................................................... 1.1
Merger.................................................... recitals
Multiemployer Plan........................................ 4.8(a)
Multiple Employer Plan.................................... 4.8(g)
New Benefit Plans......................................... 7.2(e)
Newco..................................................... preamble
Newco By-Laws............................................. 1.9
Newco Certificate......................................... 1.8
Newco Common Stock........................................ 1.4(a)
NLRB...................................................... 4.17
NYSE...................................................... 3.2(e)
Option Agreements......................................... recitals
PBGC...................................................... 4.8(f)
Permits................................................... 4.19
Qualified Witco Plan...................................... 5.8(c)
Qualified Crompton Plan................................... 4.8(c)
Qualifying Witco Proposal 7.3(c)
Qualifying Crompton Proposal 7.2(g)
Registration Statement.................................... 4.11
Release................................................... 4.20(a)
Salomon Smith Barney...................................... 4.6
<PAGE>
Defined Term Section
Second Step Merger........................................ recitals
Section 16 Information.................................... 7.2(I)
Securities Act............................................ 4.9
Series Preferred Stock.................................... 5.4(b)
Substitute Option......................................... 2.6
Systems................................................... 4.25
Tax....................................................... 4.10
Witco..................................................... preamble
Witco Acquisition Agreement 7.3(c)
Witco By-Laws............................................. 5.9
Witco Certificate......................................... 5.1
Witco Common Stock........................................ 2.4(a)
Witco Competing Transaction............................... 7.3(c)
Witco Disclosure Schedule................................. Article V
Witco Filed SEC Documents................................. 5.14
Witco Employee Benefit Plans.............................. 5.8(a)
Witco Insiders............................................ 7.2(I)
Witco Option Agreement.................................... recitals
Witco Plan................................................ 5.8(a)
Witco Preferred Stock..................................... 5.4(c)
Witco Rights Agreement.................................... 2.4(a)
Witco SEC Documents....................................... 5.9
Witco Stockholder Rights.................................. 2.4(a)
Witco Stockholders........................................ 5.3
Witco Stockholders Approval............................... 7.3(a)
Witco Stock Plans......................................... 2.6(a)
Withdrawal Liability...................................... 4.8(a)
Year 2000 Compliant....................................... 4.25
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 31, 1999
(this "Agreement"), by and among CROMPTON & KNOWLES CORPORATION, a
Massachusetts corporation ("Crompton"), PARK MERGER CO., a Delaware
corporation and wholly owned subsidiary of Crompton ("Newco"), and WITCO
CORPORATION, a Delaware corporation ("Witco").
WHEREAS, the Boards of Directors of Witco, Crompton and Newco
have determined that it is in the best interests of their respective companies
and their stockholders to consummate the business combination transaction
provided for herein in which (a) Crompton will, subject to the terms and
conditions set forth herein, merge with and into Newco (the "First Step
Merger") so that Newco is the surviving corporation in the First Step Merger,
and (b) immediately thereafter, Witco will, subject to the terms and
conditions set forth herein, merge with and into Newco (the "Second Step
Merger" and, together with the First Step Merger, the "Merger"), so that Newco
is the surviving corporation (hereinafter sometimes referred to in such
capacity as the "Combined Company") in the Second Step Merger; and
WHEREAS, as a condition to, and immediately after the execution
of, this Agreement, Crompton and Witco are entering into a Crompton stock
option agreement in the form attached hereto as Exhibit C (the "Crompton
Option Agreement"); and
WHEREAS, as a condition to, and immediately after the execution
of, this Agreement, Crompton and Witco are entering into a Witco stock option
agreement in the form attached hereto as Exhibit D (the "Witco Option
Agreement" and, together with the Crompton Option Agreement, the "Option
Agreements"); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE I
THE FIRST STEP MERGER
1.1 The First Step Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Massachusetts Business Corporation Law (the
"MBCL") and the General Corporation Law of the State of Delaware (the "DGCL"),
at the First Effective Time, Crompton shall merge with and into Newco. Newco
shall be the surviving corporation in the First Step Merger and shall continue
its corporate existence under the laws of the State of Delaware. Upon
consummation of the First Step Merger, the separate corporate existence of
Crompton shall terminate.
<PAGE>
1.2 Effective Time. The First Step Merger shall become effective as
set forth in the articles of merger that shall be filed with the Secretary of
Commonwealth of the Commonwealth of Massachusetts (the "Massachusetts
Secretary") and the certificate of merger that shall be filed with the
Secretary of State of the State of Delaware (the "Delaware Secretary") on the
Closing Date. The term "First Effective Time" shall be the date and time when
the First Step Merger becomes effective, as set forth in the articles of
merger and certificate of merger referred to in this Section 1.2.
1.3 Effects of the First Step Merger. At and after the First Effective
Time, the First Step Merger shall have the effects set forth in Section 80 of
the MBCL and Sections 259 and 261 of the DGCL.
1.4 Conversion of Crompton Common Stock. (a) At the First Effective
Time, by virtue of the First Step Merger and without any action on the part of
Crompton, Newco or the holders of common stock of Crompton or Newco, each
share of common stock, par value $.10 per share, of Crompton issued and
outstanding immediately prior to the First Effective Time (together with the
rights (the "Crompton Stockholder Rights") attached thereto issued pursuant to
that certain Rights Agreement, dated July 20, 1988, as amended, between
Crompton and The Chase Manhattan Bank, N.A., as Rights Agent (the "Crompton
Rights Agreement"), "Crompton Common Stock"), other than Dissenting Shares and
shares of Crompton Common Stock held in Crompton's treasury or by Newco, shall
be converted into one share (the "First Merger Exchange Ratio") of common
stock, par value $.01 per share, of Newco ( "Newco Common Stock").
(b) All of the shares of Crompton Common Stock converted into Newco
Common Stock pursuant to this Article I shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist as of the First
Effective Time, and each certificate previously representing any such shares
of Crompton Common Stock (a "Crompton Common Certificate") shall thereafter
represent, without the requirement of any exchange thereof, only the number of
shares of Newco Common Stock into which the shares of Crompton Common Stock
represented by such Crompton Common Certificate have been converted pursuant
to this Section 1.4.
(c) At the First Effective Time, all shares of Crompton Common Stock
that are owned by Crompton as treasury stock and all shares of Crompton Common
Stock that are owned by Crompton or Newco shall be cancelled and shall cease
to exist and no stock of Newco or other consideration shall be delivered in
exchange therefor.
1.5 Newco Common Stock. At and after the First Effective Time, each
share of Newco Common Stock issued and outstanding immediately prior to the
First Effective Time shall be cancelled and retired and shall resume the
status of authorized and unissued shares of Newco Common Stock, and no shares
of Newco Common Stock or other securities of Newco shall be issued in respect
thereof.
1.6 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Crompton Common Stock that are outstanding immediately
prior to the First Effective Time, the holders of which shall have delivered
to Crompton a written demand for appraisal of such shares in the manner
provided in Section 86 and 89 of the MBCL ("Dissenting Shares"),
<PAGE>
shall not be converted into Newco Common Stock; instead, the holders thereof
shall be entitled to payment of the appraised value of such Dissenting Shares
in accordance with the provisions of Section 89 of the MBCL; provided,
however, that (a) if any holder of Dissenting Shares shall subsequently
deliver a written withdrawal of his demand for appraisal of such shares (with
the written approval of the Combined Company if such withdrawal is not
tendered within 60 days after the First Effective Time), or (b) if any holder
fails to establish such holder's entitlement to appraisal rights under the
MBCL, such holder shall forfeit the right to appraisal of such shares of
Crompton Common Stock and each of such shares shall thereupon be deemed to
have been converted into, as of the First Effective Time, Newco Common Stock
pursuant to Section 1.4, without interest thereon.
1.7 Options. At the First Effective Time, each option granted by
Crompton to purchase shares of Crompton Common Stock that is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of Crompton Common Stock and shall be converted automatically
into an option to purchase a number of shares of Newco Common Stock equal to
the number of shares of Crompton Common Stock subject to such option
immediately prior to the First Effective Time at an exercise price per share
of Newco Common Stock equal to the exercise price per share of Crompton Common
Stock in effect immediately prior to the First Effective Time and otherwise
subject to the terms of the appropriate Crompton Employee Benefit Plan
pursuant to which such options have been issued (such plans, collectively, the
"Crompton Stock Plans") and the agreements evidencing grants thereunder. The
adjustment provided herein with respect to any options that are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) shall be and is intended to be effected in a
manner that is consistent with Section 424(a) of the Code. The duration and
other terms of the new option shall be the same as the original option, except
that all references to Crompton shall be deemed to be references to Newco.
1.8 Certificate of Incorporation. Subject to the terms and conditions
of this Agreement, at the First Effective Time, the Certificate of
Incorporation of the surviving corporation in the First Step Merger shall be
substantially in the form attached hereto as Exhibit A (the "Newco
Certificate"), with such changes thereto as shall be mutually agreed upon by
Crompton and Witco, until thereafter amended in accordance with the terms
thereof and all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered
by any Governmental Authority (collectively, "Applicable Laws").
1.9 By-Laws. Subject to the terms and conditions of this Agreement, at
the First Effective Time, the By-Laws of the surviving corporation in the
First Step Merger shall be in substantially the form attached hereto as
Exhibit B (the "Newco By-Laws"), with such changes as may be mutually agreed
upon by Crompton and Witco, until thereafter amended in accordance with the
terms thereof and Applicable Laws.
1.10 Board of Directors; Management. From and after the First
Effective Time, until duly changed pursuant hereto or in accordance with the
Newco Certificate, the Newco By-Laws or Applicable Laws, the directors of
Crompton shall be the directors of Newco, and the officers of Crompton shall
be the officers of Newco. At the Effective Time, the directors of Newco shall
<PAGE>
be as set forth in Section 2.11, and the officers of Newco shall be determined
in accordance with Section 2.10.
ARTICLE II
THE SECOND STEP MERGER
2.1 The Second Step Merger. Subject to the terms and conditions of
this Agreement, in accordance with the DGCL, at the Effective Time, Witco
shall merge with and into Newco. Newco shall be the surviving corporation in
the Second Step Merger, and shall continue its corporate existence under the
laws of the State of Delaware. Upon consummation of the Second Step Merger,
the separate corporate existence of Witco shall terminate.
2.2 Effective Time. The Second Step Merger shall become effective as
set forth in the certificate of merger (the "Certificate of Merger") that
shall be filed with the Delaware Secretary on the Closing Date. The term
"Effective Time" shall be the date and time when the Second Step Merger
becomes effective, as set forth in the Certificate of Merger. The Effective
Time shall occur immediately after the First Effective Time has occurred.
2.3 Effects of the Second Step Merger. At and after the Effective
Time, the Second Step Merger shall have the effects set forth in Sections 259
and 261 of the DGCL.
2.4 Conversion of Witco Common Stock. At the Effective Time, by virtue
of the Second Step Merger and without any action on the part of Crompton,
Newco, Witco or the holder of any of the following securities:
(a) Subject to Section 3.2(e), each share of the common stock, par
value $5.00 per share, of Witco issued and outstanding immediately prior to
the Effective Time (together with the rights (the "Witco Stockholder Rights")
attached thereto issued pursuant to that certain Rights Agreement, dated March
2, 1995, between Witco and First Chicago Trust Company of New York, as Rights
Agent (the "Witco Rights Agreement"), "Witco Common Stock"), other than shares
of Witco Common Stock held in Witco's treasury, shall be converted into the
right to receive 0.9242 shares (the "Exchange Ratio") of Newco Common Stock.
(b) All of the shares of Witco Common Stock converted into the right
to receive Newco Common Stock pursuant to this Article II shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist as
of the Effective Time, and each certificate previously representing any such
shares of Witco Common Stock (a "Common Certificate") shall thereafter
represent only the right to receive (i) a certificate representing the number
of whole shares of Newco Common Stock and (ii) cash in lieu of fractional
shares into which the shares of Witco Common Stock represented by such Common
Certificate have been converted pursuant to this Section 2.4 and Section
3.2(e). Common Certificates shall be exchanged for certificates representing
whole shares of Newco Common Stock and cash in lieu of fractional shares
issued in consideration therefor upon the surrender of such Common
Certificates in accordance with
<PAGE>
Section 3.2, without any interest thereon. If, prior to the Effective Time,
the outstanding shares of Witco Common Stock or Crompton Common Stock (or,
following the consummation of the First Step Merger, the outstanding shares of
Newco Common Stock) shall have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities as a result
of a reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in capitalization (other
than solely as a result of the First Step Merger), an appropriate and
proportionate adjustment shall be made to the Exchange Ratio.
(c) At the Effective Time, all shares of Witco Common Stock that are
owned by Witco as treasury stock and all shares of Witco Common Stock that are
owned by Witco shall be cancelled and shall cease to exist, and no stock of
Newco or other consideration shall be delivered in exchange therefor. All
shares of Newco Common Stock that are owned by Witco shall become treasury
stock of Newco.
(d) Subject to Section 7.3(e), any outstanding $2.65 Cumulative
Convertible Preferred shall not be effected by the Merger and shall continue
to have the same rights and preferences as were in effect prior to Closing.
2.5 Newco Common Stock. At and after the Effective Time, each share of
Newco Common Stock issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of common stock of the
Combined Company and shall not be affected by the Second Step Merger.
2.6 Options. (a) At the Effective Time, each option granted by Witco
to purchase shares of Witco Common Stock that is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares
of Witco Common Stock and shall be converted automatically into an option to
purchase shares of Newco Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the
appropriate Witco Employee Benefit Plan pursuant to which such options have
been issued (such plans collectively the "Witco Stock Plans") and the
agreements evidencing grants thereunder):
(i) The number of shares of Newco Common Stock to be subject to the
new option shall be equal to the product of the number of
shares of Witco Common Stock subject to the original option and
the Exchange Ratio, provided that any fractional shares of
Newco Common Stock resulting from such multiplication shall be
rounded to the nearest whole share; and
(ii) The exercise price per share of Newco Common Stock under the
new option shall be equal to the exercise price per share of
Witco Common Stock under the original option divided by the
Exchange Ratio, provided that such exercise price shall be
rounded down to the nearest whole cent (as so adjusted, a
"Substitute Option").
(b) The adjustment provided herein with respect to any options that
are "incentive stock options" (as defined in Section 422 of the Code) shall be
and is intended to be effected in a manner that is consistent with Section
424(a) of the Code. The duration and other terms of the
<PAGE>
new option shall be the same as the original option, except that all
references to Witco shall be deemed to be references to Newco.
(c) Within ten (10) days after the Effective Time, Newco shall
register under the Securities Act on Form S-8 or other appropriate form (and
use its reasonable best efforts to maintain the effectiveness thereof) shares
of Newco Common Stock issuable pursuant to all Substitute Options.
(d) Effective at the Effective Time, Newco shall assume each
Substitute Option in accordance with the plan or arrangement under which it
was issued and the stock option agreement by which it is evidenced.
2.7 Certificate of Incorporation. Subject to the terms and conditions
of this Agreement, at the Effective Time, the Newco Certificate shall be the
Certificate of Incorporation of the Combined Company, until thereafter amended
in accordance with the terms thereof and Applicable Laws.
2.8 By-Laws. Subject to the terms and conditions of this Agreement, at
the Effective Time, the Newco By-Laws shall be the By-Laws of the Combined
Company until thereafter amended in accordance with the terms thereof and
Applicable Laws.
2.9 Tax Consequences. It is intended that each of the First Step
Merger and the Second Step Merger shall constitute a "reorganization" within
the meaning of Section 368(a) of the Code and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Sections 354 and 361
of the Code.
2.10 Management Succession. At the Effective Time, E. Gary Cook shall
be Chairman of the Board of the Combined Company and Vincent A. Calarco shall
be the President and Chief Executive Officer of the Combined Company and
otherwise the officers of Newco immediately prior to the Effective Time shall
be the initial officers of the Combined Company and shall hold office until
their respective successors are duly elected and qualified, or their earlier
death, resignation or removal.
2.11 Board of Directors. From and after the Effective Time, until duly
changed in accordance with Applicable Laws, the Newco Certificate and the
Newco By-Laws, the Board of Directors of Newco shall consist of the persons
identified in Exhibit G to this Agreement.
2.12 Name; Corporate Offices. (a) At the Effective Time, the name of
the Combined Company shall be "C&K Witco Corporation."
(b) The corporate headquarters of the Combined Company shall be
maintained in the State of Connecticut.
<PAGE>
ARTICLE III
EXCHANGE OF SHARES
3.1 Newco to Make Shares Available. At or prior to the Effective Time,
Newco shall deposit, or shall cause to be deposited, with ChaseMellon
Shareholder Services, L.L.C., or another bank or trust company reasonably
acceptable to each of Crompton and Witco (the "Exchange Agent"), for the
benefit of the holders of Common Certificates, for exchange in accordance with
this Article III, certificates representing the shares of Newco Common Stock
and cash in lieu of any fractional shares (such cash and certificates for
shares of Newco Common, together with any dividends or distributions with
respect thereto, the "Exchange Fund") to be issued pursuant to Section 2.4 and
paid pursuant to Section 3.2(a) in exchange for outstanding shares of Witco
Common Stock.
3.2 Exchange of Shares. (a) As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of one or more
Common Certificates a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Common Certificates shall
pass, only upon delivery of the Common Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Common Certificates in
exchange for certificates representing the shares of Newco Common Stock and
any cash in lieu of fractional shares into which the shares of Witco Common
Stock represented by such Common Certificate or Common Certificates shall have
been converted pursuant to this Agreement. Upon proper surrender of a Common
Certificate for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of
such Common Certificate shall be entitled to receive in exchange therefor, as
applicable, (i) a certificate representing that number of whole shares of
Newco Common Stock to which such holder of Witco Common Stock shall have
become entitled pursuant to the provisions of Article II and (ii) a check
representing the amount of any cash in lieu of fractional shares that such
holder has the right to receive in respect of the Common Certificate
surrendered pursuant to the provisions of this Article III, and the Common
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on any cash in lieu of fractional shares or on any unpaid
dividends and distributions payable to holders of Common Certificates.
(b) No dividends or other distributions declared with respect to Newco
Common Stock shall be paid to the holder of any unsurrendered Common
Certificate until the holder thereof shall surrender such Common Certificate
in accordance with this Article III. After the surrender of a Common
Certificate in accordance with this Article III, the record holder thereof
shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with
respect to shares of Newco Common Stock represented by such Common
Certificate.
(c) If any certificate representing shares of Newco Common Stock is to be
issued in a name other than that in which the Common Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Common Certificate so surrendered shall be properly endorsed
(or accompanied by an appropriate instrument of transfer) and other-
<PAGE>
wise in proper form for transfer, and that the person requesting such exchange
shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of
Newco Common Stock in any name other than that of the registered holder of the
Common Certificate surrendered, or required for any other reason, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Witco of the shares of Witco Common Stock that were issued
and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Common Certificates are presented for transfer to the Exchange
Agent, they shall be cancelled and exchanged for certificates representing
shares of Newco Common Stock as provided in this Article III.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Newco Common Stock
shall be issued upon the surrender for exchange of Common Certificates, no
dividend or distribution with respect to Newco Common Stock shall be payable
on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights
of a stockholder of Newco. In lieu of the issuance of any such fractional
share, Newco shall pay to each former stockholder of Witco who otherwise would
be entitled to receive such fractional share an amount in cash determined by
multiplying (i) the average of the closing-sale prices of Crompton Common
Stock on the New York Stock Exchange, Inc. (the "NYSE") as reported by The
Wall Street Journal, Northeastern edition, for the five trading days
immediately preceding the date of the Effective Time by (ii) the fraction of a
share (rounded to the nearest thousandth when expressed in decimal form) of
Newco Common Stock to which such holder would otherwise be entitled to receive
pursuant to Section 2.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Witco for 12 months after the Effective Time shall be paid to
the Combined Company. Any former stockholders of Witco who have not
theretofore complied with this Article III shall thereafter look only to Newco
for payment of the shares of Newco Common Stock, cash in lieu of any
fractional shares, and any unpaid dividends and distributions on the Newco
Common Stock deliverable in respect of each share of Witco Common Stock such
stockholder holds as determined pursuant to this Agreement, without any
interest thereon. Notwithstanding the foregoing, none of Crompton, Newco,
Witco, the Exchange Agent or any other person shall be liable to any former
holder of shares of Witco Common Stock for any amount delivered in good faith
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(g) The Exchange Agent shall invest any cash included in the Exchange
Fund, as directed by Newco, on a daily basis. Any interest and other income
resulting from such investments shall be paid to the Combined Company upon
termination of the Exchange Fund pursuant to Section 3.2(f).
(h) In the event any Common Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Common Certificate to be lost, stolen or destroyed, the posting
by such person of a bond in such amount as Newco may
<PAGE>
determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Common Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Common Certificate
the shares of Newco Capital Stock and any cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CROMPTON AND NEWCO
Except as disclosed in a section of the Crompton disclosure schedule
delivered to Witco concurrently herewith (the "Crompton Disclosure Schedule")
reasonably related to the applicable representation and warranty being
qualified, Crompton and Newco hereby represent and warrant to Witco (subject
to Section 10.12) as follows:
4.1 Organization and Standing. Each of Crompton and its subsidiaries
is a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
conduct its business as and where now owned, leased, used, operated and
conducted. Each of Crompton and its subsidiaries is duly qualified to do
business and in good standing in each jurisdiction in which the nature of the
business conducted by it or the property it owns, leases or operates makes
such qualification necessary, except where the failure to be so qualified or
in good standing in such jurisdiction have not had or could not reasonably be
expected to have a Material Adverse Effect on Crompton. The term "Material
Adverse Effect" means, with respect to Crompton, Witco or the Combined
Company, as the case may be, a material adverse effect on (a) the business,
assets, results of operations or financial condition of such party and its
subsidiaries, taken as a whole, or (b) the ability of such party to consummate
the transactions contemplated hereby; provided, however, that Material Adverse
Effect shall not be deemed to include the impact of (i) the United States or
global economic or chemical industry conditions generally, and not
specifically relating to such party, (ii) the United States or global
securities markets in general, and not specifically relating to such party,
(iii) changes in legal or regulatory conditions that affect generally, and not
specifically relating to such party, the businesses in which Crompton and
Witco are engaged, (iv) actions or omissions of Crompton, Witco or Newco taken
with the prior written consent of the other in contemplation of the
transactions contemplated hereby, and (v) disruptions to the business of
Crompton or Witco, as the case may be, directly attributable to the
announcement of this Agreement or the transactions contemplated hereby.
Neither Crompton nor any of its subsidiaries is in default in the performance,
observance or fulfillment of any provision of, in the case of Crompton, its
Articles of Organization, as amended and restated (the "Crompton Articles"),
or By-Laws (the "Crompton By-Laws"), or, in the case of any subsidiary of
Crompton, its certificate of incorporation, by-laws or other organizational
documents.
4.2 Subsidiaries. As of the date hereof, other than immaterial
interests, Crompton does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise. Section 4.2 of the Crompton Disclosure
<PAGE>
Schedule sets forth as to each subsidiary of Crompton: (a) its name and
jurisdiction of incorporation or organization and (b) the percentage of
securities owned directly or indirectly by Crompton. Crompton owns, directly
or indirectly, each of the outstanding shares of capital stock (or other
ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such subsidiary) of each of Crompton's subsidiaries. Each of the outstanding
shares of capital stock of each of Crompton's subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by Crompton free and clear of all liens, pledges, security
interests, claims or other encumbrances, other than liens imposed by law.
There are no outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, claims, or other commitments or rights of any type
relating to the issuance, sale or transfer of any securities of any subsidiary
of Crompton, nor are there outstanding any securities that are convertible
into or exchangeable for any shares of capital stock of any subsidiary of
Crompton; and no subsidiary of Crompton has any obligation of any kind to
issue any additional securities or to pay for securities of any subsidiary of
Crompton or any predecessor thereof. Since the date of their incorporation,
Newco has not carried on any business or conducted any operations other than
the execution of this Agreement and the performance of its obligations
hereunder and matters ancillary hereto.
4.3 Corporate Power and Authority. Each of Crompton and Newco has all
requisite corporate power and authority to enter into this Agreement and,
subject to authorization of the Merger and the transactions contemplated
hereby by the holders of Crompton Common Stock ("Crompton Stockholders"), to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of each of Crompton and Newco, subject to authorization of
the Merger and the transactions contemplated hereby by Crompton Stockholders.
This Agreement has been duly executed and delivered by each of Crompton and
Newco, and constitutes the legal, valid and binding obligation of each of
Crompton and Newco, enforceable against each of them in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
4.4 Capitalization of Crompton. As of the date hereof, Crompton's
authorized capital stock consisted solely of (a) 250,000,000 shares of
Crompton Common Stock, of which (i) 65,456,873 shares were issued and
outstanding, (ii) 11,875,878 shares were issued and held in treasury (which
does not include the shares reserved for issuance as set forth in clause
(a)(iii) below) and (iii) 11,964,431 shares were reserved for issuance upon
the exercise or conversion of options, warrants, restricted stock awards or
convertible securities granted or issuable by Crompton, and (b) 250,000 shares
of preferred stock, without par value, none of which was issued and
outstanding or reserved for issuance (except for 67,000 shares designated as
"Series A Junior Participating Preferred Stock," none of which was issued and
outstanding). The authorized capital stock of Newco consists of 500 shares of
common stock, par value $.01 per share, and 500 shares of preferred stock, par
value of $.10 per share. Except as set forth above and except for the shares
of Crompton Common Stock reserved for issuance upon the exercise of the option
granted to Crompton pursuant to the Crompton Stock Option Agreement, as of the
date hereof, no shares of capital stock or other voting securities of Crompton
were issued, reserved for
<PAGE>
issuance or outstanding. Each outstanding share of Crompton capital stock is,
and all shares of Newco Common Stock to be issued in connection with the
Merger will be, duly authorized and validly issued, fully paid and
nonassessable, and each outstanding share of Crompton capital stock has not
been, and all shares of Newco Common Stock to be issued in connection with the
Merger will not be, issued in violation of any preemptive or similar rights.
As of the date hereof, other than as set forth above or in the Crompton Filed
SEC Documents, there are no outstanding subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale or transfer by Crompton of any
securities of Crompton, nor are there outstanding any securities that are
convertible into or exchangeable for any shares of capital stock of Crompton;
and Crompton has no obligation of any kind to issue any additional securities
or to pay for securities of Crompton or any predecessor. Crompton has no
outstanding bonds, debentures, notes or other similar obligations the holders
of which have the right to vote generally with Crompton stockholders.
4.5 Conflicts, Consents and Approval. Neither the execution and
delivery of this Agreement by Crompton or Newco nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or result in a breach of any provision of the
Crompton Articles or Crompton By-Laws or the Newco Certificate or the Newco
By-Laws;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result in the
termination, acceleration or cancellation of, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Crompton or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or other instrument or
obligation to which Crompton or any of its subsidiaries is a party, except for
violations, conflicts or breaches that, individually or in the aggregate, have
not had or could not reasonably be expected to have a Material Adverse Effect
on Crompton;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to Crompton or any of its subsidiaries or their
respective properties or assets, except for violations that, individually or
in the aggregate, have not had or could not reasonably be expected to have a
Material Adverse Effect on Crompton; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Crompton or any of its affiliates with any third
party, or any court, arbitral tribunal, administrative agency or commission or
other governmental or regulatory body, agency, instrumentality or authority (a
"Governmental Authority"), other than (i) authorization of the Merger and the
transactions contemplated hereby by the Crompton Stockholder Approval, (ii)
authorization for inclusion of the shares of Newco Common Stock to be issued
in the Merger and the transactions contemplated hereby on the NYSE, subject to
official notice of issuance, (iii) actions required by
<PAGE>
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"), (iv)
registrations or other actions required under U.S. federal and state
securities laws as are contemplated by this Agreement and (v) the filing of
the applicable articles or certificate of merger with the Secretary of State
of the State of Delaware and the Secretary of the Commonwealth of the
Commonwealth of Massachusetts.
(e) the only vote of holders of any class or series of Crompton Common
Stock or Newco Common Stock not heretofore obtained and necessary to approve
this Agreement, the First Step Merger and the other transactions contemplated
hereby, including the issuance of the Newco Common Stock as part of the
Merger, is the Crompton Stockholders Approval.
4.6 Brokerage and Finder's Fees; Expenses. Except for Crompton's
obligation to each of Goldman, Sachs & Co. ("Goldman Sachs") and Salomon Smith
Barney Inc. ("Salomon Smith Barney") (a copy of the written agreement relating
to each such obligation shall be provided to Witco), Crompton has not incurred
and will not incur, directly or indirectly, any brokerage, finder's,
investment banking or similar fee in connection with the transactions
contemplated by this Agreement. Other than the foregoing obligations to each
of Goldman Sachs and Salomon Smith Barney, Crompton is not aware of any claim
for payment of any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiation of this Agreement or in
connection with the transactions contemplated hereby. A bona fide written
estimate of the aggregate amount of all fees and expenses expected to be paid
by Crompton to all accountants and investment bankers in connection with the
Merger has been provided to Witco on the date hereof.
4.7 Opinion of Financial Advisor. The Board of Directors of Crompton
has received the opinion of Salomon Smith Barney to the effect that, as of the
date of this Agreement, the First Merger Exchange Ratio is fair to Crompton
Stockholders from a financial point of view.
4.8 Employee Benefit Plans. (a) The following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities under
(i) Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971
of the Code, (iv) the continuation coverage requirements of section 601 et
seq. of ERISA and section 4980B of the Code, and (v) corresponding or similar
provisions of foreign laws or regulations, in each case, other than pursuant
to the Crompton Employee Benefit Plans or the Witco Employee Benefit Plans, as
the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a
member of the same "controlled group" as the first entity, trade or business
pursuant to Section 4001(a)(14) of ERISA.
<PAGE>
A "Multiemployer Plan" means any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA.
"Crompton Employee Benefit Plans" means any material employee
benefit plan, program, policy, practices or other arrangement providing
benefits to any current or former employee, officer or director of Crompton or
any of its subsidiaries or any beneficiary or dependent thereof that is
sponsored or maintained by Crompton or any of its subsidiaries or to which
Crompton or any of its subsidiaries contributes or is obligated to contribute,
whether or not written, including, without limitation, any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA, any employee pension
benefit plan within the meaning of Section 3(2) of ERISA (whether or not such
plan is subject to ERISA) and any bonus, incentive, deferred compensation,
vacation, stock purchase, stock option, severance, employment, change of
control or fringe benefit plan, program or agreement.
A "Crompton Foreign Plan" shall refer to each material plan,
program or contract that is subject to or governed by the laws of any
jurisdiction other than the United States, and that would have been treated as
a Crompton Employee Benefit Plan had it been a United States plan, program or
contract.
A "Crompton Plan" means any Crompton Employee Benefit Plan other
than a Multiemployer Plan.
"Withdrawal Liability" means liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan (as
such terms are defined in Part I of Subtitle E of Title IV of ERISA).
(b) Section 4.8 of the Crompton Disclosure Schedule sets forth a true
and complete list of all Crompton Employee Benefit Plans. With respect to each
Crompton Plan, Crompton has made available to Witco a true, correct and
complete copy of: (i) each writing constituting a part of such Crompton Plan,
including, without limitation, all plan documents, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (ii) the most
recent Annual Report (Form 5500 Series) and accompanying schedule, if any;
(iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; and (v) the most recent determination letter
from the Internal Revenue Service (the "IRS"), if any. Crompton shall make
available to Witco within thirty days following the date of this Agreement a
list and copies of the Crompton Foreign Plans, excluding for this purpose
statutorily required benefits.
(c) The IRS has issued a favorable determination letter with respect
to each Crompton Plan and the related trust that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code (a
"Qualified Crompton Plan"), and there are no existing circumstances nor any
events that have occurred that could adversely affect the qualified status of
any Qualified Crompton Plan or the related trust. Each Crompton Plan that is
intended to meet the requirements of Section 501(c)(9) of the Code is
identified in Section 4.8 of the Crompton Disclosure Schedule, and each such
Crompton Plan meets such requirements and provides no disqualified benefits
(as such term is defined in Section 4976(b) of the Code).
<PAGE>
(d) All contributions required to be made to any Crompton Plan by
Applicable Laws or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any
Crompton Plan, for any period through the date hereof, have been timely made
or paid in full and through the Closing Date will be timely made or paid in
full or, to the extent not required to be made or paid on or before the date
hereof or the Closing Date, as applicable, have been or will be fully
reflected on the financial statements. Each Crompton Employee Benefit Plan
that is an employee welfare benefit plan under Section 3(1) of ERISA is either
(i) funded through an insurance company contract and is not a "welfare benefit
fund" within the meaning of Section 419 of the Code or (ii) unfunded.
(e) With respect to each Crompton Employee Benefit Plan, Crompton and
its subsidiaries have complied, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws and regulations
applicable to the Crompton Employee Benefits Plans, and each Crompton Employee
Benefit Plan has been administered in all material respects in accordance with
its terms. There is not now, and there are no existing, circumstances that
could give rise to, any requirement for the posting of security with respect
to a Crompton Plan or the imposition of any lien on the assets of Crompton or
any of its subsidiaries under ERISA or the Code. No prohibited transaction has
occurred with respect to any Crompton Plan from which exemption is
unavailable. Neither Crompton, its subsidiaries nor any of their ERISA
Affiliates has engaged in a transaction in connection with which Crompton, its
subsidiaries or any of their ERISA Affiliates reasonably could be subject to
either a material civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code.
(f) With respect to each Crompton Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived; (ii) the fair market
value of the assets of such Crompton Plan equals or exceeds the actuarial
present value of all accrued benefits under such Crompton Plan (whether or not
vested), based upon the actuarial assumptions used to prepare the most recent
actuarial report for such Crompton Plan; (iii) no reportable event within the
meaning of Section 4043(c) of ERISA for which the 30-day notice requirement
has not been waived has occurred, and the consummation of the transactions
contemplated by this agreement will not result in the occurrence of any such
reportable event; (iv) all premiums to the Pension Benefit Guaranty
Corporation (the "PBGC") have been timely paid in full; (v) no liability
(other than for premiums to the PBGC) under Title IV of ERISA has been or is
expected to be incurred by Crompton; and (vi) the PBGC has not instituted
proceedings to terminate any such Crompton Plan and, to Crompton's knowledge,
no condition exists that presents a risk that such proceedings will be
instituted or that would constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any such
Crompton Plan.
(g) No Crompton Employee Benefit Plan is a Multiemployer Plan or a
plan that has two or more contributing sponsors at least two of whom are not
under common control, within the meaning of Section 4063 of ERISA (a "Multiple
Employer Plan"). None of Crompton and its subsidiaries nor any of their
respective ERISA Affiliates has, at any time during the last six
<PAGE>
years, contributed to or been obligated to contribute to any Multiemployer
Plan or Multiple Employer Plan. None of Crompton and its subsidiaries nor any
of their ERISA Affiliates has incurred any Withdrawal Liability that has not
been satisfied in full.
(h) There does not now exist, and there are no existing, circumstances
that could result in, any Controlled Group Liability that would be a liability
of Crompton or any of its subsidiaries following the Closing. Without limiting
the generality of the foregoing, neither Crompton nor any of its subsidiaries
nor any of their respective ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 or 4212 of ERISA.
(i) Except as disclosed in the Crompton Filed SEC Documents, and
except for health continuation coverage as required by Section 4980B of the
Code or Part 6 of Title I of ERISA, neither Crompton nor any of its
subsidiaries has any liability for life, health, medical or other welfare
benefits to former employees or beneficiaries or dependents thereof.
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (either alone or in
conjunction with any other event) will result in, cause the accelerated
vesting or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of Crompton or any of its
subsidiaries. Without limiting the generality of the foregoing, no amount paid
or payable by Crompton or any of its subsidiaries in connection with the
transactions contemplated hereby either solely as a result thereof or as a
result of such transactions in conjunction with any other events will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(k) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted against the Crompton Plans, any fiduciaries thereof
with respect to their duties to the Crompton Plans or the assets of any of the
trusts under any of the Crompton Plans that could reasonably be expected to
result in any material liability of Crompton or any of its subsidiaries to the
PBGC, the U.S. Department of Treasury, the U.S. Department of Labor, any
Crompton Plan or any Multiemployer Plan.
(l) With respect to each Crompton Foreign Plan, Crompton and its
subsidiaries have complied, and are now in compliance, in all material
respects, with applicable local laws and regulations, and all amounts required
to be reserved on account of each Crompton Foreign Plan have been so reserved
in accordance with reasonable accounting practices prevailing in the country
where such Crompton Foreign Plan is established.
4.9 Crompton SEC Documents. Each of Crompton and its subsidiaries has
timely filed with the Commission all forms, reports, schedules, statements,
exhibits and other documents required to be filed by it since January 1, 1997
under the Securities Exchange Act of 1934, as amended (together with the rules
and regulations promulgated thereunder, the "Exchange Act"), or the Securities
Act of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act") (such documents, as supplemented and amended
since the time of filing, collectively, the "Crompton SEC Documents"). The
Crompton SEC Documents, including, without limitation, any financial
statements or schedules included therein, at
<PAGE>
the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did 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 light of the circumstances under
which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be. The financial statements of Crompton
included in the Crompton SEC Documents at the time filed (and, in the case of
registration statements and proxy statements, on the date of effectiveness and
the date of mailing, respectively) complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto, or, in the case of unaudited statements, as permitted by
Form 10-Q of the Commission), and fairly present (subject in the case of
unaudited statements to normal, recurring and year-end audit adjustments) in
all material respects the consolidated financial position of Crompton and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended.
4.10 Taxes. Except as set forth in the Crompton Filed SEC Documents,
(a) Crompton has duly filed all U.S. federal and material state and local and
foreign income, franchise, excise, real and personal property and other tax
returns and reports (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by
Crompton, (b) all of the foregoing returns and reports are complete and
correct in all material respects, and Crompton has timely paid all taxes shown
as due on such returns or reports, (c) Crompton has paid or made adequate
provision (in accordance with GAAP) in the financial statements of Crompton
included in the Crompton SEC Documents for all taxes payable in respect of all
periods ending on or prior to December 26, 1998, (d) neither Crompton nor any
of its subsidiaries has requested any extension of time within which to file
any returns in respect of any year that have not since been filed, (e) no
deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed, in each case, in writing, by any taxing
authority, against Crompton or any of its subsidiaries for which there are not
adequate reserves (in accordance with GAAP), (f) as of the date of this
Agreement, there are no pending requests for waivers of the time to assess any
such tax, other than those made in the ordinary course and for which payment
has been made or there are adequate reserves (in accordance with GAAP), (g)
the U.S. federal income tax returns of Crompton and its subsidiaries have been
audited by the IRS through the fiscal year ending December 31, 1995, and (h)
Crompton has not filed an election under Section 341(f) of the Code to be
treated as a consenting corporation. Crompton is not aware of any fact or
circumstance that would prevent the First Step Merger or the Second Step
Merger from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code. The term "tax" shall include all U.S. federal, state and
local and foreign taxes, including interest and penalties thereon and
additions thereto.
4.11 Registration Statement. None of the information provided by
Crompton, Newco or any of their subsidiaries for inclusion in the registration
statement on Form S-4 to be filed with the Commission by Crompton under the
Securities Act, including the prospectus relating to
<PAGE>
shares of Newco Common Stock to be issued in the Merger and the joint proxy
statement and form of proxies relating to the vote of Witco Stockholders with
respect to the Merger and the vote of Crompton Stockholders with respect to
the Merger (collectively and as amended, supplemented or modified, the "Joint
Proxy Statement") contained therein (such registration statement as amended,
supplemented or modified, the "Registration Statement"), at the time of the
Registration Statement becomes effective or, in the case of the Joint Proxy
Statement, at the date of mailing, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Each of the
Registration Statement and the Joint Proxy Statement, except for such portions
thereof that relate only to Witco and its subsidiaries, will comply as to form
in all material respects with the provisions of the Securities Act and the
Exchange Act.
4.12 Compliance with Law. Each of Crompton and its subsidiaries is in
compliance with, and at all times since December 31, 1995 has been in
compliance with, all Applicable Laws relating to it or its business or
properties except for instances of noncompliance that, individually or in the
aggregate, have not had or could not reasonably be expected to have a Material
Adverse Effect on Crompton. This Section 4.12 does not relate to matters with
respect to (x) employee benefits, to the extent the subject of Section 4.8,
(y) taxes, to the extent the subject of Section 4.10 or (z) the environmental
matters, to the extent the subject of Section 4.19.
4.13 Litigation. Except as set forth in the Crompton Filed SEC
Documents, there is no suit, claim, action, proceeding or investigation (an
"Action") pending or, to the knowledge of Crompton, threatened against
Crompton or any of its subsidiaries that, individually or in the aggregate,
have had or could reasonably be expected to have a Material Adverse Effect on
Crompton. Neither Crompton nor any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree that, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect on Crompton.
4.14 No Material Adverse Change. Except as set forth in the Crompton
SEC Documents filed with the Securities and Exchange Commission (the
"Commission") and publicly available prior to the date of this Agreement (the
"Crompton Filed SEC Documents"), since December 31, 1998, each of Crompton and
its subsidiaries has conducted its business in the ordinary course, consistent
with past practice, and there has been no (a) event, change, effect or
development that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect on Crompton, (b)
declaration, setting aside or payment of any dividend or other distribution
with respect to its capital stock, except as otherwise permitted by Section
6.2(b), or (c) material change in its accounting principles, practices or
methods.
4.15 Board Meeting. The Board of Directors of Crompton, at a meeting
duly called and held, has by the required vote of the directors then in office
(a) approved and determined that this Agreement and the transactions
contemplated hereby, including the Merger, taken together, are fair to and in
the best interests of Crompton and the Crompton Stockholders and (b)
recommended that Crompton Stockholders adopt this Agreement and declared that
this Agreement is advisable.
<PAGE>
4.16 Undisclosed Liabilities. Except (a) as and to the extent
disclosed or reserved against on the consolidated balance sheet of Crompton as
of December 31, 1998 or the notes thereto included in the Crompton Filed SEC
Documents or otherwise disclosed in the Crompton Filed SEC Documents, (b) as
incurred after the date thereof in the ordinary course of business consistent
with prior practice and not prohibited by this Agreement or (c) for
liabilities or obligations that, individually or in the aggregate, have not
had or could not reasonably be expected to have a Material Adverse Effect on
Crompton, neither Crompton nor any of its subsidiaries have any liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due.
4.17 Labor Relations. There is no unfair labor practice complaint
against Crompton or any of its subsidiaries pending before the National Labor
Relations Board (the "NLRB"), and there is no labor strike, dispute, slowdown
or stoppage, or any union organizing campaign, actually pending or, to the
knowledge of Crompton, threatened against or involving Crompton or any of its
subsidiaries. Except as disclosed in the Crompton Filed SEC Documents, neither
Crompton nor any of its subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. To the knowledge of Crompton, there
are no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of
Crompton or any of its subsidiaries.
4.18 Permits; Compliance. Each of Crompton and its subsidiaries is in
possession of, and in compliance with, all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders (collectively, "Permits") necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except for any such Permits the failure of which to possess,
individually or in the aggregate, have not had or could not reasonably be
expected to have a Material Adverse Effect on Crompton.
4.19 Environmental Matters. (a) The term "Environmental Laws" means
all U.S. federal, state or local or foreign Applicable Laws relating to
pollution or protection of human health or the environment, preservation or
reclamation of natural resources (including ambient air, surface water,
groundwater, land surface or subsurface strata ("Environment")), including
laws relating to emissions, discharges, Releases or threatened Releases of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of, or
exposure to, Hazardous Materials, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments, licenses, notices
or notice letters, orders, Permits, plans or regulations issued, entered,
promulgated or approved thereunder. "Release" means any release, spill,
emission, leak, dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into, under or through the Environment or
within any building, structure, facility or fixture.
(b) Except as set forth in the Crompton Filed SEC Documents, there
are, with respect to Crompton, its subsidiaries or any predecessor entities,
divisions or any formerly owned, leased
<PAGE>
or operated properties or assets of the foregoing, no past or present
violations of Environmental Laws, Releases of any material into the
Environment, actions, omissions, activities (including off-site disposal or
arranging for disposal of Hazardous Materials), circumstances, conditions,
events, incidents or contractual obligations that may give rise to any common
law environmental liability or any liability under any Environmental Law,
other than those that, individually or in, the aggregate, have not had or
could not reasonably be expected to have a Material Adverse Effect on Crompton
and none of Crompton and its subsidiaries has received any notice with respect
to any of the foregoing, nor is any Action pending or threatened in connection
with any of the foregoing.
(c) Except as set forth in the Crompton Filed SEC Documents, no
Hazardous Materials are contained on or about any real property currently
owned, leased or used by Crompton or any of its subsidiaries, and no Hazardous
Materials were released on or about any real property previously owned, leased
or used by Crompton or any of its subsidiaries during the period the property
was so owned, leased or used, except in the normal course of Crompton's
business, except for such Hazardous Materials contained or released that,
individually or in the aggregate, have not had and could not reasonably be
expected to have, a Material Adverse Effect on Crompton.
(d) Neither Crompton nor any of its subsidiaries has assumed, whether
by contract or operation of Applicable Law, any liabilities under
Environmental Law that, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect on Crompton.
(e) Except as set forth in the Crompton Filed SEC Documents, with
respect to Crompton and its subsidiaries (i) no changes in the terms or
conditions of any Permits are required under Environmental Law either prior to
or upon their renewal, and no modification, revocation, reissuance,
alteration, transfer, or amendment of such Permits, or any review by, or
approval of, any Governmental Authority of such Environmental Permits is
required in connection with the execution or delivery of this Agreement, the
consummation of the transactions contemplated hereby or the continuation of
business of Crompton or its subsidiaries following such consummation except
for any such matters that, individually or in the aggregate, have not had or
could not reasonably be expected to have a Material Adverse Effect on
Crompton, and (ii) neither Crompton nor any of its subsidiaries knows of or
reasonably anticipates any costs of any pollution control equipment or any
other compliance expenditures under Environmental Law in excess of those
currently budgeted, except for any excess costs that, individually or in the
aggregate, have not had or could not reasonably be expected to have a Material
Adverse Effect on Crompton.
4.20 Witco Stock Ownership. Neither Crompton nor any of its
subsidiaries owns any shares of Witco Common Stock or other securities
convertible into Witco Common Stock.
4.21 Contracts. None of Crompton or any of its subsidiaries, or, to
the knowledge of Crompton, any other party thereto, is in violation of or in
default in respect of, nor has there occurred an event or condition that with
the passage of time or giving of notice (or both) would constitute a default
by Crompton under, any contract, agreement, guarantee, lease or executory
<PAGE>
commitment (each a "Contract") to which it is a party, except such violations
or defaults under such Contracts that, individually or in the aggregate, have
not had or could not reasonably be expected to have a Material Adverse Effect
on Crompton.
4.22 State Takeover Laws. Prior to the date hereof, the Board of
Directors of Crompton has taken all action necessary to exempt under or make
not subject to any state takeover law or state law that Crompton is aware of
that limits or restricts business combinations or the ability to acquire or
vote shares: (a) the execution of this Agreement, (b) the Merger and (c) the
transactions contemplated hereby.
4.23 Crompton Rights Agreement. Crompton has taken or will take all
action necessary, if any, in respect of the Crompton Rights Agreement so as to
provide that none of Witco and its affiliates will become an "Acquiring
Person" and that no "Shares Acquisition Date" or "Distribution Date" (as such
terms are defined in the Crompton Rights Agreement) will occur as a result of
the execution of this Agreement or the consummation of the Merger pursuant to
this Agreement.
4.24 Year 2000. To the knowledge of Crompton, the software,
operations, systems and processes (collectively, "Systems") (including, to the
knowledge of Crompton, Systems obtained from third parties) that, in whole or
in part, are used, operated, relied upon, or integral to, Crompton's or any of
its subsidiaries, conduct of their business, are Year 2000 Compliant, except
as disclosed in the Crompton Filed SEC Reports. Crompton has plans that are
adequate to ensure that its Systems are Year 2000 Compliant and has a
reasonable belief that those plans will be fully implemented not later than
December 1, 1999. "Year 2000 Compliant" means the ability to process
(including calculate, compare, sequence, display or store), transmit or
receive data or data/time data from, into and between the 20th and 21st
centuries, and the years 1999 and 2000, and leap year calculations without
error or malfunction.
4.25 Intellectual Property. Except as disclosed in the Crompton Filed
SEC Reports: (a) Crompton and each of its subsidiaries owns, is licensed or
otherwise has the right to use, all Intellectual Property that is material to
the conduct of the business of Crompton and its subsidiaries, taken as a
whole; (b) no person is challenging, infringing on or otherwise violating any
right of Crompton or any of its subsidiaries with respect to any Intellectual
Property owned by and/or licensed to Crompton or its subsidiaries, except for
such items that, individually or in the aggregate, have not had or could
reasonably be expected to have a Material Adverse Effect on Crompton; and (c)
neither Crompton nor any of its subsidiaries has received any written notice
of any pending claim with respect to any Intellectual Property used by
Crompton and its subsidiaries, and, to its knowledge, no Intellectual Property
used by Crompton and its subsidiaries and to its knowledge no Intellectual
Property owned and/or licensed by Crompton or its subsidiaries is being used
or enforced in a manner that would result in the abandonment, cancellation or
unenforceability of such Intellectual Property, except for such items that,
individually or in the aggregate, have not had or could reasonably be expected
to have a Material Adverse Effect on Crompton. "Intellectual Property" shall
mean trademarks, service marks, brand names, certification marks, trade dress
and other indications of origin, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and application in any jurisdiction
to register, the fore-
<PAGE>
going, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, application for patents
(including, without limitation, divisions, continuations, continuations in
part and renewal applications), and any renewals, extension or reissues
thereof, in any jurisdiction; nonpublic information, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any person, proprietary writings and other works,
whether copyrightable or not, in any jurisdiction; registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extension thereof; any similar intellectual property or
proprietary rights; and any claims or causes of action arising our of or
relating to any infringement or misappropriation of any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WITCO
Except as disclosed in a section of the Witco disclosure
schedule delivered to Crompton concurrently herewith (the "Witco Disclosure
Schedule") reasonably related to the applicable representation and warranty
being qualified, Witco hereby represents and warrants to Crompton and Newco as
follows:
5.1 Organization and Standing. Each of Witco and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation with full power and authority (corporate
and other) to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each of
Witco and its subsidiaries is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction have not had or could not be reasonably expected to have a
Material Adverse Effect on Witco. Neither Witco nor any of its subsidiaries is
in default in the performance, observance or fulfillment of any provision of,
in the case of Witco, its Restated Certificate of Incorporation, as amended
(the "Witco Certificate"), or By-Laws, as amended and restated (the "Witco
By-Laws"), or, in the case of any subsidiary of Witco, its certificate of
incorporation, by-laws or other organizational documents.
5.2 Subsidiaries. As of the date hereof, other than immaterial
interests, Witco does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise. Section 5.2 of the Witco Disclosure Schedule sets forth
as to each subsidiary of Witco: (a) its name and jurisdiction of incorporation
or organization and (b) the percentage of securities owned directly or
indirectly by Witco. Witco owns, directly or indirectly, each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such subsidiary) of each of
Witco's subsidiaries. Each of the outstanding shares of capital stock of each
of Witco's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by Witco free
<PAGE>
and clear of all liens, pledges, security interests, claims or other
encumbrances, other than liens imposed by law that could not reasonably be
expected to have, in the aggregate, a Material Adverse Effect on Witco. There
are no outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any subsidiary of Witco,
nor are there outstanding any securities that are convertible into or
exchangeable for any shares of capital stock of any subsidiary of Witco; and
no subsidiary of Witco has any obligation of any kind to issue any additional
securities or to pay for securities of any subsidiary of Witco or any
predecessor thereof.
5.3 Corporate Power and Authority. Witco has all requisite corporate
power and authority to enter into this Agreement and, subject to authorization
of the Merger and the transactions contemplated hereby by the holders of Witco
Common Stock ("Witco Stockholders"), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Witco, subject to
authorization of the Merger and the transactions contemplated hereby by Witco
Stockholders. This Agreement has been duly executed and delivered by Witco and
constitutes the legal, valid and binding obligation of Witco enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
5.4 Capitalization of Witco. As of the date hereof, Witco's authorized
capital stock consisted solely of (a) 100,000,000 shares of Witco Common
Stock, of which (i) 57,644,017 shares were issued and outstanding, (ii) 17,615
shares were issued and held in treasury (which does not include the shares
reserved for issuance set forth in clause (a)(iii) below) and (iii) 10,400,000
shares were reserved for issuance upon the exercise or conversion of
outstanding options, warrants, restricted stock awards or convertible
securities other than purchase rights granted or issued by Witco, (b)
8,300,000 shares of series preferred stock, without par value ("Series
Preferred Stock"), of which no shares were issued and outstanding, (c) 14,386
shares of $2.65 Cumulative Convertible Preferred Stock, $1.00 par value per
share (the "$2.65 Cumulative Convertible Preferred," and, with the Series
Preferred Stock, "Witco Preferred Stock"), of which 5,892 were issued and
outstanding, and (d) 3,000 shares designated as "Series A Participating
Cumulative Preferred Stock," none of which was issued and outstanding. Except
as set forth above and except for the shares of Witco Common Stock reserved
for issuance upon the exercise of the option granted to Witco pursuant to the
Witco Stock Option Agreement, as of the date hereof, no shares of capital
stock or other voting securities of Witco were issued, reserved for issuance
or outstanding. Each outstanding share of Witco capital stock is duly
authorized and validly issued, fully paid and nonassessable, and has not been
issued in violation of any preemptive or similar rights. As of the date
hereof, other than as set forth above or in the Witco Filed SEC Documents,
there are no outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, claims or other commitments or rights of any type
relating to the issuance, sale or transfer by Witco of any securities of
Witco, nor are there outstanding any securities that are convertible into or
exchangeable for any shares of capital stock of Witco; and Witco has no
obligation of any kind to issue any additional securities or to pay for
securities of Witco or
<PAGE>
any predecessor. Witco has no outstanding bonds, debentures, notes or other
similar obligations the holders which have the right to vote generally with
Witco Stockholders.
5.5 Conflicts; Consents and Approvals. Neither the execution and
delivery of this Agreement by Witco, nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of the Witco
Certificate or the Witco By-Laws;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a default under, or result in the
termination, acceleration or cancellation of, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Witco or any of its subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or obligation to
which Witco or any of its subsidiaries is a party, except for violations,
conflicts or breaches that, individually or in the aggregate, have not had or
could not reasonably be expected to have a Material Adverse Effect on Witco;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Witco or any of its subsidiaries or any of their
respective properties or assets, except for violations that, individually or
in the aggregate, have not had or could not reasonably be expected to have a
Material Adverse Effect on Witco; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Witco or any of its affiliates with any third party
or any Governmental Authority, other than (i) the Witco Stockholders Approval,
(ii) actions required by the HSR Act, (iii) registrations or other actions
required under U.S. federal and state securities laws as are contemplated by
this Agreement and (iv) the filing of the certificate of merger with the
Secretary of State of the State of Delaware.
(e) The only vote of holders of any class or series of Witco capital
stock necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby, is the Witco Stockholders Approval.
5.6 Brokerage and Finder's Fees; Expenses. Except for Witco's
obligations to Goldman Sachs and Deutsche Bank Securities ("Deutsche Bank")
(copies of the written agreements relating to such obligations having
previously been provided to Crompton), Witco has not incurred and will not
incur, directly or indirectly, any brokerage, finder's, investment banking or
similar fee in connection with the transactions contemplated by this
Agreement. Other than the foregoing obligations to each of Goldman Sachs and
Deutsche Bank, Witco is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiation of this Agreement or in connection with the transactions
contemplated hereby. A bona fide written estimate of the aggregate amount of
all fees and expenses
<PAGE>
expected to be paid by Witco to all accountants and investment bankers in
connection with the Merger has been provided to Crompton on the date hereof.
5.7 Opinion of Financial Advisor. Witco has received the opinions of
Goldman Sachs and Deutsche Bank to the effect that, as of the date hereof, the
Exchange Ratio is fair to the holders of Witco Common Stock from a financial
point of view.
5.8 Employee Benefit Plans. (a) The following terms have the
definitions given below:
"Witco Employee Benefit Plans" means any material employee benefit
plan, program, policy, practices or other arrangement providing benefits to
any current or former employee, officer or director of Witco or any of its
subsidiaries or any beneficiary or dependent thereof that is sponsored or
maintained by Witco or any of its subsidiaries or to which Witco or any of its
subsidiaries contributes or is obligated to contribute, whether or not
written, including, without limitation, any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, any employee pension benefit plan
within the meaning of Section 3(2) of ERISA (whether or not such plan is
subject to ERISA) and any bonus, incentive, deferred compensation, vacation,
stock purchase, stock option, severance, employment, change of control or
fringe benefit plan, program or agreement.
A "Witco Foreign Plan" shall refer to each material plan, program
or contract that is subject to or governed by the laws of any jurisdiction
other than the United States, and that would have been treated as a Witco
Employee Benefit Plan had it been a United States plan, program or contract.
A "Witco Plan" means any Witco Employee Benefit Plan other than a
Multiemployer Plan.
(b) Section 5.8 of the Witco Disclosure Schedule sets forth a true and
complete list of all Witco Employee Benefit Plans. With respect to each Witco
Plan, Witco has made available to Crompton a true, correct and complete copy
of: (i) each writing constituting a part of such Witco Plan, including,
without limitation, all plan documents, benefit schedules, trust agreements,
and insurance contracts and other funding vehicles; (ii) the most recent
Annual Report (Form 5500 Series) and accompanying schedule, if any; (iii) the
current summary plan description, if any; (iv) the most recent annual
financial report, if any; and (v) the most recent determination letter from
the IRS, if any. Witco shall make available to Crompton within thirty days
following the date of this Agreement a list and copies of the Witco Foreign
Plans, excluding for this purpose statutorily required benefits.
(c) The IRS has issued a favorable determination letter with respect
to each Witco Plan and the related trust that is intended to be a "qualified
plan" within the meaning of Section 401(a) of the Code (a "Qualified Witco
Plan"), and there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of any Qualified
Witco Plan or the related trust. Each Witco Plan that is intended to meet the
requirements of Section 501(c)(9) of the Code is identified in Section 5.8 of
the Witco Disclosure Schedule, and each such Witco
<PAGE>
Plan meets such requirements and provides no "disqualified benefits" (as
defined in Section 4976(b) of the Code).
(d) All contributions required to be made to any Witco Plan by
Applicable Laws or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any
Witco Plan, for any period through the date hereof, have been timely made or
paid in full and through the Closing Date will be timely made or paid in full
or, to the extent not required to be made or paid on or before the date hereof
or the Closing Date, as applicable, have been or will be fully reflected on
the financial statements. Each Witco Employee Benefit Plan that is an employee
welfare benefit plan under Section 3(1) of ERISA is either (i) funded through
an insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code or (ii) unfunded.
(e) With respect to each Witco Employee Benefit Plan, Witco and its
subsidiaries have complied, and are now in compliance, in all material
respects, with all provisions of ERISA, the Code and all laws and regulations
applicable to the Witco Employee Benefits Plans and each Witco Employee
Benefit Plan has been administered in all material respects in accordance with
its terms. There is not now, and there are no existing, circumstances that
could give rise to, any requirement for the posting of security with respect
to a Witco Plan or the imposition of any lien on the assets of Witco or any of
its subsidiaries under ERISA or the Code. No prohibited transaction has
occurred with respect to any Witco Plan from which exemption is unavailable.
Neither Witco, its subsidiaries nor any of their ERISA Affiliates has engaged
in a transaction in connection with which Witco, its subsidiaries or any of
their ERISA Affiliates reasonably could be subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code.
(f) With respect to each Witco Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived; (ii) the fair market
value of the assets of such Witco Plan equals or exceeds the actuarial present
value of all accrued benefits under such Witco Plan (whether or not vested),
based upon the actuarial assumptions used to prepare the most recent actuarial
report for such Witco Plan; (iii) no reportable event within the meaning of
Section 4043(c) of ERISA for which the 30-day notice requirement has not been
waived has occurred, and the consummation of the transactions contemplated by
this agreement will not result in the occurrence of any such reportable event;
(iv) all premiums to the PBGC have been timely paid in full; (v) no liability
(other than for premiums to the PBGC) under Title IV of ERISA has been or is
expected to be incurred by Witco; and (vi) the PBGC has not instituted
proceedings to terminate any such Witco Plan and, to Witco's knowledge, no
condition exists that presents a risk that such proceedings will be instituted
or which would constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such Witco
Plan.
(g) No Witco Employee Benefit Plan is a Multiemployer Plan or Multiple
Employer Plan. None of Witco and its subsidiaries nor any of their respective
ERISA Affiliates has, at any time during the last six years, contributed to or
been obligated to contribute to any Multiem-
<PAGE>
ployer Plan or Multiple Employer Plan. None of Witco and its subsidiaries nor
any of their ERISA Affiliates has incurred any Withdrawal Liability that has
not been satisfied in full.
(h) There does not now exist, and there are no existing, circumstances
that could result in, any Controlled Group Liability that would be a liability
of Witco or any of its subsidiaries following the Closing. Without limiting
the generality of the foregoing, neither Witco nor any of its subsidiaries nor
any of their respective ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 or 4212 of ERISA.
(i) Except as disclosed in the Witco Filed SEC Documents, and, except
for health continuation coverage as required by Section 4980B of the Code or
Part 6 of Title I of ERISA, neither Witco nor any of its subsidiaries has any
liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof.
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (either alone or in
conjunction with any other event) will result in, cause the accelerated
vesting or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of Witco or any of its
subsidiaries. Without limiting the generality of the foregoing, no amount paid
or payable by Witco or any of its subsidiaries in connection with the
transactions contemplated hereby either solely as a result thereof or as a
result of such transactions in conjunction with any other events will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(k) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations that have been
asserted or instituted against the Witco Plans, any fiduciaries thereof with
respect to their duties to the Witco Plans or the assets of any of the trusts
under any of the Witco Plans that could reasonably be expected to result in
any material liability of Witco or any of its subsidiaries to the PBGC, the
U.S. Department of Treasury, the U.S. Department of Labor, any Witco Plan or
any Multiemployer Plan.
(l) With respect to each Witco Foreign Plan, Witco and its
subsidiaries have complied, and are now in compliance, in all material
respects, with applicable local laws and regulations, and all amounts required
to be reserved on account of each Witco Foreign Plan have been so reserved in
accordance with reasonable accounting practices prevailing in the country
where such Witco Foreign Plan is established.
5.9 Witco SEC Documents. Each of Witco and its subsidiaries has timely
filed with the Commission all forms, reports, schedules, statements, exhibits
and other documents required to be filed by it since January 1, 1997 under the
Exchange Act or the Securities Act (such documents, as supplemented and
amended since the time of filing, collectively, the "Witco SEC Documents").
The Witco SEC Documents, including, without limitation, any financial
statements or schedules included therein, at the time filed (and, in the case
of registration statements and proxy statements, on the dates of effectiveness
and the dates of mailing, respectively) (a) did 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 light
of the circumstances under which they were made, not misleading, and (b)
complied in all material respects with the
<PAGE>
applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The financial statements of Witco included in the Witco SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the date of effectiveness and the date of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q of the Commission), and fairly present (subject in the case of
unaudited statements to normal, recurring and year-end audit adjustments) in
all material respects the consolidated financial position of Witco and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended.
5.10 Taxes. Except as set forth in the Witco Filed SEC Documents, (a)
Witco has duly filed all U.S. federal and material state and local and foreign
income, franchise, excise, real and personal property and other tax returns
and reports (including, but not limited to, those filed on a consolidated,
combined or unitary basis) required to have been filed by Witco, (b) all of
the foregoing returns and reports are complete and correct in all material
respects, and Witco has timely paid all taxes shown as due on such returns or
reports, (c) Witco has paid or made adequate provision (in accordance with
GAAP) in the financial statements of Witco included in the Witco SEC Documents
for all taxes payable in respect of all periods ending on or prior to December
26, 1998, (d) neither Witco nor any of its subsidiaries has requested any
extension of time within which to file any returns in respect of any year
which have not since been filed, (e) no deficiencies for any tax, assessment
or governmental charge have been proposed, asserted or assessed, in each case
in writing, by any taxing authority, against Witco or any of its subsidiaries
for which there are not adequate reserves (in accordance with GAAP), (f) as of
the date of this Agreement, there are no pending requests for waivers of the
time to assess any such tax, other than those made in the ordinary course and
for which payment has been made or there are adequate reserves (in accordance
with GAAP), (g) the federal income tax returns of Witco and its subsidiaries
have been audited by the IRS through the fiscal year ending December 31, 1995
and (h) Witco has not filed an election under Section 341(f) of the Code to be
treated as a consenting corporation. Witco is not aware of any fact or
circumstance that would prevent the First Step Merger or the Second Step
Merger from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
5.11 Registration Statement. None of the information provided by Witco
or any of its subsidiaries for inclusion in the Registration Statement at the
time it becomes effective or, in the case of the Joint Proxy Statement, at the
date of mailing, will 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 light of the circumstances under which they
were made, not misleading. The Registration Statement and the Joint Proxy
Statement, except for such portions thereof that relate only to Crompton and
its subsidiaries, will each comply as to form in all material respects with
the provisions of the Securities Act and the Exchange Act.
5.12 Compliance with Law. Each of Witco and its subsidiaries is in
compliance with, and at all times since December 31, 1995 has been in
compliance with, all Applicable Laws re-
<PAGE>
lating to it or its business or properties, except for instances of
noncompliance that, individually or in the aggregate, have not had or could
not reasonably be expected to have a Material Adverse Effect on Witco. This
Section 5.12 does not relate to matters with respect to (x) employee benefits,
to the extent the subject of Section 5.8, (y) taxes, to the extent the subject
of Section 5.10 or (z) the environmental matters, to the extent the subject of
Section 5.19.
5.13 Litigation. Except as set forth in the Witco Filed SEC Documents,
there is no Action pending or, to the knowledge of Witco, threatened against
Witco or any of its subsidiaries that, individually or in the aggregate, have
had or could reasonably be expected to have a Material Adverse Effect on
Witco. Neither Witco nor any of its subsidiaries is subject to any outstanding
order, writ, injunction or decree which, individually or in the aggregate,
have had or could reasonably be expected to have a Material Adverse Effect on
Witco.
5.14 No Material Adverse Change. Except as set forth in the Witco SEC
Documents filed with the Commission and publicly available prior to the date
of this Agreement (the "Witco Filed SEC Documents"), since December 31, 1998,
each of Witco and its subsidiaries has conducted its business in the ordinary
course, consistent with past practice, and there has been no (a) event,
change, effect or development that, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect on Witco,
(b) declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock, except as otherwise permitted
by Section 6.2(b) or (c) material change in its accounting principles,
practices or methods.
5.15 Board Meeting. The Board of Directors of Witco, at a meeting duly
called and held, has by the required vote of the directors then in office, (i)
approved and determined that this Agreement and the transactions contemplated
hereby, including the Merger, taken together, are fair to and in the best
interests of Witco and Witco Stockholders and (ii) recommended that Witco
Stockholders adopt this Agreement and declared that this Agreement is
advisable.
5.16 Undisclosed Liabilities. Except (a) as and to the extent
disclosed or reserved against on the balance sheet of Witco as of December 31,
1998 or the notes thereto included in the Witco Filed SEC Documents or
otherwise disclosed in the Witco Filed SEC Documents, (b) as incurred after
the date thereof in the ordinary course of business consistent with prior
practice and not prohibited by this Agreement, or (c) for liabilities or
obligations that, individually or in the aggregate, have not had or could not
reasonably be expected to have a Material Adverse Effect on Witco, neither
Witco nor any of its subsidiaries have any liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent or otherwise
and whether due or to become due.
5.17 Labor Relations. There is no unfair labor practice complaint
against Witco or any of its subsidiaries pending before the NLRB and there is
no labor strike, dispute, slowdown or stoppage, or any union organizing
campaign, actually pending or, to the knowledge of Witco, threatened against
or involving Witco or any of its subsidiaries. Except as disclosed in the
Witco Filed SEC Documents, neither Witco nor any of its subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union
<PAGE>
or labor organization. To the knowledge of Witco, there are no organizational
efforts with respect to the formation of a collective bargaining unit
presently being made or threatened involving employees of Witco or any of its
subsidiaries.
5.18 Permits; Compliance. Each of Witco and its subsidiaries is in
possession, and in compliance with, of all Permits necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except for any such Permits the failure of which to possess,
individually or in the aggregate, have not had or could not reasonably be
expected to have a Material Adverse Effect on Witco.
5.19 Environmental Matters. (a) Except as set forth in the Witco Filed
SEC Documents, there are, with respect to Witco, its subsidiaries or any
predecessor entities, divisions or any formerly owned, leased or operated
properties or assets of the foregoing, no past or present violations of
Environmental Laws, Releases of any material into the Environment, actions,
omissions, activities (including off-site disposal or arranging for disposal
of Hazardous Materials), circumstances, conditions, events, incidents, or
contractual obligations that may give rise to any common law environmental
liability or any liability under any Environmental Law, other than those that,
individually or in the aggregate, have not or could not reasonably be expected
to have a Material Adverse Effect on Witco, and none of Witco and its
subsidiaries has received any notice with respect to any of the foregoing, nor
is any Action pending or threatened in connection with any of the foregoing.
(b) Except as set in the Witco Filed SEC Documents, no Hazardous
Materials are contained on or about any real property currently owned, leased
or used by Witco or any of its subsidiaries and no Hazardous Materials were
released on or about any real property previously owned, leased or used by
Witco or any of its subsidiaries during the period the property was so owned,
leased or used, except in the normal course of Witco's business except for
such Hazardous Materials contained or released that, individually or in the
aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect on Witco.
(c) Neither Witco nor any of its subsidiaries has assumed, whether by
contract or operation of Applicable Law, any liabilities under Environmental
Law that, individually or in the aggregate, have had or could reasonably be
expected to have a Material Adverse Effect on Witco.
(d) Except as set forth in the Witco Filed SEC Documents, with respect
to Witco and its subsidiaries (i) no changes in the terms or conditions of any
Permits are required under Environmental Law either prior to or upon their
renewal, and no modification, revocation, reissuance, alteration, transfer, or
amendment of such Permits, or any review by, or approval of, any Governmental
Authority of such Environmental Permits is required in connection with the
execution or delivery of this Agreement, the consummation of the transactions
contemplated hereby or the continuation of business of Witco or its
subsidiaries following such consummation except for any such matters that,
individually or in the aggregate, have not had or could not reasonably be
expected to have a Material Adverse Effect on Witco, and (ii) neither Witco
nor any of its subsidiaries knows of or reasonably anticipates any costs of
any pollution control equipment or any other compliance expenditures under
Environmental Law in excess of those currently budgeted,
<PAGE>
except for any excess costs that, individually or in the aggregate, have not
had or could not reasonably be expected to have a Material Adverse Effect on
Witco.
5.20 Crompton Stock Ownership. Neither Witco nor any of its
subsidiaries owns any shares of Crompton Common Stock or other securities
convertible into Crompton Common Stock.
5.21 Contracts. None of Witco, any of its subsidiaries, or, to the
knowledge of Witco, any other party thereto, is in violation of or in default
in respect of, nor has there occurred an event or condition that with the
passage of time or giving of notice (or both) would constitute a default by
Witco under, any Contract to which it is a party, except such violations or
defaults under such Contracts that, individually or in the aggregate, have not
had or could not reasonably be expected to have a Material Adverse Effect on
Witco.
5.22 DGCL Section 203 and State Takeover Laws. Prior to the date
hereof, the Board of Directors of Witco has taken all action necessary to
exempt under or make not subject to (a) Section 203 of the DGCL and (b) any
other state takeover law or state law that Witco is aware of that limits or
restricts business combinations or the ability to acquire or vote shares: (i)
the execution of this Agreement, (ii) the Merger and (iii) the transactions
contemplated hereby.
5.23 Witco Rights Agreement. Witco has taken or will take all action
necessary, if any, in respect of the Witco Rights Agreement so as to provide
that none of Crompton and its affiliates will become an "Acquiring Person" and
that no "Distribution Date" (as such terms are defined in the Witco Rights
Agreement) will occur as a result of the execution of this Agreement or the
consummation of the Merger pursuant to this Agreement or the acquisition or
transfer of shares of Witco Common Stock by Crompton.
5.24 Year 2000. To the knowledge of Witco, the Systems (including, to
the knowledge of Witco, Systems obtained from third parties) that, in whole or
in part, are used, operated, relied upon, or integral to, Witco's or any of
its subsidiaries, conduct of their business, are Year 2000 Compliant, except
as disclosed in the Witco Filed SEC Reports. Witco has plans that are adequate
to ensure that its Systems are Year 2000 Compliant and has a reasonable belief
that those plans will be fully implemented not later than December 1, 1999.
5.25 Intellectual Property. Except as disclosed in the Witco Filed SEC
Reports: (a) Witco and each of its subsidiaries owns, is licensed or otherwise
has the right to use, all Intellectual Property that is material to the
conduct of the business of Witco and its subsidiaries, taken as a whole; (b)
no person is challenging, infringing on or otherwise violating any right of
Witco or any of its subsidiaries with respect to any Intellectual Property
owned by and/or licensed to Witco or its subsidiaries, except for such items
that, individually or in the aggregate, have not had or could not reasonably
be expected to have a Material Adverse Effect on Witco; and (c) neither Witco
nor any of its subsidiaries has received any written notice of any pending
claim with respect to any Intellectual Property used by Witco and its
subsidiaries, and, to its knowledge, no Intellectual Property used by Witco
and its subsidiaries and to its knowledge no Intellectual Property owned
and/or licensed by Witco or its subsidiaries is being used or enforced in a
manner that would result in the abandonment, cancellation or unenforceability
of such Intellec-
<PAGE>
tual Property, except for such items that, individually or in the aggregate,
have not had or could not reasonably be expected to have a Material Adverse
Effect on Witco.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Businesses prior to the Effective Time. During the
period from the date of this Agreement to the Effective Time, except as
expressly contemplated or permitted by this Agreement (including the Witco
Disclosure Schedule and the Crompton Disclosure Schedule) or the Option
Agreements, each of Crompton and Witco shall, and shall cause each of their
respective subsidiaries to, (a) conduct its business in the usual, regular and
ordinary course consistent with past practice and (b) use reasonable best
efforts to maintain and preserve intact its business organization, employees
and advantageous business relationships and retain the services of its key
officers and key employees and maintain relationships with Governmental
Authorities, customers, suppliers and other third parties to the end that
their goodwill and ongoing business shall not be impaired in any material
respect.
6.2 Forbearances. During the period from the date of this Agreement to
the Effective Time, except as set forth in Section 6 of the Crompton
Disclosure Schedule or Section 6 of the Witco Disclosure Schedule, as the case
may be, and, except as expressly contemplated or permitted by this Agreement
or the Option Agreements, none of Crompton, Newco and Witco shall, and neither
Crompton nor Witco shall permit any of their respective subsidiaries to,
without the prior written consent of Crompton, in the case of actions proposed
to be undertaken by Witco, or of Witco, in the case of actions proposed to be
undertaken by Crompton or Newco:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness of
Witco or any of its wholly owned subsidiaries to Witco or any of its
subsidiaries, on the one hand, or of Crompton or any of its subsidiaries to
Crompton or any of its wholly owned subsidiaries, on the other hand), assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make any
loan or advance;
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other
distribution on, or, directly or indirectly, redeem, purchase
or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for
any shares of its capital stock, except for (w) dividends paid
by any of the subsidiaries of each of Crompton and Witco to
Crompton or Witco or any of their subsidiaries, respectively,
(x) dividends paid in the ordinary course of business
consistent with past practice by any subsidiaries (whether or
not wholly owned) of each of Crompton and Witco, (y) regular
<PAGE>
quarterly cash dividends with respect to Crompton Common Stock
and Witco Common Stock, with usual declaration, record and
payment dates and in accordance with Crompton's and Witco's
past dividend policy, as the case may be (which Crompton and
Witco agree shall be coordinated), and (z), subject to Section
7.3(a), regular cash dividends with respect to the outstanding
$2.65 Convertible Preferred in accordance with the current
terms thereof;
(iii) grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of
its capital stock, other than the issuance of common stock upon
the exercise of options outstanding on the date of this
Agreement or issued in compliance with this Agreement in
accordance with their terms; or
(iv) issue any additional shares of capital stock except pursuant to
(A) the exercise of stock options or warrants outstanding as of
the date hereof and options issued thereafter in compliance
with Section 6.2(b)(iii) and (B) the Option Agreements;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets that are material to any individual, corporation or
other entity other than a subsidiary, other than in the ordinary course of
business consistent with past practice;
(d) except for transactions in the ordinary course of business
consistent with past practice or pursuant to contracts or agreements in force
at the date of this Agreement, make any material investment either by purchase
of stock or securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual, corporation or
other entity other than a wholly owned subsidiary thereof;
(e) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material contract
or agreement, or make any change in any of its material leases or contracts,
other than renewals of contracts and leases without material adverse changes
of terms;
(f) increase in any material manner the compensation or fringe
benefits payable or to become payable to any of its employees or officers,
except for increases in the ordinary course of business consistent with past
practice in salaries or wages to employees who are not officers, or grant or
pay any pension or retirement allowance not required by any existing plan or
agreement to any employees, officers or directors, or become a party to, amend
or commit itself to any collective bargaining, bonus, stock option, restricted
stock, deferred compensation, pension, retirement, profit-sharing or welfare
benefit plan or agreement or employment, termination or severance agreement or
plan with or for the benefit of any employee, officer or director, other than
in the ordinary course of business consistent with past practice with respect
to employees who are not officers or to the extent required by Applicable Laws
or any collective bargaining agreement or contractual obligation existing on
the date hereof, or accelerate the vesting of, or the lapsing of restrictions
with respect to any stock options or other stock-based compensation;
<PAGE>
(g) settle any claim, action or proceeding involving money damages
involving an amount in excess of $2,500,000;
(h) amend its certificate of incorporation or articles of
incorporation, as the case may be, or its by-laws;
(i) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue such that the condition in Section 8.2(a)
or 8.3(a), as the case may be, would not be satisfied or in any of the
conditions to the Merger set forth in Article VIII not being satisfied, or in
a violation of any provision of this Agreement, except, in every case, as may
be required by Applicable Laws;
(j) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP; or
(k) agree to, or make any commitment to, take any of the actions
prohibited by this Section 6.2.
ARTICLE VII
ADDITIONAL AGREEMENTS
Except as set forth in the Crompton Disclosure Schedule or the
Witco Disclosure Schedule, as the case may be, the parties hereto agree as
follows with respect to the period from and after the execution of this
Agreement.
7.1 Mutual Agreements.
(a) General. Each of the parties shall use its reasonable efforts to
take all action and to do all things necessary, proper or advisable to
consummate the Merger and the transactions contemplated by this Agreement
(including, without limitation, using its reasonable best efforts to cause the
conditions set forth in Article VIII for which they are responsible to be
satisfied as soon as reasonably practicable and to prepare, execute and
deliver such further instruments and take or cause to be taken such other and
further action as any other party hereto shall reasonably request).
(b) HSR Act. As soon as practicable, and in any event no later than
twenty (20) business days after the date hereof, each of the parties hereto
will file any Notification and Report Forms and related material required to
be filed by it with the U.S. Federal Trade Commission and the Antitrust
Division of the U.S. Department of Justice under the HSR Act with respect to
the Merger, will use its reasonable best efforts to obtain an early
termination of the applicable waiting period, and shall promptly make any
further filings pursuant thereto that may be necessary, proper or advisable;
provided, however, that neither Crompton nor Witco nor any of their respective
subsidiaries shall be required hereunder to divest or hold separate any
material portion of their business or assets.
<PAGE>
(c) Other Governmental Matters. Each of the parties shall use its
reasonable best efforts to take any additional action that may be necessary,
proper or advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of any Governmental Authority that it
may be required to give, make or obtain.
(d) Tax-Free Treatment. Each of the parties shall use its reasonable
best efforts to cause the Merger to constitute a tax-free "reorganization"
under Section 368(a) of the Code and to permit Wachtell, Lipton, Rosen & Katz
and Cravath, Swaine & Moore to issue their respective opinions provided for in
Section 8.1(f).
(e) Public Announcements. Except as otherwise required by Applicable
Laws or the rules of the NYSE, none of the parties shall, or shall permit any
of its subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of Witco, in the case of a proposed announcement or statement by
Crompton or Newco, or Crompton, in the case of a proposed announcement or
statement by Witco, in each case which consent shall not be unreasonably
withheld or delayed.
(f) Access. From and after the date of this Agreement until the
Effective Time (or the termination of this Agreement), Crompton and Witco
shall permit representatives of the other to have appropriate access at all
reasonable times to the other's premises, properties, books, records,
contracts, tax records, documents, customers and suppliers. Information
obtained by Crompton and Witco pursuant to this Section 7.1(f) shall be
subject to the provisions of the confidentiality agreement between them, dated
May 5, 1999 (the "Confidentiality Agreement"), which Confidentiality Agreement
remains in full force and effect.
7.2 Additional Agreements of Crompton.
(a) Crompton Stockholders Meeting. Crompton shall take all action in
accordance with Applicable Laws and the Crompton Articles and the Crompton
By-Laws necessary to convene a meeting of Crompton Stockholders as promptly as
practicable to consider and vote upon the approval of the Merger, this
Agreement and the transactions contemplated hereby, including the issuance of
the Newco Common Stock as part of the Merger (the "Crompton Stockholders
Approval"). Without limiting the generality of the foregoing, Crompton agrees
that its obligations pursuant to the first sentence of this Section 7.2(a)
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to Crompton of any Crompton Competing Transaction,
(ii) the withdrawal or modification by the Board of Directors of Crompton of
its approval or recommendation of this Agreement and the transactions
contemplated hereby or (iii) any declaration by the Board of Directors of
Crompton that this Agreement and the transactions contemplated hereby are no
longer advisable.
(b) Preparation of Joint Proxy Statement. Crompton shall cooperate
with Witco to, and shall, as soon as is reasonably practicable, prepare and
file the Joint Proxy Statement with the Commission on a confidential basis.
Crompton and Newco shall cooperate with Witco to, and shall, prepare and file
the Registration Statement with the Commission as soon as is reasonably
practicable following clearance of the Joint Proxy Statement by the Commission
and shall coop-
<PAGE>
erate with Witco to, and shall, use all reasonable efforts to have the
Registration Statement declared effective by the Commission as promptly as
practicable and to maintain the effectiveness of the Registration Statement
through the Effective Time. If, at any time prior to the Effective Time any
information pertaining to Crompton contained in or omitted from the
Registration Statement makes such statements contained in the Registration
Statement false or misleading, Crompton shall promptly so inform Witco and
will make statements contained therein not false or misleading. Crompton shall
use all reasonable efforts to mail at the earliest practicable date to
Crompton Stockholders the Joint Proxy Statement, which shall include all
information required under Applicable Laws to be furnished to Crompton
Stockholders in connection with the Merger and the transactions contemplated
thereby. Crompton shall advise Witco promptly after it receives notice of (i)
the Registration Statement being declared effective or any supplement or
amendment thereto being filed with the Commission, (ii) the issuance of any
stop order in respect of the Registration Statement, and (iii) the receipt of
any correspondence, comments or requests from the Commission in respect of the
Registration Statement. Crompton also shall cooperate with Witco to, and
shall, take such other reasonable actions (other than qualifying to do
business in any jurisdiction in which it is not so qualified) required to be
taken under any applicable state securities laws in connection with the
issuance of shares of Newco Common Stock in the Merger.
(c) Indemnification. In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any individual who is now, or has been at
any time prior to the date of this Agreement, or who becomes prior to the
Effective Time, a director or officer or employee of Crompton, Witco, Newco or
any of their respective subsidiaries, including any entity specified in the
Crompton Disclosure Schedule or the Witco Disclosure Schedule (the
"Indemnified Parties"), is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to
(i) the fact that he or she is or was a director, officer or employee of
Crompton, Witco, Newco or any of their respective subsidiaries or any entity
specified in the Crompton Disclosure Schedule or the Witco Disclosure Schedule
or any of their respective predecessors or (ii) this Agreement, the Option
Agreements or any of the transactions contemplated hereby or thereby, whether,
in any case, asserted or arising before or after the Effective Time, the
parties hereto agree to cooperate and use their reasonable best efforts to
defend against and respond thereto. It is understood and agreed that after the
Effective Time, Newco shall indemnify and hold harmless, as and to the fullest
extent permitted by Applicable Law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by law upon receipt of any undertaking required by Applicable
Laws), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit, proceeding or investigation,
and, in the event of any such threatened or actual claim, action, suit,
proceeding or investigation (whether asserted of arising before or after the
Effective Time); and Newco, after consultation with an Indemnified Party,
shall retain counsel and direct the defense thereof, provided, however, that
by virtue of the obligations herein set forth, Newco shall not be liable to
any Indemnified Party for any legal expenses of other counsel or any other
expenses incurred by any Indemnified Party in connection with the defense
thereof, except that if
<PAGE>
Newco fails or elects not to assume such defense or counsel for the
Indemnified Parties reasonably advises the Indemnified Parties that there are
issues that raise conflicts of interest between Newco and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with Newco, and Newco shall pay the reasonable fees
and expenses of such counsel for the Indemnified Parties, (i) Newco shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for
all Indemnified Parties, unless an Indemnified Party shall have reasonably
concluded, based on the advice of counsel and after consultation with Newco,
that in order to be adequately represented, separate counsel is necessary for
such Indemnified Party, in which case, Newco shall be obligated to pay for
such separate counsel, (ii) Newco shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld) and (iii) Newco shall have no obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by Applicable Laws. Any Indemnified Party
wishing to claim Indemnification under this Section 7.2(c), upon learning of
any such claim, action, suit, proceeding or investigation, shall notify Newco
thereof, provided that the failure to so notify shall not affect the
obligations of Newco under this Section 7.2(c) except to the extent such
failure to notify materially prejudices Newco. Newco's obligations under this
Section 7.2(c) continue in full force and effect for a period of six years
from the Effective Time (or the period of the applicable statute of
limitations, if longer); provided, however, that all rights to indemnification
in respect of any claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim.
(d) Directors' and Officers' Insurance. Crompton (and Newco, from and
after the First Effective Time) shall use its reasonable best efforts to cause
the individuals serving as officers and directors of Crompton, Newco or Witco,
their respective subsidiaries or any entity specified in the Crompton
Disclosure Schedule or the Witco Disclosure Schedule immediately prior to the
First Effective Time or Effective Time, as the case may be, to be covered for
a period of six years from the Effective Time (or the period of the applicable
statute of limitations, if longer) by the directors' and officers' liability
insurance policy maintained by Crompton or Witco, as the case may be (provided
that Newco may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are not less advantageous than
such policy) with respect to acts or omissions occurring prior to the
Effective Time that were committed by such officers and directors in their
capacity as such; provided, however, that in no event shall Newco be required
to expend more than 200% of the current amount expended by Crompton or Witco,
as the case may be (the "Insurance Amount") to maintain or procure insurance
coverage pursuant hereto, and provided, further, that, if Newco is unable to
maintain or obtain the insurance called for by this Section 7.2(d), Newco
shall use its best efforts to obtain as much comparable insurance as available
for the Insurance Amount.
(e) Employee Benefits. (i) From and after the Effective Time, the
Crompton Plans and the Witco Plans in effect as of the date of this Agreement
shall remain in effect with respect to employees of Newco or Witco (or their
subsidiaries), respectively, covered by such plans at the Effective Time until
such time as the Combined Company shall, subject to Applicable Laws, the terms
of this Agreement and the terms of such plans, adopt new benefit plans, or
modify or
<PAGE>
consolidate the existing plans, with respect to employees of Newco or Witco
and their subsidiaries, respectively (the "New Benefit Plans"). Crompton and
Witco shall cooperate in reviewing, evaluating and analyzing the Crompton
Plans and the Witco Plans with a view towards developing appropriate New
Benefit Plans for the employees covered thereby subsequent to the Second Step
Merger. It is the intention of Crompton and Witco to develop New Benefit
Plans, as soon as reasonably practicable after the Effective Time, which,
among other things, treat similarly situated employees on a substantially
equivalent basis, taking into account all relevant factors, including, without
limitation, duties, geographic location, tenure, qualifications and abilities
and competitive industry practices. Notwithstanding the foregoing, employees
of the Combined Company and its subsidiaries who are covered under a
collective bargaining agreement shall be provided with benefits as are from
time to time required by such collective bargaining agreement.
(ii) The foregoing notwithstanding, the Combined Company agrees to
honor in accordance with their terms all benefits vested as of the date hereof
under the Crompton Plans or the Witco Plans or under other contracts,
arrangements, commitments, or understandings described in the Crompton
Disclosure Schedule and the Witco Disclosure Schedule.
(iii) Nothing in this Section 7.2(e) shall be interpreted as
preventing the Combined Company from amending, modifying or terminating any of
the Crompton Plans, the Witco Plans, or other contracts, arrangements,
commitments or understandings, in accordance with their terms and Applicable
Laws.
(f) Notification of Certain Matters. Crompton shall give prompt notice
to Witco of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would cause any Crompton or Newco representation or
warranty contained in this Agreement to be untrue or inaccurate at or prior to
the Effective Time such that the condition set forth in Section 8.3(a) would
not be satisfied and (ii) any material failure of Crompton or Newco to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 7.2(f) shall not limit or otherwise affect the
remedies available hereunder to Witco.
(g) No Solicitation. (i) Crompton agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers,
employees, agents or representatives, directly or indirectly, to (A) solicit,
initiate, encourage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal
with respect to any recapitalization, merger, consolidation or other business
combination involving Crompton, or acquisition of any capital stock or any
material portion of the assets (except for acquisition of assets in the
ordinary course of business consistent with past practice, transactions
disclosed in the Crompton Disclosure Schedule and the transactions
contemplated by this Agreement) of Crompton, or any combination of the
foregoing (a "Crompton Competing Transaction") or (B) negotiate, explore or
otherwise engage in discussions with any person (other than Witco or its
directors, officers, employees, agents and representatives) with respect to
any Crompton Competing Transaction. Crompton will immediately cease all
existing activities, discussions and negotiations with any parties conducted
hereto-
<PAGE>
fore with respect to any of the foregoing and shall use its reasonable best
efforts to enforce any confidentiality or similar agreement relating to a
Crompton Competing Transaction. From and after the execution of this
Agreement, Crompton shall immediately advise Witco in writing of the receipt,
directly or indirectly, of any inquiries, discussions, negotiations, or
proposals relating to a Crompton Competing Transaction (including the specific
terms thereof), and promptly furnish to Witco a copy of any such proposal or
inquiry in addition to any information provided to or by any third party
relating thereto. Notwithstanding the foregoing, prior to receipt of the
Crompton Stockholders Approval, Crompton may, but only to the extent required
by the fiduciary obligations of its Board of Directors under Applicable Law,
as determined in good faith and on a reasonable basis by such Board of
Directors and based on the written advice of outside counsel that not to so
act would constitute a violation of such fiduciary obligations, in response to
a publicly disclosed proposal for a Crompton Competing Transaction that
constitutes a Qualifying Crompton Proposal that was not solicited or
encouraged by Crompton or its representatives and that did not otherwise
result from the breach or a deemed breach of this Section 7.2(g), and subject
to compliance with the notification provisions of this Section 7.2(g), for a
10-day period commencing with the first notification to Witco under this
Section 7.2(g) of receipt of such Crompton Competing Transaction, (x) furnish
non-public information with respect to Crompton to the person proposing such
Crompton Competing Transaction and its representatives pursuant to a
confidentiality agreement with terms no less restrictive of such person than
those set forth in the Confidentiality Agreement and (y) participate in
discussions or negotiations with such person and its representatives regarding
such Crompton Competing Transaction.
(ii) Neither the Board of Directors of Crompton nor any committee
thereof shall (A) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Witco, the approval or recommendation by the Board of
Directors of Crompton of this Agreement and the transactions contemplated
hereby, (B) approve, or permit or cause Crompton to enter into, any definitive
agreement providing for the implementation of any Crompton Competing
Transaction (each a "Crompton Acquisition Agreement") or (C) approve or
recommend, or propose to approve or recommend, any Crompton Competing
Transaction. Notwithstanding the foregoing, prior to receipt of the Crompton
Stockholders Approval, and only to the extent required by the fiduciary
obligations of the Crompton Board of Directors under Applicable Law, as
determined in good faith and on a reasonable basis by such Board of Directors
and based on the written advice of outside counsel that not to so act would
constitute a violation of such fiduciary obligations, in response to a
publicly disclosed proposal for a Crompton Competing Transaction that
constitutes a Qualifying Crompton Proposal that was not solicited or
encouraged by Crompton or its representatives and that did not otherwise
result from the breach or a deemed breach of this Section 7.2(g), (I) the
Board of Directors of Crompton may withdraw or modify its approval or
recommendation of the transactions contemplated by this Agreement and, in
connection therewith, approve or recommend such Qualifying Crompton Proposal
and (II) Crompton may enter into a Crompton Acquisition Agreement
contemporaneously with its termination of this Agreement pursuant to Section
9.1(h).
(iii) Nothing contained in this Section 7.2(g) shall prohibit Crompton
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act.
<PAGE>
(iv) For purposes of this Agreement, "Qualifying Crompton Proposal"
means any proposal made by a third party to acquire all of the equity
securities or all or substantially all of the assets of Crompton, pursuant to
a tender offer, a merger, a consolidation, a recapitalization, a sale of its
assets or otherwise, that is (A) for consideration that is substantial (as
reasonably determined by the Board of Directors of Crompton) and is comprised
solely of cash and not subject to financing contingencies, (B) on terms which
a nationally recognized independent investment banking firm has opined in
writing (with only customary qualifications) to be superior from a financial
point of view to the holders of Crompton Common Stock to the transactions
contemplated by this Agreement, taking into account all of the terms and
conditions of such proposal and this Agreement (including the terms of any
proposal by Witco to amend or modify the terms of the transactions
contemplated by this Agreement), and (C) reasonably capable of being completed
within 7 months of the termination of this Agreement, taking into account all
financial, regulatory, legal and other aspects of such proposal.
(h) Listing Application. Crompton shall, as soon as practicable
following the date hereof, prepare and submit to the NYSE a listing
application covering the shares of Newco Common Stock issuable in the Merger,
and shall use its reasonable best efforts to obtain, prior to the Effective
Time, approval for the listing of such shares of Newco Common Stock, subject
to official notice of issuance.
(i) Exemption from Liability Under Section 16(b). Assuming that Witco
delivers to Crompton the Section 16 Information in a timely fashion, the Board
of Directors of Crompton, or a committee of Non-Employee Directors thereof (as
such term is defined for purposes of Rule 16b-3(d) under the Exchange Act),
shall adopt a resolution providing that the receipt by the Witco Insiders of
Newco Common Stock in exchange for shares of Witco Common Stock, and of
options on Newco Common Stock upon conversion of options on Witco Common
Stock, in each case pursuant to the transactions contemplated hereby and to
the extent such securities are listed in the Section 16 Information, are
intended to be exempt from liability pursuant to Section 16(b) under the
Exchange Act. "Section 16 Information" shall mean information accurate in all
respects regarding the Witco Insiders, the number of shares of Witco Common
Stock held by each such Witco Insider and expected to be exchanged for Newco
Common Stock in the Merger, and the number and description of the options on
Witco Common Stock held by each such Witco Insider and expected to be
converted into options on Newco Common Stock in connection with the Merger.
"Witco Insiders" shall mean those officers and directors of Witco who are
subject to the reporting requirements of Section 16(a) of the Exchange Act and
who are listed in the Section 16 Information.
(j) Crompton Rights Agreement. Prior to the earliest of the Effective
Time or any termination of this Agreement pursuant to Article IX, Crompton
agrees that it shall not, without Witco's consent, redeem the Crompton
Stockholder Rights, amend or modify the Crompton Rights Agreement or take any
other action that could result in the Crompton Rights Agreement being deemed
inapplicable to any person other than Witco and Newco.
(k) Takeover Laws; Governance Documents. Crompton shall take no action
that would cause any Crompton Competing Transaction to be exempt from any
requirements im-
<PAGE>
posed by any state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or vote shares, or
any provision of the Crompton Articles or the Crompton By-Laws that has a
similar effect.
(l) Affiliates of Crompton. Crompton shall use its reasonable best
efforts to cause each such person who may be at the Effective Time or was on
the date hereof an "affiliate" of Crompton within the meaning of Rule 145
under the Securities Act, to execute and deliver to Witco no less than 35 days
prior to the date of the meeting of Crompton Stockholders to approve the
Merger written undertakings substantially in the form attached as Exhibit F to
this Agreement.
7.3 Additional Agreements of Witco.
(a) Witco Stockholders Meeting. Witco shall take all action in
accordance with Applicable Laws, the Witco Certificate and the Witco By-Laws,
necessary to convene a meeting of Witco Stockholders and any holders of $2.65
Cumulative Convertible Preferred, voting as a single class, as promptly as
practicable to consider and vote upon the approval of the Merger, this
Agreement and the transactions contemplated hereby (the "Witco Stockholders
Approval"). Without limiting the generality of the foregoing, Witco agrees
that its obligations pursuant to the first sentence of this Section 7.3 (a)
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to Witco of any Witco Competing Transaction, (ii)
the withdrawal or modification by the Board of Directors of Witco of its
approval or recommendation of this Agreement and the transactions contemplated
hereby or (iii) any declaration by the Board of Directors of Witco that this
Agreement and the transactions contemplated hereby are no longer advisable.
(b) Information for the Registration Statement and Preparation of
Joint Proxy Statement. Witco shall as promptly as practicable furnish Crompton
and Newco with all information concerning it as may be required for inclusion
in the Registration Statement. Witco shall cooperate with Crompton in the
preparation of the Registration Statement in a timely fashion and shall use
all reasonable best efforts to have the Registration Statement declared
effective by the Commission as promptly as practicable. If, at any time prior
to the Effective Time, any information pertaining to Witco contained in or
omitted from the Registration Statement makes such statements contained in the
Registration Statement false or misleading, Witco shall promptly so inform
Crompton and provide Crompton with the information necessary to make
statements contained therein not false and misleading. Witco shall use all
reasonable efforts to cooperate with Crompton in the preparation and filing of
the Joint Proxy Statement with the Commission on a confidential basis. Witco
shall use all reasonable efforts to mail at the earliest practicable date to
Witco Stockholders the Joint Proxy Statement, which shall include all
information required under Applicable Laws to be furnished to Witco
Stockholders in connection with the Merger and the transactions contemplated
thereby.
(c) No Solicitation. (i) Witco agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers,
employees, agents or representatives, directly or indirectly, to (A) solicit,
initi-
<PAGE>
ate, encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to
any recapitalization, merger, consolidation or other business combination
involving Witco, or acquisition of any capital stock or any material portion
of the assets (except for acquisition of assets in the ordinary course of
business consistent with past practice, transactions disclosed in the Witco
Disclosure Schedule and the transactions contemplated by this Agreement) of
Witco, or any combination of the foregoing (a "Witco Competing Transaction")
or (B) negotiate, explore or otherwise engage in discussions with any person
(other than Crompton or Newco or their respective directors, officers,
employees, agents and representatives) with respect to any Witco Competing
Transaction. Witco will immediately cease all existing activities, discussions
and negotiations with any parties conducted heretofore with respect to any of
the foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to a Witco Competing
Transaction. From and after the execution of this Agreement, Witco shall
immediately advise Crompton in writing of the receipt, directly or indirectly,
of any inquiries, discussions, negotiations, or proposals relating to a Witco
Competing Transaction (including the specific terms thereof), and promptly
furnish to Crompton a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto.
Notwithstanding the foregoing, prior to receipt of the Witco Stockholders
Approval, Witco may, but only to the extent required by the fiduciary
obligations of its Board of Directors under Applicable Law, as determined in
good faith and on a reasonable basis by such Board of Directors and based on
the written advice of outside counsel that not to so act would constitute a
violation of such fiduciary obligations, in response to a publicly disclosed
proposal for a Witco Competing Transaction that constitutes a Qualifying Witco
Proposal that was not solicited or encouraged by Witco or its representatives
and that did not otherwise result from the breach or a deemed breach of this
Section 7.3(c), and subject to compliance with the notification provisions of
this Section 7.3(c), for a 10-day period commencing with the first
notification to Crompton under this Section 7.3(c) of receipt of such Witco
Competing Transaction, (x) furnish non-public information with respect to
Witco to the person proposing such Witco Competing Transaction and its
representatives pursuant to a confidentiality agreement with terms no less
restrictive of such person than those set forth in the Confidentiality
Agreement and (y) participate in discussions or negotiations with such person
and its representatives regarding such Witco Competing Transaction.
(ii) Neither the Board of Directors of Witco nor any committee thereof
shall (A) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Crompton, the approval or recommendation by the Board of Directors
of Witco of this Agreement and the transactions contemplated hereby, (B)
approve, or permit or cause Witco to enter into, any definitive agreement
providing for the implementation of any Witco Competing Transaction (each a
"Witco Acquisition Agreement") or (C) approve or recommend, or propose to
approve or recommend, any Witco Competing Transaction. Notwithstanding the
foregoing, prior to receipt of the Witco Stockholders Approval, and only to
the extent required by the fiduciary obligations of the Witco Board of
Directors under Applicable Law, as determined in good faith and on a
reasonable basis by such Board of Directors and based on the written advice of
outside counsel that not to so act would constitute a violation of such
fiduciary obligations, in response to a publicly disclosed proposal for a
Witco Competing Transaction that constitutes a Qualifying Witco Proposal that
was not solicited or encouraged by Witco or its representatives and that did
not other-
<PAGE>
wise result from the breach or a deemed breach of this Section 7.3(c), (I) the
Board of Directors of Witco may withdraw or modify its approval or
recommendation of the transactions contemplated by this Agreement and, in
connection therewith, approve or recommend such Qualifying Witco Proposal and
(II) Witco may enter into a Witco Acquisition Agreement contemporaneously with
its termination of this Agreement pursuant to Section 9.1(i).
(iii) Nothing contained in this Section 7.3(c) shall prohibit Witco
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act.
(iv) For purposes of this Agreement, "Qualifying Witco Proposal" means
any proposal made by a third party to acquire all of the equity securities or
all or substantially all of the assets of Witco, pursuant to a tender offer, a
merger, a consolidation, a recapitalization, a sale of its assets or
otherwise, that is (A) for consideration that is substantial (as reasonably
determined by the Board of Directors of Witco) and is comprised solely of cash
and not subject to financing contingencies, (B) on terms which a nationally
recognized independent investment banking firm has opined in writing (with
only customary qualifications) to be superior from a financial point of view
to the holders of Witco Common Stock to the transactions contemplated by this
Agreement, taking into account all of the terms and conditions of such
proposal and this Agreement (including the terms of any proposal by Crompton
to amend or modify the terms of the transactions contemplated by this
Agreement), and (C) reasonably capable of being completed within 7 months of
the termination of this Agreement, taking into account all financial,
regulatory, legal and other aspects of such proposal.
(d) Affiliates of Witco. Witco shall use its reasonable best efforts
to cause each such person who may be at the Effective Time or was on the date
hereof an "affiliate" of Witco, within the meaning of Rule 145 under the
Securities Act, to execute and deliver to Crompton no less than 35 days prior
to the date of the meeting of Witco Stockholders to approve the Merger written
undertakings substantially in the form attached as Exhibit E to this
Agreement.
(e) Witco Preferred Stock. At the request of Crompton, Witco (i) shall
promptly, but in no event later than 10 business days following the date of
such request, give notice of redemption of all of the then, outstanding shares
of $2.65 Cumulative Convertible Preferred to the holders thereof, and (ii)
shall immediately prior to the Effective Time irrevocably deposit in trust,
for the account of such holders, funds sufficient to pay in full the
redemption price in respect of such shares of Witco Preferred Stock, in each
case, in the manner contemplated by and pursuant to the terms and procedures
set forth in the applicable certificate of designation, preferences, rights
and limitations with respect to such $2.65 Cumulative Convertible Preferred as
in effect on the date hereof. To the extent the $2.65 Cumulative Convertible
Preferred are not so redeemed, Crompton shall take all action required to
provide that the $2.65 Cumulative Convertible Preferred shall be convertible
into Newco Common Stock immediately following the Effective Time in accordance
with the terms and procedures set forth in the applicable certificate of
designation.
(f) Witco Rights Agreement. Prior to the earlier of the Effective Time
or any termination of this Agreement pursuant to Article IX, Witco agrees that
it shall not, without Crompton's
<PAGE>
consent, redeem the Witco Stockholder Rights, amend or modify the Witco Rights
Agreement or take any other action that could result in the Witco Rights
Agreement being deemed inapplicable to any person other than Crompton and
Newco.
(g) Takeover Laws; Governance Documents. Witco shall take no action
that would cause any Witco Competing Transaction to be exempt from any
requirements imposed by DGCL Section 203, or any state takeover law or state
law that purports to limit or restrict business combinations or the ability to
acquire or vote shares, or any provision of the Witco Certificate or Witco
By-Laws that has a similar effect.
(h) Notification of Certain Matters. Witco shall give prompt notice to
Crompton of (i) the occurrence or non-occurrence of any event the occurrence
or non-occurrence of which would cause any Witco representation or warranty
contained in this Agreement to be untrue or inaccurate at or prior to the
Effective Time such that the condition set forth in Section 8.2(a) would not
be satisfied and (ii) any material failure of Witco to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 7.3(h) shall not limit or otherwise affect the remedies available
hereunder to Crompton.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Second Step
Merger. The respective obligations of the parties to effect the Second Step
Merger, and of Crompton and Newco to effect the First Step Merger, shall be
subject to the satisfaction at or prior to the Effective Time (and the First
Effective Time, in the case of the consummation of the First Step Merger) of
the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby, including the Second Step Merger and, in the
case of the holders of Crompton Common Stock, the First Step Merger,
(i) shall have been approved and adopted by the respective requisite
affirmative votes of the holders of Witco Common Stock and to the
extent outstanding, the holders of $2.65 Cumulative Convertible
Preferred, voting as a single class with the holders of the Witco
Common Stock, and (ii) the holders of the Crompton Common Stock
entitled to vote thereon.
(b) NYSE Listing. The shares of Newco Common Stock that shall
be issued to the holders of Witco Common Stock upon consummation of
the Merger shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
(c) Other Approvals. All waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or
been terminated, and all other consents, approvals, permits or
authorizations required to be obtained prior to the Effective
<PAGE>
Time from any Governmental Authority, the absence of which would
prohibit the Merger and the consummation of the transactions
contemplated hereby, shall have been obtained.
(d) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the First Step Merger,
the Second Step Merger or any of the other transactions contemplated
by this Agreement shall be in effect.
(f) Federal Tax Opinion. Crompton and Witco shall have received
an opinion of Wachtell, Lipton, Rosen & Katz and Cravath, Swaine &
Moore, respectively, in form and substance reasonably satisfactory
to Crompton and Witco, respectively, in each case, dated the Closing
Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are
consistent with the state of facts existing at the Effective Time,
each of the First Step Merger and the Second Step Merger will
constitute a "reorganization" under Section 368(a) of the Code;
Crompton and Newco will each be a party to the reorganization in
respect of the First Step Merger; and Newco and Witco will each be a
party to the reorganization in respect of the Second Step Merger.
In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of Crompton, Newco,
Witco and others.
8.2 Conditions to Obligations of Crompton and Newco. The obligations
of Crompton and Newco to effect the First Step Merger, and the obligation of
Newco to effect the Second Step Merger, are also subject to the satisfaction,
or waiver by Crompton or Newco, at or prior to the Effective Time, of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Witco set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement
and (except to the extent such representations and warranties speak
as of an earlier date) as of the Closing Date as though made on and
as of the Closing Date, provided, however, that for purposes of this
paragraph, such representations and warranties shall be deemed to be
true and correct unless the failure or failures of such
representations and warranties to be so true and correct,
individually or in the aggregate, and without giving effect to any
qualification as to materiality set forth in such representations or
warranties, has had or could reasonably be expected to have a
Material Adverse Effect on Witco. Crompton shall have received a
certificate signed on behalf of Witco by the Chief Executive Officer
and the Chief Financial Officer of Witco to the foregoing effect.
<PAGE>
(b) Performance of Obligations of Witco. Witco shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing
Date, and Crompton shall have received a certificate signed on
behalf of Witco by the Chief Executive Officer and the Chief
Financial Officer of Witco to such effect.
8.3 Conditions to Obligations of Witco. The obligation of Witco to
effect the Second Step Merger is also subject to the satisfaction or waiver by
Witco at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Crompton and Newco set forth in this Agreement shall
be true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date; provided, however, that,
for purposes of this paragraph, such representations and warranties
shall be deemed to be true and correct unless the failure or
failures of such representations and warranties to be so true and
correct, individually or in the aggregate, and without giving effect
to any qualification as to materiality set forth in such
representations or warranties, has had or could reasonably be
expected to have a Material Adverse Effect on Crompton. Witco shall
have received a certificate signed on behalf of Crompton by the
Chief Executive Officer and the Chief Financial Officer of Crompton
to the foregoing effect.
(b) Performance of Obligations of Crompton. Each of Crompton
and Newco shall have performed in all material respects all
obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and Witco shall have received a
certificate signed on behalf of Crompton by the Chief Executive
Officer and the Chief Financial Officer of Crompton to such effect.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to
the First Effective Time, whether before or after approval of the matters
presented in connection with the Second Step Merger by the holders of Crompton
Common Stock or Witco Common Stock:
(a) by mutual consent of Crompton and Witco;
(b) by either the Board of Directors of Crompton or the Board of
Directors of Witco if any permanent injunction or other order or decree of a
court or other competent Governmental Authority preventing the Merger shall
have become final and nonappealable, provided that the party seeking to
terminate this Agreement under this Section 9.1(b) shall have used its
reasonable best efforts to remove such injunction, order or decree;
<PAGE>
(c) by either the Board of Directors of Crompton or the Board of
Directors of Witco if the Second Step Merger shall not have been consummated
on or before December 31, 1999, unless the failure of the Closing to occur by
such date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(d) by either the Board of Directors of Crompton or the Board of
Directors of Witco (provided that the terminating party is not then in breach
of any representation, warranty, covenant or other agreement contained herein)
if there shall have been a breach of any of the covenants or agreements or any
of the representations or warranties set forth in this Agreement on the part
of Witco, in the case of a termination by Crompton, or Crompton or Newco, in
the case of a termination by Witco, which breach, individually or together
with other such breaches, would constitute, if occurring or continuing on the
Closing Date, the failure of the conditions set forth in Section 8.2 or 8.3,
as the case may be, and which is not cured within 30 days following written
notice to the party committing such breach or by its nature or timing cannot
be cured prior to the Closing Date;
(e) by either the Board of Directors of Crompton or the Board of
Directors of Witco, (i) if, upon a vote at a duly held meeting to obtain the
Witco Stockholders Approval, the Witco Stockholders Approval is not obtained;
or (ii) if, upon a vote at a duly held meeting to obtain the Crompton
Stockholders Approval, the Crompton Stockholders Approval is not obtained;
(f) by the Board of Directors of Crompton, if the Board of Directors
of Witco, any committee thereof or Witco withdraws, or proposes to withdraw or
modify, in a manner adverse to Crompton, its approval or recommendation of
this Agreement and the transactions contemplated hereby or approves or
recommends, or proposes to approve or recommend, any Witco Competing
Transaction;
(g) by the Board of Directors of Witco, if the Board of Directors of
Crompton, any committee thereof or Crompton withdraws, or proposes to withdraw
or modify, in a manner adverse to Witco, its approval of this Agreement and
the transactions contemplated hereby, or proposes to approve or recommend, any
Crompton Competing Transaction;
(h) by the Board of Directors of Crompton, if (i) prior to receipt of
the Crompton Stockholders Approval, Crompton has received a publicly disclosed
proposal for a Crompton Competing Transaction that constitutes a Qualifying
Crompton Proposal that was not solicited or encouraged by Crompton or its
representatives and that did not otherwise result from the breach or a deemed
breach of Section 7.2(g), (ii) the Board of Directors has determined in good
faith and on a reasonable basis, and based on the written advice of outside
counsel that not to so act would constitute a violation of such fiduciary
obligations, that it is necessary to (x) withdraw or modify its approval or
recommendation of this Agreement and the transactions contemplated hereby, (y)
terminate this Agreement pursuant hereto and (z) enter into a Crompton
Acquisition Agreement in connection with such Qualifying Crompton Proposal in
order to comply with its fiduciary obligations under Applicable Law, (iii)
Crompton has notified Witco in writing of the determination described in
clause (ii) above, (iv) at least ten business days following receipt by
<PAGE>
Witco of the notice referred to in clause (iii) above, and taking into account
any proposal made by Witco since receipt of such notice to amend or modify the
terms of the transactions contemplated by this Agreement, such Qualifying
Crompton Proposal remains a Qualifying Crompton Proposal and the Board of
Directors of Crompton has again made the determination referred to in clause
(ii) above, (v) Crompton is in compliance with Section 7.2(g), (vi) Crompton
has paid in advance the fee due under Section 10.3(c) to Witco, and (vii) the
Board of Directors of Crompton concurrently approves, and Crompton
concurrently enters into, a Crompton Acquisition Agreement providing for the
implementation of such Qualifying Crompton Proposal; or
(i) by the Board of Directors of Witco, if (i) prior to receipt of the
Witco Stockholders Approval, Witco has received a publicly disclosed proposal
for a Witco Competing Transaction that constitutes a Qualifying Witco Proposal
that was not solicited or encouraged by Witco or its representatives and that
did not otherwise result from the breach or a deemed breach of Section 7.3(c),
(ii) the Board of Directors has determined in good faith and on a reasonable
basis, and based on the written advice of outside counsel that not to so act
would constitute a violation of such fiduciary obligations, that it is
necessary to (x) withdraw or modify its approval or recommendation of this
Agreement and the transactions contemplated hereby, (y) terminate this
Agreement pursuant hereto and (z) enter into a Witco Acquisition Agreement in
connection with such Qualifying Witco Proposal in order to comply with its
fiduciary obligations under Applicable Law, (iii) Witco has notified Crompton
in writing of the determination described in clause (ii) above, (iv) at least
ten business days following receipt by Crompton of the notice referred to in
clause (iii) above, and taking into account any proposal made by Crompton
since receipt of such notice to amend or modify the terms of the transactions
contemplated by this Agreement, such Qualifying Witco Proposal remains a
Qualifying Witco Proposal and the Board of Directors of Witco has again made
the determination referred to in clause (ii) above, (v) Witco is in compliance
with Section 7.3(c), (vi) Witco has paid in advance the fee due under Section
10.3(b) to Crompton, and (vii) the Board of Directors of Witco concurrently
approves, and Witco concurrently enters into, a Witco Acquisition Agreement
providing for the implementation of such Qualifying Witco Proposal.
9.2 Effect of Termination. In the event of termination of this
Agreement by either Crompton or Witco as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, and none of
Crompton, Witco, Newco, any of their respective subsidiaries or any of the
officers or directors of any of them shall have any liability of any nature
whatsoever hereunder, or in connection with the transactions contemplated
hereby, except that (a) the last sentence of Section 7.1(f), Section 9.2 and
Article X shall survive any termination of this Agreement, and (b)
notwithstanding anything to the contrary contained in this Agreement, neither
Crompton nor Witco shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
9.3 Amendment. Subject to compliance with Applicable Laws, this
Agreement may be amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with Merger by the stockholders of
Crompton and Witco; provided, however, that, after any approval of the
transactions contemplated by this Agreement by the respective stockholders of
Crompton
<PAGE>
or Witco, there may not be any amendment of this Agreement that by law
requires the further approval of such stockholders, without the further
approval of such stockholders. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein;
provided, however, that after any approval of the transactions contemplated by
this Agreement by the respective stockholders of Crompton or Witco, there may
not be any extension or waiver of this Agreement or any portion thereof that
by law requires the further approval of such stockholders, without the further
approval of such stockholders. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1 Closing. Subject to the terms and conditions of this Agreement
and the Option Agreements, the closing of the Second Step Merger (the
"Closing") will take place at 10:00 a.m. on a date and at a place to be
specified by the parties, which shall be no later than five business days
after the satisfaction or waiver (subject to Applicable Laws) of the latest to
occur of the conditions set forth in Article VIII, unless extended by mutual
agreement of the parties (the "Closing Date").
10.2 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement (other than the
Option Agreements and the Confidentiality Agreement, which shall terminate in
accordance with terms) shall survive the Effective Time, except for those
covenants and agreements contained herein and therein that by their terms
apply in whole or in part after the Effective Time.
10.3 Fees and Expenses. (a) All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense; provided, however, that the costs
and expenses of printing and mailing the Joint Proxy Statement, and all filing
and other fees paid to the Commission in connection with the Merger, shall be
borne equally by Crompton and Witco.
<PAGE>
(b) Witco shall pay to Crompton a fee of $30 million if: (i) Witco
terminates this Agreement pursuant to Section 9.1(i); (ii) Crompton terminates
this Agreement pursuant to Section 9.1(f); or (iii) any Witco Competing
Transaction proposed to Witco or publicly disclosed and, in each case, pending
prior to the earlier of (x) the Witco Stockholders Meeting and (y) the
occurrence of the earliest event or circumstance constituting the basis for
the termination of this Agreement, and thereafter either Crompton or Witco
terminates this Agreement pursuant to Section 9.1(c), Section 9.1(e)(i), or
Section 9.1(d) (but only in the case of termination by Crompton under such
Section 9.1(d)) and, in the case of clause (iii) above, within 12 months of
such termination Witco enters into a definitive agreement to consummate, or
otherwise consummates, the transactions contemplated by any Witco Competing
Transaction. Any fee due under this Section 10.3(b) shall be paid by wire
transfer of same-day funds on the date of termination of this Agreement
(except that in the case of termination pursuant to clause (iii) above such
payment shall be made on the date of execution of such definitive agreement
or, if earlier, consummation of such transactions).
(c) Crompton shall pay to Witco a fee of $30 million if: (i) Crompton
terminates this Agreement pursuant to Section 9.1(h); (ii) Witco terminates
this Agreement pursuant to Section 9.1(g); or (iii) any Crompton Competing
Transaction proposed to Crompton or publicly disclosed and, in each case,
pending prior to the earlier of (x) the Crompton Stockholders Meeting and (y)
the occurrence of the earliest event or circumstance constituting the basis
for the termination of this Agreement, and thereafter either Crompton or Witco
terminates this Agreement pursuant to Section 9.1(c), Section 9.1(e)(ii), or
Section 9.1(d) (but only in the case of termination by Witco under such
Section 9.1(d)) and, in the case of clause (iii) above, within 12 months of
such termination Crompton enters into a definitive agreement to consummate, or
otherwise consummates, the transactions contemplated by any Crompton Competing
Transaction. Any fee due under this Section 10.3(c) shall be paid by wire
transfer of same-day funds on the date of termination of this Agreement
(except that in the case of termination pursuant to clause (iii) above such
payment shall be made on the date of execution of such definitive agreement
or, if earlier, consummation of such transactions).
10.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Crompton or Newco, to:
Crompton & Knowles Corporation
One Station Place, Metro Center
Stamford, CT 06902
Attention: Charles J. Marsden/John T. Ferguson, II
Telecopy No.: (203) 353-5470
<PAGE>
with a copy to:
Edward D. Herlihy
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Telecopy No.: (212) 403-2000
and
(b) if to Witco, to:
Witco Corporation
One American Lane
Greenwich, CT 06831
Attention: Cam DiFrancesco/Ed Smith
Telecopy No: (203) 552-2201
with a copy to:
Philip A. Gelston
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Telecopy No.: (212) 424-3700
10.5 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require
Witco, Crompton, Newco or any of their respective subsidiaries or affiliates
to take any action that would violate any applicable law, rule or regulation.
10.6 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof other than the
Option Agreements and the Confidentiality Agreement.
<PAGE>
10.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law (except to the extent that mandatory provisions of
federal law or of the DGCL or MBCL are applicable).
10.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.10 Assignment; Third-Party Beneficiaries. Neither this Agreement
nor any of the rights, interests or obligations shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. Except
for the provisions of Section 7.2(c) and 7.2(d) that may be enforced by the
persons intended to be benefited thereby, this Agreement (including the
documents and instruments referred to herein) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
10.11 Certain Agreements of Crompton and Witco. Each of Crompton and
Witco agree that the Combined Company may be sued in the Commonwealth of
Massachusetts for any prior obligation of Crompton or Witco and any obligation
incurred by the Combined Company after the Effective Time, so long as any
liability remains outstanding against any such entity in the Commonwealth of
Massachusetts, and the Combined Company irrevocably appoints the State
Secretary of the Commonwealth of Massachusetts as its agent to accept service
of process in any action for the enforcement of any such obligation, including
taxes, in the manner provided in Chapter 181 of the General Laws of the
Commonwealth of Massachusetts.
10.12 Representations and Warranties of Newco. For purposes of Article
IV and Section 8.2(a), Newco shall succeed to all representations and
warranties of Crompton after the First Effective Time as the successor
corporation to Crompton.
<PAGE>
IN WITNESS WHEREOF, Crompton, Witco and Newco have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
CROMPTON & KNOWLES CORPORATON
By:
Name:
Title:
PARK MERGER CO.
By:
Name:
Title:
WITCO CORPORATION
By:
Name:
Title:
EXECUTION COPY Exhibit C
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated May 31, 1999, between Crompton &
Knowles, a Massachusetts corporation ("Issuer"), and Witco Corporation, a
Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Reorganization of even date herewith (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to this
Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 13,025,917 fully paid and nonassessable shares of Issuer's Common Stock,
par value $.10 per share ("Common Stock"), at a price of $18.375 per share
(the "Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of
the Issuer's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. The number
of shares of Common Stock that may be received upon the exercise of the Option
and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date
of this Agreement, the number of shares of Common Stock subject to the
Option shall be increased or decreased, as appropriate, so that, after
such issuance, such number equals 19.9% of the number of shares of Common
Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, a Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of
an Exercise Termination Event (as hereinafter defined), provided that the
Holder shall have sent the written notice of such exercise (as provided in
<PAGE>
subsection (c) of this Section 2) within 60 days following such Triggering
Event. A "Triggering Event" shall mean any occurrence following which Grantee
is entitled (without any further contractual contingencies) to receive a
termination fee pursuant to Section 10.3[(b)][(c)] of the Merger Agreement.
Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement) of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof
if following such termination a Triggering Event, by its terms, cannot occur;
or (iii) such time after termination of the Merger Agreement when a Triggering
Event, by its terms, cannot thereafter occur. The term "Holder" shall mean the
holder or holders of the Option.
(b) Issuer shall notify Grantee promptly in writing of the
occurrence of any Triggering Event of which it has notice, it being
understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(c) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date
of which being herein referred to as the "Notice Date") specifying (i)
the total number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than
60 business days from the Notice Date for the closing of such purchase
(the "Closing Date"); provided that if prior notification to or approval
of any regulatory agency is required in connection with such purchase,
the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time
that otherwise would run pursuant to this sentence shall run instead from
the date on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(d) At the closing referred to in subsection (c) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price
for the shares of Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by wire transfer to a bank account
designated by Issuer, provided that failure or refusal of Issuer to
designate such a bank account shall not preclude the Holder from
exercising the Option.
(e) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (d) of this Section
2, Issuer shall deliver to the Holder a certificate or certificates
representing the number of shares of Common Stock purchased by the Holder
and, if the Option should be exercised in part only, a new Option
evidencing the rights of the Holder thereof to purchase the balance of
the shares purchasable hereunder, and the Holder shall deliver to Issuer
this Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of applicable law
or the provisions of this Agreement.
(f) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under
the Securities Act of 1933, as amended. A copy
<PAGE>
of such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions to
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(g) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (c) of
this Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the holder
of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Common Stock
shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 2 in the name
of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) use its reasonable best efforts to promptly to take
all action as may from time to time be required (including complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. ss. 18a and regulations promulgated thereunder) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) use its reasonable best
efforts to promptly to take all action provided herein to protect the rights
of the Holder against dilution.
4. This Agreement and the Option granted hereby are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Stock Option Agreements and related Options for which
this Agreement (and the Option granted hereby) may be exchanged. Upon receipt
by Issuer of evidence reasonably satisfactory to it of the loss, theft,
<PAGE>
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of
any change in, or distributions in respect of, the Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on or in respect
of the Common Stock that would be prohibited under the terms of the Merger
Agreement, or the like, the type and number of shares of Common Stock
purchasable upon exercise hereof and the Option Price shall be appropriately
adjusted in such manner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement governing any
such transaction to provide for such proper adjustment and the full
satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 60 days of such Triggering Event (whether on its own behalf
or on behalf of any subsequent holder of this Option (or part thereof) or any
of the shares of Common Stock issued pursuant hereto), promptly prepare, file
and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and
shall use its reasonable best efforts to cause such registration statement to
become effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan
of disposition requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement first to become effective and
then to remain effective for such period not in excess of 180 days from the
day such registration statement first becomes effective or such shorter time
as may be reasonably necessary to effect such sales or other dispositions.
Grantee shall have the right to demand two such registrations. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if
in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by Issuer,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however, that after
any such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate;
and provided further, however, that if such reduction occurs, then the Issuer
shall file a registration statement for the balance as promptly as practicable
and no reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating
<PAGE>
itself in respect of representations, warranties, indemnities and other
agreements customarily included in secondary offering underwriting agreements
for the Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each
case by promptly mailing the same, postage prepaid, to the address of record
of the persons entitled to receive such copies. Notwithstanding anything to
the contrary contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to this Section 6 by reason of the fact
that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Notwithstanding any other provision of this Agreement,
in no event shall the Total Option Profit (as hereinafter defined) exceed in
the aggregate $30 million.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of shares as would, as of
the date of exercise, result in a Notional Total Option Profit (as
hereinafter defined) which would exceed in the aggregate $30 million.
(c) As used herein, the term "Total Option Profit" shall
mean the aggregate amount (before taxes) of the following: (i) (x) the
amount received by Grantee pursuant to Section 15, less (y) Grantee's
purchase price for any Option Shares, (ii) (x) the amount received by
Grantee pursuant to the sale of Option Shares to any unaffiliated party,
valuing any non-cash consideration at its fair market value, less (y)
Grantee's purchase price for such Option Shares, and (iii) any equivalent
amount with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Option Profit"
with respect to any number of shares of Common Stock as to which Grantee
has delivered an exercise notice shall be the Total Option Profit
determined as of the Notice Date assuming that the Option were exercised
on such date for such number of shares of Common Stock and assuming that
such shares, together with all other Option Shares held by Grantee and
its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions or underwriting
discounts).
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and shall not
be the continuing or surviving corporation of such consolidation or merger,
(ii) to permit any person, other than Grantee or one of its Subsidiaries, to
merge into Issuer and Issuer shall be the continuing or surviving corporation,
but, in connection with such merger, the then outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of any
other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of the
outstanding voting shares and voting share equivalents of the merged company,
or (iii) to sell or otherwise transfer all or substantially all of its assets
to any person, other than Grantee or one of its Subsidiaries, then, and in
each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged
<PAGE>
for, an option (the "Substitute Option"), at the election
of the Holder, of either (x) the Acquiring Corporation (as hereinafter
defined) or (y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger
with Issuer (if other than Issuer), (ii) Issuer in a merger in which
Issuer is the continuing or surviving person, and (iii) the
transferee of all or substantially all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise of
the Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common
Stock to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common Stock
within the immediately preceding six-month period, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets,
the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by the
Holder and reasonably acceptable to the Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time
of such sale.
(4) "Average Price" shall mean the average closing price
of a share of the Substitute Common Stock for the 45 business days
immediately preceding the consolidation, merger or sale in question,
but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer
or by any company which controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar
as possible and in no event less advantageous to the Holder. The issuer
of the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option
is then exercisable, divided by the Average Price. The exercise price of
the Substitute Option per share of Substitute Common Stock shall then be
equal to the Option Price multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock for which the Option
is then exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option is
exercisable.
<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the shares of Substitute Common Stock
outstanding prior to exercise but for this clause (e), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over
(ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
the Holder or the Owner, as the case may be, and reasonably acceptable to
the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. [Intentionally Omitted]
10. The 60-day period for exercise of certain rights under Sections
2, 6 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance
with its terms will have reserved for issuance upon the exercise of the
Option, that number of shares of Common Stock equal to the maximum number
of shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required
redeeming all of the Rights or amending or terminating the Rights
Agreement) so that the entering into of this Option Agreement, the
acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the grant
of any rights to any person under the Rights Agreement or enable or
require the Rights to be exercised, distributed or triggered.
<PAGE>
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will not
be, acquired with a view to the public distribution thereof and will not
be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations hereunder within 90 days
following such Triggering Event (or such later period as provided in Section
10).
14. Each of Grantee and Issuer will use its reasonable best efforts
to make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the New
York Stock Exchange upon official notice of issuance.
15. (a) At any time from and after the occurrence of a Triggering
Event, (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 60 days of such occurrence (or
such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the highest price per share
of Common Stock to be paid or received in connection with or as a result of
such Triggering Event (including, in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment
<PAGE>
banking firm selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Issuer, divided by the number of shares of Common
Stock of Issuer outstanding at the time of such sale), or (ii) the highest
closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be. In determining the Market/Offer Price,
the value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the
case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 15 by surrendering for such purpose to
Issuer, at its principal office, this Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option Shares in
accordance with the provisions of this Section 15. Within the latter to
occur of (x) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to
the occurrence of a Triggering Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner
the Option Share Repurchase Price therefor or the portion thereof, if
any, that Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from repurchasing the Option and/or the Option Shares
in full, Issuer shall immediately so notify the Holder and/or the Owner
and thereafter deliver or cause to be delivered, from time to time, to
the Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business
days after the date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 15 is prohibited
under applicable law or regulation from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices, in each
case as promptly as practicable in order to accomplish such repurchase),
the Holder or Owner may revoke its notice of repurchase of the Option or
the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the
Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A)
to the Holder, a new Stock Option Agreement evidencing the right of the
Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 15 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
<PAGE>
(e) The Holder and any Owner shall have rights substantially
identical to those set forth in paragraphs (a), (b), (c) and (d) of this
Section 15 with respect to the Substitute Option, the Substitute Common
Stock and the Substitute Option Issuer.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 15, the full number of shares
of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal or state law
apply).
20. This Agreement may be executed in two counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
<PAGE>
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
CROMPTON & KNOWLES CORPORATION
By:
Name:
Title:
WITCO CORPORATION
By:
Name:
Title:
EXECUTION COPY Exhibit D
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated May 31, 1999, between Witco
Corporation, a Delaware corporation ("Issuer"), and Crompton & Knowles
Corporation, a Massachusetts corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Reorganization of even date herewith (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to this
Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
11,471,159 fully paid and nonassessable shares of Issuer's Common Stock, par
value $5.00 per share ("Common Stock"), at a price of $17.50 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of
the Issuer's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. The number
of shares of Common Stock that may be received upon the exercise of the Option
and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
this Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such issuance,
such number equals 19.9% of the number of shares of Common Stock then issued
and outstanding without giving effect to any shares subject or issued pursuant
to the Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, and from time to time, if, but only if, a Triggering Event
(as hereinafter defined) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that the Holder
shall have sent the written notice of such exercise (as provided in
<PAGE>
subsection (c) of this Section 2) within 60 days following such Triggering
Event. A "Triggering Event" shall mean any occurrence following which Grantee
is entitled (without any further contractual contingencies) to receive a
termination fee pursuant to Section 10.3[(b)][(c)] of the Merger Agreement.
Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement) of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof
if following such termination a Triggering Event, by its terms, cannot occur;
or (iii) such time after termination of the Merger Agreement when a Triggering
Event, by its terms, cannot thereafter occur. The term "Holder" shall mean the
holder or holders of the Option.
(b) Issuer shall notify Grantee promptly in writing of the
occurrence of any Triggering Event of which it has notice, it being
understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(c) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i)
the total number of shares it will purchase pursuant to such
exercise and (ii) a place and date not earlier than three business
days nor later than 60 business days from the Notice Date for the
closing of such purchase (the "Closing Date"); provided that if
prior notification to or approval of any regulatory agency is
required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date
on which any required notification periods have expired or been
terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(d) At the closing referred to in subsection (c) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for
the shares of Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by wire transfer to a bank
account designated by Issuer, provided that failure or refusal of
Issuer to designate such a bank account shall not preclude the
Holder from exercising the Option.
(e) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (d) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the
Holder shall deliver to Issuer this Agreement and a letter agreeing
that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this
Agreement.
(f) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
<PAGE>
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions to
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(g) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (c) of this
Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable
in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. or treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after giving effect
to all other options, warrants, convertible securities and other rights to
purchase Common Stock; (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or
performed hereunder by Issuer; (iii) use its reasonable best efforts to
promptly to take all action as may from time to time be required (including
complying with all premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. ss. 18a and regulations promulgated
thereunder) in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and (iv)
use its reasonable best efforts to promptly to take all action provided herein
to protect the rights of the Holder against dilution.
4. and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase, on the same terms and subject to the
same conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Stock Option Agreements and related
Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft,
<PAGE>
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. pursuant to Section 1 of this Agreement, the number of
shares of Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as provided in
this Section 5. In the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares, distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Merger Agreement, or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof and the
Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall
be made in any agreement governing any such transaction to provide for such
proper adjustment and the full satisfaction of the Issuer's obligations
hereunder.
6. of Grantee delivered within 60 days of such Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration
statement under the 1933 Act covering this Option and any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of this Option and any shares of
Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such registration
statement first to become effective and then to remain effective for such
period not in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably necessary to
effect such sales or other dispositions. Grantee shall have the right to
demand two such registrations. The foregoing notwithstanding, if, at the time
of any request by Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith judgment
of the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may
be reduced; provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the account of the
Holder shall constitute at least 25% of the total number of shares to be sold
by the Holder and Issuer in the aggregate; and provided further, however, that
if such reduction occurs, then the Issuer shall file a registration statement
for the balance as promptly as practicable and no reduction shall thereafter
occur. Each such Holder shall provide all information reasonably requested by
Issuer for inclusion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such registration, Issuer
shall become a party to any underwriting agreement relating to the sale of
such shares, but only to the extent of obligating
<PAGE>
itself in respect of representations, warranties, indemnities and other
agreements customarily included in secondary offering underwriting agreements
for the Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each
case by promptly mailing the same, postage prepaid, to the address of record
of the persons entitled to receive such copies. Notwithstanding anything to
the contrary contained herein, in no event shall Issuer be obligated to effect
more than two registrations pursuant to this Section 6 by reason of the fact
that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Notwithstanding any other provision of this Agreement,
in no event shall the Total Option Profit (as hereinafter defined) exceed in
the aggregate $30 million.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of shares as would, as of
the date of exercise, result in a Notional Total Option Profit (as
hereinafter defined) which would exceed in the aggregate $30 million.
(c) As used herein, the term "Total Option Profit" shall
mean the aggregate amount (before taxes) of the following: (i) (x) the
amount received by Grantee pursuant to Section 15, less (y) Grantee's
purchase price for any Option Shares, (ii) (x) the amount received by
Grantee pursuant to the sale of Option Shares to any unaffiliated party,
valuing any non-cash consideration at its fair market value, less (y)
Grantee's purchase price for such Option Shares, and (iii) any equivalent
amount with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Option Profit"
with respect to any number of shares of Common Stock as to which Grantee
has delivered an exercise notice shall be the Total Option Profit
determined as of the Notice Date assuming that the Option were exercised
on such date for such number of shares of Common Stock and assuming that
such shares, together with all other Option Shares held by Grantee and
its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions or underwriting
discounts).
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and shall not
be the continuing or surviving corporation of such consolidation or merger,
(ii) to permit any person, other than Grantee or one of its Subsidiaries, to
merge into Issuer and Issuer shall be the continuing or surviving corporation,
but, in connection with such merger, the then outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of any
other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of the
outstanding voting shares and voting share equivalents of the merged company,
or (iii) to sell or otherwise transfer all or substantially all of its assets
to any person, other than Grantee or one of its Subsidiaries, then, and in
each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged
<PAGE>
for, an option (the "Substitute Option"), at the election of the Holder, of
either (x) the Acquiring Corporation (as hereinafter defined) or (y) any
person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the continuing
or surviving corporation of a consolidation or merger with Issuer
(if other than Issuer), (ii) Issuer in a merger in which Issuer is
the continuing or surviving person, and (iii) the transferee of all
or substantially all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(3) "Assigned Value" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common
Stock to be paid by any third party pursuant to an agreement with
Issuer, (iii) the highest closing price for shares of Common Stock
within the immediately preceding six-month period, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets,
the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by the
Holder and reasonably acceptable to the Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time
of such sale.
(4) "Average Price" shall mean the average closing price of
a share of the Substitute Common Stock for the 45 business days
immediately preceding the consolidation, merger or sale in question,
but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer
or by any company which controls or is controlled by such person, as
the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of
the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option
is then exercisable, divided by the Average Price. The exercise price of
the Substitute Option per share of Substitute Common Stock shall then be
equal to the Option Price multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock for which the Option
is then exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option is
exercisable.
<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise but for this clause (e), the issuer of the Substitute
Option (the "Substitute Option Issuer") shall make a cash payment to
Holder equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over (ii) the
value of the Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or
the Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. [Intentionally Omitted]
10. The 60-day period for exercise of certain rights under Sections
2, 6 and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance
with its terms will have reserved for issuance upon the exercise of the
Option, that number of shares of Common Stock equal to the maximum number
of shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required
redeeming all of the Rights or amending or terminating the Rights
Agreement) so that the entering into of this Option Agreement, the
acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the grant
of any rights to any person under the Rights Agreement or enable or
require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will not
be, acquired with a view to the public distribution thereof and will not
be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may
assign in whole or in part its rights and obligations hereunder within 90 days
following such Triggering Event (or such later period as provided in Section
10).
14. Each of the Grantee and Issuer will use its reasonable best
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the New
York Stock Exchange upon official notice of issuance.
15. (a) At any time from and after the occurrence of a Triggering
Event, (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 60 days of such occurrence (or
such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the highest price per share
of Common Stock to be paid or received in connection with or as a result of
such Triggering Event (including, in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment
<PAGE>
banking firm selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Issuer, divided by the number of shares of Common
Stock of Issuer outstanding at the time of such sale), or (ii) the highest
closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be. In determining the Market/Offer Price,
the value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the
case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 15 by surrendering for such purpose to
Issuer, at its principal office, this Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option Shares in
accordance with the provisions of this Section 15. Within the latter to
occur of (x) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to
the occurrence of a Triggering Event, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner
the Option Share Repurchase Price therefor or the portion thereof, if
any, that Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from repurchasing the Option and/or the Option Shares
in full, Issuer shall immediately so notify the Holder and/or the Owner
and thereafter deliver or cause to be delivered, from time to time, to
the Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business
days after the date on which Issuer is no longer so prohibited; provided,
however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to paragraph (b) of this Section 15 is prohibited
under applicable law or regulation from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices, in each
case as promptly as practicable in order to accomplish such repurchase),
the Holder or Owner may revoke its notice of repurchase of the Option or
the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the
Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A)
to the Holder, a new Stock Option Agreement evidencing the right of the
Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 15 shall not
terminate upon the occurrence of an Exercise Termination Event unless no
Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
<PAGE>
(e) The Holder and any Owner shall have rights substantially
identical to those set forth in paragraphs (a), (b), (c) and (d) of this
Section 15 with respect to the Substitute Option, the Substitute Common
Stock and the Substitute Option Issuer.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 15, the full number of shares
of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal or state law
apply).
20. This Agreement may be executed in two counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
<PAGE>
23. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
CROMPTON & KNOWLES CORPORATION
By:
Name:
Title:
WITCO CORPORATION
By:
Name:
Title:
